Otte v. Otte, 47A04-9501-CV-30
| Decision Date | 29 August 1995 |
| Docket Number | No. 47A04-9501-CV-30,47A04-9501-CV-30 |
| Citation | 655 N.E.2d 76 |
| Parties | Ervin G. OTTE, Nancy S. Otte, Brian Otte, Alan Otte, Robert Hite and Martha Hite, Appellants (Defendants Below), v. Ralph M. OTTE and Geraldine S. Otte, assignees of Production Credit Association of the Fourth District f/k/a Farmers Production Credit Association of Scottsburg, Appellees (Plaintiffs Below). |
| Court | Indiana Appellate Court |
Ervin and Nancy Otte appeal from the trial court's order directing the Lawrence County Sheriff to sell their farm.
We affirm.
I. Whether the evidence is sufficient to support the trial court's conclusion that the transfer of the farm from Ervin and Nancy to Nancy's parents and back to Nancy and her sons constituted a fraudulent conveyance.
II. Whether the trial court erred in ordering the farm sold.
During the 1970's, Ervin and Nancy Otte executed four promissory notes, co-signed by Ervin's parents, Francis and Ruth Otte, in favor of Farmers Production Credit Association of Scottsburg. The notes were secured by mortgages on several pieces of real estate, including Ervin's and Nancy's farm. Apparently, Ervin and Nancy defaulted on the promissory notes because on April 28, 1982, Farmers filed a complaint against Ervin, Nancy, Francis and Ruth in the Lawrence County Circuit Court seeking to foreclose on the mortgages.
Thereafter, on August 20, 1982, Nancy filed a petition for relief under Chapter 13 of the United States Bankruptcy Code. Nancy provided for the debt owed to Farmers in her Chapter 13 creditor payment plan, and Farmers objected. Later, Farmers and Nancy entered into a settlement agreement providing for payment to Farmers outside the Chapter 13 plan. On May 23, 1983, the United States Bankruptcy Court for the Southern District of Indiana entered an order confirming Nancy's amended Chapter 13 plan. With respect to the settlement agreement between Farmers and Nancy, the bankruptcy court stated as follows:
On February 22, 1983, this Court approved a Settlement Agreement between the Debtor and the Farmers' Production Credit Association of Scottsburg, and the Court specifically finds that the real estate that is jointly held by Debtor and her husband is not property of the estate and that notice and hearing to all creditors in general is not necessary for there to be sales of the real estate pursuant to the Settlement Agreement.
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The Debtor is authorized and ordered to take all necessary steps to consummate the Settlement Agreement between the debtor and the Farmers' Production Credit Association of Scottsburg.
(R. 99-100).
Nancy did not make the payments as required under the settlement agreement with Farmers, however, because on September 21, 1987, the Lawrence County Circuit Court entered summary judgment in favor of Farmers and against Ervin, Nancy, Francis, and Ruth. The trial court granted Farmers a judgment for $180,797.71, and ordered that the mortgage on Ervin's and Nancy's farm be foreclosed, finding in part as follows:
[t]hat on or about August 20, 1982, Defendant, Nancy S. Otte, filed a voluntary petition in bankruptcy, in the United States Bankruptcy Court, Southern District of Indiana, New Albany Division, under Cause No. 82-0146 NA. Upon discharge, Nancy S. Otte should not be held personally liable for any deficiency resulting from the foreclosure sale of the above-described real and personal property.
(R. 20).
Thereafter, Ervin's and Nancy's farm was offered for sale at a judicially ordered sheriff's sale on November 10, 1987, where Farmers purchased the farm, in effect from itself, leaving a deficiency of $125,374.75. Farmers sought to satisfy the deficiency by commencing execution proceedings against the farm owned by Francis and Ruth. To preserve Francis's and Ruth's fee simple ownership interest in the farm, Ralph Otte (Ervin's brother and another son of Francis and Ruth) and Ralph's wife, Geraldine, purchased Farmers' judgment against Ervin, Nancy, Francis, and Ruth for the $125,374.75 deficiency due Farmers. Farmers' successor-in-interest, Production Credit Association of the Fourth District (PCA), assigned the judgment to Ralph and Geraldine, and recorded the assignment in the Office of the Recorder of Lawrence County on June 24, 1988.
On August 1, 1988, the bankruptcy court entered an order discharging Nancy "from all debts provided for by the plan...." (R. 102).
