Luke L. Tooley, Jr. v. Michael Ghosh (mem. dec.) ( 2020 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
FILED
the defense of res judicata, collateral Jun 29 2020, 9:07 am
estoppel, or the law of the case. CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
APPELLANT PRO SE APPELLEE PRO SE
Luke L. Tooley, Jr. Michael Ghosh
Billerica, Massachusetts The Ghosh Law Office LLC
Carmel, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Luke L. Tooley, Jr., June 29, 2020
Appellant-Respondent, Court of Appeals Case No.
19A-PL-3016
v. Appeal from the Hamilton
Superior Court
Michael Ghosh, The Honorable Jonathan M.
Appellee-Petitioner. Brown, Judge
Trial Court Cause No.
29D02-1707-PL-6437
Bradford, Chief Judge.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-3016 | June 29, 2020 Page 1 of 15
Case Summary
[1] At some point prior to the initiation of the underlying lawsuit, Michael Ghosh
and Meleeka Clary-Ghosh divorced. Ghosh initiated a lawsuit against Clary-
Ghosh and MCM Fashions, LLC (“MCM”), alleging that Clary-Ghosh had
fraudulently transferred certain assets to MCM. Ghosh subsequently amended
the complaint to include Luke L. Tooley, Jr.; Andrew L. Clary, Jr.; and TCD
Productions, LLC (“TCD”), alleging that the additional parties participated in
the fraudulent transfer of the assets. Ghosh subsequently obtained judgment
liens against some of the parties, including Tooley, and petitioned for the
appointment of a receiver to receive, retrieve, manage, protect, and sell all
property and real estate encumbered by the liens. On December 3, 2019, the
trial court granted Ghosh’s petition to appoint a receiver. Tooley challenges the
appointment of the receiver on appeal, arguing that the trial court abused its
discretion in doing so. Concluding that the trial court abused its discretion by
failing to provide Tooley with notice of the hearing on Ghosh’s petition, we
reverse the judgment of the trial court and remand for further proceedings.
Facts and Procedural History
[2] The underlying facts of this case, as set forth in our recent decision in a related
appeal, are as follows:
On July 11, 2017, Ghosh filed a verified complaint (“initial
complaint”) against Clary-Ghosh, his former spouse, and MCM
to set aside fraudulent transfers and to pierce the corporate
veil/alter ego of MCM pursuant to Indiana Code chapter 32-18-
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2. MCM’s operating agreement shows that it is composed of
Clary-Ghosh, who served as the business’s registered agent,
Tooley, and Clary, who is the brother of Clary-Ghosh. Schedule
II of the MCM operating agreement, titled, “MEMBER
INFORMATION, CONTRIBUTION & INTEREST
PERCENTAGE” listed Tooley’s address as follows:
Luke L. Tooley, Jr.
11 Crawfield Street
Dorchester, Massachusetts 02125
Before Ghosh and Clary-Ghosh were married, Tooley and Clary-
Ghosh had children together and Ghosh and Clary-Ghosh went
to Tooley’s personal residence in Dorchester, Massachusetts to
pick up Clary-Ghosh’s daughters from their visitation with
Tooley. In the initial complaint, Ghosh sought to collect on
judgments that had been awarded to him against Clary-Ghosh
arising out of the divorce proceedings between him and Clary-
Ghosh, alleging that Clary-Ghosh fraudulently conveyed all of
her property to MCM with the actual intent to hinder, delay, or
defraud Ghosh. On March 8, 2018, Tooley established a
revocable trust [(“the Tooley Trust”)] into which he subsequently
transferred, among other assets, a 2000 Mercedes-Benz CLK 430,
a 2002 Chevrolet Venture, a 2005 Lexus GX 470, a 2007 BMV
750i, and a 2005 Mercedes-Benz CLS 500C, vehicles that Clary-
Ghosh owned and had previously transferred to MCM.
