Lee's Ready Mix and Trucking, Inc. v. Creech

Decision Date22 January 1996
Docket NumberNo. 36A01-9506-CV-199,36A01-9506-CV-199
Citation660 N.E.2d 1033
PartiesLEE'S READY MIX AND TRUCKING, INC., Appellant-Plaintiff, v. Carl CREECH d/b/a Concrete Specialties and Concrete Specialties, Inc., Appellees-Defendants.
CourtIndiana Appellate Court

Appeal from the Jackson Superior Court, No. 36D01-9401-CP-2; Frank W. Guthrie, Judge.

Corinne R. Finnerty, McConnell & Finnerty, North Vernon, for Appellant.

Jon W. Webster, Webster & Webster, North Vernon, for Appellees.

OPINION

BAKER, Judge.

Appellant-plaintiff Lee's Ready Mix and Trucking, Inc. (Ready Mix) appeals the trial court's judgment in favor of appellees-defendants Carl Creech d/b/a Concrete Specialties and Concrete Specialties, Inc. Specifically, Ready Mix contends that the trial court erred in finding that it failed to prove: 1) that Creech fraudulently transferred substantially all of his assets to CSI in an attempt to defraud Ready Mix, 2) that any of the exceptions to the general rule limiting the liability of successor corporations for the debts of predecessor corporations were applicable to the present case, and 3) constructive fraud.

FACTS

The undisputed facts reveal that Ready Mix is an Indiana corporation which owns and operates ready-mix concrete plants in Jackson, Jennings and Bartholomew counties in Indiana. From October 1992 until January 1993, Ready Mix sold ready-mix concrete to Creech who was operating Concrete Specialties as a sole proprietorship. During that period, Creech incurred a debt to Ready Mix of approximately $69,575.00. In December 1992, Ready Mix's president, Larry Lee, learned that Creech was having financial difficulties and that he would be unable to pay his debt. As a result, Lee introduced Creech to Ed Callaway and suggested that they form a partnership to bring in new investments and business for Concrete Specialties.

After meeting, Creech and Callaway agreed to form Concrete Specialties, Inc. (CSI) and entered into a Pre-Incorporation Agreement (Agreement) on January 14, 1993. The Agreement provided that Creech and Callaway would be the sole officers and shareholders of CSI and would receive 499 shares and 501 shares of stock respectively. Record at 718. The Agreement further provided that Callaway would contribute $1,000.00 to CSI as his initial capital contribution and would loan $50,000.00 1 to CSI in an attempt to revitalize Creech's financial position. R. at 718. In return, Creech agreed to provide the equipment that he used in Concrete Specialties as his initial capital contribution. The Agreement also stated that neither CSI nor Callaway would be responsible for Creech's debts or become liable or responsible for them in any way. R. at 718.

CSI was incorporated on January 22, 1993, and began doing business on February 8, 1993. At that time, Creech was insolvent and had no collectible intangible assets. R. at 119. Over the next several months, CSI purchased approximately $200,000.00 of ready-mix concrete from Ready Mix. CSI opened and maintained its own accounts separate from those that Creech had maintained and paid Ready Mix in full for the concrete that it purchased. Although CSI also paid the debts owed to some of Creech's creditors, it did not pay Ready Mix for Creech's debts.

On June 21, 1994, Ready Mix filed an amended complaint against Creech d/b/a Concrete Specialties and Concrete Specialties, Inc., alleging that: 1) Creech failed and refused to pay his debt of $79,011.92, 2 2) Callaway promised that CSI would pay Creech's debt within one year and failed to do so, 3) Creech fraudulently conveyed and transferred substantially all of his assets to CSI in an attempt to defraud Ready Mix, and 4) CSI both expressly and impliedly assumed liability for Creech's debt. R. at 117, 121-128. In response, CSI filed an answer on February 3, 1995, denying Ready Mix's allegations and asserting several affirmative defenses, including the statute of frauds and lack of consideration.

Following a bench trial, the trial court entered findings of fact and conclusions of law on March 17, 1995, finding that Ready Mix failed to meet its burden of establishing: 1) that Creech fraudulently conveyed and transferred substantially all of his assets to CSI in an attempt to defraud Ready Mix, 2) that CSI agreed to pay Ready Mix for Creech's debts, 3) promissory estoppel, 4) equitable estoppel, and 5) constructive fraud. R. at 242-45.

