Court Opinion

ID: 4307905
Source: CourtListenerOpinion
Date Created: 2018-08-28 15:06:09.090511+00
Date Added: 2024-06-11T07:49:33.643146
License: Public Domain

FILED
                                                                     Aug 28 2018, 8:48 am

                                                                         CLERK
                                                                     Indiana Supreme Court
                                                                        Court of Appeals
                                                                          and Tax Court

APPELLANT PRO SE                                           ATTORNEY FOR APPELLEE
Douglas C. Holland                                         Michelle A. Cobourn-Baurley
Lawrenceburg, Indiana                                      Shelbyville, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Douglas C. Holland,                                        August 28, 2018
Appellant-Defendant,                                       Court of Appeals Case No.
                                                           18A-PL-792
        v.                                                 Appeal from the Dearborn
                                                           Superior Court
Indiana Farm Bureau Insurance,                             The Honorable Jonathan N.
Appellee-Plaintiff                                         Cleary, Judge
                                                           Trial Court Cause No.
                                                           15D01-1709-PL-43

Baker, Judge.

Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018                           Page 1 of 12
[1]   Indiana Farm Bureau Insurance (Farm Bureau) sued attorney Douglas Holland

      to recover money owed to it from a subrogation claim that arose from

      Holland’s representation of a woman (Client) who was injured in a vehicle

      collision. Farm Bureau and Holland filed competing motions for summary

      judgment on Farm Bureau’s ability to recover its money from Holland, rather

      than Client. The trial court found in favor of Farm Bureau, and Holland now

      appeals. Finding that the statute of limitations expired before Farm Bureau

      filed its complaint, we reverse and remand.

                                                      Facts     1

[2]   On September 19, 2012, Client was injured in a vehicle collision, after which

      Client retained Holland as her attorney in her personal injury lawsuit against

      the tortfeasor. On November 20, 2012, Farm Bureau, which insured Client,

      paid $5,000 toward Client’s medical bills. In December 2014, the personal

      injury lawsuit settled in Client’s favor and on December 22, 2014, Holland filed

      a motion to dismiss it, which the trial court granted. Holland requested Client

      to allow him to retain $3,500 of her settlement to cover any subrogation claims

      that Farm Bureau might have for one year beginning on December 22, 2014.

[3]   Meanwhile, on August 28, 2014, Farm Bureau submitted a notice of its lien

      rights to Holland. On September 4, 2014, Holland acknowledged the lien in

      1
       We heard oral argument in Indianapolis on August 7, 2018. We thank counsel for their informative oral
      advocacy.

      Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018                           Page 2 of 12
      writing. On October 31, 2014, Holland called Farm Bureau’s counsel’s office

      and requested that Farm Bureau waive its subrogation claim. Holland and

      Farm Bureau then unsuccessfully tried to negotiate the subrogation amount.

      On June 9, 2015, Farm Bureau asked that Holland request a damages hearing

      so that the trial court presiding over Client’s lawsuit against the tortfeasor could

      determine the amount of the subrogation claim. Holland stated that the lawsuit

      had been dismissed and that Farm Bureau would have to file a small claim to

      determine what amount, if any, Client owed it. This exchange was apparently

      the last one between the parties for the remainder of 2015. On December 29,

      2015, Client asked Holland to return to her the balance of the settlement;

      Holland complied.

[4]   Then, on July 13, 2017, Farm Bureau made a formal demand for payment of its

      subrogation claim. On September 14, 2017, Farm Bureau filed a complaint

      against Holland for its subrogation claim for $3,333, alleging that Holland

      breached the fiduciary duty he owed to Farm Bureau and that he breached the

      constructive trust imposed on the money at issue. On September 27, 2017,

      Holland filed his answer, alleging that he had no legal authority to pay Farm

      Bureau without Client’s consent. That same day, he filed a motion for

      summary judgment, arguing that the statute of limitations had run and that he

      had no legal requirement to withhold subrogation funds from Client’s

      settlement.

