Court Opinion

ID: 4455757
Source: CourtListenerOpinion
Date Created: 2019-11-14 16:04:58.909051+00
Date Added: 2024-06-11T14:45:15.535282
License: Public Domain

FILED
                                                                 Nov 14 2019, 5:48 am

                                                                        CLERK
                                                                  Indiana Supreme Court
                                                                     Court of Appeals
                                                                       and Tax Court

ATTORNEY FOR APPELLANTS                                   ATTORNEY FOR APPELLEE
Karen Celestino-Horseman                                  Stephen R. Lewis
Of Counsel, Austin & Jones, P.C.                          Indianapolis, Indiana
Indianapolis, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Raul Hernandez-Velazquez,                                 November 14, 2019
Appellant-Respondent,                                     Court of Appeals Case No.
                                                          18A-DR-3109
and                                                       Appeal from the
                                                          Fountain Circuit Court
Modesto Hernandez and
                                                          The Honorable
Elizabeth Barcaleta,                                      Samuel A. Swaim, Special Judge
Appellants-Intervenors,                                   Trial Court Cause No.
                                                          23C01-1411-DR-332
        v.

Sondra Hernandez,
Appellee-Petitioner

Vaidik, Chief Judge.

Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019                     Page 1 of 17
                                           Case Summary
[1]   Raul Hernandez-Velazquez (“Husband”), Modesto Hernandez, and Elizabeth

      Barcaleta Santiago (collectively, “Appellants”) appeal the trial court’s order

      requiring the conveyances of certain properties to Sondra Hernandez (“Wife”)

      to effectuate the division of marital assets in Husband and Wife’s divorce.

      Specifically, Appellants argue that the trial court erred in finding that Wife is a

      creditor under the Uniform Fraudulent Transfer Act (UFTA), by finding that

      Husband conveyed several properties to Elizabeth shortly before the divorce

      with the intent to defraud Wife, and by setting aside those conveyances.

      Because the evidence supports the trial court’s finding that Wife is a creditor

      under UFTA and that Husband’s intent was fraudulent, we affirm.

                            Facts and Procedural History
[2]   Husband and Wife were married in August 2001. Wife is a United States

      citizen. Husband is a citizen of Mexico and resides in the United States

      without proper documentation. Husband worked from approximately 2001 to

      2005 at Lithonia Lighting and then at Harrison Steel from 2005 to 2008. For

      her part, Wife worked as a translator on a contract basis for the Southeast

      Fountain School Corporation and Fountain Circuit Court. She also babysat

      occasionally but was primarily focused on raising her and Husband’s four

      children: S.H., born in May 2002, A.H., born in January 2006, and twins, I.H.

      and M.H., born in April 2008. To afford their daily living expenses, the family

      Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 2 of 17
      applied for and received government benefits, such as housing assistance, food

      stamps, and Medicaid.

[3]   Husband’s brother, Modesto, was close to the family throughout the marriage.

      Modesto is also a citizen of Mexico and resides in the United States without

      proper documentation. Although they have never been married, Modesto has

      been in a relationship with Elizabeth, also a citizen of Mexico, for more than

      thirty years, and together they have three children. Since Modesto arrived in

      the United States in 1999, without Elizabeth, he has worked for Masterguard,

      Perdue, Harrison Steel, and Closure Systems International. He also mows

      lawns whenever he can. In September 2005, Husband and Modesto decided to

      buy and renovate a foreclosed house at 317 Harrison Street in Crawfordsville.

      The brothers bought the house for $11,000 cash, with Modesto putting $9,600

      toward the purchase price and Husband providing the rest and doing the

      renovations. See Tr. Vol. III p. 99. The house was titled and insured in

      Husband’s name. After renovations were complete, 317 Harrison Street was

      rented for $600 a month. Tr. Vol. II p. 24; see also Ex. 12. Wife was responsible

      for collecting rent and paying property taxes. In June 2006, Husband and

      Modesto decided to buy and renovate another house, this one located at 316 W.

      Van Buren Street in Veedersburg. The brothers bought the house for $18,000

      cash. See Ex. 36. The house was titled and insured in Husband’s name. This

      house was Husband and Wife’s marital home through the remainder of the

      marriage.

      Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019   Page 3 of 17
[4]   After Husband was fired from Harrison Steel in 2008, he and Wife started a

      business—Sorani Construction and Remodeling—that would buy foreclosed

      homes, fix them up, and then rent or sell them. Tr. Vol. II p. 15. In January

      2010, Husband decided to buy and renovate a foreclosed duplex at 115 N.

