Yesterday, I gave a brief explanation of Proceedings Supplemental. As luck would have it, the Indiana Supreme Court issued an opinion today that expounds greatly upon the Proceeding Supplemental in the case of Rose & Underwood v. Mercantile National Bank. It involved a tortured procedural posture that I don’t feel like describing at the moment.
As I mentioned, the proceeding supplemental is a tool used by judgment creditors to discover and obtain assets of the judgment debtor available to satisfy an existing judgment. Among many other things the Supreme Court in the Rose & Underwood case indicated that the change of venue provision of the trial rules is not available to the parties of the underlying judgment but is available to third parties (e.g. garnishee defendants). Fraudulent transfers may be determined in the course of a proceeding supplemental. A fraudulent transfer remains valid as between grantor and granteeee, but with respect to the judgment creditor, the asset is subject to execution as if it were still in the name of the grantor. Generally jury trials are not available to decide issues raised in a proceeding supplemental, but sometimes they are:
For all that appears, this approach developed over nearly 130 years seems to serve us well. While juries are disfavored in proceedings supplemental for their tendency to prolong matters, where the pleadings form issues of fact that a jury could reasonably decide, the parties may demand a jury trial.
Finally, new claims are not allowed to be raised via Proceedings Supplemental. For example, in this case, Debtor Company, an S Corp, transferred money to its owners in an effort to avoid paying Debtor Company’s judgment. The transfer was deemed fraudulent, and Creditor Company was entitled to go after the money even though it was in the hands of Debtor Company’s owners. However, Creditor Company was not allowed to use the Proceeding Supplemental as a vehicle to allege a new tort claim against Debtor Company’s owners (under which theory creditor could get triple damages and attorney’s fees.)
It seemed to me that, for all of the legal discussion in this opinion, it was a little light on legal citation. This doesn’t surprise me since a lot of what goes on in a Proceeding Supplemental seems to have more to do with custom than with black letter law. The Supreme Court advises that the Proceeding Supplemental is equitable rather than legal in nature, so maybe that explains the relative lack of caselaw. But, reading the opinion, I got the feeling the Supreme Court was sort of making it up as it went along. It seems to have made the right decisions, but I don’t get the feeling they relied a lot on precedent when reaching those decisions. Just a feeling.
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