## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 08

- 3431 I N RE : J AM ES E. R O SE, D e b t or . M ER CANTIL E N ATI ONA L B ANK OF I NDI ANA, as Truste e, J
. R. C ONS T RUCT I ON C O . an d J OS EP H R AMACC I, P la intif fs-A pp ella nts, v. J AM ES E. R O SE, D efend a nt-A pp ellee.

Appeal from the United States District Court fo r the C entral D istricto f Illino is. No . 2:08 CV2116

—Mi ch ael P . M cC us key, Chief Ju dge
.
A RG UE D F EB RU AR Y 19, 2009

— D ECI DE D O CT OB ER 7, 20092 N o. 08

- 3431

The H onorab le Frederick J
. K apala ofthe Un it ed Stat es  Di s t r i c tCo ur tf orthe Nor the r n Di s t r i c to fI l l i no i s , s i t t i ngby des i gna t i on. Befo re F L A U M an d W I L L I A MS, C ircu it Judges , an d K APALA, D i s t r i ctJudg e .  W I L L I A MS, Cir cuit Judg e . In 200 5, J am es E. Rose fi l ed for ba nk r upt cyi n the Uni te d S ta te s Ban k r upt cyCo urt f orthe CentralDis tr i ct o fI l l i noi s. M er canti l e Nati onal B a n ko fIn d i a n a ( “ Me r c a nt i l e ” ) fi l e d a n a d v e r s a r y c o mpla i nt chal l engi ng the disc harg eabi l i ty of a d eb t that Rose owed to i t a ri si ng fro m a previ ous j ud gm ent e nter ed i n a n In d i a n a s u p e r i o rc o u r t
. T h e j u d g me n tw a s b a s e d, i n part, o n a c l ai m M er canti l e had m ade under I nd iana’s C rim e Victim s’ Com p en sation A ct (“C V C A ”), I n d
. C o d e § 3 4

- 2 4

- 3

- 1
. In J u n e 2 0 0 7, th e In d i a n a S u p r e me Cou r t r ul ed th at M er ca nt i l e ha d no t pr o per l y b r o ug ht the ne w C V C A c l ai m bec ause i t was fi l ed duri ng a proce eding s su ppl ement al to c o l l ec t o n a n a l r ea dy ex i st i ng j u dgm ent, r atherthan as a s epara te cl ai m under a new cau se n u m b er. Ros ev. M e r ca nt i l eNat ’ l Bank o f Ham m ond, 868 N
. E.2 d 772, 77 7 ( I nd . 2 007)
. A s a r esul t, the bankruptcy cour t a gr eed, r uling tha t the appli cabl e tw o- yea r sta tute ofl i m i tat i ons bar re d M er canti l e’s com pla i nt. The bankr up tcy cour t g ra nted Rose ’ s m oti on t o dism i ss M ercan til e’s ad versary com p lai nt, and the d istri ct cou rt affi rm ed
. I n re R o se, N o. 08

- CV

- 2116 , 20 08 W L 40557 83, at *6 ( C
. D
. I ll
. A ug . 26, 2008 ). A ftero ra lar gum ent in thi s ca se, the I nd i ana Court of A p p eals de term ined that the C V C A clai m against R ose’sN o. 08

- 3431 3 j oin t s h ar eh old er , Ro b er t U n d er w oo d , w as p ro p er ly c om m enced w i thi n the sta tute ofl i m i tat i ons despit e b e i ngi mpr o vi de nt l y fi l e d a s p a r to fa p r o c e e di ng s s up p lem en ta l. M e r ca nt i l eNat ’ l Bank of Ham m ond v. U nde rwood, 90 6 N .E .2d 88 1 (In d . C t. A p p . 200 9). B ec au se M er c an tile proper l y c om m enced i ts CV CA cl ai m withi n the st at ute ofl i m i tat i ons, we re ver se the ruling o fthe dist ri ct c ourt
.