On August 27, 2018, Ghosh filed a motion for leave to amend
the complaint (“amended complaint”), seeking to add three
additional defendants, Tooley and Clary, in their individual
capacities, and [TCD]. TCD was created by Clary-Ghosh and
identified Tooley as its sole corporate manager. The trial court
granted Ghosh’s motion to amend on January 3, 2019. The
amended complaint set forth the amounts of the judgments
awarded to Ghosh as a result of the divorce proceedings between
Clary-Ghosh and Ghosh, which totaled $84,567.13. It also set
forth the vehicles that Clary-Ghosh owned and transferred to
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MCM, which included the vehicles that Tooley had previously
transferred to his revocable trust. The amended complaint
sought, among other things, to hold Tooley personally liable for
the judgments awarded to Ghosh against Clary-Ghosh in their
divorce proceeding. Ghosh requested relief, in part, for the trial
court to order Tooley personally liable for Clary-Ghosh’s debts
and financial obligations due and owing Ghosh and to order
Tooley (along with MCM, TCD, Clary-Ghosh, and Clary) to pay
Ghosh punitive damages for their malicious and/or fraudulent
conduct.
Ghosh engaged a private process server to serve Tooley, a
resident of Massachusetts, with the summons, amended
complaint, and the order granting motion for leave to amend at
the address for the residence listed in the MCM operating
agreement, 11 Crawfield Street, Dorchester, Massachusetts
02125 (“11 Crawfield”). It was discovered that 11 Crawfield did
not exist in Dorchester, but there was an 11 Cawfield Street,
Dorchester, Massachusetts 02125 (“11 Cawfield”). Ghosh’s
process server made five unsuccessful attempts to serve Tooley at
11 Cawfield throughout January 2019 but eventually successfully
served Tooley on February 4, 2019 at 11 Cawfield with the
summons, amended complaint, and order granting motion for
leave to amend. The process server noted that he left the
documents at [Tooley’s residence] and mailed a copy of the
documents served via first class United States Mail.
On February 7, 2019, Ghosh filed a verified notice of service of
process on Tooley and attached the process server’s affidavit of
service, which the trial court entered into its chronological case
summary (“CCS”). On March 15, 2019, Ghosh filed a motion
for default judgment against Tooley to which he attached an
affidavit from his trial counsel in support of his motion. The
affidavit indicated that Tooley was served with a copy of the
summons and the amended complaint on February 4, 2019,
failed to appear, plead, or defend himself before February 27,
2019, which was the deadline for Tooley to respond to the
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amended complaint, and that Tooley was not currently in the
armed forces of the United States.
On May 1, 2019, the trial court granted Ghosh’s motion and
entered a default judgment against Tooley. The trial court
awarded Ghosh a judgment against Tooley in the amount of
$84,567.13 plus interest, a $75,000 award of punitive damages
plus interest, and attorney’s fees and costs with the amount to be
determined at a damages hearing.
Clary-Ghosh v. Ghosh, 2020 WL 2503929, at *1–2 (Ind. Ct. App. May 15, 2020)
(“Ghosh I”) (internal record quotations and citations omitted).
[3] On May 28, 2019, Tooley filed a motion to vacate the default judgment and to
dismiss the matter pursuant to Trial Rule 12(b)(5) (“motion to vacate”),
claiming that he never received a summons or amended complaint either by
hand-delivery or through the United States Mail. Id. at *2. In response to
Tooley’s motion, Ghosh, who had been to Tooley’s residence during his
marriage to Clary-Ghosh, averred that Tooley resided at 11 Cawfield. Id. at *3.
“On July 2, 2019, the trial court denied Tooley’s motion to vacate, finding that
Tooley was properly served and that the trial court had personal jurisdiction
over Tooley.” Id. at *2. On appeal, we affirmed the trial court’s finding that
Tooley was properly served with notice of the lawsuit and that the trial court
had personal jurisdiction over him. Id. at *6. Specifically, we concluded that
“the default judgment entered against Tooley is valid, and the trial court
correctly denied Tooley’s motion to vacate.” Id. at *6.
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[4] Contemporaneously, on May 22, 2019, after the trial court entered the default
judgment against Tooley, Ghosh filed a verified petition requesting the
appointment of a receiver. The trial court set receivership hearing for July 18,
2019. On July 17, 2019, Clary-Ghosh filed a notice of bankruptcy and
automatic stay, listing Clary, TCD, Tooley, and the Tooley Trust as a co-
debtors. The hearing on Ghosh’s petition was subsequently rescheduled for
September 9, 2019. The trial court subsequently postponed the hearing until
either the bankruptcy automatic stay was lifted or the case was dismissed by the
bankruptcy court. On November 27, 2019, the co-debtor bankruptcy stay was
lifted.
