Court Opinion

ID: 4412422
Source: CourtListenerOpinion
Date Created: 2019-06-28 16:03:52.41642+00
Date Added: 2024-06-11T12:32:38.725093
License: Public Domain

FILED
                                                                    Jun 28 2019, 9:00 am

                                                                         CLERK
                                                                     Indiana Supreme Court
                                                                        Court of Appeals
                                                                          and Tax Court

ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEE,
Zachary J. Stock                                           JUDITH M. FULFORD
Indianapolis, Indiana                                      William J. Spalding
                                                           Spalding Law LLC
                                                           Bloomington, Indiana
                                                           ATTORNEY FOR APPELLEE,
                                                           THOMAS BUNGER
                                                           Scott D. Pankow
                                                           Indianapolis, Indiana

                                             IN THE
    COURT OF APPEALS OF INDIANA

Cheryl Underwood,                                          June 28, 2019
Appellant-Plaintiff,                                       Court of Appeals Case No.
                                                           18A-PL-1744
        v.                                                 Appeal from the Monroe Circuit
                                                           Court
Judith M. Fulford; Thomas                                  The Honorable Elizabeth A. Cure,
Bunger, in his capacity as the                             Judge
Personal Representative of the                             Trial Court Cause Nos.
Estate of Kenneth K. Kinney;                               53C01-1504-MI-657
and Sheree Demming,                                        53C01-1603-PL-471
                                                           53C01-1711-ES-256
Appellees-Defendants.

Pyle, Judge.

                                   Statement of the Case

Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019                            Page 1 of 13
[1]   This matter involves three consolidated cases initiated by Cheryl Underwood

      (“Underwood”): two claims against the Estate of Kenneth K. Kinney (the

      “Estate”) seeking contribution for a partnership liability (collectively, the

      “Contribution Action”); a claim against the Estate for alleged fraudulent

      transfer of property (the “Fraudulent Transfer Action”); and a petition for sale

      and partition of the parties’ jointly owned real estate (the “Partition Action”).

      Presently, Underwood appeals the trial court’s judgment in favor of the Estate

      in the Contribution Action and Fraudulent Transfer Action and its retention of

      funds in the Partition Action. Specifically, Underwood argues that the trial

      court erred in concluding that she could not recover in the Contribution Action

      and Fraudulent Transfer Action because the Estate was entitled to both

      common-law and statutory indemnification for Underwood’s wrongful

      conduct. She further argues that the trial court erred in retaining the proceeds

      (“Partition Proceeds”) from the sale of the parties’ jointly owned real estate (the

      “Partition Sale”) even after determining the parties’ respective ownership

      interests. Concluding that the trial court did not err in concluding that the

      Estate was entitled to indemnification but did err in retaining Underwood’s and

      the Estate’s shares of the Partition Proceeds, we affirm in part, reverse in part,

      and remand.

[2]   We affirm in part, reverse in part, and remand.

                                                       Issues
      1.      Whether the trial court clearly erred in entering judgment in
              favor of the Estate in the Contribution Action and Fraudulent
              Transfer Action.
      Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019          Page 2 of 13
      2.      Whether the trial court clearly erred in retaining some of the
              Partition Proceeds after determining the parties’ respective
              ownership interests.

                                                       Facts
[3]   These parties come before our Court again following a lengthy factual and

      procedural history spanning nearly two decades. We have detailed this history

      in two previously published opinions (collectively, the “Demming Litigation”).

      See Demming v. Underwood, 943 N.E.2d 878, 882-83 (Ind. Ct. App. 2011), trans.

      denied; Demming v. Underwood, 40 N.E.3d 887, 891-93 (Ind. Ct. App. 2015). The

      parties have also been heard by our Supreme Court in a property-division

      matter (the “Partition Action”) also relating to this matter. See Underwood v.

      Bunger, 70 N.E.3d 338, 340-42 (Ind. 2017). The following is a summary of facts

      pertinent to the issues Underwood presently appeals.