I . B AC KGR OUND I n 1 99 5, M er ca nt i l e N at i o na lBa nko fIndi ana, J
. R. C on st ru c t i on C o. an d Jos ep h R am ac c i (w h om w e c oll ecti vel y c al l “M er cant i l e”) sued J asper - N ew ton Uti l i ty( “J

- N ”) , a n Indi an a su b- S c o r po r at i o n o per at i ng as a p ub li c ut il ity com p an y, in an I nd iana sup er io r c o urt f o rc o nt r ac t damag es a nd s pec i fi c per f o r m an ce . The sui t alleged that J

- N f ai l ed to l i ve up to i ts com m i tme nt s unde ra wa t e ra n d s e we rs e r v i c e s a g r e e me n t
. At t h a t t i me , J a me s E
. R o s e w a s a 5 0 % s h a r e h o l d e r i n J

- N. Foll o wi nga b en cht r i al, the c o ur t en te r ed j udg m en t aga i nst J

- N f or$1 59, 581. O n D ecem ber 18, 200 1, fi ve w eeks after th e j ud gm en t, J- N w as sol d to W ate r Se rv i ces Co m p an y o fInd i ana, Inc. ( “W SCI ”) f or$4 75, 000. U nd erthe ter m s o fthe sal e, Rose an d Rob ert U nd erw ood , t h e other 50% J -N share hold er, a g r e e d t o i nd e mni fy WS CIf o ra nya nd a l ll i abi l i ti es ar i si ng out of M er canti l e’ s sui t aga i nst J

- N
. J

- N then t r a ns fe r r e d $ 2 3 7, 5 0 0 e a c h t o R o s e a nd Und e r wo o d. I n M ar ch 200 2, M er canti l e m oved fo r proce edi ngs supp l em entalto co l l ect on the j ud gm ent. On N ove m ber16 ,4 N o. 08

- 3431 20 02 , M er ca nt i l e fi l ed tw o c la i m s unde rthe Indi an a Frau dul en t Tr an sferAct, Ind. Co de § 32

- 18

- 2- 17, a l l eg i ng th atRo se , Under woo d, J- N a nd W S CIha d a ct ed fr au dulen tly by tra n sfe rrin g R os e’s a n d U n d er w oo d ’s s h ar es in J-N to W S C I inord er to av oid p ay in g t h e jud gm en t. In February20 03, M er canti l e m ove d fo r l eave to am end i ts com pla i nt to add a cl ai m under Ind i ana’ s CVC A
. N o fee was pa id to th e Cl er ko fthe Co ur t an d no s um m o ns w er e e veri ssued to Rose o r U nd er w oo d i n connect i on w i th M er canti l e’ s CVC A cl ai m . On J uly23, 2003, Rose and U nd er w oo d tendere d $181, 300 ( the o riginalj ud gm ent a m ount pl us statuto ryi nter est ) to the cour t. Even th o ug h R ose an d Under woo d pa i d the j udg m en t, the tr i alc o ur t g r an te d M er ca nt i l e’ s m o tion to a m en d the com pla i nt nun c pro t unco n N ovem be r2 6, 2 00 3 an d m ade the or der r etr oac ti ve to M ar ch 28, 20 03. A ft e rab e nc h t r i a ldu r i ngwh i c h i tc o ns i de r e d b o th th e F r au dul en t Tr an sferActa nd CVCA c l ai m s, the N ew ton Superi orCourtente re d j ud gm ent in f avo r of M er ca nt i l e, a war di ng$ 54 2, 43 5. 49 i n t r eb l e d am age s an d $1 62, 730 i n att or neys’ fees . The Ind i ana Courto fA pp ea ls affi rm ed the tr ebl e dam age s r uling but re m anded f or re cal cul ati on o fthe att orn ey s’ fees . In the m eanti m e, o n Oct o be r1 4, 2 00 5, Ro se fi l ed f o rCha pte r1 1 reli efi n the U ni ted S tat es Bankruptcy Cour t forthe Central Dist ri ct o f I ll inois. On M arch 7, 2006, M ercan til e fi led an ad versary com pla i nt to chal l enge th e d ischar geabi l i ty ofthe j ud gme n to n i t s C V C A c l a i m. I n J une 2 00 7, the Indi an a S upr eme Co ur t r ev er se d the ap p ella te co u rt ’s ru lin g on th e C V C A cla im a n d h eldN o. 08