[5] On December 3, 2019, the trial court conducted a hearing on Ghosh’s petition,
after which it granted Ghosh’s request for the appointment of a receiver. In
doing so, the trial court found, with respect to Tooley, as follows:
9. Pursuant to Ind. Code § 32-30-5-9, the Court cannot
appoint a receiver until the adverse party has appeared or had
reasonable notice of the application for the appointment of a
receiver.
****
12. [Tooley] was served with notice of the instant cause of
action on February 4, 2019 and he has filed motions in the
instant cause of action, and a default judgment was entered in
favor of [Ghosh] and against [Tooley] on May 1, 2019;
13. [Ghosh] served [Clary], [TCD], and [Tooley] with a copy
of [Ghosh’s] Verified Petition for Appointment of Receiver via
U.S. Mail on May 22, 2019;
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14. Defendants [Clary], [TCD], and [Tooley] have either
appeared or had reasonable notice of the application for the
appointment of a receiver;
15. It is therefore ordered that [Ghosh’s] Verified Petition for
Appointment of Receiver is GRANTED. The parties are granted
seven days to strike from the following panel. Judgment
Defendants [Clary], [TCD], and [Tooley] shall each strike one (1)
no later than December 10, 2019, then Plaintiff shall strike one
(1) no later than December 17, 2019, and the remaining
individual will be appointed by the Court as the Receiver.
Should a party not strike within the time allotted, the Court shall
strike for them. The panel is as follows:
a. James Young (Indianapolis)
b. Debbie Caruso (Indianapolis)
c. Martha Lehman (Indianapolis)
d. Chris Hagenow (Indianapolis)
e. Michael Hebenstreit (Indianapolis)
16. The Receiver, once appointed, shall be able to receive,
retrieve, manage, protect, and sell all property and real estate
owned by Defendants, [Tooley] a/k/a [the Tooley Trust], [TCD]
and [Clary] that are encumbered by the judgment liens of
[Ghosh] and to hold the proceeds of said sales for the benefit of
the parties until further order of the Court. Said receiver for the
purposes set forth herein is specifically authorized by Ind. Code §
32-30-5-7 as follows:
“The receiver may, under control of the court or the
judge: (1) bring and defend actions; (2) take and keep
possession of the property; (3) receive rents; (4)
collect debts; and (5) sell property; in the receiver’s
own name, and generally do other acts respecting the
property as the court or judge may authorize.”
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Appellant’s App. Vol. III pp. 30–31. Tooley filed a notice of bankruptcy and
motion for a stay of the proceedings on December 13, 2019. On December 19,
2019, the trial court issued an order appointing Hagenow as the receiver with
respect to TCD and Clary.1
Discussion and Decision
[6] Tooley challenges the trial court’s December 3, 2019 order, contending that the
trial court abused its discretion in appointing a receiver over both his property
and the property contained in the Tooley Trust. For his part, Ghosh argues
that Tooley’s appeal is not ripe as the matter, as it involves Tooley, was stayed
when Tooley filed a notice of bankruptcy on December 13, 2019. While the
trial court may not have yet appointed a specific individual to act as the receiver
over Tooley’s property, the trial court’s December 3, 2019 order granting
Ghosh’s request for a receiver specifically applied to Tooley and was issued
prior to Tooley’s request for a stay pending bankruptcy proceedings. We
therefore conclude that Tooley’s challenge to the trial court’s December 3, 2019
order is ripe for appeal.
1
The trial court’s order made no reference to Tooley, presumably due to stay requested by Tooley pending
resolution of his bankruptcy proceedings.
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I. Overview of Law Relating to the Appointment of a
Receiver
[7] Generally, “proceedings for the appointment of a receiver are ancillary in their
nature and must be supported by a principal action.” State ex rel. Busick v.