Pursuant to the dictates of the Federal Agricultural Credit Act, PCA, which held title to Ervin's and Nancy's farm, had to offer to sell the farm to Ervin and Nancy, who had a right of first refusal. Ervin and Nancy obtained approximately $64,000.00 to purchase the farm from Nancy's parents, Robert and Martha Hite. Robert Hite submitted a personal check to PCA dated August 12, 1988, in the amount of $63,400.00. Thereafter, on August 15, 1988, PCA executed a Corporate Warranty Deed conveying the farm to Ervin and Nancy. On the same date, Ervin and Nancy conveyed their farm to Robert and Martha "for and in the consideration of one dollar and other valuable considerations." (R. 188). The same day, upon receiving title to Ervin's and Nancy's farm, Robert and Martha sold the property back to Nancy and her two sons, under a contract for the sale of real estate. The terms of the contract called for $10.00 upon execution of the agreement with the balance to be paid by Nancy and her sons on or before August 15, 1990. 1
On December 28, 1990, Ralph and Geraldine filed a "Motion for Order Determining Validity and Priority of Judgment Lien of Ralph M. Otte and Geraldine S. Otte and Motion for Order Permitting Execution Upon Real Estate and Setting Sheriff's Sale Upon Execution" in the Lawrence County Circuit Court case. (R. 26). Essentially, in an attempt to satisfy the approximately $125,000.00 deficiency judgment they now owned, Ralph and Geraldine requested the trial court to order Ervin's and Nancy's farm to be sold at a sheriff's sale.
In response, Nancy filed a petition to reopen her bankruptcy case on July 8, 1992, and filed a "Complaint Seeking to Enjoin Action in Violation of Discharge Provision and Order" against Ralph and Geraldine. (R. 145). Ralph and Geraldine moved for summary judgment in the bankruptcy court alleging that the undisputed material facts indicated that Nancy's 1988 bankruptcy discharge did not discharge her from the $125,000.00 debt owed to Ralph and Geraldine because it was not "provided for" in her Chapter 13 creditor payment plan. Nancy filed a cross motion for summary judgment alleging that despite the fact she made payments directly to Farmers (now PCA), Nancy's plan, in fact, "provided for" that debt because the plan referenced the settlement agreement.
In its entry on the parties' cross-motions for summary judgment, the bankruptcy court concluded in pertinent part as follows:
1. Ralph and Geraldine may proceed in the Lawrence Circuit Court to enforce their judgment lien against real property held by Nancy and Ervin Otte as tenants by the entirety.
* * * * * *
3. A creditor may proceed to collect on a debtor's liability with respect to property owned as tenants by the entirety, when a pre-discharge judgment lien on that property exists. (Citations omitted).
4. The pre-discharge lien of Ralph and Geraldine Otte was neither erased nor destroyed by Nancy Otte's intervening bankruptcy. (Citations omitted).
5. As a matter of law, Ralph and Geraldine Otte are entitled to judgment in their favor on the Complaint seeking to Enjoin Action in Violation of Discharge Provision and Order.
(R. 150). Apparently the bankruptcy court's ruling was not appealed.
On December 17, 1992, Ralph and Geraldine, Ervin and Nancy, and Robert and Martha filed their evidentiary stipulations identifying the documentary evidence upon which the trial court was to base its determination of the validity and priority of the judgment lien held by Ralph and Geraldine in the Lawrence County Circuit Court. Following an oral argument, the trial court issued findings of fact and conclusions of law on September 23, 1994, determining that the bankruptcy court's order allowed Ralph and Geraldine to enforce their judgment lien against Ervin's and Nancy's farm in the Lawrence County Circuit Court. The trial court also concluded the transfers of the farm from Ervin and Nancy to Robert and Martha, her parents, and back to Nancy and her sons were fraudulent, and that, therefore, Ralph's and Geraldine's lien on the farm had priority over the interest asserted by Robert and Martha and Nancy and her sons. The trial court also ordered the farm to be sold at a Sheriff's sale and the proceeds applied to the deficiency judgment held by Ralph and Geraldine.
Additional facts will be presented in our discussion of the issues.
It appears the findings of fact and conclusions of law entered by the trial court were not requested by either party. In such a case, this court applies a two-tier standard of review. Coffin v. Hollar (1993), Ind.App., 626 N.E.2d 586, 589. The court first determines whether the evidence supports the findings and then determines whether the findings support the judgment. Id. Special findings and the judgment flowing therefrom will be set aside only if they are clearly erroneous. Id.
This Court will neither reweigh the evidence nor judge the credibility of the witnesses. Id. Rather, this court will view only the evidence in the record which supports the judgment along with all reasonable inferences to be drawn therefrom. Id.
Ervin and Nancy argue the evidence was insufficient to support the trial court's conclusion that the series of conveyances which took place on August 15, 1988, were fraudulent.
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