      Walnut Street in Crawfordsville. The duplex was purchased for $10,500 cash

      and was titled and insured in Husband’s name. After renovations were

      complete, each unit at 115 N. Walnut Street was rented for $400 a month. Ex.

      27. Wife was responsible for collecting rent, and Sorani Construction paid the

      property taxes. In March 2010, Husband decided to buy and renovate a

      foreclosed house at 821 N. Sherman Street in Veedersburg. The purchase price

      of the house was $9,000 and was paid for by a cashier’s check in Husband’s

      name. The house was titled and insured in Husband’s name. After renovations

      were complete, 821 N. Sherman Street was rented for $425 a month. See Ex.

      48. Wife was responsible for collecting rent, and Husband paid the property

      taxes. In May, Husband and Modesto decided to buy a house located at 415

      W. North Street in Crawfordsville. The brothers bought the house for $6,000

      cash, with Modesto putting $5,348.24 toward the purchase price and Husband

      providing the rest and doing the renovations. The house was titled in

      Modesto’s name, and Sorani Construction paid the property taxes.

[5]   Two years later, in November 2012, Modesto married Wife’s aunt, Penny

      Stonebraker. The marriage was part of Modesto’s attempt to acquire lawful

      permanent resident status. Tr. Vol. II p. 140.

      Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019   Page 4 of 17
[6]   In May 2013, Husband decided to buy and renovate a foreclosed house at 404

      S. Grace Street in Crawfordsville. The purchase price of the house was $8,500

      and was paid for by a cashier’s check in Husband’s name. Tr. Vol. II p. 43; see

      also Ex. 31. The house was titled and insured in Husband’s name. After

      renovations were complete, 404 S. Grace Street was rented for $650 a month.

      Wife was responsible for collecting rent, and Sorani Construction paid the

      property taxes. In December, the brothers became worried that if Modesto

      divorced Penny, she could get the house located at 415 W. North Street, so

      Modesto transferred ownership of 415 W. North Street to Husband. Tr. Vol. II

      p. 32. Husband did not pay Modesto any money in exchange for the transfer.

      In February 2014, Husband sold 415 W. North Street to Jesus Trevino and

      Maria Magdalena under a rent-to-own arrangement. Ex. 17. The monthly

      payments are $680 a month. Tr. Vol. II p. 35.

[7]   In April, Husband decided to buy and renovate a house at 515 Chambers Street

      in Veedersburg. He purchased the house for $19,500 cash, and it was titled and

      insured in his name. In September, while Modesto was still married to Penny,

      his partner, Elizabeth, arrived in the United States. Elizabeth arrived without

      proper documentation. Husband and Wife traveled to Texas to pick up

      Elizabeth, and after they returned to Indiana, their marriage began to

      deteriorate. Husband told Wife that she needed to show Elizabeth how to

      collect rent and issue receipts because Elizabeth would now do that job instead

      of Wife. Tr. Vol. III pp. 13-14. Husband also had Wife type a document

      saying that they owed Modesto $51,500. Id. at 133. Both Husband and Wife

      Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019    Page 5 of 17
      signed the document. Then on October 13, Husband conveyed all the

      properties titled in his name to Elizabeth for ten dollars. Tr. Vol. II p. 17; see

      also Exs. 1, 2. Less than a month later, Wife requested a protective order,

      alleging that Husband had committed two acts of domestic violence against

      her—first on October 24 and then again on November 12. Wife then filed a

      petition for dissolution of marriage on November 18, 2014.

[8]   In May 2016, the trial court entered its findings of fact and conclusions of law

      and decree of dissolution. See Appellant’s App. Vol. II p. 12. Both parties filed

      motions to correct errors, and the trial court entered an agreed order vacating

      the property-division portion of the trial court’s May 2016 order. A special

      judge was appointed to resolve the property-division issue.

[9]   In July 2017, Wife filed an amended petition for dissolution of marriage,

      alleging that Husband “made the conveyances [to Elizabeth] with the intent to

      hinder, delay, and defraud creditors, including Wife, to protect and preserve the

      real property for Husband’s own use and benefit, and to prevent and hinder

      Wife from collecting and receiving, . . . the amount due Wife in this dissolution

      of marriage action.” Appellant’s App. Vol. II p. 84. Wife did not cite UFTA in

      her amended petition, but she used language found in the statute, which

      provides, in relevant part:

              A transfer made or an obligation incurred by a debtor is voidable
              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:

      Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019       Page 6 of 17
                        (1) with actual intent to hinder, delay, or defraud any
                        creditor of the debtor; or

                        (2) without receiving a reasonably equivalent value in
                        exchange for the transfer or obligation, and the debtor:

                                (A) was engaged or was about to engage in a
                                business or a transaction for which the remaining
                                assets of the debtor were unreasonably small in
                                relation to the business or transaction; or

                                (B) intended to incur or believed or reasonably
                                should have believed that the debtor would incur
                                debts beyond the debtor’s ability to pay as the debts
                                became due.