[4]   Sometime in 2002, Sheree Demming (“Demming”) retained Underwood, a real

      estate broker, to help her purchase two properties on East Sixth Street in

      Bloomington, Indiana (the “Sixth Street Properties”). Instead of facilitating the

      sale to Demming, Underwood approached Kenneth Kinney (“Kinney”) about

      purchasing the Sixth Street Properties as partners. Ultimately, she and Kinney

      purchased the Sixth Street Properties for themselves.

[5]   On April 19, 2007, Demming filed suit against Underwood and Kinney

      asserting claims for breach of fiduciary duty and constructive fraud and

      requesting the imposition of a constructive trust compelling Underwood and

      Kinney to convey title of the Sixth Street Properties to her. Demming

      Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019        Page 3 of 13
      ultimately prevailed on her claims and was awarded $154,552.14 in damages

      (the “Demming Judgment”), for which Underwood and Kinney were held

      jointly and severally liable. Underwood subsequently satisfied the Demming

      Judgment on her own.

[6]   On November 16, 2014, Kinney passed away. He was survived by his wife

      Judith Fulford (“Fulford”) and the personal representative of his Estate,

      Thomas Bunger (“Bunger”). In February and March of 2015, Underwood

      initiated the Contribution Action, demanding equal contribution for any

      payment made to satisfy the Demming Judgment, as well as equal contribution

      for any charges, costs, or additional damages arising out of the Demming

      Judgment.

[7]   On April 13, 2015, Underwood filed the Partition Action to petition to compel

      the partition of other real estate (the “Eighth Street Property”) jointly owned by

      Underwood, Fulford, and the Estate. On March 3, 2016, she also filed the

      Fraudulent Transfer Action against the Estate, alleging that Kinney had

      conveyed certain other properties to Fulford in violation of Indiana’s Uniform

      Fraudulent Transfer Act (“UFTA”).

[8]   On July 15, 2016, the Eighth Street Property was sold at the Partition Sale for

      $237,000. Once the remaining mortgage amount was satisfied, the Partition

      Proceeds amounted to $204,284.89. On April 18, 2017, and July 13, 2017, the

      trial court consolidated the Contribution Action and the Partition Action,

      respectively, into the Fraudulent Transfer Action.

      Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019        Page 4 of 13
[9]   On December 4, 2017, the trial court conducted a bench trial in the

      Contribution Action on the issue of whether Kinney holds a right to indemnity

      from Underwood for any liability resulting from the Demming Litigation, and

      therefore, whether Underwood was precluded from obtaining contribution

      toward payment of that judgment. On April 24, 2018, the trial court entered its

      finding that the Demming Judgment had held Kinney vicariously liable for

      Underwood’s wrongful conduct and that Kinney had committed no

      independent fraudulent act. The trial court also concluded that Kinney (and

      now the Estate) had both a common-law right and a statutory right to

      indemnity from Underwood for the Demming Judgment. The trial court

      further concluded that its judgment in the Contribution Action rendered the

      Fraudulent Transfer Action invalid and moot. The trial court issued an order

      (the “Indemnification Order”) that reads, in pertinent part, as follows:

              The Court, being duly advised, now hereby enters judgment in
              favor of the Estate and against Underwood and finds that the
              Estate is entitled to judgment on whether Underwood is legally
              entitled to contribution for any payments toward or expenses for
              the Demming Judgment. For the aforementioned reasons, [the
              two claims of the Contribution Action] are invalid as a matter of
              law and were properly denied.

              The Court further enters judgment in favor of the Estate and
              Fulford and against Underwood on Underwood’s Fraudulent
              Transfer complaint in [] Case No. 53C01-1603-PL-000471. This
              case is now rendered invalid and moot as a result of Underwood
              not having any claim in the Estate arising out of the Demming
              Judgment.

              The Court further finds that the ownership interests in the
              property at issue in Case No. 53C01-1504-MI-000657 were and
              continue to be disputed by Underwood, the Estate, and Fulford.

      Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019           Page 5 of 13
                This matter will be addressed at a later date in that action and
                does not constitute a valid claim in the Estate.