- 3431 5 that M er canti l e’ s a tte m pt to s ee k new dam age s fro m Ros e a nd Und e r wo o d di d no t fi t the pu r po s e o f a pro c ee d in gs su p p lem en ta l. R o se, 86 8 N
. E. 2d at7 77
. The I nd i ana S up re m e Cou rt st ate d that s uch proce edi ngs ar e a pp ro pri ate o nl y foract i ons to enf or ce a nd co l lect exi sting j ud gm en ts , n ot to est abl i sh new ones, and that if M e r c an tile w ish ed to p u rs u e t h e C V C A cla im it w oul d have t o do so under a new cau se o fact i on o r thro ugh so m e o therm eans. O n N o v e mb e r1 2 , 2 0 0 7, f o l l o win gth e In d i a n a S u p r e me Court rul i ng, M erc anti l e fi l ed an Am ended C om pla i nt to Deter m i ne Di scha rg eabi l i ty i n the bankr up tcy case . Rose fi l ed a m oti on t o dism i ss that com pla i nt, wh i ch the bankr upt cyc o ur t g r an te d o n Ma rch 6, 2 00 8. In g r an tingthe m oti on, the cour t r eas oned thatthe C V C A cla i m had n ev er be en p ro p er ly c om m en c ed w ith inth e a p p lica b le tw o- yea r sta tute ofl i m ita ti ons and w as ther ef or e ba rr ed by the s tatute’ s e xpir ati on. The bank ru p tcy cour t r ej ecte d M er ca nt i l e’ s ar g um en t th atIndi an a’ s J o ur ne y ’ s Acco unt S ta tu te a ppl i ed. Th at statut e al l o ws a n e xt en si o n o fthe sta tute ofl i m i tat i ons f oract i ons com m enced by a pla i nti ffwh i ch f ai lbec ause the j ud gm ent i s a rr est ed or r ev e r s e d o n a p p e a l
. In d
. C o d e § 3 4

- 1 1

- 8

- 1
. E c h o i n gthe I n diana Suprem e Cour t, the cour t r eas oned that M er canti l e had no t m et the re quir em ents f or“c om m enci ng” a n ac ti on byfi l i ng the CVC A cl ai m i n a pr oce edi ngs su ppl ement al, a nd , the r efo r e, the J o ur ne y ’ s Acco unt St atute di d not r evi ve M er canti l e’ s a dversaryco m pla i nt. On app eal, the dist ri ct c ourtaffi rm ed the bankr up tcy cour t’ s r uling tha t di sm i sse d the adver sar y c om pla i nt.6 N o. 08

- 3431 Fol l owing or alar gum ent i n t h is c ase , o n M ay 18, 20 09, th e I ndi an a Cou r t o fAppea l s i ss ue d a de ci si o n inv o lvi ng th e C V C A cla im th at w as file d b efo re R os e filed h is bankr up tcy peti ti on. The appel late co urt concl ud ed that M er ca nt i l e’ s CVCA c l ai m was c o m m en ce d wi th i n the st a t u t e o f lim ita tio n s w h en it w as init ially im p ro vid en tly filed as p ar t o f t h e p ro c ee d in gs su p p lem en ta l. M er cantil e, 906 N
. E.2 d at 8 86. On J une 16, 20 09, U nd er w oo d fi l ed a peti ti o n t o t r an sferj ur i sdi ct i o n, s ee k i ng to a ppea lthe I ndi an a Cou r t o fAppeal’ s d ec i si o n t o the Indi an a S u p r e me C o u r t
. O n A u g u s t1 9 , 2 0 0 9 , t h e In d i a n a S u p r e me Court unanim ousl y deni ed U nd er w oo d’s peti ti on t o tr an sferj ur i sdi ct i o n. M er canti l e a pp eal s the bankruptcy cour t’ s di sm i ssa lo f i ts advers ar y c om pla i nt. In additi on , it asks thi s co urt to c e r t i fy th e f o l l o w i n gqu e s t i o n t o th e In d i a n a S u p r e me Cou r t: “ W he th erthe Indi an a st atut e o fl i m i ta ti o ns r uns and expir es w hi l e a c as e is on appeali n I nd i ana co urts and i s s ubsequentl y r eve rs ed on pro ceduralgr ounds f or i m properj oi nd ero fcl ai m s?”

