Cheryl Underwood v. Judith M. Fulford Thomas Bunger, in his capacity as the Personal Representative of the Estate of Kenneth K. Kinney and Sheree Demming

FILED
Jun 28 2019, 9:00 am

CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court

ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE,
Zachary J. Stock JUDITH M. FULFORD
Indianapolis, Indiana William J. Spalding
Spalding Law LLC
Bloomington, Indiana
ATTORNEY FOR APPELLEE,
THOMAS BUNGER
Scott D. Pankow
Indianapolis, Indiana

IN THE
COURT OF APPEALS OF INDIANA

Cheryl Underwood, June 28, 2019
Appellant-Plaintiff, Court of Appeals Case No.
18A-PL-1744
v. Appeal from the Monroe Circuit
Court
Judith M. Fulford; Thomas The Honorable Elizabeth A. Cure,
Bunger, in his capacity as the Judge
Personal Representative of the Trial Court Cause Nos.
Estate of Kenneth K. Kinney; 53C01-1504-MI-657
and Sheree Demming, 53C01-1603-PL-471
53C01-1711-ES-256
Appellees-Defendants.

Pyle, Judge.

Statement of the Case

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[1] This matter involves three consolidated cases initiated by Cheryl Underwood

(“Underwood”): two claims against the Estate of Kenneth K. Kinney (the

“Estate”) seeking contribution for a partnership liability (collectively, the

“Contribution Action”); a claim against the Estate for alleged fraudulent

transfer of property (the “Fraudulent Transfer Action”); and a petition for sale

and partition of the parties’ jointly owned real estate (the “Partition Action”).

Presently, Underwood appeals the trial court’s judgment in favor of the Estate

in the Contribution Action and Fraudulent Transfer Action and its retention of

funds in the Partition Action. Specifically, Underwood argues that the trial

court erred in concluding that she could not recover in the Contribution Action

and Fraudulent Transfer Action because the Estate was entitled to both

common-law and statutory indemnification for Underwood’s wrongful

conduct. She further argues that the trial court erred in retaining the proceeds

(“Partition Proceeds”) from the sale of the parties’ jointly owned real estate (the

“Partition Sale”) even after determining the parties’ respective ownership

interests. Concluding that the trial court did not err in concluding that the

Estate was entitled to indemnification but did err in retaining Underwood’s and

the Estate’s shares of the Partition Proceeds, we affirm in part, reverse in part,

and remand.

[2] We affirm in part, reverse in part, and remand.

Issues
1. Whether the trial court clearly erred in entering judgment in
favor of the Estate in the Contribution Action and Fraudulent
Transfer Action.
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 2. Whether the trial court clearly erred in retaining some of the
Partition Proceeds after determining the parties’ respective
ownership interests.

Facts
[3] These parties come before our Court again following a lengthy factual and

procedural history spanning nearly two decades. We have detailed this history

in two previously published opinions (collectively, the “Demming Litigation”).

See Demming v. Underwood, 943 N.E.2d 878, 882-83 (Ind. Ct. App. 2011), trans.

denied; Demming v. Underwood, 40 N.E.3d 887, 891-93 (Ind. Ct. App. 2015). The

parties have also been heard by our Supreme Court in a property-division

matter (the “Partition Action”) also relating to this matter. See Underwood v.

Bunger, 70 N.E.3d 338, 340-42 (Ind. 2017). The following is a summary of facts

pertinent to the issues Underwood presently appeals.

[4] Sometime in 2002, Sheree Demming (“Demming”) retained Underwood, a real

estate broker, to help her purchase two properties on East Sixth Street in

Bloomington, Indiana (the “Sixth Street Properties”). Instead of facilitating the

sale to Demming, Underwood approached Kenneth Kinney (“Kinney”) about

purchasing the Sixth Street Properties as partners. Ultimately, she and Kinney

purchased the Sixth Street Properties for themselves.

[5] On April 19, 2007, Demming filed suit against Underwood and Kinney

asserting claims for breach of fiduciary duty and constructive fraud and

requesting the imposition of a constructive trust compelling Underwood and

Kinney to convey title of the Sixth Street Properties to her. Demming

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 ultimately prevailed on her claims and was awarded $154,552.14 in damages

(the “Demming Judgment”), for which Underwood and Kinney were held

jointly and severally liable. Underwood subsequently satisfied the Demming

Judgment on her own.

[6] On November 16, 2014, Kinney passed away. He was survived by his wife

Judith Fulford (“Fulford”) and the personal representative of his Estate,

Thomas Bunger (“Bunger”). In February and March of 2015, Underwood

initiated the Contribution Action, demanding equal contribution for any

payment made to satisfy the Demming Judgment, as well as equal contribution

for any charges, costs, or additional damages arising out of the Demming

Judgment.