       (App, Vol. 2 at 43-44).

[10]   Subsequently, on June 21, 2018, the trial court issued an order (the “Partition

       Order”) determining the parties’ respective interests in the Partition Proceeds as

       follows: fifty percent (50%) to Underwood; twenty-five percent (25%) to Kinney

       (and now the Estate); and twenty-five percent (25%) to Fulford. Also within

       the Partition Order, the trial court authorized the disbursement of Fulford’s

       share but ordered that the remaining shares be held by the clerk until further

       order.

[11]   Underwood now appeals both the Indemnification Order and the Partition

       Order.

                                                     Decision
[12]   In both Orders being appealed, the trial court entered findings of fact and

       conclusions of law pursuant to Indiana Trial Rule 52(A). We therefore apply a

       two-tiered standard of review: we first determine whether the evidence

       supports the trial court's findings, and second we determine whether the trial

       court’s findings support the judgment. Anderson v. Ivy, 955 N.E.2d 795, 800

       (Ind. Ct. App. 2011), trans. denied. The trial court’s findings and conclusions

       will be set aside only if they are clearly erroneous, i.e., if the record contains no

       facts or inferences supporting them. Redd v. Redd, 901 N.E.2d 545, 549 (Ind.

       Ct. App. 2009). The party appealing the trial court’s judgment must establish

       that the findings are clearly erroneous. Anderson, 955 N.E.2d at 800. The trial
       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019           Page 6 of 13
       court’s findings are clearly erroneous only when a review of the record leaves us

       firmly convinced that a mistake has been made. Id. In reviewing the trial

       court’s findings, we neither reweigh the evidence nor assess the credibility of

       witnesses, but consider only the evidence most favorable to the judgment.

       Redd, 901 N.E.2d at 549. We do not, however, defer to the trial court’s

       conclusions of law, which we review de novo. Anderson, 955 N.E.2d at 800;

       Redd, 901 N.E.2d at 549.

[13]   Here, Underwood does not challenge any of the trial court’s specific findings.

       Rather, she contends that the trial court misapplied the law in two ways: (1) by

       determining that she was not entitled to recover for her fraudulent transfer

       claims because the Estate owed her no contribution for the Demming

       Judgment; and (2) by retaining proceeds from the Partition Sale until the

       parties’ resolved their disputes about ownership interests. We will consider

       each of her arguments in turn.

       1. Dismissal of Underwood’s Fraudulent Transfer Claim

[14]   First, Underwood challenges the trial court’s dismissal of her fraudulent transfer

       claim against the Estate. Specifically, she argues that “the trial court should not

       have applied common law indemnity concepts to determine whether Kinney

       (or his estate) was a debtor under Indiana’s UFTA. (Underwood’s Br. 9). She

       further argues that Kinney is not entitled to either common-law or statutory

       indemnification, and therefore she may recover a contribution from the Estate

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019        Page 7 of 13
       for the Demming Judgment because she “paid more than her share of the

       liability.” Id. at 12. We disagree.

[15]   Indiana’s UFTA provides, in relevant part that:

               A transfer made or an obligation incurred by a debtor is
               fraudulent as to a creditor, whether the creditor’s claim arose
               before or after the transfer was made or the obligation was
               incurred, if the debtor made the transfer or incurred the
               obligation … with actual intent to hinder, delay, or defraud any
               creditor of the debtor[.]

       IND. CODE § 32-18-2-14. The UFTA further defines a “debtor” as “a person

       who is liable on a claim.” I.C. § 32-18-2-2. We have previously held that a

       defendant cannot logically be held liable for fraudulent transfer under the

       UFTA if he is not to be held liable for the creditor’s underlying claim. See Four

       Seasons Mfg, Inc. v. 1001 Coliseum, LLC, 870 N.E.2d 494, 511 (Ind. Ct. App.

       2007) (“There is a logical disconnect between the trial court’s decision that

       FSM is liable to Coliseum for its role in the fraudulent transfer but is not a

       debtor to Coliseum.”) (emphasis in original). Accordingly, when a UFTA

       defendant is not a debtor to the plaintiff, dismissal is proper. See id.

