Schrenker v. State

• Citation: 919 N.E.2d 1188
• Decision Date: 19 January 2010
• Docket Number: No. 29A02-0902-CV-128.,29A02-0902-CV-128.
• Parties: Michelle SCHRENKER, Appellant-Defendant, v. STATE of Indiana, Appellee-Plaintiff.
• Court: Court of Appeals of Indiana

919 N.E.2d 1188 Michelle SCHRENKER, Appellant-Defendant,
v.
STATE of Indiana, Appellee-Plaintiff. No. 29A02-0902-CV-128. Court of Appeals of Indiana. January 19, 2010.

[919 N.E.2d 1190]

Mary F. Schmid, Stewart & Irwin, P.C., Indianapolis, IN, Attorney for Appellant.

Gregory F. Zoeller, Attorney General of Indiana, Elizabeth Rogers, David L. Steiner, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.

OPINION

MAY, Judge.

Michelle Schrenker and her husband Marcus were the subjects of an action by the Indiana Securities Commissioner. Marcus had been a registered investment adviser representative but he continued to provide investment services after his registration expired. He ultimately fled the state "with an unknown amount of investor money and/or assets purchased with investor money." (App. at 15.) The Commissioner's complaint named Marcus, Michelle, and their three corporations as defendants, and alleged the defendants collectively engaged in acts that violated the Indiana Securities Act. The trial court appointed a receiver over Michelle's assets after she agreed to a preliminary injunction that would prevent her from transferring any assets until an accounting could be completed. We affirm the appointment of a receiver.¹

FACTS AND PROCEDURAL HISTORY

Marcus was registered as an investment advisor with the Indiana Securities Division, and he and Michelle were principals in investment firms called Heritage Wealth Management (HWM), Heritage Insurance Services (HIS), and Icon Wealth Management (Icon). The offices were leased to both Marcus and Michelle, and Michelle kept the books and was chief financial officer (CFO) for the three firms. She was paid $11,600 monthly, and the State asserts she "did not consider her position as CFO to be simply a title."² (Br. of Appellee State of Indiana (hereinafter "State's Br.") at 3.) She was the majority shareholder and a director of HWM. She handled the books, recordkeeping, and accounting

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for HWM and Icon, and had the authority to write checks and withdraw money from the HIS account. Marcus and Michelle agreed their assets would be held in Michelle's name because Marcus feared a "litigious industry" after 9-11. (App. at 129.)

Marcus encouraged some clients to invest in a fund that allegedly would take advantage of the relative strength of the Euro over the dollar. He instructed those clients to pay the money to HIS. Marcus apparently did not invest the money in the Euro fund; instead he and Michelle used the money in HIS for their personal expenses. In December 2008, Michelle withdrew $66,500 from the HIS account.

DISCUSSION AND DECISION

If the Securities Commissioner believes a person

has engaged, is engaging, or is about to engage in an act, practice, or course of business constituting a violation of this article or a rule adopted or order issued under this article or that a person has, is, or is about to engage in an act, practice, or course of business that materially aids a violation of this article or a rule adopted or order issued under this article, the commissioner may maintain an action in the circuit or superior court in the county where the investigation or inquiry in question is being conducted to enjoin the act, practice, or course of business and to enforce compliance with this article or a rule adopted or order issued under this article.

* * * * * *

(b) In an action under this section and on a proper showing, the court may:

(1) issue a permanent or temporary injunction, restraining order, or declaratory judgment;

(2) order other appropriate or ancillary relief, which may include:

(A) an asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator;

(B) ordering a receiver or conservator appointed under clause (A) to take charge and control of a respondent's property, including investment accounts and accounts in a depository institution, rents, and profits; to collect debts; and to acquire and dispose of property ...

Ind.Code § 23-19-6-3.

Our scope of review of an interlocutory order appointing a receiver is limited. We will not weigh the evidence on appeal, and we must construe the evidence along with all reasonable inferences in favor of the trial court's decision. In re Marriage of Gore, 527 N.E.2d 191, 195 (Ind.Ct.App.1988). The appointment of a receiver is in the sound discretion of the trial court, and therefore our standard of review is that of abuse of discretion. Id.

