Jackson v. Russell
| Decision Date | 17 January 1989 |
| Docket Number | No. 06A01-8606-CV-151,06A01-8606-CV-151 |
| Citation | 533 N.E.2d 153 |
| Parties | C.W. JACKSON, Appellant/Cross-Appellee (Defendant Below), and Jackson Plastics Company; Excelarium Products Corporation; Columbus Air Corporation; Tiger Development Company; and Marguerite L. Jackson, Appellants/Cross-Appellees (Garnishee-Defendants Below), v. George E. RUSSELL, Appellee/Cross-Appellant (Plaintiff Below). |
| Court | Indiana Appellate Court |
Robert J. DuComb, Jr., Sharon B. Shively, Sacks, Tierney, Kasen & Kerrick, P.A., Phoenix, Ariz., for appellant/cross-appellee.
Peter L. Obremskey, Parr, Richey, Obremskey & Morton, Lebanon, for appellants.
Robert F. Zoccola, Alan S. Brown, James Dimos, Locke Reynolds Boyd & Weisell, Indianapolis, Thomas A. Whitsitt, Giddings, Whitsitt, Baker & McClure, Lebanon, for appellee/cross-appellant.
This appeal arises from proceedings supplemental in a lawsuit awarding a $2,000,000 judgment to the now appellee-judgment creditor George E. Russell. The now appellant-judgment debtor C.W. Jackson appeals from trial court rulings made in the proceedings supplemental. The original trial proceedings were affirmed by the opinion of this court. See, Jackson v. Russell (1986), Ind.App., 498 N.E.2d 22. Rehearing and transfer were denied in that appeal.
After judgment was entered, C.W. Jackson and his wife, Marguerite L. Jackson, completed a series of transactions involving property they owned. These transactions form the bulk of the facts involved in this appeal.
The Jackson transfers began about two months after the entering of the $2,000,000 judgment. The Jacksons owned all of the stock of Como Plastics, an Indiana corporation. The building and the real estate of Como Plastics, located in Bartholomew County, Indiana, were owned by Jackson Plastics Company which is an Indiana general partnership in which C.W. Jackson and his wife are equal partners. Jackson Plastics Company was specifically created in 1980 for the purpose of owning the real estate and improvements thereon which were to be leased to Como Plastics. Jackson Plastics also owned a parcel of real estate next to the property occupied by Como Plastics, and two Beech aircraft. In November, 1984, Jackson Plastics transferred title to one of the aircraft to Columbus Air Corporation, an Arizona corporation in which the Jacksons owned all of the stock. Transfer was made by a bill of sale signed by the Jacksons as general partners of Jackson Plastics. No money changed hands as a part of this transfer, although it appears that Columbus Air assumed the debt on the airplane. Shortly thereafter, title to the second airplane was transferred to Columbus Air Corporation under very similar circumstances. At about the same time Jackson Plastics transferred the parcel of real estate next to the Como Plastics plant to Tiger Development Company, which is an Arizona partnership. The Jacksons owned half of Tiger Development with the other half being owned by Lincoln Meadows Corporation, an Indiana corporation. Lincoln Meadows stock was owned entirely by the Jacksons. Tiger paid no money for the real estate. In early 1985, Jackson Plastics, by way of a quitclaim deed, transferred the property occupied by Como Plastics to C.W. Jackson and Marguerite Jackson as "husband and wife as their community property." The deed recited that the transfer was made for $10 and other consideration. After the above transfers were completed, Lincoln Meadows merged with Excelarium Products Corporation, an Arizona corporation, with all of the stock being owned by the Jacksons. Como Plastics was also merged into Excelarium a little later. In both mergers no money was exchanged, however, both Jacksons received additional Excelarium stock. There are also a few parcels of real estate located in Indiana owned by the Jacksons as husband and wife. No transfers involving these parcels were made during this period.
It should also be noted that the Jacksons had been married for 40 years or more and since 1969 they resided in Arizona, a community property state. Mrs. Jackson was not a party to the original lawsuit.
The appeal and the cross-appeal stems primarily from a trial court order which held, among other things, that the partnership interest of C.W. Jackson in Jackson Plastics was a separate and distinct individual interest and subject to execution by Russell but Russell did not have a lien on the shares of stock of Como, Lincoln Meadows or Excelarium and those shares were not subject to execution. The trial court also found that the transfers of the two airplanes and the conveyance of the two parcels of real estate in Bartholomew County to be fraudulent.
Jackson states the issues on appeal as being:
1. Whether the trial court erred, as a matter of law, when it denied Jackson's Motion to Quash or Modify the Writ of Execution on March 17, 1986.
2. Whether the trial court's Order in Proceedings Supplementary of March 12, 1986, is supported by sufficient evidence or is erroneous as a matter of law.
3. Whether the enforcement of the Judgment against Marguerite L. Jackson violates her constitutional right to due process.
Jackson argues the first two issues jointly with the thrust of the arguments being that the proceeds of the real estate held as tenants by the entireties are not subject to the separate debts of one spouse and that the proceeds and profits from the sale of the real estate are community property and not subject to judicial execution of one of the spouses.
Initially, we deem it proper to examine the post-judgment property transfers in the context of the trial court's finding that they were fraudulently made.
IND. CODE 32-2-1-14 reads:
All conveyances or assignments, in writing or otherwise, of any estate in lands, or of goods or things in action, every charge upon land, goods or things in action, and all bonds, contracts, evidences of debt, judgments, decrees, made or suffered with the intent to hinder, delay or defraud creditors or other persons of their lawful damages, forfeitures, debts or demands, shall be void as to the person sought to be defrauded.
Case law has developed a "badges of fraud" test to identify occurrences indicative of a fraudulent intent on the part of those making the transfers. These characteristics are summarized in Arnold v. Dirrim (1979), Ind.App., 398 N.E.2d 442, at 446, 447:
Among the most common indicia of fraud is the transfer of property by a debtor during the pendency of a suit against him, especially where the transfer renders the debtor insolvent or greatly reduces his estate.... Evidence of a series of contemporaneous transactions the result of which is to strip a debtor of all his property available for execution is not an ordinary transaction and is therefore a badge of fraud.... Another reliable indication of fraudulent intent is the presence of secret or hurried transactions not in the usual mode of doing business. Indeed any transaction conducted in a manner differing from customary methods may be fraudulent. It is also a badge of fraud that the debtor retains benefits over the property transferred. One may not be the beneficial owner of property and still have it exempt from his debts.... Furthermore the fact that no consideration was given or that the consideration was greatly below the value of the property is recognized as a prime factor in determining whether a transaction is to be deemed fraudulent.... Finally, a transfer of property between members of a family may evince a fraudulent intent. (Citations omitted.)
The concurrence of several of the badges of fraud allows affirming the trial court. Jackson v. Farmers State Bank (1985), Ind.App., 481 N.E.2d 395, trans. denied.
An examination of the post-judgment Jackson transfers, as previously recounted in this...
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...... warranty is untrue or misleading." Jackson v. Russell, 498 N.E.2d 22, 36 (Ind.App. 1 Dist.1986), appeal after remand, 533 N.E.2d 153, (Ind.App. 1 Dist.1989), cert. denied, 494 U.S. 1004, 110 S.Ct. 1297, 108 L.Ed.2d 474 (1990). This last clause is the direct opposite of the clause in the......
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