II. A N A L Y S IS A . M ercan ti le Com m en ced I ts CV C A Claim W it h in t he St a t ut e o fL i mi t a t i o ns W e revie w a Ru le 12(b) (6) d ism issal of an ad versary c o m p lain t in ba n kr u p tc y d e n ov o. In reCons ol
. Indu s. , 36 0 F. 3d 7 12 , 71 6 ( 7th Ci r. 20 04)
. M er canti l e’ s co m pla i nt was di smi ss ed be ca use t he b an k r upt cyc o ur t he l d tha t th e sta tute ofl i m i tat i ons bar re d his c lai m . In re l evantpart, I nd i ana’ s CVC A st ate s:N o. 08

- 3431 7 Se c. 1. I fa perso n suffer s a pecuni ar y l oss as a re su lt of a vio l at ion of IC 35 -43 , I C 35 -42 -3-3 , I C 35- 42- 3- 4, o r I C 35- 45- 9, the perso n m ay bring a ci vi la ct i o n a g ains t th e per so n who c au se d the l oss f orthe f ol l owing: ( 1) A n am ount not to exceed thre e ( 3) ti m es th e ac tu alda m ag es o f th e per so n s uffer i ng the l oss . ( 2) The c o st s o fthe a ct i o n. ( 3) A r eas onabl e a tto rney ’ s fee. I nd
. Code § 34- 24- 3- 1. Essenti al l y, the CV CA al l ows a p er so n w h o s u ffer s p ec u n iar y l o s s as a re su lt of c er ta in proper ty cri m es to seek tr ebl e dam age s a nd at torneys’ fees . Because a cl ai m under the CVC A is p rim ar i l y penal inn at u r e , a t w o-y ea r st at u te of lim ita tio n s a p p lies
. C la rk v. U niv. of Eva nsvil le, 7 8 4 N. E. 2 d 9 4 2 , 9 4 5 ( I nd
. C t. App
. 2003 )
. H er e, the ear l i est d at e at w hi ch the sta tute of li m itations cou ld h ave be gan r un nin g on M ercan til e’s cl ai m was De cember2 00 1, a t th e ti m e o fthe fr au dul en t tr an sf er t o W S CI
. The l at es t dat e atwhi chthe sta tu te ofl i m i tat i ons coul d have be gan running was N ove m ber20 02, wh en M er c an ti l e l earned ofthe tr ansfer ofas set s a nd fi l ed i ts Com pla i nt f orRel i ef in A i d of Exe cut i o n o n J udg m en t to v oi d the t r an sferunde rthe Fr au d u len t T ra n sfe r A c t. M er c a n tile arg u es th at it i ni ti ate d the CVC A cl ai m wh en i t m oved fo r l eave to am en d the com pla i nt to add the CVC A cl ai m o n February14, 20 03, wellwithi n the sta tute ofl i m i tat i ons. Ro se c ont en ds th atM er ca nt i l e ne ve rpr o per l y fi l ed th e CV CA cl ai m b ec au se i t a tte m pted to do so duri ng a8 N o. 08

- 3431 pr o ce eding s su ppl ement al
. S o , a cc o r di ngt o Ro se, M er ca nti l e never re fi l ed the CV CA cl ai m w i thi n the statu te o f l i m i tat i ons. I n o r de rt o s o r to utwh e the rthe CV CA c l a i m was p r o pe r l y c o mme n c e d wi th i n th e s t a t u t e o fl i mi t a t i o n s , we m u st ex am in e s ev er al op in ion s o f th e In d ian a c ou rt s. In R o se, t h e I nd i ana S up re m e Cour t r eve rs ed the tr i al co ur t’ s g ran t to M er ca nt i l e o fl ea ve t o a m en d the c om p lain t to a d d t h e C V C A cla im
. R o se, 86 8 N
. E.2 d at 7 77. As th e In d i a n a S u p r e me C o u r te x p l a i n e d i n i t s o p i n i o n, proce edi ngs s up p lem entalo fferthe j ud gm ent c re dit or j ud i ci alr eso urces “fordi sco ver i ng ass ets , re achi ng equi tabl e a nd o theri nter est [ s] notsubj ect to l evyand s ale at l aw and t o set asi de fra ud ule nt co n ve yances .” Id. at 775 (quoti ng M cCar t hy v. M cCar t hy, 2 9 7 N. E
. 2 d 4 4 1 , 4 4 4 ( I nd
. Ct. A pp . 19 73) )
. Fr audu l ent Tr ansferA ct c lai m s s eek enf or cem ent ofthe j ud gm ent, wh i ch br i ngs these cl ai m s withi n the sco pe ofpro ceedi ngs s up ple m en ta l. See I n r e I m po rt & M ini C a r P a rts, Ltd ., 20 0 B .R . 857, 859 n .1 ( Bankr. N
. D. I nd
. 19 96) ( “I n I nd i ana, the own ero fan unp a i d j ud g men tma y, thr o ugh pr o c e e di ng s s up ple