       Ind. Code § 32-18-2-14. UFTA defines a “debtor” as “a person that is liable on

       a claim,” Ind. Code § 32-18-2-2, and a “creditor” as “a person that has a

       claim,” id.

[10]   Wife’s amended petition also brought Elizabeth into the proceedings. See

       Appellant’s App. Vol. II pp. 83-86. In March 2018, Elizabeth and Modesto

       were permitted to intervene in the dissolution proceedings. See id. at 90.

[11]   The trial court held the final hearing over three days on June 7, August 27, and

       October 18, 2018. Wife testified that she started Sorani Construction with

       Husband to “buy foreclosed homes, fix them up, rent them out or sell them.”

       Tr. Vol. II p. 15. Wife said that she and Husband used savings to purchase the

       houses they bought and credit cards to pay for the remodeling. Id. at 73. Wife

       acknowledged that Modesto had loaned the family some money but alleged
       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019            Page 7 of 17
that the money was “not directly for any certain property.” Id. at 74, 170. Wife

said that when they first started flipping homes, the family lived in an

apartment and their rent was paid for by the government. Id. at 119. Wife also

said that they received up to $500 a month in food stamps. Id. at 122. Wife

testified that Husband told her that he transferred all their properties to

Elizabeth in October 2014 to make sure that she “didn’t get any properties

when [she] filed for divorce.” Id. at 18. Modesto testified that after Husband

lost his job in 2008, he began loaning the family money for “bills and

everything.” Id. at 244. Modesto said that he would give Husband money as

he needed and that over time he had loaned Husband about $39,000. See id. at

247. Husband testified that he had “a good job until 2008” and that after he

was fired Modesto began helping his family financially. Tr. Vol. III p. 77.

Husband said that when he was fired, he received around $22,000 in profit

sharing but that all the money went to pay for things his children needed. See

id. at 91. Husband acknowledged that he transferred all his properties to

Elizabeth in October 2014 but said that he did so because he believed that all

the properties belonged to Modesto. Id. at 104. Husband said that he believed

that all the properties titled in his name belonged to Modesto because he had

helped finance all the purchases. See id. at 149. Husband said that he “still” has

an arrangement with Modesto that he is “going to do the labor and [Modesto]

will repay [him].” Id. at 102. Husband also acknowledged that he withdrew

$1,400 from his and Wife’s bank account on November 12, 2014—the day

before Wife obtained a protective order against him. See id. at 135. Elizabeth

Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019         Page 8 of 17
       testified that she does not speak English and that in order to collect rent for the

       properties, she must use an interpreter. Id. at 59, 63.

[12]   In December 2018, the trial court issued its findings of fact and conclusions of

       law. The trial court found that UFTA applies to Husband’s conveyance of the

       properties to Elizabeth and that Wife is a creditor under UFTA. Thereafter, the

       court addressed the disputed properties as follows:

               33. [Husband] and Modesto allegedly formed a partnership in
               2005 to purchase, flip, and rent homes in Montgomery and
               Fountain counties.

                                                       *****

               43. There is no documentary evidence to support the testimony
               regarding the partnership.

                                                       *****

               57. [Husband] purchased each property in a cash transaction.
               Cash transactions require far less time and effort from the buyer’s
               perspective at closing. Given the lack of financing, the parties
               offered no explanation why the properties could not have been
               placed in Modesto’s name, or that of the partnership, in his
               absence.

               58. The documentary evidence overwhelmingly supports the
               inclusion of each of the properties in the marital estate.

                                                       *****

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 9 of 17
        64. Given the modest purchase prices, [Wife’s] testimony that
        each of the properties was bought with the rental income is
        credible.

                                                *****

        67. Based on the applications for assistance, it appears that a
        significant portion of [Husband and Wife’s] daily living expenses
        w[ere] paid using government benefits. The Court does not
        condone this behavior, but it offers some explanation regarding
        the disposable income necessary to purchase the distressed
        properties.

                                                *****

        74. [T]he Court finds that the conveyances on October 13, 2014
        are fraudulent and are hereby set aside.

                                                *****

        76. The Court does find that Modesto Hernandez helped finance
        the purchase of most if not all the properties here under
        consideration. There ha[ve] been so many different attempts at
        defrauding the government and/or other parties it is impossible
        at this point to determine what the original intentions of the
        parties were as to these investments.

