The BRANHAM CORPORATION, Appellant-Plaintiff, v. NEWLAND RESOURCES, LLC and John E. Bator, et al., Appellees-Defendants.
No. 06A01-1409-PL-399.
Court of Appeals of Indiana.
Oct. 15, 2015.
17 N.E.3d 979
John E. Bator, Bator Law, Greenfield, IN, Appellee pro se.
SHARPNACK, Senior Judge.
Statement of the Case
[1] This is the fourth1 appeal in this litigation between the parties stemming from a contract for assistance in negotiation for the provision of water and sewer utility services in Boone County. Here, the trial court granted The Branham Corporation‘s motion to voluntarily dismiss without prejudice proceedings supplemental to execution of garnishment against certain garnishee defendants, conditioning the same upon the payment of the attorney fees incurred by the garnishee defendants up to the time of the filing of the motion to dismiss. The trial court later issued an amended order establishing the amount of the various attorney fee awards, setting a deadline for the payment of those fees, and ordering the dismissal be converted to a dismissal with prejudice in the event of nonpayment of the fees by the established deadline. The trial court‘s order was stayed pending appeal. Branham now appeals and John E. Bator, a garnishee defendant, cross-appeals.2 We affirm.
Issues
[2] Branham raises the following issues on appeal, which we consolidate and restate as:
- Did the trial court err by applying
Indiana Trial Rule 41(A)(2) to pro-ceedings supplemental filed under Indiana Trial Rule 69(E) ? - Did the trial court err by ignoring its own mandatory local rule concerning signatures of an attorney of record on pleadings?
- Did the trial court err by vacating a prior order after it had already become final and effective and no motion to correct error or appeal from that order had been pursued?
- Was Branham denied procedural and substantive due process?
Bator raises the following issue on cross-appeal:
- Did the trial court err by limiting its award of attorney fees to only those fees incurred up to the filing of Branham‘s motion to dismiss?
Facts and Procedural History
Businesses, Attorneys, and Individuals Involved
[3] To give context to the relationship of the various businesses, attorneys, and individuals involved, we first set forth their various roles. Boone County Utilities, ETC, is an Indiana limited liability company wholly owned by Newland Resources, LLC. Newland is owned by four entities: EcoHoldings, LLC, EcoSource, LLC, Greenleaf, LLC, and White River Venture Partners. EcoHoldings, LLC, is the Managing Member of BCU. Appellant‘s App. p. 96.3 James B. Harmon is the Managing Member of EcoHoldings, LLC. Id. John Michael Kensill is the Managing Member of EcoSource, LLC. Id. Cornelius M. (Lee) Alig is the Managing Member of Greenleaf, LLC, and the principal of Royal Run Partners, LP, the developer of Royal Run subdivision. Id. Samuel Sutphin is the General Partner of White River Venture Partners. Id.
[4] Harmon also served as the Manager of BCU. Id. Kensill served as BCU‘S Assistant Manager. Id. Delores (Dee) Sutphin was BCU‘s Bookkeeper. Id.
[5] The Branham Corporation entered into an agreement with Newland to provide assistance in negotiating contracts to accept sewage flow from and for the sale of water in Boone County, and is the judgment creditor of a judgment entered against Newland on a breach of contract claim.
[6] Valenti-Held Real Estate Group, LLP is an affiliate of Valenti-Held Contractor/Developer, Inc., an owner/developer of approximately 462 acres of land located in Perry and Worth Townships of Boone County. Id. Valenti-Held entered into a series of contracts with BCU for the provision of water and sewage utility services within its development. Id.
