COA affirms turnover of tax sale surplus funds

A man who loaned money nearly 10 years ago to a company in exchange for a mortgage security interest in some real estate is entitled to the surplus funds from a tax sale involving that land, the Indiana Court of Appeals held Tuesday.

Michael Fish loaned money to 2444 Acquisitions in 2008; a default judgment of foreclosure was entered against the company and in favor of Fish for $263,308.73 in July 2011. Fish sought sheriff’s sale of the real estate, which was twice paused because 2444 Acquisitions filed for Chapter 11. In 2014, Fish filed a complaint for turnover property in the bankruptcy court, leading to the court to order the Marion County auditor to turn over the tax sale surplus funds to counsel for 2444 Acquisitions to be held in the lawyer’s trust account.

Some funds were approved by the court to be paid out to cover attorney fees and expenses. Fish later filed to have the bankruptcy case dismissed, which the court granted. It led to the dismissal of Fish’s adversarial complaint for turnover property. 2444 Acquisition’s attorney then transferred the tax sale surplus funds from his account to his client’s account.

Fish then filed a complaint in the trial court for turnover of those funds. The trial court granted the motion, concluding Fish has substantial interest in the properties and 2444 Acquisitions has no entitlement to the funds or protectable interest relative to the use of those funds.

2444 Acquisitions appealed, raising several arguments, all of which the Court of Appeals rejected. Fish did not have to purpose his claim by using proceedings supplemental, but was allowed to assert a claim directly with the trial court, which he did, Judge Patricia Riley wrote.

Fish was not collaterally estopped from pursuing his motion for turnover because the bankruptcy court never issued a final adjudication as to the ownership of the tax sale surplus funds. The judges also held that Fish did not waive his right for the funds because he continued to pursue the cause before the trial court.

The COA also rejected 2444 Acquisitions’ claim that the trial court erred when it failed to take into account the amounts already distributed to its attorney by order of the bankruptcy court and the amount owed by Fish to a former member of the company, as 2444 Acquisitions failed to cite any authority or evidence to support its argument.

The case is 2444 Acquisitions, LLC v. Michael Fish, 49A02-1606-MF-1315.