Court Opinion

ID: 4112430
Source: CourtListenerOpinion
Date Created: 2016-12-30 17:06:44.056047+00
Date Added: 2024-06-11T12:47:50.582815
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral                                         FILED
estoppel, or the law of the case.
                                                                            Dec 30 2016, 8:16 am

                                                                                CLERK
                                                                            Indiana Supreme Court
                                                                               Court of Appeals
                                                                                 and Tax Court

ATTORNEYS FOR APPELLANT                                 ATTORNEYS FOR APPELLEES
Ronald J. Waicukauski                                   Debra H. Miller
Carol Nemeth Joven                                      James R. Fisher
Price Waicukauski Joven & Catlin, LLC                   Miller & Fisher, LLC
Indianapolis, Indiana                                   Indianapolis, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Linda H. Havel,                                         December 30, 2016
Appellant-Plaintiff,                                    Court of Appeals Case No.
                                                        49A02-1605-CT-1101
        v.                                              Appeal from the Marion Superior
                                                        Court
Vaughan & Vaughan and                                   The Honorable Cynthia J. Ayers,
Charles V. Vaughan,                                     Judge
Appellees-Defendants.                                   Trial Court Cause No.
                                                        49D04-1204-CT-14369

Bradford, Judge.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016        Page 1 of 14
                                          Case Summary
[1]   In April of 2012, Appellant-Plaintiff Linda H. Havel brought suit against her

      former employers, Appellees Vaughan & Vaughan and Charles V. Vaughan

      (collectively, “the Appellees”), alleging a breach of the parties’ employment

      contract. Specifically, Havel, who was employed by the Appellees as a non-

      equity partner from November 1, 2007 to January 20, 2012, argued that the

      Appellees had breached the parties’ employment contract by failing to

      compensate Havel according to its terms. On April 26, 2016, the trial court

      granted the Appellees’ partial motion for summary judgment with respect to

      Havel’s claims arising from the years 2008 and 2009, concluding that the claims

      were barred by the applicable two-year statute of limitations.

[2]   On appeal, Havel contends that the trial court erred by doing so because the

      statute of limitations should have been tolled pursuant to the doctrine of

      fraudulent concealment, the discovery rule, or the doctrine of equitable

      estoppel. Concluding that the trial court erred in granting the Appellees’

      motion for partial summary judgment, we reverse the judgment of the trial

      court and remand the matter to the trial court for further proceedings.

                            Facts and Procedural History
[3]   Havel was employed by the Appellees as a non-equity partner from November

      1, 2007 to January 20, 2012. At some point near the end of 2008, Havel

      requested Vaughan & Vaughan’s (“the Firm”) tax documents. Despite Havel’s

      Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 2 of 14
      request, Vaughan did not provide Havel with any of the Firm’s financial

      records. Havel also inquired into the Firm’s expenses, specifically asking

      Vaughan if he had charged personal expenses to the Firm. Vaughan responded

      that he had not charged any personal expenses to the Firm and indicated that it

      cost $500,000 per year to run the Firm. Because Havel (1) had known Vaughan

      for a number of years, (2) trusted what he told her to be true, and (3) did not

      have any reason to distrust Vaughan, Havel made no further requests for the

      firm’s financial records or inquire into whether Vaughan was charging personal

      expenses to the firm.

[4]   Havel resigned from her position with the Firm on January 20, 2012. After her

      resignation, her personal accountant advised her that because she had been

      classified as a “partner” of the Firm, she should retain a copy of the Firm’s tax

      returns for the years 2008 through 2011 in her business files. Havel’s requests

      for these documents were initially denied by the Appellees. However, on

      March 6, 2012, Vaughan provided Havel with a copy of the Firm’s tax returns

      for the years 2008 through 2011.

[5]   Upon review of these documents, Havel discovered that despite Vaughan’s

      statement indicating otherwise, Vaughan had appeared to charge at least

      $308,877 in non-business related personal expenses against the Firm during the

      four years in question. These personal expenses included:

              credit card charges for trips to Napa Valley, California, Florida,
              Chicago, Atlanta, Wisconsin, Illinois, New York, and Masters
              Golf Tournament including vacations taken over the 4th of July,

      Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 3 of 14
              Spring Break, Christmas and New Years [sic]; charges for regular
              liquor purchases; charges for weekends at [Vaughan]’s lake house
              in Culver, Indiana; charges for daily meals and daily gas; charges
              for personal car repairs, car licenses, car registration, plates and
              insurance for multiple cars for [Vaughan] and a 1998 Aurora for
              [Vaughan’s father]; charges for expensive dinners, hotel charges
              and groceries during [Vaughan’s] son’s travel swim meets all over
              the state of Indiana; car leases charged to the firm for a GMC
              Yukon, 2004 BMW 535XI, and 2008 BMW; $42,000 in cash
              paid for a 2008 Cadillac; thousands of dollars for sporting tickets
              to Purdue football and basketball events; monthly account
              charges for non-business related meals at the Other Pub;
              contributions made to organizations personal to [Vaughan], his
              wife, his minor son and his father; country club dues for multiple
              country clubs including the Carlton in Chicago, Illinois; his
              Mother’s airplane; his Father’s pontoon boat, and multiple
              unexplained adjusted journal entries.

      Appellant’s App. Vol. 2, pp. 116-17.

[6]   On April 10, 2012, Havel brought suit against the Appellees, alleging a breach

      of the parties’ employment contract. Specifically, Havel argued that the

      Appellees had breached the parties’ employment contract by failing to

      accurately compensate her according to the contract’s terms. The Appellees

      filed a motion for partial summary judgment on January 5, 2016, arguing that

      Havel’s claims relating to compensation or the years 2008 and 2009 were barred

      by the applicable two-year statute of limitations. Havel subsequently file a

      response in opposition to the Appellees’ motion.

      Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 4 of 14
[7]   The trial court conducted a hearing on the Appellees’ motion on April 20, 2016.

      Six days later, on April 26, 2016, the trial court issued an order granting the

      Appellees’ motion for partial summary judgment. This appeal follows.

                                Discussion and Decision
[8]   On appeal, Havel contends that the trial court erred in granting the Appellees’

      motion for partial summary judgment, arguing that the trial court erred in

      finding, as a matter of law, that her breach of contract claims relating to the

      years 2008 and 2009 were barred by the applicable two-year statute of

      limitations.

                                     I. Standard of Review
              Summary judgment is appropriate only where no genuine issues
              of material fact exist, and the moving party is entitled to
              judgment as a matter of law. Ind. Trial Rule 56(C); Settles v.
              Leslie, 701 N.E.2d 849, 852 (Ind. Ct. App. 1998). Genuine issues
              of material fact exist where facts concerning an issue which
              would dispose of the litigation are in dispute. Settles, 701 N.E.2d
              at 852. The moving party has the initial burden of
              demonstrating, prima facie, the absence of genuine issues of
              material fact. Id. If the moving party does so, the burden then
              falls upon the non-moving party to identify a factual dispute
              which would preclude summary judgment. Id. Upon appeal of a
              grant of summary judgment, we apply the same standard as the
              trial court, resolving any factual disputes or conflicting inferences
              in favor of the non-moving party. Id. We consider only those
              portions of the record specifically designated to the trial court.
              Id. Upon appeal, the non-moving party bears the burden of
              persuasion and must specifically point to the disputed material
              facts and the designated evidence pertaining thereto. Id. We will
      Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 5 of 14
              liberally construe the designated evidence in favor of the non-
              movant, so that [s]he is not improperly denied [her] day in court.
              Id.

      Meisenhelder v. Zipp Exp., Inc., 788 N.E.2d 924, 926-27 (Ind. Ct. App. 2003).

                                              II. Analysis
[9]   In challenging the trial court’s award of partial summary judgment in favor of

      the Appellees, Havel asserts that an issue of material fact remains as to whether

      the statute of limitations was tolled by fraudulent concealment, the discovery

      rule, or the doctrine of equitable estoppel.1 When a statute of limitation defense

      is asserted and presumptively established by a defendant in a summary

      judgment motion, the burden shifts to the plaintiff to establish that the claim

      has been timely brought. Doe v. Shults-Lewis Child & Family Servs., Inc., 718
N.E.2d 738, 745 (Ind. 1999). As such, on review, we must determine whether

      1
        To the extent that the Appellees question whether Havel could raise these equitable defenses
      to their assertion that some of Havel’s claims were time barred after not including the
      equitable defenses in her complaint, we observe that the Indiana Supreme Court has held the
      following:
               Initially, a plaintiff need not anticipate a statute of limitations defense and
               plead matter[s] in avoidance in the complaint. If the complaint shows on its
               face that the statute of limitations has run, the defendant may file a T.R.
               12(B)(6) motion. Plaintiff may then amend to plead the facts in avoidance.
               On the other hand, if the defendant simply answers the complaint setting up
               the statute of limitations, the plaintiff may, but does not have to, file a reply in
               avoidance. The defendant may seek summary judgment, in which event it
               becomes incumbent upon the plaintiff to present facts raising a genuine issue in
               avoidance of the statute of limitations. If the case goes to trial, the plaintiff
               must establish the facts in avoidance of the statute of limitations.
      Nichols v. Amax Coal Co., 490 N.E.2d 754, 755 (Ind. 1986) (quoting Nichols v. Amax Coal Co.,
      482 N.E.2d 776, 778 (Ind. Ct. App. 1985) (Ratliff, J., dissenting to denial of rehearing.)).

      Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 6 of 14
       Havel designated evidence before the trial court which created an issue of

       material fact as to whether the running of the applicable statute of limitations

       was tolled by any of the above-asserted doctrines.

                                   A. Fraudulent Concealment
[10]   “For centuries, our justice system has operated under the principle that a person

       who commits fraud should not be permitted to gain thereby.” Alldredge v. Good

       Samaritan Home, Inc., 9 N.E.3d 1257, 1261 (Ind. 2014). “As applied to statutes

       of limitation, this principle means ‘the statute in good conscience cannot run

       until the party has a right to commence his suit, and that right cannot accrue in

       the case of fraud, until the injured party is informed of the injury done or fraud

       committed.’” Id. (quoting Raymond v. Simoson, 4 Blackf. 77, 85 (Ind. 1835)).

               Fraudulent concealment is an equitable doctrine which operates
               to prevent a defendant from asserting the statute of limitations as
               a bar to a claim where the defendant, by his own actions,
               prevents the plaintiff from obtaining the knowledge necessary to
               pursue a claim. [Shults-Lewis, 718 N.E.2d at 744-45]. When this
               occurs, equity will toll the statute of limitations until the
               equitable grounds cease to operate as a reason for delay. Id. at
               745. The fraudulent concealment exception does not establish a
               new date for the commencement of the statute of limitations, but
               instead creates an equitable exception. Fager v. Hundt, 610
N.E.2d 246, 251 (Ind. 1993). Under this equitable exception,
               instead of a full statutory limitations period within which to act, a
               plaintiff must exercise due diligence in commencing his action
               after the equitable grounds cease to operate as a valid basis for
               causing delay. Id. Therefore, a plaintiff must institute an action
               within a reasonable time after he discovers information which
               would lead to discovery of the cause of action. Southerland v.
               Hammond, 693 N.E.2d 74, 78 (Ind. Ct. App. 1998).
       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 7 of 14
       Meisenhelder, 788 N.E.2d at 931.

[11]   As far back as 1843, the Indiana General Assembly has adopted a statutory

       provision codifying the common law principle that the fraudulent concealment

       of wrongdoing by one party should toll the statute of limitations. Alldredge, 9
N.E.3d at 1261-62. Currently, Indiana Code section 34-11-5-1 provides that

       “[i]f a person liable to an action conceals the fact from the knowledge of the

       person entitled to bring the action, the action may be brought at any time

       within the period of limitation after the discovery of the cause of action.”

               The type of concealment necessary for operation of the statute
               has long been defined:
                     “‘It must appear that some trick or artifice has been
                     employed to prevent inquiry or elude investigation,
                     or calculated to mislead and hinder the party entitled
                     from obtaining information, by the use of ordinary
                     diligence, that a right of action exists; or it must
                     appear that the facts were misrepresented to or
                     concealed from the party, by some positive acts or
                     declarations, when inquiry was being made or
                     information sought....’ [Citation omitted].”
               Basinger v. Sullivan (1989), Ind. App., 540 N.E.2d 91, 94.

       Chaiken v. Eldon Emmor & Co., 597 N.E.2d 337, 341-42 (Ind. Ct. App. 1992).

       The burden is placed “squarely on the plaintiff” to prove fraudulent

       concealment. Shults-Lewis, 718 N.E.2d at 748.

[12]   “The genus fraudulent concealment comprises two species: active and

       passive.” Lyons v. Richmond Cmty. Sch. Corp., 19 N.E.3d 254, 260 (Ind. 2014)

       (citing Hughes v. Glaese, 659 N.E.2d 516, 519 (Ind. 1995)). “Active fraudulent

       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 8 of 14
       concealment requires a showing that the defendant (1) had actual knowledge of

       the alleged wrongful act and (2) intentionally concealed it from the plaintiff (3)

       by making some statement or taking some action ‘calculated to prevent inquiry

       or to mislead,’ [Hughes, 659 N.E.2d at 522], (4) upon which the plaintiff

       reasonably relied. Doe v. United Methodist Church, 673 N.E.2d 839, 845 (Ind. Ct.