[7] Melissa Garrard is an attorney who represented Newland and for a time Dee Sutphin. Thomas Eckerle is an attorney who represented Newland and its members with regard to liquidation of BCU‘s assets from September 22, 2003 to September 28, 2004, and also represented Newland and its members in the BCU
The Litigation
[8] Background information from prior appeals and actions in this matter is helpful to understand how the parties to this appeal arrived at this point. We draw our information from those cases and direct those interested in reading more about them to the pertinent citations listed below.4
[9] Newland was organized on October 11, 1994, and was originally formed to develop real estate, ultimately exploring a possible development project in Boone County known as the Royal Run Subdivision. In 1996, after considering options for the provision of water and sewer utility services to that subdivision, Newland formed a wholly-owned utility operating company known as BCU. Newland entered into an agreement with Branham for assistance in negotiating a contract with the City of Indianapolis for the acceptance of sewage flow from the BCU service area and a contract with the Indianapolis Water Company for the sale of water to BCU for delivery in the BCU service area. Among the numerous terms of the contract between Newland and Branham was a provision for the calculation and payment of a success fee.
[10] On June 5, 2002, the IURC initiated an investigation into the operation of BCU. An interim order entered on March 12, 2003, imposed several conditions on BCU. That order was followed by a second interim order issued by the IURC on December 17, 2003, finding BCU in substantial and material non compliance with many of the conditions imposed earlier and scheduling a hearing to consider either the appointment of a receiver or the sale of BCU.
[11] Ultimately, BCU filed a petition for Chapter 11 bankruptcy and the bankruptcy court established three claims bar dates, each in 2004. Branham filed several proofs of claim, each timely filed, but each based on its contract with Newland. After delays requested by Branham, a hearing was held on Branham‘s claims. The day before that hearing Branham filed an untimely proof of claim that raised different theories of recovery. The district court denied the timely proofs of claim because they were contract based and BCU, the debtor, was not a party to the contract. The untimely proof of claim was denied because it was untimely and raised new theories of recovery. The district court‘s judgment was affirmed by the Seventh Circuit Court of Appeals. In Re Boone County Utils., LLC, 506 F.3d 541 (7th Cir. 2007).
[12] On February 11, 2004, the Town of Whitestown, BCU, and Valenti-Held entered into a Novation and Substitution Agreement that was conditioned upon approval from the bankruptcy court and any approval necessary from the IURC. Ultimately, the IURC deferred to the jurisdiction of the bankruptcy court. BCU filed a disclosure statement related to its amended liquidating plan of reorganization, and filed a plan establishing that Whitestown would pay $4,200,000.00 to BCU, and would pay $4,222,175.00 to Valenti-Held to resolve all of BCU‘s obligations to Valenti-Held. The bankruptcy court approved the
[13] On October 31, 2005, Branham filed its first amended complaint against Newland and others. In the end, the only count remaining for trial was Branham‘s allegation of breach of contract against Newland regarding the calculation and payment of the success fee. At the conclusion of the jury trial, a verdict was returned in favor of Branham awarding damages in the amount of $397,853.92. The trial court entered judgment on the jury verdict and a panel of this Court affirmed the trial court‘s judgment. Newland Res., LLC v. Branham Corp., 918 N.E.2d 763 (Ind. Ct. App. 2009).
[14] On June 22, 2010, the Boone Circuit Court entered an order awarding Branham post-judgment interest on the jury verdict that had been upheld on appeal. Newland was given twenty-one days from the date of the order in which to satisfy the judgment plus interest. However, Branham was unable to collect the judgment.
[15] Pursuant to BCU‘s liquidation plan in the bankruptcy proceedings, distributions from the sale were made to creditors, and then Newland, the sole equity holder in BCU, for its equity interest. Claims for administrative expenses, administrative claims of professionals, and priority tax claims were not classified under the plan, but were to be paid as soon as practicable after the sale. Branham was not listed as a secured creditor because BCU was not a party to the contract between Newland and Branham.
[16] On December 29 and 30, 2011, Branham filed a Verified Motion for Proceedings Supplemental to Execution and Garnishment (Cause No. 06C01-0409-PL-517) (“517“), and a Complaint for Damages (Cause No. 06C01-1201-CT-0001) (“0001“). In 0001, Branham alleged claims under the
[17] The trial court entered summary judgment motions against Branham in 0001. On appeal, we affirmed the trial court‘s grant of summary judgment against Branham and reversed the trial court‘s order dismissing Eckerle without prejudice, and remanded the matter to the trial court for entry of summary judgment in favor of Eckerle. This resolved the claims brought under 0001. Branham Corp. v. Newland Res., LLC, 17 N.E.3d 979 (Ind. Ct. App. 2014).