[7] On April 13, 2015, Underwood filed the Partition Action to petition to compel

the partition of other real estate (the “Eighth Street Property”) jointly owned by

Underwood, Fulford, and the Estate. On March 3, 2016, she also filed the

Fraudulent Transfer Action against the Estate, alleging that Kinney had

conveyed certain other properties to Fulford in violation of Indiana’s Uniform

Fraudulent Transfer Act (“UFTA”).

[8] On July 15, 2016, the Eighth Street Property was sold at the Partition Sale for

$237,000. Once the remaining mortgage amount was satisfied, the Partition

Proceeds amounted to $204,284.89. On April 18, 2017, and July 13, 2017, the

trial court consolidated the Contribution Action and the Partition Action,

respectively, into the Fraudulent Transfer Action.

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[9] On December 4, 2017, the trial court conducted a bench trial in the

Contribution Action on the issue of whether Kinney holds a right to indemnity

from Underwood for any liability resulting from the Demming Litigation, and

therefore, whether Underwood was precluded from obtaining contribution

toward payment of that judgment. On April 24, 2018, the trial court entered its

finding that the Demming Judgment had held Kinney vicariously liable for

Underwood’s wrongful conduct and that Kinney had committed no

independent fraudulent act. The trial court also concluded that Kinney (and

now the Estate) had both a common-law right and a statutory right to

indemnity from Underwood for the Demming Judgment. The trial court

further concluded that its judgment in the Contribution Action rendered the

Fraudulent Transfer Action invalid and moot. The trial court issued an order

(the “Indemnification Order”) that reads, in pertinent part, as follows:

The Court, being duly advised, now hereby enters judgment in
favor of the Estate and against Underwood and finds that the
Estate is entitled to judgment on whether Underwood is legally
entitled to contribution for any payments toward or expenses for
the Demming Judgment. For the aforementioned reasons, [the
two claims of the Contribution Action] are invalid as a matter of
law and were properly denied.

The Court further enters judgment in favor of the Estate and
Fulford and against Underwood on Underwood’s Fraudulent
Transfer complaint in [] Case No. 53C01-1603-PL-000471. This
case is now rendered invalid and moot as a result of Underwood
not having any claim in the Estate arising out of the Demming
Judgment.

The Court further finds that the ownership interests in the
property at issue in Case No. 53C01-1504-MI-000657 were and
continue to be disputed by Underwood, the Estate, and Fulford.

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 This matter will be addressed at a later date in that action and
does not constitute a valid claim in the Estate.

(App, Vol. 2 at 43-44).

[10] Subsequently, on June 21, 2018, the trial court issued an order (the “Partition

Order”) determining the parties’ respective interests in the Partition Proceeds as

follows: fifty percent (50%) to Underwood; twenty-five percent (25%) to Kinney

(and now the Estate); and twenty-five percent (25%) to Fulford. Also within

the Partition Order, the trial court authorized the disbursement of Fulford’s

share but ordered that the remaining shares be held by the clerk until further

order.

[11] Underwood now appeals both the Indemnification Order and the Partition

Order.

Decision
[12] In both Orders being appealed, the trial court entered findings of fact and

conclusions of law pursuant to Indiana Trial Rule 52(A). We therefore apply a

two-tiered standard of review: we first determine whether the evidence

supports the trial court's findings, and second we determine whether the trial

court’s findings support the judgment. Anderson v. Ivy, 955 N.E.2d 795, 800

(Ind. Ct. App. 2011), trans. denied. The trial court’s findings and conclusions

will be set aside only if they are clearly erroneous, i.e., if the record contains no

facts or inferences supporting them. Redd v. Redd, 901 N.E.2d 545, 549 (Ind.

Ct. App. 2009). The party appealing the trial court’s judgment must establish

that the findings are clearly erroneous. Anderson, 955 N.E.2d at 800. The trial
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 court’s findings are clearly erroneous only when a review of the record leaves us

firmly convinced that a mistake has been made. Id. In reviewing the trial

court’s findings, we neither reweigh the evidence nor assess the credibility of

witnesses, but consider only the evidence most favorable to the judgment.

Redd, 901 N.E.2d at 549. We do not, however, defer to the trial court’s

conclusions of law, which we review de novo. Anderson, 955 N.E.2d at 800;

Redd, 901 N.E.2d at 549.

[13] Here, Underwood does not challenge any of the trial court’s specific findings.

