Estates of Kalwitz v. Kalwitz

• Decision Date: 15 October 1999
• Docket Number: No. 46A03-9903-CV-104.,46A03-9903-CV-104.
• Parties: The ESTATES OF Helen KALWITZ and Obed A. Kalwitz, Sr., Appellants, v. Obed A. KALWITZ, Jr., Rolene Kalwitz, Obed Kalwitz III, and Lorene Mohlke, Appellees.
• Court: Indiana Appellate Court

717 N.E.2d 904

The ESTATES OF Helen KALWITZ and Obed A. Kalwitz, Sr., Appellants, v. Obed A. KALWITZ, Jr., Rolene Kalwitz, Obed Kalwitz III, and Lorene Mohlke, Appellees.

No. 46A03-9903-CV-104.

Court of Appeals of Indiana.

October 15, 1999.

Stephen A. Kray, LaPorte, Indiana, Attorney for Appellant.

Stephen Bower, Cohen & Thiros, Merrillville, Indiana, Attorney for Appellee.

OPINION

DARDEN, Judge

STATEMENT OF THE CASE

Sharon Grieger and Eugene Kalwitz, both individually and as coexecutors of the Estate of Obed Kalwitz, Sr. (deceased) and Grieger, as the executrix of the Estate of Helen Kalwitz, (deceased) (collectively, the Estates) filed this action against Obed Kalwitz, Jr., his wife, Rolene, and their children, Obed III and Lorene Mohlke (collectively, the Defendants) to quiet title and to impose a constructive trust on certain real property that Obed, Sr. and Helen allegedly conditionally transferred to their grandchildren, Obed III and Lorene.¹ After a hearing on cross-motions for summary judgment, a special judge entered an order granting summary judgment in favor of the Defendants. The Estates appeal.

We affirm in part, reverse in part and remand.

ISSUES

I. Whether the trial court erred by denying the Estates' summary judgment motion and by granting Defendants' cross-motion for summary judgment on the Estates' fraudulent conveyance claim.

II. Whether the trial court erred by denying the Estates' summary judgment motion and granting Defendants' cross-motion for summary judgment on the Estates' claim that the deeds were void because they were the products of the unauthorized practice of law.

III. Whether the trial court erred by denying the Estates' summary judgment motion and granting Defendants' cross-motion for summary judgment on the Estates' constructive fraud claim.

FACTS

In 1940, Obed, Sr. married Helen, and four children were born to the marriage: Obed, Jr., Eugene, Sharon, and Ted. Obed, Sr. and Helen raised their children in their home on a 312-acre farm in LaPorte County. By the late 1970's, Obed, Sr. and Helen had acquired approximately 290 acres of additional farm land in LaPorte County.

Although Obed, Sr. and Helen owned the property, they farmed it as a partnership with their children, sharing in the expenses and profits. Obed, Jr., the elder child, became the head of the Kalwitz' family farming operation and was responsible for the day-to-day operation of the farm when Obed, Sr. and Helen retired from active farming in 1978.

In 1979, Ted, the youngest of the children, died. That same year, Obed, Sr. and Helen executed mutual wills, in which 331 acres of their property—the 312-acre homestead plus nineteen additional acres—were to go to Sharon and Eugene following a life estate in the surviving spouse (parent). The remaining 270 acres were to go to Obed, Jr. and Eugene following a life estate in the surviving spouse.

In the early 1980's, Obed, Jr. asked his parents and his brother, Eugene, to co-sign on a loan so that he could purchase his own farm land. Obed, Sr., Helen, and Eugene agreed to co-sign for the loan and executed a promissory note in favor of LaPorte Production Credit Association (LPCA). To secure payment for the loan, Obed, Sr. and Helen executed a second mortgage on the 270 acres of their farmland as collateral. In 1985, LPCA filed a mortgage foreclosure action on the promissory note after Obed, Jr. and his wife, Rolene, failed to pay the note. The Kalwitz family answered the complaint and filed a counterclaim, alleging lender fraud.

Subsequently, in November of 1986, while the LPCA litigation was still pending, Obed, Jr. persuaded Obed, Sr. and Helen to transfer title of their 312-acre homestead plus 19 additional acres of farmland to his children, 16-year-old Obed III and 21-year-old Lorene, to protect the property from a possible deficiency judgment in the foreclosure action. Obed, Jr.'s wife, Rolene, prepared the deeds to transfer title to the property. With the apparent thought of protecting their property from the pending litigation, and in reliance upon Obed, Jr.'s oral promise to reconvey the subject acreage back to them after the LPCA litigation concluded, Obed, Sr. and Helen signed the deeds conveying the property to their grandchildren without receiving any consideration in return. The weekend after Obed, Sr. and Helen deeded the property to their grandchildren, Obed, Jr. assured Sharon that the conveyance of the property "was just a protective measure in the event the [LPCA] lawsuit did go bad so at least our parents [have] a chance to keep their home." (R. 54).²

After the transfer, Obed, Sr. and Helen continued to reside on the 312-acre homestead and treat the property as their own. Obed Sr. died in 1989, and Helen and Eugene consulted their family attorney regarding opening Obed Sr.'s estate. They told the attorney about the 1986 deeds transferring title to the 331 acres to Obed III and Lorene. The family attorney informed Helen and Eugene that they might be able to sue Obed, Jr. and his children under a constructive trust theory to recover the property. Helen responded that there was no need to sue because Obed, Jr. was going to give the property back.

