COA affirms for Michigan City in property fraudulent transfer dispute

An appellate panel has sided with a northern Indiana city involving its attempts to satisfy default judgments against a family for incurred and future investigation and remediation costs associated with a property they own where a manufacturing facility was once located.

Issues began after Sheonarayan Verma, as president of Erincraft Enclosures, Inc., filed an “Assumed Business Name Certificate” for Erincraft Manufacturing Co. located on property in Michigan City. The certificate named 12 partners, including three of his and Jaidevi Verma’s children, who resided in Michigan City, and two of the children conveyed the Erincraft Property to Jaidevi in 1994.

In 2001, Sheonarayan executed a deed as “settler” establishing Rukmani as a public trust in the name of his deceased mother, with its registered office in Betul, Madhya Pradesh, India. Sheonarayan was to serve as Rukmani’s first managing trustee, with the remaining trustee members to be selected from “among the male members or their wives[] of the Settler’s [Sheonarayan’s] family.” As such, the deed states that they, as “the descendants and members of the family of the Settler,” have “a pious duty to carry out the Settler’s directions.”

After the Michigan City Redevelopment Commission authorized an environmental assessment of the Erincraft Property which revealed that the property’s soil and groundwater was impacted above the default closure concentrations, Michigan City obtained ownership of the property through court action in 2006.

Later on, Jaidevi, Sheonarayan, and Rukmani, by way of its manager signed an agreement written in Hindi which, when translated into English, indicated that Jaidevi and Sheonarayan were “in need of money for [their] personal matters” and addressed the transfer to Rukmani of eight parcels of property in LaPorte County purportedly owned and possessed by them, including their primary residence.

When Michigan City in 2015 filed a complaint against several prior owners and operators, including Jaidevi, Erincraft, Inc., and others of certain contaminated properties to recover costs associated with investigating and remediating the properties, a slew of deed transfers took place between the family members.

Michigan City in Feb. 2020 filed a Motion to Set Aside Fraudulent Transfers, arguing that Jaidevi and Sheonarayan transferred the parcels with the intent to hinder, delay, or defraud creditors, no sales disclosure forms were filed when Sheonarayan transferred the Parcels to Rukmani, and Rukmani did not engage in any business or operations in Indiana except for its ownership of the Parcels.

The LaPorte Circuit Court ultimately entered an order granting Michigan City’s Motion to Set Aside Fraudulent Transfers, prompting the appellants to seek reversal. They argued that substantial evidence does not support the trial court’s findings based on Ind. Code § 32-18-2-14(b)(1), (3), (5), and (9).

But the Indiana Court of Appeals affirmed in the case of Shri Rukmani Balaji Mandir Trust, et al. v. Michigan City, et al., 20A-PL-01831, finding no issue with the trial court’s decision.

“To the extent the Appellants claim that title, ownership, and possession of the

Parcels passed in 2009, we note Jaidevi’s later execution of the August 3, 2015 deed,” Judge Elaine Brown wrote for the appellate court. “We further observe that the entry preceding a total payment of ‘9450000’ in the spreadsheet Rukmani tendered in its March 20, 2020 response indicates a date of ‘06.11.2018.’”

Given the evidence, and in light of the agreement, the Indiana Court of Appeals concluded that it could not say the Parcels were transferred to Rukmani prior to the recording of the 2019 deeds or that Jaidevi and Sheonarayan did not retain possession or control of the property after 2009.

“Additionally, we note Jaidevi’s counsel filed an appearance over four-and-one half years from the filing of the complaint and that an attached excerpt of a May 2018 deposition by Sheela to Michigan City’s February 2020 motion to set aside fraudulent transfers indicates that she stated, ‘India,’ when asked where her mother and father live,” the appellate court continued.

“At the March 5, 2020 proceedings supplemental hearing, Jaidevi and Sheonarayan did not appear personally as previously ordered, and counsel for Jaidevi and Rukmani stated his clients were in India and ‘had no intention of returning to the United States.’ Under these circumstances, we find substantial evidence of probative value supports the court’s finding with respect to Ind. Code § 32-18-2- 14(b)(5) of the IUFTA,” it wrote.

Additionally, the appellate court found that the evidence, taken together, supports the trial court’s findings and that the court was able to consider the evidence as a whole.  It therefore concluded that the trial court did not err in determining that the badges of fraud taken together constituted a pattern of fraudulent intent.

As to the issue of good faith, the appellate court found that the trial court did not commit error and in light of the absence of sales disclosure forms or other documents proving the payment of consideration, a reasonable factfinder could conclude Rukmani was not a good faith purchaser of the Parcels for reasonably equivalent value.

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