       App. 1996).” Id. at 260-61. “Passive fraudulent concealment requires (1) a

       relationship between the parties such that the defendant has a duty to disclose

       the alleged wrongful act to the plaintiff and (2) a breach of that duty.” Id. at

       261 (citing Guy v. Schuldt, 236 Ind. 101, 109, 138 N.E.2d 891, 895 (1956)).

[13]   Here, the record reveals that Havel designated evidence raising an issue of

       material fact as to whether the Appellees committed active fraudulent

       concealment. Havel designated her affidavit, in which she averred the

       following:

               8.     Vaughan told me that he would pay me one-third of the
               profits as my compensation and said that he would pay me a
               minimum share of $110,000.…
               9.     … [Vaughan] said that I was not responsible for
               generating business for the firm, paying any expenses, or having
               any type of managerial responsibility other than to be the
               attorney in the firm’s Indianapolis office and work the cases.
                                               ****
               13. … I worked at Vaughan and Vaughan continuously from
               November 1, 2007, to January 20, 2012.
                                               ****

       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 9 of 14
         19. At the end of 2008, I asked Charlene [Beaver][2] for my
         copy of the partnership tax returns. She stated that it was her
         understanding that I was not entitled to a copy of the returns
         because I was a non-equity partner. She said I could ask
         [Vaughan] for a copy and that he could give them to me if he
         chose to.
         20. I called [Vaughan] and asked him for a copy of the
         partnership tax returns. I told him Charlene had told me I was
         not entitled to a copy because I was a non-equity partner but that
         he could give me a copy of [sic] he wanted to. [Vaughan] said
         “that’s about right.” He then asked me why I wanted a copy and
         I told him that I thought I should have a copy and he said he
         didn’t know where they were and it’s his family’s firm, and I
         didn’t need them.
         21. In this same conversation, I inquired about my year end
         compensation because I thought it seemed low based on the cases
         that I knew had settled that year. [Vaughan] said that due to
         overhead, the amount was correct. I asked what it cost to run the
         firm and he said $500,000 per year. I asked him if he was charging
         personal expenses to the firm and he said no.
         22. The entire conversation was uncomfortable and [Vaughan]
         did not like me asking these questions. At the time, I had known
         [Vaughan] for almost 10 years and considered him to be like an
         older brother. I had no reason to distrust [Vaughan], and I believed
         what he told me was true. So, after this conversation, I did not
         question [Vaughan] again about whether he was charging
         personal expenses to the firm. For this same reason, I never
         demanded to see the books because I saw no reason to ask to see
         them.
         23. Thereafter, [Vaughan] never provided me with a copy of
         the firm’s tax returns for 2008, and I never asked [Vaughan]

2
    Charlene Beaver worked as the Appellees’ accountant.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 10 of 14
         again for a copy of the partnership returns because I thought I
         was not entitled to them because I was a non-equity partner.

Appellant’s App. Vol. 2, pp. 106-09 (emphases added). Havel further averred

as follows:

         29. During my period of employment from November 1, 2007
         to January 20, 2012, I was never provided a copy of the books,
         tax returns or accounting documents for Vaughan and Vaughan.
         30. During my period of employment from November 1, 2007
         to January 20, 2012, neither [Vaughan] nor Charlene Beaver, the
         firm’s CPA, ever discussed any specific expenses with me and
         [Vaughan] always just told me the overhead was $500,000.
         31. During my period of employment from November 1, 2007
         to January 20, 2012, I was never provided access to the summary
         records or source financial documents for all financial affairs of
         the firm.
         32. From November 1, 2007, to January 20, 2012, I was never
         informed of the exact profits of the firm or how my share was
         calculated and I was never provided with an accounting of the
         firm’s net profit. I did not “concur” with any calculation because
         I was never involved in how any calculation was arrived at or
         informed of the same. I relied on [Vaughan]’s representations to
         me that what I was being paid was accurate and true, and on that
         basis, I accepted the share I was paid.
         33. From November 1, 2007, to January 20, 2012, I never had
         any control over any firm funds and I never had control or access
         to any firm bank account, nor was I ever told I could examine the
         firm’s financial records. Additionally, neither [Vaughan] nor
         David Miller[3] ever told me I could have access to any financial
         records.