m entaland garni shm ent, se ek to setasid e a nd r eco ver all eged ly frau d ulen t trans fers ofthe j ud gm en t d ebtor’s p ro p er ty .”); see also R o se, 86 8 N
. E.2 d at 7 76. The CV CA cl ai m , o n the ot h er h and, w as not fi l ed to enf or ce the p re vi ous j ud gm ent but ratherto se ek dam age s ba se d on a ne w ca us e o fa ct i o n. Al th o ug h the Indi an a Su p r e m e C ou rtd et er m in ed th at th e t ria l co u rtim p ro viden tly g r an te d M er ca nt i l e leav e to a m en d i ts c o m pl aint to ad d th e C V C A cla im , i t a lso st at ed th at M er c an tileN o. 08

- 3431 9 “m ay continue to pu rs ue i ts CV CA cl ai m thr ough t ra nsfer to a n ew ca u se n u m b e r or so m e o th er m ea n s.” R o se, 868 N
. E.2 d at 777. Aft erthe Indi an a S upr eme Cou r t i ss ue d i ts de ci si o n, the N ew ton Superi orCourtdeni ed M er cantile’ s m oti on s e e k i ngmi sj o i nd e ro fthe CV CA c l a i m. Mer c a nt i l e a ppea l ed th atde ci si o n t o the Indi an a Cou r t o fAppea l s. The I n d i a n a C o u r t o fAp p e a l s fo u n d th e c l a i m w a s c o mm enced i n a t i m ely fashio n and that M er canti l e was en titl ed to m isj oind er. M er cantil e, 9 0 6 N. E
. 2 d a t 8 83
. The c ou rt co n cl ud ed that M er canti l e’ s C V C A cla im w as com m enced w i thi n the sta tute ofl i m i tat ions w hen M er c an tile filed its m ot ion to am en d th e c o m p lain t. Id. at8 86
. Th e co ur t wento n t o e xpl ain tha t th e I ndi an a Su p re m e C ou rt ’s r u lin g, th at br in gin g t h e C V C A cla im du rin g a pro ceedi ng supple m ent was i m proper, di d “not re w ri te hi sto ryand er ase t h e ti m e o fco m m encem ent o f the a cti on, ” i d. at88 6- 87, and, as a re sul t, M er canti l e was en tit led to m isjoin d er of th e C V C A cla im
. Id. at88 8. A s t h e q u es tio n inv olv es th e u n d er lyin g st at e c laim f ordam age s, thi s co urt appli es sta te l aw . K utsuge r as v. AVC O Corp. , 9 73 F
. 2d 13 41 , 1 34 6 ( 7th Ci r . 1 992). We c on cur with the re aso ni ng o fthe I nd i ana Courto f A pp eal s that th e CV CA cl ai m was proper l y c om m enced w ith inth e s t a t u te of lim ita tio n s w h en M er c an tile am ended it s co m pla i nt. Thi s m ostrecentIndi ana C ourto f A p p eals de cision, w hich th e Ind iana Su p rem e C ou rt d eclin ed to recons ider, i s the final w ord that M ercan til e’s CVCA c l ai m di d no t “e va po r at e i nt o the e th er ” when th e In d ian a S u p re m e C ou rtru led lat er th at it w as im p r o v i-10 N o. 08

- 3431 d en tly filed d u rin g a p ro c ee d in g s u p p lem en ta l. M er cantil e, 90 6 N
. E. 2d at8 87
. The r efo r e, M er ca nt i l e’ s co m pl ai nt sh o ul d no t ha ve be endi smi ss ed o n s ta tu te o fl i m i ta ti o ns gr ounds.

B. M er canti l e’ s M ot i on f orCert i f i cat i on i s D enie d I n l i g hto fo urde ci si o n in M er ca nt i l e’ s f av o r, we dec l i ne i t s r e q u e s tt o c e r t i fy a q ue s t i o n t o th e In d i a n a S u p r e me Court.

I I I . C ONC L US I ON Therefor e, we R EV ER SE t he de cision of th e d istri ct cou rt a nd R EMA ND f orfurtherpro ceed i ngs c onsi ste nt with th i s o pi ni o n.

10- 7- 09