[18] We now turn to the subject of this appeal which involves our review of the trial court‘s decision in 517, Branham‘s Verified Motion for Proceedings Supplemental to Execution and Garnishment.
[19] Although brought as a motion for proceedings supplemental, Branham‘s motion was much more than that. Proceedings supplemental to execution “may be enforced by verified motion or with affidavits in the court where the judgment is rendered alleging generally: (1) that the plaintiff owns the described judgment against the defendant; (2) that the plaintiff has cause to believe that levy of execution against the defendant will satisfy the judgment; (3) that the defendant be ordered to appear before the court to answer as to his
[20] Branham‘s motion established that it is the owner of a judgment entered based on a jury‘s verdict in the same court and requested that the trial court take judicial notice of that judgment and the trial court‘s order on post-judgment interest. However, Branham‘s motion also threatened to seek the remedy of contempt, alleging that Newland disobeyed the trial court‘s order to pay the judgment by concealing property and engaging in fraudulent conveyances. Section XVII of the motion specifically alleges Newland fraudulently conveyed property. Other counts alleged various violations of the
[21] In section XXV, on page fifty-four of Branham‘s verified motion, Branham sought equitable relief from the court including “piercing the corporate veil” where, as here, Newland‘s managers and/or members have committed wrongs such as (1) undercapitalization; (2) failure to maintain and/or provide corporate records; (3) fraudulent representations; (4) use of the company to promote fraud, injustice, or illegal activities; (5) conference of benefits on individual members; (6) commingling of assets and affairs; (7) failure to observe required company formalities; and (8) other acts that ignore, control, or manipulate the business form.” Appellant‘s App. pp. 54-55. Branham further alleged that Harmon had perjured himself, and that Harmon, as the majority owner of EcoHoldings, violated various sections of the Indiana Code pertaining to limited liability companies by reporting to the Indiana Secretary of State an erroneous address for EcoHoldings’ principal office and by falsely reporting that EcoHoldings’ corporate records were maintained at that erroneous address.
[22] On August 21, 2012, the trial court held a hearing on all pending motions in 517 and took the matter under advisement. Days after the hearing, Branham filed a motion to withdraw proceedings supplemental as to Dee Sutphin and Melissa Garrard. The trial court entered an order withdrawing the proceedings supplemental as to Sutphin and Garrard the next day before a response could be filed. Branham also filed a motion to withdraw proceedings supplemental as to Eckerle, Bator, and Redman Ludwig, P.C., and a separate motion to withdraw proceedings supplemental as to BCU.
[23] On August 27, 2012, Eckerle filed an objection to Branham‘s motion as to him. Next, on September 4, 2012, Eckerle filed a motion to vacate Branham‘s withdrawal of proceedings supplemental against him. On September 14, 2012, Delores Sutphin and Melissa Garrard each filed motions for joinder in Eckerle‘s objection and motion to vacate the withdrawal. Likewise, Bator and Redman Ludwig, P.C., sought to join in Eckerle‘s objection and motion.
[24] The trial court held a hearing on the matter on December 7, 2012. In an order issued on February 4, 2013, the trial court stated that it would allow Branham to withdraw proceedings supplemental without prejudice as to Bator, Redman Ludwig, P.C., Eckerle, Garrard, and Sut-
Discussion and Decision
Standard of Review
[25] The parties agree that this matter should be reviewed de novo. Where the facts before the trial court are in dispute but the trial court rules on a paper record without conducting an evidentiary hearing, no deference is afforded the trial court‘s findings of fact or judgment. GKN Co. v. Magness, 744 N.E.2d 397, 401 (Ind. 2001). This is so because in those circumstances, a court on review is in as good a position as the trial court to determine the matter before it. Id. We will affirm the judgment of the trial court on any legal theory the evidence of record supports. Id. Nevertheless, the trial court‘s ruling is presumptively correct, and is subject to reversal on the basis of an incorrect factual finding only if the appellant persuades us that the balance of the evidence is contrary to the trial court‘s findings. Id.
