Husband intended to defraud wife before divorce, COA rules

A man who conveyed several properties he owned to a family member shortly before divorcing his wife intended to defraud her, the Indiana Court of Appeals affirmed Thursday.

Raul Hernandez-Velazquez and his wife, Sondra Hernandez, were married for nearly 20 years before Sondra filed for divorce in 2014. Before that, the couple owned Sorani Construction and Remodeling, which purchased foreclosed homes, fixed them up and either rented or sold them. Hernandez-Velazquez and his brother, Modesto Hernandez, purchased and renovated several homes in the following years. Most of the properties were titled in Hernandez-Velazquez’s name and Sondra was typically responsible for collecting rent and/or paying property taxes.

Before Sondra filed for divorce, Hernandez-Velazquez conveyed the all the properties titled in his name for $10 to Elizabeth Barcaleta Santiago, Modesto’s significant other. Sondra was then informed by her husband that Santiago would be assuming the role of collecting rent and paying the taxes.

A special judge appointed to resolve the property-division issue during the divorce proceedings concluded that the Uniform Fraudulent Transfer Act applied to Hernandez-Velazquez’s conveyance of the properties to Elizabeth and that Sondra was a creditor under UFTA. Sondra was therefore assigned four of the properties and the appellants were thus ordered to execute quitclaims to convey the home’s respective titles to her.

The appellants appealed, arguing that the trial court erred by setting aside the property conveyances to Santiago pursuant to UFTA because Sondra was not a creditor and there was no evidence of an intent to defraud.

The Indiana Court of Appeals disagreed, however, first finding ample evidence to show both Sondra and her husband contributed to the purchases of the properties, that the majority of the properties were initially titled and insured in either of their names, and that the property taxes were paid by the couple’s business, among other things.

“All of this supports the trial court’s finding that the properties are part of the marital estate for purposes of Husband and Wife’s divorce, and therefore Wife is a creditor under UFTA because she has a claim to the properties,” Chief Judge Nancy Vaidik wrote for the appellate panel.

It further found at least five badges of fraud codified by the UFTA to prove that Hernandez-Velazquez did intend to defraud his wife.

“First, the record shows that Husband transferred the properties to Elizabeth approximately one month before Wife filed for divorce and when the parties’ relationship had already begun to deteriorate. Second, the transfer of these properties greatly reduced the marital estate because the rental properties were substantially all of the family’s assets,” the panel wrote.

“Third, there is evidence that Husband would retain some benefits over the rental properties. That is, Husband, Modesto, and Elizabeth, would continue to renovate and manage the properties and collect rent from tenants. Fourth, Husband transferred the properties to Elizabeth for little or no consideration. That is, he transferred all the properties to Elizabeth for ten dollars,” the panel continued. “Finally, the transfer of these properties from Husband to Elizabeth was effectively a transfer between family members … All of this together constitutes a pattern of fraudulent intent.”

It therefore affirmed in Raul Hernandez-Velazquez, et al. v. Sondra Hernandez, 18A-DR-03109.

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