Rather, she contends that the trial court misapplied the law in two ways: (1) by

determining that she was not entitled to recover for her fraudulent transfer

claims because the Estate owed her no contribution for the Demming

Judgment; and (2) by retaining proceeds from the Partition Sale until the

parties’ resolved their disputes about ownership interests. We will consider

each of her arguments in turn.

1. Dismissal of Underwood’s Fraudulent Transfer Claim

[14] First, Underwood challenges the trial court’s dismissal of her fraudulent transfer

claim against the Estate. Specifically, she argues that “the trial court should not

have applied common law indemnity concepts to determine whether Kinney

(or his estate) was a debtor under Indiana’s UFTA. (Underwood’s Br. 9). She

further argues that Kinney is not entitled to either common-law or statutory

indemnification, and therefore she may recover a contribution from the Estate

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 for the Demming Judgment because she “paid more than her share of the

liability.” Id. at 12. We disagree.

[15] Indiana’s UFTA provides, in relevant part that:

A transfer made or an obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor’s claim arose
before or after the transfer was made or the obligation was
incurred, if the debtor made the transfer or incurred the
obligation … with actual intent to hinder, delay, or defraud any
creditor of the debtor[.]

IND. CODE § 32-18-2-14. The UFTA further defines a “debtor” as “a person

who is liable on a claim.” I.C. § 32-18-2-2. We have previously held that a

defendant cannot logically be held liable for fraudulent transfer under the

UFTA if he is not to be held liable for the creditor’s underlying claim. See Four

Seasons Mfg, Inc. v. 1001 Coliseum, LLC, 870 N.E.2d 494, 511 (Ind. Ct. App.

2007) (“There is a logical disconnect between the trial court’s decision that

FSM is liable to Coliseum for its role in the fraudulent transfer but is not a

debtor to Coliseum.”) (emphasis in original). Accordingly, when a UFTA

defendant is not a debtor to the plaintiff, dismissal is proper. See id.

[16] Here, the trial court’s dismissal was proper for precisely that reason. Although

Underwood argues that “the trial court applied the wrong legal standard to

determine whether the Estate was a debtor under the [UFTA,]” her argument is

wholly devoid of any citation to authority for that proposition. (See

Underwood’s Br. at 10-12). Rather, Underwood simply quotes sections of the

UFTA and UPA and circularly asserts that she was a creditor under the UFTA

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 “because she has a right to contribution from [the Estate] arising from Kinney’s

obligation to contribute to the losses of the partnership.” (Appellant’s Br. 11).

Because Underwood has failed to present a cogent argument that the trial court

applied the wrong legal standard to determine whether the Estate was a debtor,

we will not consider that assertion on appeal. Shepherd v. Truex, 819 N.E.2d

457, 463 (Ind. Ct. App. 2004) (“It is well settled that we will not consider an

appellant’s assertion on appeal when he has failed to present cogent argument

supported by authority and references to the record as required by the rules.”)

(internal citation and quotation marks omitted).

[17] Underwood next argues that the trial court erred in finding that the Estate was

entitled to common-law indemnity for the Demming Judgment. Specifically,

she argues that common-law indemnity is unavailable to the Estate because the

former partnership relationship between her and Kinney is to be governed

solely by Indiana’s Uniform Partnership Act (“UPA”). For the reasons below,

we disagree.

[18] “Generally, the right of indemnification arises only by contract, express or

implied, or by statutory obligation.” Rotec, Div. of Orbitron, Inc. v. Murray Equip.,

Inc., 626 N.E.2d 533, 535 (Ind. Ct. App. 1993), reh’g denied. “However, a right

to indemnity may be implied at common law.” Id. (citing Indianapolis Power &

Light Co. v. Snodgrass, 578 N.E.2d 669, 670-71 (Ind. 1991)). “In the absence of

any express contractual or statutory obligation to indemnify, such action will lie

only where a party seeking indemnity is without actual fault but has been

compelled to pay damages due to the wrongful conduct of another for which he

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 is constructively liable.” Id. “The obligation to indemnify does not arise until

the party seeking indemnity suffers loss or damages[.]” Indianapolis–Marion

Cnty. Pub. Library v. Charlier Clark & Linard, PC, 929 N.E.2d 838, 848 (Ind. Ct.

App. 2010), trans. denied. “In contribution or indemnification cases, the damage

that occurs is the incurrence of a monetary obligation that is attributable to the

actions of another party.” Pflanz v. Foster, 888 N.E.2d 756, 759 (Ind. 2008). See

also Coca–Cola Bottling Co.-Goshen, Ind. v. Vendo Co., 455 N.E.2d 370, 373 (Ind.