I. Conditions of Withdrawal of Proceedings Supplemental
[26] Branham argues that the trial court erred by applying
[27] Here, Branham filed proceedings supplemental under 517 in an effort to collect on its judgment against Newland. As our supreme court stated in Rose v. Mercantile Nat. Bank of Hammond, 868 N.E.2d 772, 775 (Ind. 2007), “[j]udgment creditors in Indiana have long relied on proceedings supplemental to execution to help enforce judgments.” “With roots in equity, a proceeding supplemental offers the judgment creditor judicial resources ‘for discovering assets, reaching equitable and other interest[s] not subject to levy and sale at law and to set aside fraudulent conveyances.‘” Id. (quoting McCarthy v. McCarthy, 156 Ind.App. 416, 420-21, 297 N.E.2d 441, 444 (1973)).
[28] “Proceedings supplemental are a continuation of the underlying claim on the merits—not an independent action.” Lewis v. Rex Metal Craft, Inc., 831 N.E.2d 812, 817 (Ind. Ct. App. 2005). They are initiated under the same cause number in the same court that entered judgment against the defendant. Id. In addition, although the rule itself explains that no further pleadings shall be required, case law requires responsive pleadings when a new issue arises. Rose, 868 N.E.2d at 775. Nevertheless, even when no new issue arises, responsive pleadings are permitted, leading to discovery and a hearing. Id.
[29] Therefore, the issue here is not whether proceedings supplemental are civil actions under
[30] For all of its prolixity, the 517 verified motion for proceedings supplemental requests only the kind of relief available through
[31] As noted above, Branham‘s motion threatened to seek the remedy of contempt alleging that Newland disobeyed the trial court‘s order to pay the judgment by concealing property and engaging in fraudulent conveyances. Section XVII of the motion specifically alleges Newland fraudulently conveyed property. Other counts alleged various violations of the
[32] More specifically, Branham‘s motion threatened to seek the remedy of contempt alleging that Newland disobeyed the trial court‘s order to pay the judgment by concealing property and engaging in fraudulent conveyances. Section XVII of the motion specifically alleges Newland fraudulently conveyed property. Other counts alleged various violations of the
[33] The trial court noted that responses had been filed to the 517 allegations to which no objection had been lodged and therefore conditioned Branham‘s withdrawal without prejudice of the proceed-
[34] Just as equitable principles are involved in proceedings supplemental as a remedy to creditors in discovering assets in collection of their judgments, it is appropriate under these specific circumstances for the trial court to exercise its equitable power here to protect the interests of the garnishee defendants.
[35] “As a general proposition, the trial court has full discretion to fashion equitable remedies that are complete and fair to all parties involved.” Swami, Inc. v. Lee, 841 N.E.2d 1173, 1178 (Ind. Ct. App. 2006), trans. denied. Nonetheless, trial courts will not exercise equitable powers when an adequate remedy at law exists. Id. Where necessary, equity has the power to pierce rigid statutory rules to prevent injustice. Id. But if substantial justice can be accomplished by following the law, and the parties’ actions are clearly governed by rules of law, equity follows the law. Id. at 1178-79.
[36] The garnishee defendants have defended against the proceedings supplemental initiated by Branham and have incurred attorney fees in the process. That the litigation up to this point has been contentious is manifest. As the trial court noted, Branham‘s verified motion was fifty-nine pages long and made specific allegations against the garnishee defendants to the point that the allegations resembled a tort claim to which the garnishee defendants felt compelled to respond. The pro-
[37] With respect to attorney fees, Indiana adheres to the American Rule, namely that each party must pay his own attorney fees absent an agreement between the parties, statutory authority, or a rule to the contrary. Fackler v. Powell, 891 N.E.2d 1091, 1098 (Ind. Ct. App. 2008), trans. denied. There are certain recognized exceptions to the general rule, which are inapplicable here. See State Bd. of Tax Comm‘rs v. St. John, 751 N.E.2d 657, 659 (Ind. 2001) (recognizing equitable exceptions of obdurate behavior and common fund to American rule).