3
    David Miller served as the bookkeeper for Vaughan and Vaughan.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 11 of 14
       Appellant’s App. Vol. 2, pp. 110-11. Havel also averred that (1) she was

       ultimately provided with a copy of the firm’s tax returns for 2008-2011 on or

       about March 6, 2012, (2) it was not until she reviewed these tax returns that she

       realized that Vaughan had been untruthful when he indicated that he had not

       charged personal expenses against the firm, and (3) that in April of 2012, she

       filed the underlying action against the Appellees. Havel indicated that she

       believed that as a result of Vaughan’s actions, her income was reduced by

       $102,596 over the course of her four-year term of employment with the firm.

[14]   In addition to her affidavit, Havel also designated portions of the transcript of

       both hers and Vaughan’s depositions which were taken in connection to the

       underlying breach of contract action. The relevant portions of Havel’s

       deposition again indicated that she requested a copy of the Firm’s tax

       documents for 2008 and that, at that time, she also inquired into the Firm’s

       expenses. Havel indicated that Vaughan merely told her that “It costs

       $500,000” and “that’s how much it costs.” Appellant’s App. Vol. 2, p. 157.

       Havel stated that she asked Vaughan “‘[w]ell, is everything that we’re paying

       for related to work and business related?’ He told me yes.” Appellant’s App.

       Vol. 2, p. 157. Havel further stated that she did not ask to see a breakdown of

       all expenses because she “didn’t think [she] needed to ask” because she “trusted

       what [Vaughan] told [her] was true.” Appellant’s App. Vol. 2, p. 157. Upon

       further questioning by counsel, the following exchange occurred:

               [Counsel]:       Did you ask [Vaughan] to itemize the expenses for
               you?
               [Havel]:         I didn’t think I needed to ask him that. I asked him
       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 12 of 14
               what the expenses were; and he said they were all legitimate, that
               that’s how much it cost to run the firm. I trusted what he told me
               was true.
                                                ****
               [Counsel]: But you did absolutely nothing to follow up and
               obtain detail about what those expenses were to evaluate them
               yourself?
               [Havel]:      I did not feel that I needed to do that because I have
               known [Vaughan] for 14 years.
               [Counsel]: Okay.
               [Havel]:      I trusted him implicitly. He told me there weren’t
               any personal expenses. So I believed him.
                                                ****
               [Havel]:      … What I’m saying is, is that it never occurred to
               me that vacations, that liquor, that multiple car leases, that an
               airplane, that a boat, that nightly dinners out, it never occurred to
               me that those were being charged to the firm[.]

       Appellant’s App. Vol. 2, pp. 157-58. As for Vaughan, the transcript of his

       deposition indicates that he acknowledged that there may have been some

       personal expenses charged to the Firm. Vaughan also acknowledged that when

       questioned about expenses, he told Havel “this is what it costs every year.”

       Appellant’s App. Vol. 2, p. 163.

[15]   Review of Havel’s deposition testimony and averments are consistent. Havel

       stated on both occasions that (1) she was denied access to the Firm’s 2008 tax

       documents; (2) when asked specifically by Havel, Vaughan asserted that he had

       not charged personal expenses to the Firm; and (3) Havel did not inquire into

       the Firm’s expenses further because she trusted and believed Vaughan’s

       assertions. These consistent statements, coupled with Vaughan’s subsequent

       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 13 of 14
       acknowledgement that he “may” have charged personal expenses to the Firm,

       Appellant’s App. Vol. 2, p. 160, are at odds with Vaughan’s claims that he did

       not fraudulently conceal information relating to the Firm’s finances from Havel.

[16]   It is of note that in the instant appeal, we need not decide whether such actions

       actually amounted to fraudulent concealment. Rather, we need only determine

       if an issue of material fact remains as to whether the actions amounted to

       fraudulent concealment. Keeping this in mind, we observe that, at the very

       least, an issue of material fact remains as to whether Vaughan’s actions were

       calculated to mislead Havel as to the Firm’s finances or to hinder her from

       discovering that he had, in fact, charged some personal expenses to the Firm.

       As such, we conclude that the facts of this case are sufficient to raise an issue of

       material fact as to whether the Appellees engaged in fraudulent concealment. 4

[17]   The judgment of the trial court is reversed and the matter remanded to the trial

       court for further proceedings.

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

       4
          Having determined that an issue of material fact remains as to whether the applicable two-
       year statute of limitations was tolled by fraudulent concealment, we need not consider whether
       it was tolled by either the discovery doctrine or the doctrine of equitable estoppel.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1605-CT-1101 | December 30, 2016   Page 14 of 14