Ct. App. 1983) (explaining that one of the elements of a claim for indemnity is

that a claimant “has paid or been compelled to pay a judgment recovered by the

injured person”) (emphasis added); cf. TLB Plastics Corp. v. Procter & Gamble

Paper Prods. Co., 542 N.E.2d 1373, 1376 (Ind. Ct. App. 1989) (stating that a

party seeking indemnity suffers loss “at the time of payment of the underlying

claim, payment of a judgment on the underlying claim, or payment in

settlement of the underlying claim”), reh’g denied, trans. dismissed.

[19] Here, Underwood does not dispute any of the trial court’s findings supporting

its conclusion, specifically that Kinney committed no independent act of fraud

but was held constructively liable for Underwood’s own wrongful and

fraudulent conduct. Instead, she argues only that the indemnification

provisions of the UPA preempt any common-law indemnification that would

be available to the Estate. Once again, she has failed to present a cogent

argument in support of this position; her argument is wholly devoid of any

citation to authority to support this assertion. For that reason alone, her

argument fails. See Shepherd, 819 N.E.2d at 463. Furthermore, the pertinent

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 section of the UPA governing indemnification does not purport to preempt any

common-law rights, but rather expressly preserves all other rights. See I.C. § 23-

24-1-39 (expressly stating a party’s entitlement under that provision is “without

prejudice to any other right”). Therefore, based on the specific facts of this case

– that Kinney was without actual fault and was compelled to pay damages due

to Underwood’s wrongful conduct – we conclude that the record before us

supports a judgment in favor of the Estate based on a right to indemnification

implied at common law.1 We affirm the trial court’s judgment in favor of the

Estate in the Contribution Action and Fraudulent Transfer Action.

2. Disbursement of Partition Proceeds

[20] Finally, Underwood argues that the trial court erred by not disbursing to her a

one-half share of the Partition Proceeds. Specifically, she argues that it was

clearly erroneous for the trial court to withhold disbursement of the Partition

Proceeds after the parties’ ownership interests have been determined. We

agree.

[21] INDIANA CODE § 32-17-4-2.5(l) governs the disbursement of proceeds from real

property partition sales. It provides, in pertinent part, that “the court shall

1
Underwood also argues that the trial court erred in finding that the Estate was entitled to statutory
indemnification. Because we find that the Estate was entitled to common-law indemnification, we need not
address this argument.

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 divide the proceeds of the sale among the remaining owners in proportion to their

ownership interest.” (emphasis added).

[22] Here, the trial court first determined in the Indemnification Order that the

“ownership interests in the property at issue in [the Partition Action] were and

continue to be disputed by Underwood, the Estate, and Fulford.” (App. Vol 2

at 44). Subsequently, in the Partition Order, the trial court determined the

following ownership interests in the Partition Proceeds: fifty percent (50%) to

Underwood; twenty-five percent (25%) to Kenneth Kinney (and now the

Estate); and twenty-five percent (25%) to Fulford. The trial court then

disbursed the share belonging to Fulford but retained the remaining shares until

further order. It provided no explanation or further findings to support its

continued retention of the shares belonging to the Estate and Underwood.2 For

that reason, we do not find that the trial court’s findings support its judgment in

that regard, see Anderson, 955 N.E.2d at 800, and we therefore reverse and

remand that part of the Partition Order.

[23] In conclusion, the trial court did not clearly err in finding that the Estate was

entitled to indemnification from Underwood for the Demming Judgment and

2
In her brief, Underwood also points to the lis pendens notice filed by the Estate in the Partition Action and
argues that the trial court improperly held the notice to be a valid lien against the Partition Proceeds. She
cites Curry v. Orwig, 429 N.E.2d 268, 273 (Ind. Ct. App. 1981), for the proposition that a lis pendens notice
may not be used to secure a personal claim against a party. However, her arguments and reliance on Curry
are inapposite. Here, the trial court never stated in either the Indemnification or the Partition Order that the
Partition Proceeds were being held subject to the Estate’s lis pendens notice. Therefore, we need not address
Underwood’s arguments regarding the doctrine of lis pendens.

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 entering judgment in favor of the Estate in the Contribution Action and

Fraudulent Transfer Action. Accordingly, we affirm the Indemnification

Order. However, the trial court did clearly err in the Partition Order, as the

trial court’s findings (specifically the respective ownership percentages it

determined) do not support its continued retention of the respective shares of

the Partition Proceeds belonging to Underwood and the Estate. Therefore, we

remand for the trial court to disburse the Partition Proceeds according to the

parties’ ownership interests.

[24] We affirm in part, reverse in part, and remand.

Brown, J., and Altice, J., concur.

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