Ewing, 230 Ind. 188, 190, 102 N.E.2d 370, 371 (1951). “Our scope of review of
an interlocutory order appointing a receiver is limited.” Schrenker v. State, 919
N.E.2d 1188, 1191 (Ind. Ct. App. 2010). “We will not weigh the evidence on
appeal, and we must construe the evidence along with all reasonable inferences
in favor of the trial court’s decision.” In re Marriage of Gore, 527 N.E.2d 191,
195 (Ind. Ct. App. 1988). “The appointment of a receiver is in the sound
discretion of the trial court, and therefore our standard of review is that of abuse
of discretion.” Id.
[8] “[T]he appointment of a receiver is an extraordinary and drastic remedy to be
exercised with great caution.” Crippin Printing Corp. v. Abel, 441 N.E.2d 1002,
1005 (Ind. Ct. App. 1982).
The action affects one of man’s most cherished and sacred rights
guaranteed by the United States Constitution—the right to be
secure in his property. This right is fundamental to every society
in which men are free. For these reasons the statute which grants
such authority is to be strictly construed.
State ex rel. Makar v. St. Joseph Cty. Circuit Court, 242 Ind. 339, 347, 179 N.E.2d
285, 289–90 (1962) (footnote omitted). Quoting the Missouri Court of Appeals’
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decision in Lynch v. Lynch, 277 S.W.2d 692 (Mo. App. 1955), we previously
stated that
The appointment of a receiver is essentially a prerogative of
equity, which may be exercised as a means of conserving the
property or assets for the benefit of all parties in interest. The
court will be authorized to appoint a receiver if it appears that,
through fraud, mismanagement, misconduct, or otherwise, there
is a likelihood that the property will be squandered, wasted,
misappropriated or unlawfully diverted without the court’s
intervention. But, absent threatened destruction or dissipation of
the property, or where there is no good cause to believe that
benefit would result from the appointment of a receiver, then the
court should decline to make such an appointment. The power to
appoint a receiver is a delicate one which is reluctantly exercised
by the courts.… A receiver should be appointed only when the
court is satisfied that the appointment will promote the interests
of one or both parties, that it will prevent manifest wrong,
imminently impending, and that the injury resulting will not be
greater than the injury sought to be averted.
Gore, 527 N.E.2d at 196–97 (internal citations, quotations, and emphasis
omitted). “The appointment of a receiver is a statutorily granted authority that
must be strictly construed, and it cannot be sustained unless proper statutory
grounds for the appointment are sufficiently shown.” City of South Bend v.
Century Indent. Co., 821 N.E.2d 5, 13 (Ind. Ct. App. 2005), trans. denied.
[9] Indiana Code section 32-30-5-1 provides, in relevant part, that a receiver may
be appointed in the following cases:
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(1) In an action by a vendor to vacate a fraudulent purchase of
property or by a creditor to subject any property or fund to the
creditor’s claim.
****
(3) In all actions when it is shown that the property, fund or rent,
and profits in controversy are in danger of being lost, removed, or
materially injured.
****
(5) When a corporation:
(A) has been dissolved;
(B) is insolvent;
(C) is in imminent danger of insolvency; or
(D) has forfeited its corporate rights.
(6) To protect or preserve, during the time allowed for
redemption, any real estate or interest in real estate sold on
execution or order of sale, and to secure rents and profits to the
person entitled to the rents and profits.
(7) In other cases as may be provided by law or where, in the
discretion of the court, it may be necessary to secure ample
justice to the parties.
However, “a receiver should not be appointed if the plaintiff has an adequate
remedy at law or by way of temporary injunction.” Towne & Terrace Corp. v.
City of Indianapolis, 122 N.E.3d 846, 855 (Ind. Ct. App. 2019) (internal
quotation omitted).
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II. Application to Instant Matter
A. General Claims Regarding Tooley’s Status in the
Underlying Lawsuit
1. Jurisdiction & Validity of Judgment Entered Against Tooley
[10] Tooley argues that the trial court lacks jurisdiction over him because he was
never served with adequate notice or process of the underlying lawsuit. We
have previously found this assertion to be without merit. See Ghosh I, 2020 WL
2503929, at *6 (concluding that Tooley was properly served with notice of the
underlying lawsuit and that the trial court had personal jurisdiction over him).
Tooley also argues that the judgment entered against him is invalid. Contrary
to Tooley’s argument, we concluded in Ghosh I that the default judgment
entered against Tooley is valid. Id. We will not revisit either of these decisions
in the instant appeal.