Appellant’s App. Vol. II pp. 32-35. After putting the disputed properties into

the marital pot, the trial court divided it 50-50. Wife was assigned the

properties located at 317 Harrison Street, 415 W. North Street, 115 N. Walnut

Street, and 316 W. Van Buren Street. Id. at 37. The trial court also ordered

that “the parties shall execute quitclaim deeds within thirty (30) days of this
Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 10 of 17
       Order to convey title of each of the properties awarded to [Wife].” Id. at 36.

       Husband was assigned the properties located at 404 S. Grace Street, 821 N.

       Sherman Street, and 515 Chambers Street. Id. at 37. The trial court also found

       that Husband and Wife were both responsible for $51,500 they owed to

       Modesto. The trial court included the $51,500 as marital debt and divided it

       equally between Husband and Wife. See id. After the trial court divided the

       marital pot, it ordered Husband to pay Wife a lump-sum equalization payment

       of $2,382.30 within ninety days. See id.

[13]   Husband, Modesto, and Elizabeth now appeal.

                                  Discussion and Decision
[14]   Where, as here, the trial court enters special findings and conclusions pursuant

       to Indiana Trial Rule 52(A), we apply a two-tiered standard of review. Barton v.

       Barton, 47 N.E.3d 368, 373 (Ind. Ct. App. 2015), trans. denied. We determine

       first if the evidence supports the findings and second whether the findings

       support the judgment. Id. The trial court’s findings and conclusions will be set

       aside only if clearly erroneous. Id. We neither reweigh the evidence nor

       reassess witness credibility. Id. Instead, we must accept the ultimate facts as

       stated by the trial court if there is evidence to sustain them. Id.

[15]   Appellants’ brief touches on many different topics, but the gist of their

       argument appears to be that the trial court erred when it included the properties

       that Husband transferred to Elizabeth (in the marital pot). Appellants allege

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019       Page 11 of 17
       that these properties were actually owned by Modesto and that therefore they

       cannot be included in the marital pot. It is well settled that in a dissolution

       action, all marital property, whether owned by either spouse before the

       marriage, acquired by either spouse after the marriage and before final

       separation of the parties, or acquired by their joint efforts, goes into the marital

       pot for division. Ind. Code § 31-15-7-4(a); Falatovics v. Falatovics, 15 N.E.3d

       108, 110 (Ind. Ct. App. 2014). The date of “final separation” is the date the

       petition for dissolution is filed. Ind. Code § 31-9-2-46. When dividing marital

       property, the trial court must, at a minimum, be sufficiently apprised of the

       approximate gross value of the marital estate. Montgomery v. Faust, 910 N.E.2d

       234, 238 (Ind. Ct. App. 2009). “The requirement that all marital assets be

       placed in the marital pot is meant to insure that the trial court first determines

       that value before endeavoring to divide property.” Id. “Indiana’s ‘one pot’

       theory prohibits the exclusion of any asset in which a party has a vested interest

       from the scope of the trial court’s power to divide and award.” Falatovics, 15

       N.E.3d at 110 (quotation omitted). While the trial court may decide to award a

       particular asset solely to one spouse as part of its just and reasonable property

       division, it must first include the asset in its consideration of the marital estate

       to be divided. Id.

[16]   Here, the trial court found that there was evidence that Husband’s conveyances

       to Elizabeth in October 2014 were fraudulent under UFTA. On appeal,

       Appellants argue that the trial court erred by setting aside these conveyances

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 12 of 17
       pursuant to UFTA for two reasons: (1) Wife is not a creditor and (2) there is no

       evidence of an intent to defraud.

                                       I. Spouse as Creditor
[17]   Appellants argue that Wife is not a creditor under UFTA because the

       “properties were purchased by [Modesto] and [Modesto] had the legal right to

       direct to whom the properties should be conveyed, in this instance to

       [Elizabeth].” Appellant’s Br. p. 17.

[18]   UFTA defines “creditor” as “a person that has a claim.” I.C. § 32-18-2-2. The

       trial court found that “[a] spouse is a creditor” and that therefore Wife is a

       creditor under UFTA. Appellant’s App. Vol. II p. 28. Appellants argue that

       Modesto financed the purchases of the properties and that therefore Wife is not

       a creditor under UFTA. See Appellant’s Br. p. 17. However, there is ample

       evidence showing that Husband and Wife contributed to the purchases of the

       properties. First, Husband testified that he had a “good job until 2008.” Tr.

