Hoesman v. Sheffler

Decision Date20 May 2008
Docket NumberNo. 77A01-0708-CV-385.,77A01-0708-CV-385.
Citation886 N.E.2d 622
PartiesKatherine HOESMAN and Gary Hoesman, Appellants-Plaintiffs, v. Daniel SHEFFLER and Constance Pleasant Johnson, Appellees-Defendants.
CourtIndiana Appellate Court

Arnold H. Brames, Brames & Oldham, Terre Haute, IN, Attorney for Appellant.

Jeffry A. Lind, Fleschner, Stark, Tanoos & Newlin, Terre Haute, IN, Attorney for Appellee, Daniel Sheffler.

James O. McDonald, Joleen V. Klotz, Everett, Everett & McDonald, Terre Haute, IN, Attorney for Appellee, Constance Pleasant Johnson.

OPINION

ROBB, Judge.

Case Summary and Issues1

This case involves an attempt by Katherine and Gary Hoesman to collect a judgment ordered in their favor and against Julia Sheffler, who converted money from a trust fund established for the benefit of the Hoesmans. The Hoesmans appeal the trial court's order granting summary judgment to Constance Johnson, Julia's mother, and denying the Hoesmans' motions to amend their complaint and to consolidate this case with another. On appeal, the Hoesmans raise four issues, which we consolidate and restate as:

1. Whether the trial court improperly granted summary judgment on the Hoesmans' fraudulent transfer claim;

2. Whether the trial court improperly granted summary judgment on the Hoesmans' claim that they held a statutory lien on property transferred to Constance and that this lien has priority over a security interest held by Constance; and

3. Whether the trial court abused its discretion in denying the Hoesmans' motions to amend their complaint and their motions to consolidate this suit with a prior related suit.

Daniel Sheffler, Julia's husband and a defendant in this suit, also raises the issue of whether the trial court's denials of the Hoesmans' motions for leave to amend their complaint and to consolidate are issues properly before this court.

We conclude the trial court's denial of the Hoesmans' motions to amend and to consolidate are not properly before this court, and therefore do not address the propriety of these decisions. Concluding that the trial court improperly granted summary judgment in favor of Constance on the Hoesmans' claims regarding fraudulent transfers and the priority of their lien, we reverse the trial court's grant of summary judgment and remand for further proceedings.

Facts and Procedural History

Ann Klapper died in 1992, leaving a trust (the "Klapper Trust"), to which Julia Sheffler was appointed trustee in 1997. While acting as trustee, Julia replaced Klapper's actual will with a will indicating the Klapper Trust continued until Katherine Hoesman, Klapper's granddaughter, turned thirty-five, instead of eighteen, as provided in the actual will. Additionally, Julia converted funds from the Klapper Trust for her own personal use. The Hoesmans discovered Julia's malfeasance in 2003, and on November 23, 2003, the Hoesmans filed a petition requesting relief, including Julia's removal as trustee. On January 29, 2004, the trial court issued an Agreed Judgment and Order requiring Julia to resign from her position as trustee and to prepare an accounting of the Klapper Trust's assets. Prior to this accounting, Julia obtained $300,000 from her parents, William and Constance Johnson, and made three deposits into the Klapper Trust, $100,000 on December 24, 2003, $90,000 on January 20, 2004, and $150,899.11 on March 3, 2004. Julia filed her accounting on March 3, but the trial court found that it was not a true and accurate accounting. In an effort to determine the extent of Julia's conversions, Alan Hazelrigg, the successor trustee, took Julia's deposition. However, Julia invoked the Fifth Amendment and refused to answer questions regarding her transactions as trustee. Subsequently, Julia was subpoenaed and called to testify at a court hearing, on October 4, 2004, but again invoked the Fifth Amendment.

On March 15, 2004, Julia and Daniel executed an "Installment Promissory Note" (the "Note") under which they agreed to pay Constance, as trustee of the Constance Johnson Revocable Trust (the "Constance Trust"), and as successor trustee of the William F. Johnson Revocable Trust ("the William Trust"), $300,000, plus 6 percent interest, in annual installments of roughly $30,000, payable beginning December 31, 2004. On that same day, Daniel and Julia gave Julia's parents a security interest in several vehicles owned by Daniel and Julia, and executed a mortgage on their residence in favor of Julia's parents. On October 14, 2004, Julia transferred 65.33 shares of B & C Johnson Farms, Inc., a closely held, Subchapter S Corporation, to Constance. On January 5, 2005, Julia transferred her remaining eight shares to Constance.

