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Indiana Supreme Court Discusses Proceedings SupplementalDo you know what "proceedings supplemental" are? If you are in the business of collecting judgments in Indiana, and from time to time virtually all secured lenders are, then the June 27, 2007 opinion by the Indiana Supreme Court in Rose v. Mercantile National Bank, 2007 Ind. LEXIS 471 provides a great primer on the subject. Facts of Rose. Plaintiffs sued an S-Corp, and the trial court entered judgment against S-Corp for $159,581. During the litigation, the owners of S-Corp sold the company in an asset sale to Corporation I for $475,000. Corporation I then transferred its rights and obligations under the asset-purchase agreement to Corporation II, a wholly-owned subsidiary of Corporation I. After the sale, the owners of S-Corp deposited the sale proceeds into S-Corp's bank account and, within three days, issued checks to themselves for the entire sale price. The closing occurred approximately one month after the trial court entered judgment for Plaintiffs. About a year later, presumably because the judgment had not been paid, Plaintiffs moved for proceedings supplemental and brought fraudulent transfer claims against S-Corp, Corporation I, Corporation II, and S-Corp's owners. Plaintiffs asserted that assets had been transferred out of S-Corp to avoid paying the judgment. During the proceedings supplemental, Plaintiffs sought to amend the complaint to add additional claims and to recover new damages. The result was a new judgment for Plaintiffs for $542,435.49 plus attorney's fees of $162,730. The Indiana Supreme Court affirmed the trial court's finding that the two owners of S-Corp fraudulently transferred assets, but the Court set aside the new claims for new damages. Proceedings supplemental generally. Proceedings supplemental are designed to help judgment creditors enforce judgments â€" for discovering assets and to set aside fraudulent conveyances. Proceedings supplemental are merely the continuation of an original action. Ind. Trial Rule 69(E) generally governs proceedings supplemental, and the motion is made in the court where judgment was rendered. Discovery is permitted, and a hearing must be conducted, after which certain property is to be applied toward the judgment. Id. at 4-5. Fraudulent transfer. Judgment creditors often use proceedings supplemental to bring fraudulent transfer actions, the purpose of which is to remove "obstacles which prevent the enforcement of the judgment . . . through the levy of execution." The essence of a fraudulent transfer action is not to attack the transfer or to recover damages. Instead, the action "is to subject property to execution as though it were still in the name of the grantor." Id at 6-7. New claims. Unlike Plaintiffs' fraudulent transfer claims, Plaintiffs also sought new damages from the S-Corp owners by adding a new cause of action under Indiana's Crime Victims' Compensation Act, which allows for treble damages and attorney's fees. The Court said this was a no-no: "Allowing a new claim to be tacked on at this stage would be just as unfitting as opening up any other litigation to add new claims after judgment. Such an approach to collections would lay the groundwork for perpetual motion-a far cry from the timely and efficient system of conflict resolution the nation's judiciary strives to provide. Proceedings supplemental are appropriate only for actions to enforce and collect existing judgments, not to establish new ones." Id. at 7. So, a new claim for new damages, and thus the imposition of a new judgment, should be filed in a new lawsuit. On the other hand, "any action to assist in collection of an original judgment [like a proceeding supplement] must be filed under the same cause number as the original action." Id. In addition to addressing the generalities of proceedings supplemental, the Indiana Supreme Court provides clarity for lenders concerning fraudulent transfer actions, which can be appropriately prosecuted in proceedings supplemental or, in other words, in a continuation of the same case and in the same trial court that rendered the judgment. Any new claims or, in other words, actions for separate and distinct damages, however, must be the subject of another lawsuit. Other articles by this author »
About John D. Waller
John D. Waller is a partner at the Indianapolis law firm of Wooden & McLaughlin LLP. He publishes the blog Indiana Commercial Foreclosure Law at http://commercialforeclosureblog.typepad.com. John's phone number is 317-639-6151, and his e-mail address is jwaller@woodmclaw.com. Related
And here is another random article you might be interested in... Turn An Arts And Crafts Hobby Into A BusinessAre you searching for a quick way to make an extra income? Why not turn that Cooking Interest, Comic Book Collecting, or Your Retro Clothing Collection Into A Home Based Business Venture! Most people enjoy hobbies they have pursued with great enthusiasm for years. Even though they may find their leisure activities fulfilling and enjoyable they never imagined making money with a fun hobby! The world is packed with amazingly talented people. Are you one of these gifted individuals? These talented individuals might have a passion for sewing fabulous original wardrobes, marvelous hand knitted items, furniture making, creative paintings, photographs, jewelry art, greeting card design, doll making, original toys, baby clothing, candle making, quilting, calligraphy, fancy soap making, about anything you can imagine! Crafting is actually a great way to start a home business on a shoe string. You might want to start on a small scale by offering your creative work to friends and family. Later on, once you have enough products, you might decide to rent a booth at local flea markets or crafts shows to display your work. As you may know the Arts And Crafts Industry Is Enjoying An Amazingly Phenomenal Popularity. People are eager to purchase hand made clothing, furniture, custom made keepsakes or jewelry. If you have the creative talent this is one business you should consider! A friend, Joyce, diverted her obsession with candle making into a thriving business. She started by selling her hand made scented candles to friends and neighbors. Word of mouth spread about her candles. Soon she was receiving enough orders to keep her very busy. Joyce throws house parties to sell her candles and also takes custom orders from ads she runs in local newspapers. Next, she plans to take her candles to the stores and malls in her area. I recently read about a middle aged fellow who turned his knowledge about collecting rare comic books into a thriving business. Imagine? Several hundred of his old comic books are now worth their weight in gold. And his wife is no longer protesting about the space the old editions take up in their home. Think about it! What's your passion? What's your leisure time interest? Could your leisurely pursuits translate into a lucrative business? --------------------------------------------------------- Click The Link Below For More Information. Other articles by this author »
About BB Lee
BB Lee is a professional writer and the editor of SmallBizBits
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