[5]   On October 27, 2017, Farm Bureau filed its own motion for summary

      judgment, arguing that it had a medical payments lien, that Holland had a

      Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018         Page 3 of 12
      fiduciary duty to Farm Bureau, that a constructive trust was created when

      Holland received funds in which Farm Bureau had an interest, and that the

      applicable statute of limitations is six years and had not yet run.

[6]   On January 18, 2018, a hearing on the motions for summary judgment took

      place. Following the hearing, the trial court granted Farm Bureau’s motion for

      summary judgment and motion to strike, ordering Holland to pay Farm Bureau

      $3,333, and denied Holland’s motion for summary judgment. The trial court

      did not issue findings of fact or conclusions of law. On February 13, 2018,

      Holland filed a motion to correct error, arguing that the trial court erred by

      granting Farm Bureau’s motion for summary judgment. That same day, he

      filed two more motions for summary judgment: one arguing that there is no

      subject matter jurisdiction in this case because Farm Bureau’s claim is a

      contractual one and Farm Bureau has not presented any legal theory of liability

      against Holland; and one arguing that as an agent, he was not liable to Farm

      Bureau. The trial court denied all three post-judgment motions. Holland now

      appeals.

      Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018        Page 4 of 12
                                      Discussion and Decision
[7]   Holland raises three issues on appeal, one of which we find dispositive:

      whether the trial court erred by granting Farm Bureau’s motion for summary

      judgment and by denying Holland’s motion for summary judgment.2

[8]   Our standard of review on summary judgment is well established:

               We review summary judgment de novo, applying the same
               standard as the trial court: “Drawing all reasonable inferences in
               favor of . . . the non-moving parties, summary judgment is
               appropriate ‘if the designated evidentiary matter shows that there
               is no genuine issue as to any material fact and that the moving
               party is entitled to judgment as a matter of law.’” Williams v.
               Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A
               fact is ‘material’ if its resolution would affect the outcome of the
               case, and an issue is ‘genuine’ if a trier of fact is required to
               resolve the parties' differing accounts of the truth, or if the
               undisputed material facts support conflicting reasonable
               inferences.” Id. (internal citations omitted).

      Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

[9]   The law regarding subrogation is also well settled:

      2
       At the trial court level, Farm Bureau moved to strike a certain paragraph from an affidavit that Holland
      submitted; the trial court granted that motion. On appeal, Holland argues that the trial court erred by
      granting this motion. Because of the disposition of this case, we find it unnecessary to address this issue.
      Then, during the appeal, Farm Bureau moved to strike a section of Holland’s brief, arguing that because
      Holland had not raised a particular issue to the trial court, he could not raise it on appeal. Because of the
      disposition of this case, we find that the issue raised in this motion to strike has become moot. Therefore, by
      separate order, we deny the motion to strike as moot.

      Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018                                  Page 5 of 12
               Subrogation is a doctrine of equity long recognized in Indiana. It
               applies whenever a party, not acting as a volunteer, pays the debt
               of another that, in good conscience, should have been paid by the
               one primarily liable. When a claim based on subrogation is
               recognized, “a court substitutes another person in the place of a
               creditor, so that the person in whose favor it is exercised succeeds
               to the right of the creditor in relation to the debt.” Matter of Estate
               of Devine, 628 N.E.2d 1227, 1230 n.4 (Ind. Ct. App. 1994). It is
               settled that “[s]ubrogation confers no greater right than the
               subrogor had at the time the surety or indemnitor became
               subrogated. The subrogator [sic] insurer stands in the same
               position as the subrogor, for one cannot acquire by subrogation
               what another, whose rights he claims, did not have.” American
               States Ins. Co. v. Williams, 151 Ind. App. 99, 106, 278 N.E.2d 295,
               300 (1972) (internal quotation marks and citation omitted). The
               ultimate purpose of the doctrine, as with other equitable
               principles such as contribution, is to prevent unjust enrichment.

       Erie Ins. Co. v. George, 681 N.E.2d 183, 186 (Ind. 1997) (some citations omitted).

