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Indiana

Fraud

Shi v Yi, 921 NE2d 31 (Ind. Ct. App., 2010).

Facts:Lei Shi filed a lawsuit against Cecilia Yi. During that suit's pendency, Yi bought a parcel of real estate in Marion County, Indiana. On November 27, 2006, Yi quitclaimed the property to an LLC she created called Nova Property Investment LLC (Nova). The quitclaim deed was prepared by Enterprise Title.

On December 6, 2006, Shi won a judgment against Yi for approximately $221,000, which was filed in Marion County on December 18, 2006.

In early 2007, Enterprise recorded Yi's quitclaim deed. It also conducted two title searches and prepared a title commitment for Nova to sell the property. Among other things, the title commitment identified Shi's judgment against Yi. On April 19, 2007, Enterprise served as the title insurance agent and escrow agent for a closing where Nova sold the property to a third party. Also, Enterprise and Yi entered into a confidential escrow agreement whereby Enterprise held $25,000 of the closing's proceeds in escrow with disposition arrangements based on the outcome of Yi's appeal of Shi's judgment.

Subsequently, Shi filed suit against multiple parties including Enterprise. Count I alleged that the conveyances of the property from Yi to Nova and from Nova to the third party were fraudulent. Count II alleged fraud on creditors against Enterprise. Enterprise moved to dismiss both counts against it. The trial court dismissed Count II for lack of evidence that Enterprise used its own funds to acquire the property, but Count I survived. Thereafter, Enterprise moved for summary judgment on Count I, claiming that it was neither a grantor nor grantee of the property and therefore did not engage in fraudulent conveyance as a matter of law. The court granted Enterprise's motion and Shi appealed.

Holding:Affirmed. The court stated that Shi's suit relied on the Indiana Uniform Fraudulent Transfer Act (IUFTA), specifically Indiana Code Section 32-18-2-15. That section makes a debtor's transfer of property fraudulent as to his or her creditor if the property is transferred for less than its value and the debtor was either insolvent at the time or made insolvent by the transfer. A creditor can only bring a claim under this law against a party who is liable for the underlying claim.

First, the court affirmed the trial court's dismissal of Count II as to Enterprise. The court found that Shi did not demonstrate that Enterprise fit the IUFTA's definition of a debtor and therefore the IUFTA was inapposite. Furthermore, to assert Count II, Shi relied on cases dealing with common law fraud, but that cause of action failed because the complaint did not assert that Enterprise or any other defendant made any misrepresentations to Shi.

Next, the court applied the same reasoning from its analysis of Count II to the summary judgment in favor of Enterprise on Count I. Besides that reasoning, the court stated that Shi failed to demonstrate any issue of material fact on which the court should reverse the trial court's decision.

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[Last update: 10-11-10]