INDIANA CASELAW UPDATE
Qualified Settlement Offers, Patent v. Latent Distinction, and Lost Earnings
Stephen E. Arthur
Importance of Qualified Provider Status
A facility’s status as a qualified healthcare provider under the Indiana Medical Malpractice Act entitles that facility to certain procedural benefits and protections from excessive liability. Recently, the Indiana Supreme Court opined that lower courts should balance the hardship to the defendant with alternative remedies before revoking its status as a qualified healthcare provider. Schriber v. Anonymous, 2006 WL 999969 (Ind. 2006).
In Schriber, a patient allegedly suffered severe burns at Eagle Valley Healthcare Center, which was owned by Eaglecare, Inc., and died as a result. The patient’s wife, Schriber, commenced a civil action in the Marion Circuit Court for malpractice against Eagle Valley. Schriber, however, failed to file a proposed complaint with the DOI or obtain an opinion from a medical review panel in accordance with the Act before the applicable statute of limitations had run. The trial court found it was without jurisdiction and dismissed the complaint.
The Indiana Court of Appeals reversed the trial court’s dismissal. It determined that Eagle Valley was not a qualified provider under the Act because it had not filed a certificate of assumed name for its business designation, and had failed to conspicuously post its license in public view pursuant to Indiana Code. Schriber, therefore, was permitted to proceed with her claim in the trial court.
On transfer, the Indiana Supreme Court rejected the decision of the Court of Appeals and in so doing noted that disqualifying a qualified provider from the provisions of the Act imposes drastic consequences. For example, the facility would be exposed to unlimited liability instead of the $250,000.00 cap allowed by the Act. Additionally, a qualified provider would not be entitled to the benefit of the preliminary medical review panel mechanism or the common law defense of contributory negligence, rather than the statutory remedial scheme of comparative fault. For these reasons, the Court disagreed with the decision to disregard Eagle Valley’s status as a qualified provider. Alternatively, the Court concluded that it would have been more appropriate to toll the statute of limitations until the plaintiff has reasonable time to determine whether the defendant is a qualified provider.
Necessity to Record Judgment Lien Against Property Prior to Conveyance
A deed can only be held void as to a person who has, without notice, in good faith, and for a valuable consideration, acquired a legal interest in the property. ABN AMRO Mortgage Group, Inc. v. American Residential Services, LLC, 2006 WL 932081 (Ind. Ct. App. 2006). ABN obtained a quitclaim deed over certain property from a defaulting borrower. It proceeded to bring an action against American Residential who had recorded its judgment lien against the Property’s former owners after the property had been transferred to ABN. While the suit was pending, ABN sold the Property to the Braughtons. The trial court granted summary judgment, finding that ABN was no longer a real party in interest and that American held a valid lien against the Property.
The Indiana Court of Appeals determined that the trial court erred by ordering that ABN be substituted with the Braughtons as the real parties in interest. In a case of transfer of interest subsequent to the commencement of the action, substitution of the person to whom the interest is transferred is permitted but is not required and the action may be continued by or against the original party. Trial Rule 17(C). ABN possessed title to the Property when it initiated its foreclosure action and, therefore, was a real party in interest at that time. Additionally, ABN was directly responsible for any judgment awarded against the Property because it had warranted to the Braughtons that title to the property was unencumbered. ABN, therefore, satisfied the real party in interest requirement of Trial Rule 17.
The Court noted that recording statutes exist for the protection of subsequent purchasers, mortgagees, and lessees of real property. American was a lien holder and did not pay valuable consideration to obtain an interest in the Property. American was not directly interested in obtaining the Property from the borrowers, instead it pursued and recovered a judgment against the borrowers on unrelated debts. Therefore, the Court found, recording statutes did not govern this situation.
Furthermore, where a land owner has sold and conveyed a lot in controversy prior to the date of the judgment, he has no title or interest in it, at that time or afterward, to become the subject of a judgment lien. Runyan v. McClellan, 24 Ind. 165 (Ind. 1865). American only could claim an interest in the lot by virtue of its judgment attaching as a lien thereon, through a title in the landowner, and as no such title existed, it followed that the failure to record the deed and the ignorance of American of its existence, cannot create such lien. ABN, 2006 WL 932081. Although record title is evidence of ownership, recording does not establish ownership, and whether or not a deed is recorded has no effect on its validity. Id. Because the defaulting borrower had quitclaimed its interest in the Property to ABN before a lien was recorded against the Property, no lien was created.
Action to Set Aside Fraudulent Transfer Considered Part of Underlying Claim
An individual shareholder, with the right to control proceedings of which a corporation is involved and has already received one change of judge, will not be entitled to a second change of judge in the same proceeding. Rose v. Mercantile Nat’l Bank of Hammond, 844 N.E.2d 1035 (Ind. Ct. App. 2006). In Rose, Mercantile brought an action against a corporation for breach of contract. The corporation requested and received a new judge under Trial Rule 76(B). That rule provides:
In civil actions, where a change may be taken from the judge, such change shall be granted upon the filing of an unverified application or motion without specifically stating the ground therefore by a party or his attorney. Provided, however, a party shall be entitled to only one change of judge. (emphasis added)
While Mercantile’s claim was pending, the corporation was sold and the proceeds distributed to its two shareholder owners. Mercantile, after receiving a judgment against the corporation, moved to void the transfer of the sale proceeds to the individual shareholders as a fraudulent transfer. The individual shareholders application for a change of judge was denied by the trial court.
Affirming the trial court’s decision to deny a second change of judge motion, the Indiana Court of Appeals determined that, similar to proceedings supplemental, actions to set aside fraudulent transfers are not independent actions, but rather are an equitable remedy designed to subject the judgment debtor’s property to execution by the creditor. The sole purpose of fraudulent conveyance actions is to remove obstacles that prevent the enforcement of judgments. Therefore, Mercantile’s action to set aside the fraudulent transfer from the corporation to its shareholders was not independent from the underlying claim against the corporation.
Moreover, the Court determined that the individual shareholders, although not named parties in the original action, were not entitled to a change of judge as they clearly controlled the corporation. Where owners have a right to control the proceedings, to make defense, to adduce and cross-examine witnesses, and to appeal from the decision, they are in essence parties to the original proceedings. Id. The action to set aside the transfers from the corporation to the individual shareholders was not independent of the underlying claim against the corporation and the shareholders. Accordingly, the shareholders were not entitled to a second change of judge.
Stephen Arthur (firstname.lastname@example.org) is a partner with Harrison & Moberly, LLP, in Indianapolis, concentrating his practice in federal and state complex commercial litigation. Mr. Arthur is the author of the Civil Trial Practice and Indiana Procedural Forms volumes in West Publishing’s Indiana Practice series. The opinions and analysis expressed in this column are those of the author.