Jeffrey Crider v. Christina Crider
2014 Ind. App. LEXIS 416, 15 N.E.3d 1042 (2014)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
In a dissolution proceeding, a court may secure an equalization judgment with a lien on a spouse's interests in a closely-held business despite transfer restrictions in the company's governing documents. However, the enforcement of that lien must follow established legal procedures: a charging order for LLC membership interests and a judicial sale for corporate stock, rather than an automatic transfer of ownership and control to the creditor spouse.
Facts:
- Jeff Crider and Christina Crider were married in 1992.
- During the marriage, Jeff acquired significant ownership interests in numerous closely-held family businesses, including Crider & Crider, Inc. (CCI) and several LLCs, collectively known as the 'Crider Entities.'
- The Crider Entities operated under shareholder and operating agreements that strictly limited the transfer of ownership interests, particularly involuntary transfers to outside parties.
- After 2007, around the time of the couple's initial separation attempts, CCI, a highly profitable company, ceased making large shareholder distributions, and the shareholders, including Jeff, began loaning money to the company instead.
- Jeff's father, Robert, purportedly made over $2 million in 'loans' to Jeff, evidenced by promissory notes upon which Jeff never made any payments, which Jeff described as an estate planning tool.
- The couple maintained a lavish lifestyle inconsistent with Jeff's claimed salary, and a 2007 personal financial statement estimated Jeff's net worth at over $11 million.
- Christina was primarily a stay-at-home parent during the marriage at Jeff's request and had minimal personal assets or income at the time of the divorce.
Procedural Posture:
- In May 2009, Christina Crider filed a petition for dissolution of marriage against Jeff Crider in an Indiana trial court.
- After an eleven-day hearing, the trial court entered a final dissolution decree on June 26, 2013, ordering Jeff to make an equalization payment to Christina of $4,752,066.
- The decree granted Christina a security lien on all of Jeff’s business interests and provided that if the judgment was unpaid after 180 days, Christina would take 'ownership and control' of one-half of those interests.
- Jeff filed a notice of appeal with the Court of Appeals of Indiana on July 25, 2013, challenging the decree.
- The Crider Entities, the family businesses, were granted permission to intervene in the case post-judgment.
- The trial court entered several post-judgment orders related to collection and child support, which Jeff also challenged in a second notice of appeal filed on January 27, 2014.
- The Court of Appeals of Indiana consolidated Jeff's two appeals for review.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a trial court in a dissolution proceeding have the authority to order an automatic transfer of ownership and control of a spouse's interests in closely-held businesses to the other spouse to satisfy an equalization judgment, when those interests are subject to transfer restrictions?
Opinions:
Majority - Barnes, Judge.
No, a court may not order an automatic transfer of ownership and control. While a trial court can secure a monetary judgment with a spouse's business interests and override private transfer restriction agreements to enforce that judgment, it must use the proper legal mechanisms. The court's order granting Christina automatic 'ownership and control' of Jeff's interests upon non-payment was overly broad and exceeded its authority. Citing precedent from F.B.I. Farms, Inc. v. Moore, the court affirmed that stock transfer restrictions cannot prevent an involuntary transfer to satisfy a dissolution judgment. However, the remedy must not unnecessarily entangle the former spouses. The proper remedy for Jeff's corporate stock in CCI is a sheriff's sale, subject to the other shareholders' right of first refusal. For his LLC membership interests, Indiana law provides that the exclusive remedy for a judgment creditor is a charging order, which grants the creditor the right to receive distributions but not the right to participate in management or exercise control. Therefore, the dissolution decree was reversed to the extent it allowed for an automatic transfer of ownership and control, and the case was remanded for the trial court to implement the appropriate enforcement mechanisms.
Analysis:
This case provides a crucial roadmap for high-asset divorces involving interests in closely-held businesses. It strongly reaffirms the principle that private shareholder or operating agreements cannot shield marital assets from equitable division. However, the decision imposes important limitations by mandating that courts use established commercial law remedies, thereby balancing the creditor spouse's right to payment against the need to protect the business from operational disruption. By clearly distinguishing the enforcement procedures for corporate stock (sheriff's sale) versus LLC interests (charging order), the court establishes a clear precedent that guides lower courts and prevents them from fashioning remedies that improperly entangle ex-spouses in post-divorce business management.
Unlock the full brief for Jeffrey Crider v. Christina Crider