SYMONS INTERNATIONAL GROUP, INC. et al v. CONTINENTAL CASUALTY COMPANY

Filing 318

ENTRY denying 314 the Individual Counter Defendant's Motion to Vacate and Reconsider Order Holding Non-Transferees Liable for Fraudulent Conveyances in Light of New Indiana Appellate Decision. Signed by Judge Richard L. Young on 4/12/2010. (PG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION ) ) ) Plaintiffs, ) ) vs. ) ) CONTINENTAL CASUALTY ) COMPANY, an Illinois Insurance ) Corporation, ) ) Defendant, ) ) CONTINENTAL CASUALTY ) COMPANY, and 1911 CORP., ) ) Counterplaintiffs and ) Third-Party Plaintiffs, ) ) vs. ) ) IGF INSURANCE COMPANY, IGF ) HOLDINGS, INC., and SYMONS ) INTERNATIONAL GROUP, INC. ) ) Counterdefendants, ) ) and ) ) GORAN CAPITAL, INC., GRANITE ) REINSURANCE COMPANY, LTD., ) SUPERIOR INSURANCE COMPANY, ) PAFCO GENERAL INSURANCE COMPANY, ALAN SYMONS, DOUGLAS ) ) SYMONS, and G. GORDON SYMONS, ) ) Counterdefendants and ) Third-Party Defendants. IGF INSURANCE COMPANY, et al.,

1:01-cv-799-RLY-KPF

ENTRY ON THE INDIVIDUAL COUNTERDEFENDANTS' MOTION TO VACATE AND RECONSIDER ORDER HOLDING NON-TRANSFEREES LIABLE FOR FRAUDULENT CONVEYANCES IN LIGHT OF NEW INDIANA APPELLATE DECISION Alan Symons and Gordon Symons (the "Individual Counterdefendants") move the court to vacate its Findings of Fact and Conclusions of Law and order that they cannot be held liable for alleged fraudulent transfers because the court's ruling is contrary to a recent Indiana Court of Appeals ruling, Shi v. Yi, 921 N.E.2d 31 (Ind. Ct. App. 2010). For the reasons set forth below, the court DENIES the Individual Counterdefendants' motion. The issue which the court addressed in its Findings of Fact and Conclusions of Law is whether an officer or director of a first transferee, who is found to have personally participated in the fraud, can be held personally liable under the IUFTA. (Findings of Fact and Conclusions of Law, Docket # 257, Conclusion of Law No. 85). Following the reasoning of the Seventh Circuit in DFS Sec. Healthcare Receivables Trust v. Caregivers Great Lakes, Inc., 384 F.3d 338, 347, 348 (7th Cir. 2004), this court determined that such an officer or director who has personally participated in the fraudulent transfer can be liable for the transfer. (Findings of Fact and Conclusions of Law, Docket # 257, Conclusion of Law Nos. 83-89). The court then determined, based upon the facts of the case, that the Individual Counterdefendants (including Douglas Symons) personally participated in the fraudulent transfer (id. at 90-94) and financially benefitted from the fraudulent transfer (id. at 95-101).
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In the case presented by the Individual Counterdefendants, Shi v. Yi, supra, the defendant, Yi, transferred real property to a wholly-owned subsidiary, Nova, in order to avoid the debt owed to plaintiff. Shi, 921 N.E.2d at 33. Nova then sold the property to a third-party defendant purchaser (Lucas). Id. at 34. Plaintiff then sued Yi, Nova, and the third-party purchaser, for fraudulent conveyance. Id. The Complaint also named the title company, Enterprise, as a defendant. Id. The facts reflected that Enterprise prepared a title commitment policy, which had noted the underlying judgment between plaintiff and Shi, and had recorded the quitclaim deed between Yi and Nova. Id. The trial court dismissed Enterprise as a defendant. Id. at 35. In affirming the trial court, the Court of Appeals reasoned: (1) "Shi does not attempt to demonstrate that Enterprise may be considered a `debtor' for IUFTA purposes [and] [c]onsequently, Enterprise is an improper party" (id. at 37); (2) there was no allegation that Enterprise engaged in a misrepresentation or other fraudulent act (id. at 38); and (3) there was no allegation that Enterprise received the property as a grantee (id.). Shi does not persuade the court to vacate its Findings of Fact and Conclusions of Law. The defendant dismissed in Shi, Enterprise, was merely a conduit, and not an active participant in, the fraud. Significantly, Enterprise was not an officer or director of, or in any way related to, either the transferor, the first transferee, or the second transferee. Enterprise did not control, participate in, or benefit from the property sale or the fraud. The Shi case cited, without analysis, numerous routine Indiana cases, none of which involved the question presented here: the liability of controlling officers, directors, and
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shareholders of corporate recipients of fraudulent transfers, where those shareholders, officers, and directors did control, participate in, and benefit directly from the fraudulent transfers. Nor did the Shi case discuss or cite DFS, the case discussed at length in the court's Conclusions of Law. Shi does not purport to and does not address new controlling Indiana precedent of first impression on the issue decided by the court. In the absence of the same, the court's Findings of Fact and Conclusions of Law stand. The Individual Counterdefendants' Motion to Vacate and Reconsider Order Holding Non-Transferees Liable for Fraudulent Conveyances in Light of Indiana Appellate Decision (Docket # 314) is hereby DENIED.

SO ORDERED this 12th day of April 2010.

__________________________________ RICHARD L. YOUNG, CHIEF JUDGE United States YOUNG,Court JUDGE RICHARD L. District CHIEF United rn District of Court SoutheStates District Indiana Southern District of Indiana

Electronic Copies to: Robert M. Baker III [e-mail] Robert L. Browning SCOPELITIS GARVIN LIGHT & HANSON [e-mail] Braden Kenneth Core SCOPELITIS GARVIN LIGHT HANSON & FEARY PC [e-mail]
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James H. Hanson SCOPELITIS GARVIN LIGHT HANSON & FEARY PC [e-mail] James A. Hardgrove SIDLEY AUSTIN BROWN & WOOD LLP [e-mail] Jeffrey Lynn McKean WOODEN & MCLAUGHLIN LLP [e-mail] Robert L. McLaughlin WOODEN & MCLAUGHLIN LLP [e-mail] Patricia M. Petrowski SIDLEY AUSTIN LLP [e-mail] Michael Rabinowitch WOODEN & MCLAUGHLIN LLP [e-mail] Ellen S. Robbins SIDLEY AUSTIN LLP [e-mail] R. Jay Taylor Jr. SCOPELITIS GARVIN LIGHT HANSON & FEARY PC [e-mail] Copy to: Susan Spies Roth SIDLEY AUSTIN LLP One South Dearborn Chicago, IL 60603

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