2. Creditor-Debtor Relationship
[11] Tooley also argues that the appointment of a receiver would be inappropriate
because he is not a debtor of Ghosh. This argument fails, however, as Ghosh
holds a valid judgment against Tooley for compensatory damages in the
amount of $84,567.13 plus interest and punitive damages in the amount of
$75,000 plus interest. Id. at *2. With respect to the Uniform Fraudulent
Transfer Act, the term “claim” means “a right to payment” and “debt” means
“liability on a claim.” Ind. Code § 32-18-2-2(2) & (4). A creditor is “a person
that has a claim” and a debtor is “a person that is liable on a claim.” Ind. Code
§ 32-18-2-2(3) & (5). As such, the entry of judgment in Ghosh’s favor against
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Tooley established a creditor-debtor relationship. See generally, Stroud v. Lints,
790 N.E.2d 440, 446 (Ind. 2003) (providing that a staggering punitive damages
award traps the plaintiff and defendant forever in a creditor-debtor
relationship).
B. Order Appointing Receiver
[12] Tooley contends that the trial court abused its discretion in granting Ghosh’s
petition for the appointment of a receiver. Tooley raises a number of assertions
as to how the trial court abused its discretion, one of which we find dispositive.
[13] Tooley asserts that the trial court abused its discretion by failing to provide him
with notice of the December 3, 2019 hearing, during which it heard argument
relating to Ghosh’s petition. Generally, “[r]eceivers may not be appointed in
any case until the adverse party has appeared or has had reasonable notice of
the application for the appointment, except upon sufficient cause shown by
affidavit.” Ind. Code § 32-30-5-9. However, the Indiana Supreme Court has
further held that “notice must be given of any interlocutory hearing for the
appointment of a receiver.” State ex rel. Mammonth Dev. & Const. Consultants, Inc.
v. Superior Court of Marion Cty., 265 Ind. 573, 576, 357 N.E.2d 732, 733 (1976)
(citing Hawkins v. Aldridge, 211 Ind. 332, 340, 7 N.E.2d 34, 37 (1937) (“Where
the defendants have entered a general appearance, they are entitled to be
notified in person, or through their counsel, of any hearing where evidence will
be taken either on the merits of the case or upon interlocutory motions or
petitions.”)). Given the Indiana Supreme Court’s decisions in Mammonth and
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Hawkins, we conclude that Tooley was entitled to notice of the hearing on
Ghosh’s request for the appointment of a receiver.
[14] In this case, the trial court found, and the record demonstrates, that while
Tooley had been given reasonable notice of Ghosh’s request for the
appointment of a receiver, he had not been given notice of the December 3,
2019 hearing, during which the trial court considered Ghosh’s request for the
appointment of a receiver. The trial court acknowledged during the December
3, 2019 hearing that Tooley had not been given notice of the hearing. Given
the Indiana Supreme Court precedent indicating that Tooley was entitled to
notice of this hearing, we conclude that the trial court abused its discretion by
failing to ensure that Tooley was given notice of the hearing. We therefore
reverse the appointment of the receivership as it applies to Tooley and remand
for a hearing on Ghosh’s petition, a hearing of which Tooley should be
provided with adequate notice. 2
Conclusion
[15] In sum, we conclude that (1) the trial court has jurisdiction over Tooley, (2) the
default judgment entered against him is valid, and (3) a debtor-creditor
2
Tooley also asserts that the trial court abused its discretion by extending the scope of the receivership to
cover all of his property and property included in the Tooley Trust and that Ghosh failed to prove that a
receivership was justified under the strict requirements of Indiana law. However, because we reverse the trial
court’s order appointing the receiver as it relates to Tooley, we need not consider Tooley’s additional
challenges to the trial court’s order.
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relationship exists between Tooley and Ghosh. However, we also conclude
that the trial court abused its discretion by failing to provide Tooley with notice
of the December 3, 2019 hearing on Ghosh’s request for the appointment of a
receiver. We therefore reverse the appointment of the receiver as it relates to
Tooley and remand to the trial court for a hearing with specific instructions for
the trial court to ensure that Tooley is provided with adequate notice of said
hearing.
[16] The judgment of the trial court is reversed and remanded with instructions.
Baker, J., and Pyle, J., concur.
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