Opinion ID: 1191668
Heading Depth: 2
Heading Rank: 1

Heading: Mercantile Commenced Its CVCA Claim Within the Statute of Limitations

Text: We review a Rule 12(b)(6) dismissal of an adversary complaint in bankruptcy de novo. In re Consol. Indus., 360 F.3d 712, 716 (7th Cir.2004). Mercantile's complaint was dismissed because the bankruptcy court held that the statute of limitations barred his claim. In relevant part, Indiana's CVCA states: Sec. 1. If a person suffers a pecuniary loss as a result of a violation of IC 35-43, IC XX-XX-X-X, IC XX-XX-X-X, or IC 35-45-9, the person may bring a civil action against the person who caused the loss for the following: (1) An amount not to exceed three (3) times the actual damages of the person suffering the loss. (2) The costs of the action. (3) A reasonable attorney's fee. Ind.Code § 34-24-3-1. Essentially, the CVCA allows a person who suffers pecuniary loss as a result of certain property crimes to seek treble damages and attorneys' fees. Because a claim under the CVCA is primarily penal in nature, a two-year statute of limitations applies. Clark v. Univ. of Evansville, 784 N.E.2d 942, 945 (Ind.Ct.App.2003). Here, the earliest date at which the statute of limitations could have began running on Mercantile's claim was December 2001, at the time of the fraudulent transfer to WSCI. The latest date at which the statute of limitations could have began running was November 2002, when Mercantile learned of the transfer of assets and filed its Complaint for Relief in Aid of Execution on Judgment to void the transfer under the Fraudulent Transfer Act. Mercantile argues that it initiated the CVCA claim when it moved for leave to amend the complaint to add the CVCA claim on February 14, 2003, well within the statute of limitations. Rose contends that Mercantile never properly filed the CVCA claim because it attempted to do so during a proceedings supplemental. So, according to Rose, Mercantile never refiled the CVCA claim within the statute of limitations. In order to sort out whether the CVCA claim was properly commenced within the statute of limitations, we must examine several opinions of the Indiana courts. In Rose, the Indiana Supreme Court reversed the trial court's grant to Mercantile of leave to amend the complaint to add the CVCA claim. Rose, 868 N.E.2d at 777. As the Indiana Supreme Court explained in its opinion, proceedings supplemental offer the judgment creditor judicial resources for discovering assets, reaching equitable and other interest[s] not subject to levy and sale at law and to set aside fraudulent conveyances. Id. at 775 (quoting McCarthy v. McCarthy, 156 Ind.App. 416, 297 N.E.2d 441, 444 (1973)). Fraudulent Transfer Act claims seek enforcement of the judgment, which brings these claims within the scope of proceedings supplemental. See In re Import & Mini Car Parts, Ltd., 200 B.R. 857, 859 n. 1 (Bankr.N.D.Ind.1996) (In Indiana, the owner of an unpaid judgment may, through proceedings supplemental and garnishment, seek to set aside and recover allegedly fraudulent transfers of the judgment debtor's property.); see also Rose, 868 N.E.2d at 776. The CVCA claim, on the other hand, was not filed to enforce the previous judgment but rather to seek damages based on a new cause of action. Although the Indiana Supreme Court determined that the trial court improvidently granted Mercantile leave to amend its complaint to add the CVCA claim, it also stated that Mercantile may continue to pursue its CVCA claim through transfer to a new cause number or some other means. Rose, 868 N.E.2d at 777. After the Indiana Supreme Court issued its decision, the Newton Superior Court denied Mercantile's motion seeking misjoinder of the CVCA claim. Mercantile appealed that decision to the Indiana Court of Appeals. The Indiana Court of Appeals found the claim was commenced in a timely fashion and that Mercantile was entitled to misjoinder. Mercantile, 906 N.E.2d at 883. The court concluded that Mercantile's CVCA claim was commenced within the statute of limitations when Mercantile filed its motion to amend the complaint. Id. at 886. The court went on to explain that the Indiana Supreme Court's ruling, that bringing the CVCA claim during a proceeding supplement was improper, did not rewrite history and erase the time of commencement of the action, id. at 886-87, and, as a result, Mercantile was entitled to misjoinder of the CVCA claim. Id. at 888. As the question involves the underlying state claim for damages, this court applies state law. Kutsugeras v. AVCO Corp., 973 F.2d 1341, 1346 (7th Cir.1992). We concur with the reasoning of the Indiana Court of Appeals that the CVCA claim was properly commenced within the statute of limitations when Mercantile amended its complaint. This most recent Indiana Court of Appeals decision, which the Indiana Supreme Court declined to reconsider, is the final word that Mercantile's CVCA claim did not evaporate into the ether when the Indiana Supreme Court ruled later that it was improvidently filed during a proceeding supplemental. Mercantile, 906 N.E.2d at 887. Therefore, Mercantile's complaint should not have been dismissed on statute of limitations grounds.