[16]   Here, the trial court’s dismissal was proper for precisely that reason. Although

       Underwood argues that “the trial court applied the wrong legal standard to

       determine whether the Estate was a debtor under the [UFTA,]” her argument is

       wholly devoid of any citation to authority for that proposition. (See

       Underwood’s Br. at 10-12). Rather, Underwood simply quotes sections of the

       UFTA and UPA and circularly asserts that she was a creditor under the UFTA

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019          Page 8 of 13
       “because she has a right to contribution from [the Estate] arising from Kinney’s

       obligation to contribute to the losses of the partnership.” (Appellant’s Br. 11).

       Because Underwood has failed to present a cogent argument that the trial court

       applied the wrong legal standard to determine whether the Estate was a debtor,

       we will not consider that assertion on appeal. Shepherd v. Truex, 819 N.E.2d
457, 463 (Ind. Ct. App. 2004) (“It is well settled that we will not consider an

       appellant’s assertion on appeal when he has failed to present cogent argument

       supported by authority and references to the record as required by the rules.”)

       (internal citation and quotation marks omitted).

[17]   Underwood next argues that the trial court erred in finding that the Estate was

       entitled to common-law indemnity for the Demming Judgment. Specifically,

       she argues that common-law indemnity is unavailable to the Estate because the

       former partnership relationship between her and Kinney is to be governed

       solely by Indiana’s Uniform Partnership Act (“UPA”). For the reasons below,

       we disagree.

[18]   “Generally, the right of indemnification arises only by contract, express or

       implied, or by statutory obligation.” Rotec, Div. of Orbitron, Inc. v. Murray Equip.,

       Inc., 626 N.E.2d 533, 535 (Ind. Ct. App. 1993), reh’g denied. “However, a right

       to indemnity may be implied at common law.” Id. (citing Indianapolis Power &

       Light Co. v. Snodgrass, 578 N.E.2d 669, 670-71 (Ind. 1991)). “In the absence of

       any express contractual or statutory obligation to indemnify, such action will lie

       only where a party seeking indemnity is without actual fault but has been

       compelled to pay damages due to the wrongful conduct of another for which he

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019          Page 9 of 13
       is constructively liable.” Id. “The obligation to indemnify does not arise until

       the party seeking indemnity suffers loss or damages[.]” Indianapolis–Marion

       Cnty. Pub. Library v. Charlier Clark & Linard, PC, 929 N.E.2d 838, 848 (Ind. Ct.

       App. 2010), trans. denied. “In contribution or indemnification cases, the damage

       that occurs is the incurrence of a monetary obligation that is attributable to the

       actions of another party.” Pflanz v. Foster, 888 N.E.2d 756, 759 (Ind. 2008). See

       also Coca–Cola Bottling Co.-Goshen, Ind. v. Vendo Co., 455 N.E.2d 370, 373 (Ind.

       Ct. App. 1983) (explaining that one of the elements of a claim for indemnity is

       that a claimant “has paid or been compelled to pay a judgment recovered by the

       injured person”) (emphasis added); cf. TLB Plastics Corp. v. Procter & Gamble

       Paper Prods. Co., 542 N.E.2d 1373, 1376 (Ind. Ct. App. 1989) (stating that a

       party seeking indemnity suffers loss “at the time of payment of the underlying

       claim, payment of a judgment on the underlying claim, or payment in

       settlement of the underlying claim”), reh’g denied, trans. dismissed.