[38] Branham seeks to have the proceedings supplemental dismissed without prejudice against these garnishee defendants. Understandably, the garnishee defendants are concerned about incurring additional attorney fees in the event that Branham refiles proceedings supplemental against them. The trial court correctly concluded that as a condition of withdrawing the proceedings supplemental without prejudice, Branham must pay a portion of the reasonable attorney fees incurred by the garnishee defendants. We find no error in the trial court‘s use of
[39] Similarly, we reject Branham‘s argument that the motion to withdraw did not need a court order, under
II. Boone County‘s Local Rule
[40] Next, Branham argues that the trial court erroneously failed to apply its mandatory local rule to Bator. Branham contends that since Bator admitted he did not file an appearance in this action, any pleadings accepted for filing should have been struck from the record. Branham turns to
[41] In Boone County, appearances by counsel are governed by local rule.
[42] In Meredith v. State, 679 N.E.2d 1309, 1310 (Ind. 1997), our Supreme Court discussed the ability of Indiana trial courts
[43] Here, Branham did not file a written objection to any of Bator‘s pleadings and did not move to strike them for failure to comply with the local rule. Rather, Branham orally raised the issue of noncompliance with the rule at the hearing held on October 23, 2013, during which the issue of attorney fees was addressed after the proceedings supplemental had been ordered dismissed. Branham was not prejudiced by the noncompliance. We find that under the circumstances of this case the trial court did not abuse its discretion by waiving compliance with the local rule.
III. Final Order Vacated
[44] Branham claims that the trial court erred by vacating its prior order granting its request for the withdrawal of proceedings supplemental as to Garrard and Sutphin. Branham claims that ac-
[45] Garrard and Sutphin have not participated in this appeal. Where an appellee fails to file a brief, we review the matter to determine if the appellant has made a prima facie showing of reversible error. Cox v. State, 780 N.E.2d 1150, 1162 (Ind. Ct. App. 2002). Prima facie error has been described as error at first sight, on first appearance, or on the face of it. Id.
[46] The record reveals only the trial court‘s CCS entry reflecting that it was withdrawing the proceedings supplemental as to Garnishee Defendants Garrard and Sutphin. Appellant‘s App. p. 553.
[47]
IV. Due Process Violation
[48] Next, Branham contends that certain of the trial court‘s findings include language it suggests indicates that the trial court considered extrinsic evidence against which it was unable to defend. More specifically, Branham challenges the following language from the trial court‘s February 4, 2013 order:
25) Clearly, a typical
T.R. 69(E) motion for proceedings supplemental is not a new civil action.26) That being said, Branham‘s Motion is just as clearly not a typical motion for proceedings supplemental.
....
54) If Branham was only attempting to inquire as to assets that the Garnishee Defendants might possess, in order to satisfy its judgment, it did so by applying a sledgehammer to a nail.
Appellant‘s Appendix pp. 70, 74.
[49] Branham contends that it was denied procedural due process under article I section 12 of the Indiana Constitution and section 1 of the Fourteenth Amendment to the United States Constitution, namely because it had no notice that the trial court would consider its motion to be atypical or its actions akin to applying a sledgeham-
[50] We do not accept Branham‘s characterization of the trial court‘s comments. The comments do not suggest the application of an unannounced standard. Rather, they reflect fair comment on the nature of this particular verified motion for proceedings supplemental. The verified motion for proceedings supplemental did more than was required under
[51] “The Fourteenth Amendment of the United States Constitution prohibits any state from depriving a person of life, liberty, or property without due process of law.” Bankhead v. Walker, 846 N.E.2d 1048, 1053 (Ind. Ct. App. 2006). “The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment‘s protection of liberty and property.” Id. Both the federal and state constitutional provisions “prohibit state action which deprives a person of life, liberty, or property without the ‘process’ or
[52] It is true that
[53] As for substantive due process, the federal and state due process analysis is identical. N.B. v. Sybinski, 724 N.E.2d 1103, 1112 (Ind. Ct. App. 2000), trans. denied. “Substantive due process ensures that state action is not arbitrary or capricious regardless of the procedures used.” Id. “An arbitrary and capricious decision is one which is patently unreasonable. It is made without consideration of the facts and in total disregard of the circumstances and lacks any basis which might lead a reasonable person to the same conclusion.” City of Indianapolis v. Woods, 703 N.E.2d 1087, 1091 (Ind. Ct. App. 1998), trans. denied. We do not reweigh evidence in conducting our appellate review. Id.
