Klinker v. First Merchants Bank, N.A.
2012 Ind. LEXIS 37
| Ind. | 2012Background
- Klinker managed Trucks Unlimited, Inc., a Decatur used-car dealer; FMB financed Trucks with floor-plan loans secured by perfected security interests and guarantees.
- Audit on December 23, 2008 revealed 31 financed vehicles were missing or transferred without remittance to FMB; some titles remained with Trucks but transfers occurred without consent.
- March 17, 2009, FMB filed an eight-count complaint including fraud (Count I) and CVCA-based treble damages (Count II) in Adams Circuit Court; Klinker did not respond.
- Trial court granted summary judgment to FMB on Counts I–VII, based on undisputed facts; awarded treble damages and attorney's fees on the fraud claims.
- Court of Appeals reversed excluding Klinker’s affidavit but affirmed summary judgment based on ‘badges of fraud’; Supreme Court granted transfer to review whether summary judgment on fraud/treble damages was proper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there were genuine issues of material fact on fraud under CVCA | FMB argues undisputed facts show specific intent to defraud | Klinker argues mens rea cannot be decided at summary judgment despite badges of fraud | Summary judgment improper; genuine issues of material fact remain |
| Whether Klinker possessed the requisite mens rea for fraud under I.C. 35-43-5-4 | Badges of fraud establish intent to defraud | Badges of fraud alone do not prove intent at summary judgment | Mens rea must be resolved by trier of fact; cannot be inferred at summary judgment |
| Whether bank fraud under I.C. 35-43-5-8 can be decided on summary judgment | Transfers and misrepresentations show a scheme to obtain funds by false pretenses | Timing and mens rea differ; circumstantial evidence insufficient alone for summary judgment | Material facts remain; summary judgment not warranted on bank fraud claim |
| Role of timing and contemporaneous conduct in proving bank fraud | Transfers and misrepresentations occurred to obtain funds and qualify as bank fraud | Some alleged acts occurred post-loan or outside knowledge; timing matters under the statute | Timing issues preclude summary judgment; issues for trial |
Key Cases Cited
- White v. Ind. Realty Assocs. II, 555 N.E.2d 454 (Ind. 1990) (CVCA requires proof of underlying crime by preponderance; no CVCA predicate necessity)
- Milburn v. Phillips, 34 N.E. 983 (Ind. 1893) (fraud cannot be presumed; mens rea required)
- Hoesman v. Sheffler, 886 N.E.2d 622 (Ind. Ct. App. 2008) (badges of fraud evaluated in context; no single factor controlling)
- Greenfield v. Arden Seven Penn Partners, L.P., 757 N.E.2d 699 (Ind. Ct. App. 2001) (considers badges of fraud and overall evidence)
- Otte v. Otte, 655 N.E.2d 76 (Ind. Ct. App. 1995) (fraud inquiries balance conduct and intent in context)
- Am. Heritage Banco, Inc. v. McNaughton, 879 N.E.2d 1110 (Ind. Ct. App. 2008) (banking context; circumstantial evidence may support bank fraud claims)
- Tracy v. Morell, 948 N.E.2d 855 (Ind. Ct. App. 2011) (summary judgment reviews require weighing of inferences; issues of fact for trial)
- Payday Today, Inc. v. McCullough, 841 N.E.2d 638 (Ind. Ct. App. 2006) (timing requirements for bank fraud; know at the time of execution)
- Cash in a Flash, Inc. v. McCullough, 853 N.E.2d 533 (Ind. Ct. App. 2006) (treble damages require proof of intent at time of act)