[19]   Here, Underwood does not dispute any of the trial court’s findings supporting

       its conclusion, specifically that Kinney committed no independent act of fraud

       but was held constructively liable for Underwood’s own wrongful and

       fraudulent conduct. Instead, she argues only that the indemnification

       provisions of the UPA preempt any common-law indemnification that would

       be available to the Estate. Once again, she has failed to present a cogent

       argument in support of this position; her argument is wholly devoid of any

       citation to authority to support this assertion. For that reason alone, her

       argument fails. See Shepherd, 819 N.E.2d at 463. Furthermore, the pertinent

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019        Page 10 of 13
       section of the UPA governing indemnification does not purport to preempt any

       common-law rights, but rather expressly preserves all other rights. See I.C. § 23-

       24-1-39 (expressly stating a party’s entitlement under that provision is “without

       prejudice to any other right”). Therefore, based on the specific facts of this case

       – that Kinney was without actual fault and was compelled to pay damages due

       to Underwood’s wrongful conduct – we conclude that the record before us

       supports a judgment in favor of the Estate based on a right to indemnification

       implied at common law.1 We affirm the trial court’s judgment in favor of the

       Estate in the Contribution Action and Fraudulent Transfer Action.

       2. Disbursement of Partition Proceeds

[20]   Finally, Underwood argues that the trial court erred by not disbursing to her a

       one-half share of the Partition Proceeds. Specifically, she argues that it was

       clearly erroneous for the trial court to withhold disbursement of the Partition

       Proceeds after the parties’ ownership interests have been determined. We

       agree.

[21]   INDIANA CODE § 32-17-4-2.5(l) governs the disbursement of proceeds from real

       property partition sales. It provides, in pertinent part, that “the court shall

       1
         Underwood also argues that the trial court erred in finding that the Estate was entitled to statutory
       indemnification. Because we find that the Estate was entitled to common-law indemnification, we need not
       address this argument.

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019                           Page 11 of 13
       divide the proceeds of the sale among the remaining owners in proportion to their

       ownership interest.” (emphasis added).

[22]   Here, the trial court first determined in the Indemnification Order that the

       “ownership interests in the property at issue in [the Partition Action] were and

       continue to be disputed by Underwood, the Estate, and Fulford.” (App. Vol 2

       at 44). Subsequently, in the Partition Order, the trial court determined the

       following ownership interests in the Partition Proceeds: fifty percent (50%) to

       Underwood; twenty-five percent (25%) to Kenneth Kinney (and now the

       Estate); and twenty-five percent (25%) to Fulford. The trial court then

       disbursed the share belonging to Fulford but retained the remaining shares until

       further order. It provided no explanation or further findings to support its

       continued retention of the shares belonging to the Estate and Underwood.2 For

       that reason, we do not find that the trial court’s findings support its judgment in

       that regard, see Anderson, 955 N.E.2d at 800, and we therefore reverse and

       remand that part of the Partition Order.

[23]   In conclusion, the trial court did not clearly err in finding that the Estate was

       entitled to indemnification from Underwood for the Demming Judgment and

       2
         In her brief, Underwood also points to the lis pendens notice filed by the Estate in the Partition Action and
       argues that the trial court improperly held the notice to be a valid lien against the Partition Proceeds. She
       cites Curry v. Orwig, 429 N.E.2d 268, 273 (Ind. Ct. App. 1981), for the proposition that a lis pendens notice
       may not be used to secure a personal claim against a party. However, her arguments and reliance on Curry
       are inapposite. Here, the trial court never stated in either the Indemnification or the Partition Order that the
       Partition Proceeds were being held subject to the Estate’s lis pendens notice. Therefore, we need not address
       Underwood’s arguments regarding the doctrine of lis pendens.

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019                                  Page 12 of 13
       entering judgment in favor of the Estate in the Contribution Action and

       Fraudulent Transfer Action. Accordingly, we affirm the Indemnification

       Order. However, the trial court did clearly err in the Partition Order, as the

       trial court’s findings (specifically the respective ownership percentages it

       determined) do not support its continued retention of the respective shares of

       the Partition Proceeds belonging to Underwood and the Estate. Therefore, we

       remand for the trial court to disburse the Partition Proceeds according to the

       parties’ ownership interests.

[24]   We affirm in part, reverse in part, and remand.

       Brown, J., and Altice, J., concur.

       Court of Appeals of Indiana | Opinion 18A-PL-1744 | June 28, 2019         Page 13 of 13