[54] We cannot characterize the trial court‘s comments as arbitrary and capricious. The trial court acknowledged for the record that this particular proceedings supplemental went beyond those common-
[55] Branham further argues that it was denied due process because Bator filed dual captioned pleadings that allegedly lack specificity as to which arguments applied to the 0001 case and the 517 case. Again, we disagree with Branham‘s representations. Both actions arose out of the same facts, the transcript of the hearings includes both captions, and the CCS reflects entries cross-referencing orders and rulings from both actions. Bator‘s response to Branham‘s motion to withdraw contained arguments specifically addressing both actions. To be sure, Branham should not have been confused by Bator‘s responses regardless of the labeling. Many if not all of the 0001 allegations were infused in the 517 verified motion; therefore, the responses were likely quite similar. We find no denial of due process here.
[56] Next, Branham argues that it was denied due process because Bator, Garrard, and Sutphin‘s filings incorporated by reference entire pleadings which lacked required specificity.
[57] Here, given the complexity of the issues raised and the responsive pleadings
V. Limitation on Attorney Fee Award
[58] Bator cross-appeals, arguing that the trial court erred by limiting the attorney fee award to the work done up to the point that Branham filed its motion to withdraw the proceedings supplemental. Bator contends that the legal work completed in opposition to the motion to withdraw led to the award of attorney fees and should have been included in the trial court‘s calculation. On the other hand, Branham argues that to the extent the trial court correctly awarded any attorney fees at all, it did not err by imposing the limitation.
[59] We note that Bator invokes review of the attorney fee award under a clearly erroneous standard. Reply Br. of Cross-Appellant p. 4. However, the cases cited by Bator are distinguishable in that the attorney fees under appellate review were awarded as sanctions for claims found to be frivolous, unreasonable, and groundless. See Davidson v. Boone Cnty., 745 N.E.2d 895 (Ind. Ct. App. 2001); Kahn v. Cundiff, 533 N.E.2d 164 (Ind. Ct. App. 1989). Here, the attorney fees were awarded as a condition of withdrawal of the proceedings supplemental without prejudice.
[60] Branham argues that Bator and the other garnishee defendants have suffered a negative judgment and that standard of review is applicable. We disagree. A judgment entered against a party who bore the burden of proof at trial is a negative judgment. Smith v. Dermatology Assocs. of Fort Wayne, P.C., 977 N.E.2d 1, 4 (Ind. Ct. App. 2012). A negative judgment will be reversed on appeal only where it is contrary to law. Id. The pay-
[61] In Highland Realty, 563 N.E.2d at 1274, our Supreme Court held that “[a]ppellate courts in Indiana will take jurisdiction of
[62] The trial court chose to limit the amount of legal work to be reimbursed to the effort to defend against the proceedings supplemental. This award was a condition imposed upon Branham by the trial court if it chose to seek a voluntary withdrawal of the proceedings supplemental without prejudice. The legal work applied to objecting to the voluntary withdrawal, was a different enterprise altogether. The garnishee defendants were no longer in the position of defending against the proceedings supplemental, but were vigorously attempting to prevent the filing of subsequent proceedings supplemental in the matter if the withdrawal was without prejudice. “Requiring the plaintiff to reimburse the defendant for attorney‘s fees before voluntary dismissal in a case like this one, where litigation has been long and costly, is simply a means of protecting the defendant from the consequences of
Conclusion
[63] In light of the above, we affirm the trial court‘s judgment. In order to voluntarily withdraw the proceedings supplemental without prejudice, Branham must pay attorney fees as ordered by the trial court.
[64] Affirmed.
RILEY, J., and BROWN, J., concur.