[10]   Indiana Code chapter 34-53-1 governs subrogation, but does not address

       subrogation claims on funds that are or were held by an attorney on behalf of

       the attorney’s client. Another statute, however, suggests that a subrogation

       claim should be considered a lien. A lien is a claim that one person holds on

       another’s property as a security for an indebtedness or charge. Beam v. Wausau

       Ins. Co., 765 N.E.2d 524, 532 (Ind. 2002). Indiana Code section 34-51-2-19

       provides

               If a subrogation claim or other lien or claim that arose out of the
               payment of medical expenses or other benefits exists in respect to
               a claim for personal injuries or death and the claimant’s recovery
               is diminished:

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018            Page 6 of 12
                        (1) by comparative fault; or

                        (2) by reason of the uncollectibility of the full value of the
                        claim for personal injuries or death resulting from limited
                        liability insurance or from any other cause;

               the lien or claim shall be diminished in the same proportion as
               the claimant's recovery is diminished. The party holding the lien
               or claim shall bear a pro rata share of the claimant’s attorney’s
               fees and litigation expenses.

       (Emphasis added.)

[11]   Indiana Rule of Professional Conduct 1.15 provides that

               (d) Upon receiving funds or other property in which the client or
               third person has an interest, a lawyer shall promptly notify the
               client or third person. Except as stated in this rule or otherwise
               permitted by law or by agreement with the client, a lawyer shall
               promptly deliver to the client or third person any funds or other
               property that the client or third person is entitled to receive and,
               upon request by the client or third person, shall promptly render
               a full accounting regarding such property.

               (e) When in the course of representation a lawyer is in possession
               of property in which two or more persons (one of whom may be
               the lawyer) claim interests, the property shall be kept separate by
               the lawyer until the dispute is resolved. The lawyer shall
               promptly distribute all portions of the property as to which the
               interests are not in dispute.

       Comment 4 to the Rule provides that

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018                Page 7 of 12
               Paragraph (e) also recognizes that third parties may have lawful
               claims against specific funds or other property in a lawyer’s
               custody, such as a client’s creditor who has a lien on funds
               recovered in a personal injury action. A lawyer may have a duty
               under applicable law to protect such third-party claims against wrongful
               interference by the client. In such cases, when the third-party claim is not
               frivolous under applicable law, the lawyer must refuse to surrender the
               property to the client until the claims are resolved. A lawyer should
               not unilaterally assume to arbitrate a dispute between the client
               and the third party, but, when there are substantial grounds for
               dispute as to the person entitled to the funds, the lawyer may file
               an action to have a court resolve the dispute.

       (Emphasis added.)

[12]   The facts of this case are not in dispute. Both parties agree that a subrogation

       claim needed to be paid to Farm Bureau, that they reached an impasse on June

       9, 2015, regarding the amount of the claim that should be paid, and that

       following this date, neither party acted to resolve the issue until Farm Bureau

       filed its complaint against Holland on September 14, 2017. Yet the statute and

       the Rules of Professional Conduct indicate a professional duty for Holland to

       have retained the funds at issue until the claim was resolved because Farm

       Bureau had a lien on the funds. Indeed, our Supreme Court has stated that

               [a]ttorneys who, during the course of a representation, receive
               settlements funds in which a third party has an undisputed legal
               interest are obligated promptly to deliver those funds to the third
               party. If entitlement to settlement funds is disputed, an attorney
               must hold the disputed funds in a separate account until the
               dispute is resolved.

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018                 Page 8 of 12
       In re Allen, 802 N.E.2d 922, 924 (Ind. 2004). In that case, our Supreme Court

       found that an attorney violated Rule 1.15 when he did not retain settlement

       funds to pay a chiropractor who had treated the attorney’s client when the

       chiropractor had an undisputed claim to a portion of the settlement proceeds

       that was memorialized in an agreement with the attorney. Id. at 924-25. Our

       Supreme Court then found that another attorney violated Rule 1.15 when, at

       the attorney’s client’s instruction, the attorney paid a chiropractor less than the

       amount owed because the client thought she had been overcharged. The

       attorney sent the client the rest of the settlement proceeds. The Court held that

       the attorney was obligated to hold the funds in trust until the parties resolved

       the amount that the chiropractor was owed. Id. at 925.

