National City Bank of Evansville v. Oldham, 82A01-8811-CV-361

• Decision Date: 09 May 1989
• Docket Number: No. 82A01-8811-CV-361,82A01-8811-CV-361
• Citation: 537 N.E.2d 1193
• Parties: NATIONAL CITY BANK OF EVANSVILLE, Plaintiff-Appellant, v. John OLDHAM, Eastern Indemnity Company of Maryland, Lewis A. Volpe, Treasurer of Vanderburgh County, Indiana, Board of County Commissioners Vanderburgh County, Indiana, Judgment Defendant Appellees, Estate of Hubert D. Oldham, Garnishee Defendant Appellee.
• Court: Indiana Appellate Court

Page 1193

537 N.E.2d 1193

NATIONAL CITY BANK OF EVANSVILLE, Plaintiff-Appellant, v. John OLDHAM, Eastern Indemnity Company of Maryland, Lewis A Volpe, Treasurer of Vanderburgh County, Indiana Board of County Commissioners Vanderburgh County, Indiana Judgment Defendant Appellees Estate of Hubert D. Oldham, Garnishee Defendant Appellee.

No. 82A01-8811-CV-361.

Court of Appeals of Indiana, First District.

May 9, 1989.

Marilyn R. Ratliff, Kahn, Dees, Donovan & Kahn, Evansville, for plaintiff-appellant.

John J. Jewell, Trimble & Jewell, Evansville, for appellees.

STATEMENT OF THE CASE

NEAL, Judge.

Plaintiff-appellant, National City Bank of Evansville (the Bank), appeals the decision of the Vanderburgh Circuit Court denying its motion for proceedings supplemental wherein it sought to satisfy a judgment it held against defendant-appellee, John S. Oldham (Oldham), from the assets of the garnishee defendant-appellee, Estate of Hubert D. Oldham (the Estate).

We affirm.

STATEMENT OF THE FACTS

The Bank instituted foreclosure proceedings against Oldham and on December 20, 1983, obtained a judgment against him in the amount of $248,043.87 plus interest and costs. On March 5, 1984, the property that was the subject of the foreclosure action was sold at a sheriff's sale for $165,000, leaving a deficiency judgment against Oldham in the amount of $94,465.73.

On October 18, 1987, Oldham's father died and his will was duly admitted to probate on October 23, 1987. The will left a large portion of the Estate to Oldham including certain residential real estate located in Evansville, Indiana. On January 22, 1988, the Bank, in order to satisfy the deficiency judgment, filed a motion for proceedings supplemental, naming the Estate as garnishee defendant. Thereafter, on March 9, 1988, Oldham filed in the probate proceedings a disclaimer pursuant to IND.CODE 32-3-2-3, wholly and entirely disclaiming the property and interests in property which devolved to him from the estate. On April 20, 1988, Oldham executed and filed an amended disclaimer correcting a clerical error contained in the prior disclaimer.

By agreement, the Bank's motion for proceedings supplemental was submitted to the trial court upon the stipulated facts and briefs of the parties and a hearing was conducted thereon on August 18, 1988. Subsequently, the trial court denied the Bank's motion, determining that it was not

entitled to execute upon any of the assets of the Estate by virtue of Oldham's valid and effective disclaimer disclaiming any interest he may have had therein. The Bank appeals this decision.

ISSUES

The Bank raises the following issues for our review:

I. Whether the trial court erred in failing to find that there did not exist an encumbrance within the meaning of IND.CODE 32-3-2-10 barring Oldham's statutory right to disclaim.

II. Whether the trial court erred in failing to find that there did not exist an acceptance of an interest or benefit within the meaning of IND.CODE 32-3-2-11 barring Oldham's statutory right to disclaim.

III. Whether the trial court applied the various provisions of the disclaimer statute in an unconstitutional manner.

DISCUSSION AND DECISION

ISSUE I: Encumbrance

The Bank points out that it acquired a lien against Oldham's real property when it duly entered and indexed in the Vanderburgh County judgment docket the judgment it previously obtained against Oldham on December 20, 1983. See IND.CODE 34-1-45-2. It also points out that title to a decedent's personal and real property, whether he died testate or intestate, passes immediately by operation of law to the devisee or heir. The Bank first argues that by virtue of its previously recorded judgment lien, it acquired a lien against any assets of the estate in which Oldham had an interest at the moment the decedent died. It argues further that because the lien attached prior to the time Oldham executed the disclaimer, he was thereafter barred from attempting to do so.