       Vol. III p. 77. Next, Wife testified that she and Husband used their savings to

       purchase the properties and credit cards to do the renovations. See Tr. Vol. II p.

       73. Wife also testified that during the time she and Husband were purchasing

       and flipping the properties, the family lived in an apartment paid for by the

       government and used food stamps to support their daily needs. See id. at 119,

       122. Finally, the majority of the properties were initially titled and insured in

       either Husband or Wife’s name, and the property taxes were paid by Husband

       and Wife’s business, Sorani Construction. All of this supports the trial court’s

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019    Page 13 of 17
       finding that the properties are part of the marital estate for purposes of Husband

       and Wife’s divorce, and therefore Wife is a creditor under UFTA because she

       has a claim to the properties. See Appellant’s App. Vol. II p. 34.

                                        II. Fraudulent Intent
[19]   Appellants next argue that there is no evidence that indicates or suggests that

       the transfer of the properties from Husband to Elizabeth was made with the

       intent to hinder, delay, or defraud Wife in any way as required by UFTA.

[20]   A creditor who seeks to have a transfer set aside as fraudulent under UFTA

       bears the burden of proving that such transfer was made with fraudulent intent.

       Greenfield v. Arden Seven Penn Partners, L.P., 757 N.E.2d 699, 703 (Ind. Ct. App.

       2001), trans. denied. The question of fraudulent intent is a question of fact. Id.

       Lack of consideration alone is not enough to support a charge of fraud. Id.

       Rather, fraudulent intent may be inferred from various factors or “badges of

       fraud” present in a given transaction. Id. These common-law factors include:

               1. the transfer of property by a debtor during the pendency of a
                  suit;

               2. a transfer of property that renders the debtor insolvent or
                  greatly reduces his estate;

               3. a series of contemporaneous transactions which strip a debtor
                  of all property available for execution;

               4. secret or hurried transactions not in the usual mode of doing
                  business;

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 14 of 17
        5. any transaction conducted in a manner differing from
           customary methods;

        6. a transaction whereby the debtor retains benefits over the
           transferred property;

        7. little or no consideration in return for the transfer;

        8. a transfer of property between family members.

Id. (citing Otte v. Otte, 655 N.E.2d 76, 81 (Ind. Ct. App. 1995), trans. denied). As

no single indicium constitutes a showing of fraudulent intent per se, the facts

must be taken together to determine how many badges of fraud exist and if

together they amount to a pattern of fraudulent intent. Id. Indiana’s UFTA has

codified these “badges of fraud.” Under UFTA, to determine the debtor’s

intent, the trial court may consider, among other factors, whether:

        (1) the debtor retained possession or control of the property
        transferred after the transfer;

        (2) the transfer or obligation was disclosed or concealed;

        (3) before the transfer was made or the obligation was incurred,
        the debtor had been sued or threatened with suit;

        (4) the transfer was of substantially all the debtor’s assets;

        (5) the debtor absconded;

        (6) the debtor removed or concealed assets;

Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019      Page 15 of 17
               (7) the value of the consideration received by the debtor was
               reasonably equivalent to the value of the asset transferred or the
               amount of the obligation incurred;

               (8) the debtor was insolvent or became insolvent shortly after the
               transfer was made or the obligation was incurred; and

               (9) the transfer occurred shortly before or shortly after a
               substantial debt was incurred.

       I.C. § 32-18-2-14.

[21]   Here, there are at least five “badges of fraud” present. First, the record shows

       that Husband transferred the properties to Elizabeth approximately one month

       before Wife filed for divorce and when the parties’ relationship had already

       begun to deteriorate. Second, the transfer of these properties greatly reduced

       the marital estate because the rental properties were substantially all of the

       family’s assets. Third, there is evidence that Husband would retain some

       benefits over the rental properties. That is, Husband, Modesto, and Elizabeth,

       would continue to renovate and manage the properties and collect rent from

       tenants. Fourth, Husband transferred the properties to Elizabeth for little or no

       consideration. That is, he transferred all the properties to Elizabeth for ten

       dollars. Finally, the transfer of these properties from Husband to Elizabeth was

       effectively a transfer between family members. Although Modesto and

       Elizabeth have never been married, they have been in a relationship for over

       thirty years and have three children together. All of this together constitutes a

       pattern of fraudulent intent.

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019        Page 16 of 17
[22]   For all of the foregoing reasons, we affirm the trial court’s setting aside of

       Husband’s conveyances to Elizabeth.

[23]   Affirmed.

       Riley, J., and Bradford, J., concur.

       Court of Appeals of Indiana | Opinion 18A-DR-3109 | November 14, 2019     Page 17 of 17