Still, the appointment of a receiver is an

extraordinary and drastic remedy to be exercised with great caution. The action affects one of man's most cherished and sacred rights guaranteed by the United States Constitution — the right to be secure in his property. This right is fundamental to every society in which men are free. For these reasons the statute which grants such authority is to be strictly construed.

919 N.E.2d 1192

Crippin Printing Corp. v. Abel, 441 N.E.2d 1002, 1005 (Ind.Ct.App.1982) (internal quotation omitted).

The appointment of a receiver is a statutorily granted authority that must be strictly construed, and it cannot be sustained unless proper statutory grounds for the appointment are sufficiently shown. City of South Bend v. Century Indent. Co., 821 N.E.2d 5, 13 (Ind.Ct.App.2005), trans. denied 841 N.E.2d 181 (Ind.2005). The power to appoint a receiver should be exercised only when it is clear that no other full and adequate remedy exists whereby justice between the parties may be affected and a wrong prevented, and only in a clear case of extreme necessity. Accordingly, the standard by which the appointment can be justified is exceptionally stringent. Marriage of Gore, 527 N.E.2d at 195.

The trial court made special findings of fact and conclusions of law, as it must when deciding whether to grant a preliminary injunction. Aberdeen Apartments v. Cary Campbell Realty Alliance, Inc., 820 N.E.2d 158, 163 (Ind.Ct.App.2005), reh'g denied, trans. denied. On review, we determine whether the findings support the judgment. Id. We will reverse only if the judgment is clearly erroneous. Id. Findings of fact are clearly erroneous when the record lacks evidence or reasonable inferences from the evidence to support them. Id. We consider the evidence in the light most favorable to the judgment and construe findings together liberally in favor of the judgment. Id.

While the record as to Michelle is quite sparse, we cannot say the trial court abused its discretion in appointing a receiver. The appointment of a receiver was premised on the trial court's conclusions Michelle "materially aided" Marcus and his corporations in violating the Securities Act by "allowing and personally converting investor funds to be used for the personal use" of her and Marcus, (App. at 19), and she was "jointly and severally liable with and to the same extent as" Marcus and his companies by virtue of her position as Chief Financial Officer of three companies.³ (Id. at 11.)

919 N.E.2d 1193

1. Does the Evidence Support the Findings?

Michelle notes it was to the HIS account alone that Marcus had his clients wire funds or write checks, and she asserts there was no evidence she was CFO of HIS. As we may not weigh the evidence and must construe the evidence along with all reasonable inferences in favor of the trial court's decision, we cannot say the finding she was CFO of HIS is clearly erroneous. There was evidence Michelle kept the books for HIS, and Marcus said she was CFO.⁴ It is apparent she had access to the HIS checking account, as she withdrew at least $66,500 from it.⁵

Michelle next asserts there was no evidence to support the finding Marcus and Michelle "did convert investor funds for his or her own personal use," (App. at 12), as there was no evidence she intentionally or knowingly used investor funds. Her argument is premised on the statutory definition of criminal conversion: "A person who knowingly or intentionally exerts unauthorized control over property of another person commits criminal conversion." Ind.Code § 35-43-4-3. A person who has suffered a pecuniary loss as a result of a criminal conversion may bring a civil action to recover the loss, and in such a civil action must prove by a preponderance of the evidence that the defendant committed the criminal act. Jet Credit Union v. Loudermilk, 879 N.E.2d 594, 597 (Ind.Ct.App.2008), trans. denied 891 N.E.2d 49 (Ind.2008). In a criminal conversion action, criminal intent is an essential element that must be proven. Id. To

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establish that intent, a plaintiff must show the defendant was aware of a high probability his control over the plaintiff's property was unauthorized. Id.

Criminal conversion requires the unauthorized control to be either knowing or intentional, but mens rea is not an element of tortious conversion. Computers Unlimited, Inc. v. Midwest Data Systems, Inc., 657 N.E.2d 165, 171 (Ind.Ct. App.1995). Nor is good faith a defense. Id. Conversion, as a tort, is the appropriation of the personal property of another to the party's own use and benefit, or in its destruction, or in exercising dominion over it, in exclusion and...