The trial court finally determined that Julia stole at least $349,000 from the Klapper Trust. On November 15, 2005, the Sullivan Circuit Court issued a judgment against Julia and in favor of the Hoesmans in the amount of $288,144.95, under Cause No. 77C01-9202-ES-00015 ("Cause No. 00015"). This amount included double damages for the amount converted by Julia, attorney's fees, and additional damages for loss of investment funds and interest. The trial court also subtracted several amounts, including the roughly $340,000 that Julia had deposited in the Klapper Trust.

On April 12, 2005, the Hoesmans filed the instant suit against Julia and Daniel, alleging that Julia had damaged the Hoesmans through her malfeasance and misfeasance, and that Daniel either should have known of Julia's actions or participated in and realized the benefit of Julia's actions. On June 27, 2005, the Hoesmans filed a motion to consolidate the current action with Cause No. 00015. The trial court denied this motion on August 16, 2005. The Hoesmans subsequently moved, and were granted permission, to add Constance as a party in this case. This amended complaint alleged that Constance was the recipient of fraudulent transfers from Julia and Daniel, and requested a judgment that Daniel and Constance be named constructive trustees of any money or property transferred to them from Julia. On November 3, 2006, the Hoesmans filed a motion for leave to file a second amended complaint, in which they were attempting to join B & C Johnson Farms, Constance, as trustee of the Constance Trust, and Julia and Daniel's children. On January 29, 2007, the Hoesmans filed a motion for leave to file a third amended complaint, in which they were attempting to join Constance as trustee of the William Trust. Also on January 29, the Hoesmans again moved to consolidate the instant action with Cause No. 00015.

On November 16, 2006, Constance filed a motion to dismiss the amended complaint against her. This motion was later converted to a motion for summary judgment, to which the Hoesmans filed a response and designated evidence. Constance then filed a motion to strike the Hoesmans' designated evidence. On February 27, 2007, the Hoesmans filed a motion requesting that the trial court make findings of fact and conclusions of law in the event that it granted Constance's motion for summary judgment.

On May 3, 2007, the trial court issued an order granting Constance's motion for summary judgment and her motion to strike the Hoesmans' designated evidence2 "inasmuch as the same lacks any specificity." Appellant's Appendix at 16. The trial court also denied the Hoesmans' motions for leave to file second and third amended complaints and their motion to consolidate. The trial court did not issue any findings of fact or conclusions of law.

On June 1, 2007, the Hoesmans filed a motion requesting that the trial court certify its May 3 Order for interlocutory appeal and another motion requesting that the trial court declare its grant of summary judgment to be a final judgment. On August 14, 2007, the Hoesmans filed their notice of appeal of the May 3 Order despite the fact that the trial court had not ruled on their motions for certification or to declare a final judgment. On August 23, 2007, the Hoesmans filed a renewed motion to have the May 3 Order be declared a final judgment. On September 7, 2007, the trial court issued an order granting this motion, stating "that there is `not just reason for delay' and this Court's Order and Summary Judgment dated May 3, 2007, granting Constance Johnson's Motion to Dismiss / Motion for Summary Judgment is now declared a `final judgment' as to the issues of fact and law addressed in that Order and Summary Judgment." Id. at 17.

On November 29, 2007, Constance and Daniel filed a Joint Motion to Dismiss Appeal. On January 2, 2008, this court issued an order denying this motion. The Hoesmans now appeal.

Discussion and Decision3

I. Summary Judgment

A. Standard of Review for Summary Judgment

Summary judgment is appropriate when the evidence shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C). The trial court's grant of a motion for summary judgment comes to us cloaked with a presumption of validity. Rodriguez v. Tech Credit Union Corp., 824 N.E.2d 442, 446 (Ind.Ct.App.2005). However, we review a trial court's grant of summary judgment de novo, construing all facts and making all reasonable inferences from the facts in favor of the non-moving party. Progressive Ins. Co. v. Bullock, 841 N.E.2d 238, 240 (Ind.Ct.App.2006), trans. denied. We may affirm the trial court's grant of summary judgment upon any basis that the record supports. Rodriguez, 824 N.E.2d at 446.

B. The Hoesmans' Claim Involving Fraudulent Transfers

The purpose of a fraudulent transfer claim is "the removal of obstacles which prevent the enforcement of the judgment.... While the action may involve a conveyance said to be fraudulent, the recovery is not for the wrong or tort. It is not in damages." Rose v. Mercantile Nat'l Bank of Hammond, 868 N.E.2d 772, 776 (Ind.2007) (quoting Beavans v. Groff, 211 Ind. 85, 90, 5 N.E.2d 514, 516-17 (1937)). "If a fraudulent action is...

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