In April of 1995, Helen died. The day after Helen's funeral, Obed, Jr. informed Eugene and Sharon that he was not going to reconvey title to the 331 acres to the estates of his parents and ordered Eugene off the property.³ On October 17, 1995, Helen's Estate filed a "Complaint for Return of 331 Acres" against the Defendants, seeking an order declaring a constructive trust on the property and to quiet title to the property in Helen's Estate or Helen's beneficiaries. The one-count complaint, which did not expressly identify any theory for the imposition of a constructive trust, alleged that Obed, Sr. and Helen deeded 331 acres to Obed III and Lorene at the request and instruction of Obed, Jr. and his wife, Rolene; that Obed, Jr. and Rolene occupied a position of trust and confidence with Obed, Sr. and Helen at the time of the transfer; that the transfer was made without consideration to protect the property from an adverse judgment in a pending lawsuit; that the transfer was made with the understanding and in reliance upon Obed, Jr. and Rolene's promise to return the property to them at the conclusion of the pending LPCA litigation; and that the Defendants' refusal to return the land was unreasonable, in bad faith, and an attempt to defraud the Estate.⁴

On November 9, 1995, the Defendants filed a motion to dismiss the complaint pursuant to Ind. Trial Rule 12(B)(6), and Helen's Estate responded with a motion for summary judgment, seeking the imposition of a constructive trust based upon a constructive fraud theory, though not expressly designated as such.⁵ After conducting a hearing, the trial court denied both motions.

On July 10, 1996, Obed, Sr.'s Estate, Sharon, and Eugene filed a complaint against the Defendants which was nearly identical to the complaint filed by Helen's Estate. Defendants subsequently moved for summary judgment on the Estates' complaints, which they characterized as asserting a claim to declare the 1986 deeds invalid as conveyances to defraud creditors. The Estates countered with a cross-motion for summary judgment, claiming that, as a matter of law, the 1986 deeds are invalid for being the product of the unauthorized practice of law and that the deeds are fraudulent conveyances as to the third-party beneficiaries under Obed, Sr. and Helen's mutual wills. After a hearing, the trial court entered summary judgment in favor of Defendants, simply concluding that the 1986 deeds were valid.

DECISION

When reviewing the grant or denial of summary judgment, we use the same standard as the trial court: whether the pleadings and evidence demonstrate that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. Miller by Miller v. Memorial Hosp. of South Bend, Inc., 679 N.E.2d 1329, 1330 (Ind.1997)

; Ind. Trial Rule 56(C). Any doubt as to the existence of an issue of material fact, or an inference to be drawn from the facts, must be resolved in favor of the nonmoving party. Cowe v. Forum Group, Inc., 575 N.E.2d 630, 633 (Ind.1991). Summary judgment will be affirmed on appeal if it is sustainable on any legal theory or basis found in the designated material. Murphy v. Mortell, 684 N.E.2d 1185, 1187 (Ind.Ct. App.1997),

trans. denied.

Finally, the fact that both parties to an appeal request summary judgment does not change our standard of review. We consider each motion separately to determine whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Von Haden v. Supervised Estate of Von Haden, 699 N.E.2d 301, 303 (Ind.Ct. App.1998).

I. Fraudulent Conveyance

The Estates assert that the trial court erred by denying their motion for summary judgment on their action for the return of the 331 acres. According to the Estates, the undisputed designated material reveals that the 1986 deeds were conveyances to defraud creditors.

Under Indiana law, a conveyance of real estate "made or suffered with the intent to hinder, delay, or defraud creditors or other persons of their lawful damages, forfeitures, debts or demands" are "void as to the persons sought to be defrauded." Ind.Code § 32-2-1-14 (repeal, see now Ind.Code § 32-2-7-1 et. seq.). Only a creditor may bring an action to set aside a fraudulent conveyance. Browning v. Walters, 616 N.E.2d 1040, 1047 (Ind.Ct. App.1993), opinion adhered to on reh'g, 620 N.E.2d 28. In discussing actions to set aside conveyances on the ground of fraud under a former statute nearly identical to I.C. § 32-2-1-14, it has been stated:

... [a conveyance fraudulent as to creditors] is neither void nor voidable as to persons other than creditors. By section 8064, Burns' 1926, it is declared that all conveyances made for the purpose of

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