[13]   During oral argument, Holland explained that, in December 2015, when he had

       not heard from Farm Bureau for more than six months, he thought Farm

       Bureau had decided to waive its subrogation claim. Considering that, after

       negotiating the subrogation claim for months, Farm Bureau inexplicably ceased

       communication about the issue for more than two years, we understand

       Holland’s assumption.

[14]   Nonetheless, we are reminded of the old adage that what is good for the goose

       is good for the gander. If, for example, an attorney represents a client against

       an insurance company, the attorney is likely to file an attorney’s lien with the

       insurance company and to expect the insurance company to comply with the

       lien. In this scenario, if the insurance company gives any proceeds directly to

       the client instead of the attorney in violation of the attorney’s lien, then the

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018          Page 9 of 12
       attorney is likely to sue the insurance company. Likewise, if the insurance

       company files a medical lien with an attorney, and the attorney gives money to

       his client (who is the insured) that should be retained for the lien, then the

       insurance company can sue the attorney. Thus, we find that Holland had a

       duty to retain the funds until the parties resolved their dispute over the amount

       of the subrogation claim. That duty, however, is not interminable—the

       attorney need not hold the money forever.

[15]   The outcome of this case, then, turns on determining the appropriate statute of

       limitations for Farm Bureau’s attempt to collect its money. In other words, we

       must decide whether Farm Bureau waited too long. Holland argues that the

       appropriate statute of limitations is the two-year limit for tort claims.3 He offers

       two starting points for the time limit: November 20, 2012, which is when Farm

       Bureau issued medical payments, or June 9, 2015, which is when the parties

       reached their impasse and communication ceased between them. Farm Bureau

       counters that a six-year statute of limitations is appropriate, reasoning that a

       constructive trust was formed when Holland retained Client’s money and that

       constructive trusts are subject to the six-year statute of limitations for fraud.4

       Farm Bureau contends that the statute of limitations should begin on June 9,

       3
           Ind. Code § 34-11-2-4(a).
       4
           I.C. § 34-11-2-7(4).

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018         Page 10 of 12
       2015, which was when it first became aware of Holland’s refusal to repay the

       lien, and runs through June 9, 2021.

[16]   We agree with Holland that a two-year statute of limitations is appropriate

       because breach of fiduciary duty is a tort claim for injury to personal property,

       and an action for injury to personal property must be commenced within two

       years after the cause of action accrues. I.C. § 34-11-2-4(a). Moreover, we are

       unpersuaded that a six-year statute of limitations should apply to this case.

       Although Farm Bureau argues this time period is appropriate because a

       constructive trust was imposed, a constructive trust can be imposed only

       through fraud. Kalwitz v. Estate of Kalwitz, 822 N.E.2d 274, 280 (Ind. Ct. App.

       2005). For fraud to exist, there must be a material misrepresentation of past or

       existing fact. Kesling v. Hubler Nissan, Inc., 997 N.E.2d 327, 335 (Ind. 2013). In

       its briefs and during oral argument, Farm Bureau was simply unable to identify

       any material misrepresentation made by Holland.

[17]   We therefore apply a two-year statute of limitations. A cause of action in a tort

       claim accrues and the statute of limitations begins to run when the plaintiff

       knew or, in the exercise of ordinary diligence, could have discovered that an

       injury had been sustained as a result of the tortious act of another. First Farmers

       Bank & Tr. Co. v. Whorley, 891 N.E.2d 604, 610 (Ind. Ct. App. 2008). Farm

       Bureau acknowledges that it first became aware of Holland’s refusal to repay

       the lien on June 9, 2015. Accordingly, we find that the statute of limitations

       began to run on June 9, 2015, and expired on June 9, 2017. Farm Bureau filed

       its complaint against Holland on September 14, 2017—more than three months

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018       Page 11 of 12
       too late. The trial court erred by granting summary judgment for Farm Bureau

       and by denying Holland’s motion for summary judgment when Farm Bureau’s

       claim was time-barred.

[18]   The judgment of the trial court is reversed and remanded with instructions to

       enter judgment in favor of Holland.

       Vaidik, C.J., and Brown, J., concur.

       Court of Appeals of Indiana | Opinion 18A-PL-792 | August 28, 2018    Page 12 of 12