DISCUSSION AND DECISION
I. Standard of Review

We first note the deferential standard of review we are to employ in this case. The trial court entered special findings of fact and conclusions of law upon Ready Mix's motion. When a trial court enters specific findings of fact and conclusions of law under Ind.Trial Rule 52(A), we must determine whether the trial court's findings are sufficient to support the judgment. Vanderburgh County Board of Comm'rs v. Rittenhouse (1991), Ind.App., 575 N.E.2d 663, 666, trans. denied. In reviewing the judgment, we must first determine whether the evidence supports the findings and second whether the findings support the judgment. Id. A judgment will be reversed only if clearly erroneous. Id. Also, we note here that Ready Mix is appealing from a negative judgment, which we will reverse only if the evidence is without conflict, and all reasonable inferences to be drawn from the evidence lead to but one conclusion and the trial court has reached a different conclusion. Williams v. City of Indianapolis Dep't of Pub. Works (1990), Ind.App., 558 N.E.2d 884, 888, trans. denied. We will neither reweigh the evidence nor judge the credibility of witnesses. Id.

II. Fraudulent Conveyance

Ready Mix contends the trial court erred in determining that it failed to meet its burden of establishing that Creech fraudulently conveyed and transferred substantially all of his assets to CSI in an attempt to defraud Ready Mix. Specifically, Ready Mix challenges several of the trial court's findings as well as its conclusion that the evidence presented at trial did not establish that Creech acted with fraudulent intent.

Fraudulent intent can be inferred from certain indicia called "badges of fraud." U.S. Marketing Concepts, Inc. v. Don Jacobs Buick-Subaru, Inc. (1989), Ind.App., 547 N.E.2d 892, 894. Some of the badges from which fraudulent intent can be inferred include: 1) the transfer of property by a debtor during the pendency of a suit; 2) a transfer of property that renders the debtor insolvent or greatly reduces his estate; 3) a series of contemporaneous transactions which strip the debtor of all property available for execution; 4) secret or hurried transactions not in the usual mode of doing business; 5) any transaction conducted in a manner differing from customary methods; 6) a transaction whereby the debtor retains benefits over the transferred property; 7) little or no consideration in return for the transfer; and 8) a transfer of property between family members. Id. When there is a concurrence of several badges of fraud an inference of fraudulent intent may be warranted. Id. However, no one badge of fraud constitutes a per se showing of fraudulent intent. Jones v. Central Nat'l Bank of St. Johns (1989), Ind.App., 547 N.E.2d 887, 890. Rather, the facts must be taken together to determine how many badges of fraud exist and if together they constitute a pattern of fraudulent intent. Id.

In the present case, the trial court made the following pertinent Findings of Fact regarding the badges of fraud:

18. [Creech] and [Callaway] are not related and CSI was formed and the assets transferred to CSI from [Creech] prior to any lawsuit being filed or any threat of litigation being made by [Ready Mix]. There is no fiduciary or confidential relationship between [Creech] and [Callaway] or between [Creech], [Callaway] and [Ready Mix].

19. [Callaway] never suggested to [Creech] that they should cheat, defraud, hinder or delay [Ready Mix] in collection of it's [sic] debt against [Creech]. [Ready Mix] has taken judgment against [Creech], but collection has been stayed by the Chapter 13 filing.

20. [Creech] was insolvent before he ever transferred any assets to CSI and the transfer of assets to CSI made [Ready Mix's] position no worse than it was before [Ready Mix] extended credit to [Creech].

21. None of the transactions between [Creech] and [Callaway] were secret or hurried.

22. [Creech] received a forty-nine percent (49%) interest in CSI in exchange for his assets.

R. at 244. The court then concluded that because none of the badges of fraud were present, Creech had not acted with fraudulent intent. Ready Mix, however, contends finding No. 18 is unsupported by the evidence. Specifically, Ready Mix argues that Creech's transfer of property to CSI constituted a badge of fraud because it was done at a time when Creech should have recognized the possibility of a lawsuit. However, our review of the record reveals that Creech transferred the equipment to CSI in January of 1993, almost one year before Ready Mix filed its lawsuit against him. Further, at the time Creech formed CSI and transferred the equipment, Ready Mix had not threatened to bring a lawsuit against him. Instead, Lee attempted to strengthen Creech's financial position by introducing him to Callaway and suggesting that they form a partnership to bring in new investments and business. This evidence supports the trial court's finding that Creech transferred the equipment to CSI prior to the filing of any lawsuit, prior to any threat of litigation by Ready Mix, and prior to a time when Creech should have recognized the possibility of a lawsuit.

Ready Mix next challenges the trial court's finding No. 21 that the transactions between Creech and Callaway were not secretive and hurried. Specifically, Ready Mix contends that the transactions were, in fact, secretive and hurried because, although Ready Mix knew that Creech and Callaway had formed CSI, it was not made aware that their Agreement limited CSI's liability for Creech's...

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