Cheryl Underwood v. Judith M. Fulford Thomas Bunger, in his capacity as the Personal Representative of the Estate of Kenneth K. Kinney and Sheree Demming ( 2019 )

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
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[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.
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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
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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.
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[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.
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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
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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
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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
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“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
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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
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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.
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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.
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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.
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