It is true that the real and personal property of a decedent passes immediately upon his death to the person to whom it is devised by will or to the person who succeeds to the estate as his heir subject to certain circumstances not relevant here. See IND.CODE 29-1-7-23. It is also true that the interests of an heir or devisee in the decedent's estate may be taken by his creditors for the payment of his debts. See 10 I.L.E. Descent & Distribution Sec. 78 (1983). A judgment creditor of a decedent's heir or devisee, however, has no greater rights in the decedent's property than the heir or devisee. If the title of an heir or devisee is divested so also are the rights of his creditor.

IND.CODE 32-3-2-1 to -15 provides a scheme whereby a person to whom an interest devolves by whatever means may divest himself of all or a portion of an interest by disclaiming it in whole or in part. In this regard, IND.CODE 32-3-2-2 provides:

A person to whom an interest devolves by whatever means may disclaim the interest in whole or in part as provided in this chapter. A person's personal representative, guardian, or conservator may disclaim on behalf of the person. The disclaimer shall:

(1) be in writing;

(2) describe the property and the interest in the property to be disclaimed; and

(3) be signed by the person to whom the interest devolves, or his personal representative, guardian, or conservator.

Pursuant to this statute, Oldham executed a disclaimer as to any interest which may have devolved to him from the estate. The disclaimer was timely and properly executed in full compliance with the statutory requirements. The Bank does not dispute this fact. Rather, the Bank disputes the effect the disclaimer had on its judgment lien which it maintains had already attached to Oldham's interest in the assets of the Estate.

Regarding the effect of a disclaimer of an intestate or testamentary interest, IND.CODE 32-3-2-3(d) provides:

If provision has not been made for another devolution, an interest disclaimed under this section devolves as if the disclaimant had predeceased the decedent. A disclaimer under this section relates back for all purposes that relate to the interest disclaimed to a time immediately before the death of the decedent.

This language is clear. The disclaimer relates back to a time immediately before a decedent's death and the interest disclaimed devolves as if the disclaimant predeceased the decedent. The effect of the disclaimer is the same as if the disclaimed interest had never been created in the disclaimant. As a result, the disclaimed interest is not transferred to the disclaimant at the decedent's death. As there is no transfer of an interest to the disclaimant, there is nothing to which a lien can attach. Consequently, creditors of the disclaimant and his estate have no claim against or right in the disclaimed property. See Matter of Estate of Wisely (1980), Ind.App., 402 N.E.2d 14, trans. denied.

In Wisely, Mrs. Wisely executed and filed a legally effective disclaimer pursuant to IND.CODE 29-1-6-4, the predecessor of the statute at issue here, renouncing her interest in her husband's estate. The Indiana Department of Revenue argued that a legally effective disclaimer should not affect the assessment of inheritance tax because the tax is imposed at the time of the decedent's death and therefore the tax should be computed according to distribution by the will as if no disclaimer had occurred. Regarding the effect of the disclaimer, this court stated:

The language of this statute is unmistakably clear: The interest renounced passes as if the person renouncing had predeceased the decedent and the renunciation relates back to the date of the decedent's death for all purposes. The effect of this statute upon Mrs. Wisely's renunciation is that her renounced interest passed to her daughters as if she had predeceased her husband and her renunciation related back to the date of her husband's death for all purposes. The renounced interest, therefore, was not transferred to her at decedent's death.

402 N.E.2d at 15-16. In reaching this conclusion, we emphasized that the language of the statute required that the relation back doctrine be applied for all purposes. Thus, the disclaimer statute is effective even as against the Indiana inheritance tax authority. We see no reason why a typical judgment creditor, like the Bank, should be afforded any greater rights than the Indiana taxing authorities.

In the case at bar, Oldham executed his disclaimer in accordance with the disclaimer statute. Thus, Oldham's disclaimer related back to a time immediately before his father's death and he is treated as though he predeceased his father. By virtue of the disclaimer statute, therefore, no property from the estate, real or personal, was passed to Oldham at his father's death. There having been no interest passed to Oldham from the estate, there was nothing to which the Bank's judgment lien against him could attach. The Bank, therefore, had no claim against or right in the disclaimed property.

The Bank attempts to avoid this result, however, by characterizing its judgment lien as an encumbrance. This is of significance in light of IND.CODE 32-3-2-10 which designates certain circumstances which act to bar a person's right to disclaim an interest. That statute states in pertinent part:

The right to disclaim an interest is barred after any of the following events:

(1) An assignment, conveyance, encumbrance, pledge, or transfer of the interest.

The Bank argues that by reason of the judgment it obtained against Oldham prior to his father's death, an involuntary encumbrance was created attaching at the moment of death to any interest Oldham had in the Estate. In furtherance of this contention, the Bank argues that there is no requirement that any of the events listed in the statute result from the voluntary actions or conduct of the disclaimant.

The Bank's argument presents nothing more than an exercise in...