Opinion
24A-PL-1011
12-03-2024
421 Storage, LLC, and Dean Trennepohl, Appellants-Defendants v. Bazinga Farms, LLC, Appellee-Plaintiff
ATTORNEY FOR APPELLANTS WILLIAM T. SAMMONS THE LAW OFFICE OF WILLIAM T. SAMMONS RENSSELAER, INDIANA ATTORNEY FOR APPELLEE LIBERTY L. ROBERTS CHURCH CHURCH HITTLE &ANTRIM NOBLESVILLE, INDIANA
Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.
Appeal from the Carroll Circuit Court The Honorable Benjamin A. Diener, Judge Trial Court Cause No. 08C01-2206-PL-7
ATTORNEY FOR APPELLANTS WILLIAM T. SAMMONS THE LAW OFFICE OF WILLIAM T. SAMMONS RENSSELAER, INDIANA
ATTORNEY FOR APPELLEE LIBERTY L. ROBERTS CHURCH CHURCH HITTLE &ANTRIM NOBLESVILLE, INDIANA
MEMORANDUM DECISION
Kenworthy, Judge
Case Summary
[¶1] The trial court dissolved 421 Storage, LLC, and later issued an order appointing Dan Hanlin to wind up its business affairs. 421 Storage and Dean Trennepohl filed this interlocutory appeal from the order appointing Hanlin, asserting it was an appeal of right because the order erroneously appointed Hanlin as a receiver. Because the trial court's order appoints Hanlin to wind up and liquidate the business and not to serve as a receiver, this Court lacks jurisdiction over the appeal. We dismiss and remand for calculation of damages.
Facts and Procedural History
[¶2] Hanlin and his wife are co-owners of Bazinga Farms, LLC; each own a fifty percent share in the company. Bazinga Farms and Trennepohl each own a fifty percent share in 421 Storage, an Indiana limited liability company. Both Hanlin and Trennepohl serve as managers of 421 Storage.
[¶3] In 2022, Bazinga Farms filed a complaint against 421 Storage and Trennepohl (collectively, "Appellants") asking the trial court to dissolve 421 Storage under Indiana Code Section 23-18-9-2. Bazinga Farms requested this relief because a deadlock existed between Hanlin and Trennepohl as to the management of the company. The trial court issued a Decree of Dissolution dissolving 421 Storage in May 2023. When a limited liability company is dissolved, the managers may wind up the business or-if a manager has engaged in wrongful conduct-the court of the county in which the business is located may do so. I.C. § 23-18-9-4. The court found Trennepohl had engaged in "unauthorized, unilateral conduct" related to the business and assumed authority to wind up 421 Storage's business affairs. Appellants' App. Vol. 2 at 22.
"On application by or for a member, the circuit or superior court . . . may decree dissolution of the limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement." Ind. Code § 23-18-9-2 (1993).
[¶4] Appellants then filed a motion styled "Petition to Appoint Receiver to Liquidate Company." The petition asked the court to appoint "a suitable person to fully and finally wind up the business affairs of the company, to liquidate the assets of the company, and do all things required by Indiana Code sections 23-18-9-3 and 23-18-9-6 and all other applicable laws[.]" Id. at 32-33. From this point on, Appellants, Bazinga, and the trial court referred to the person to be appointed for this purpose as a "receiver."
[¶5] The trial court held a hearing on the petition. During the hearing, Trennepohl asked the trial court to appoint Trennepohl as receiver or, in the alternative, to appoint one of "several qualifying agencies, auction companies out there who have experience in selling and liquidating commercial real estate[.]" Tr. Vol. 2 at 6. Hanlin objected to Trennepohl's appointment and asked the court to appoint Hanlin. The trial court accepted the parties' request for time to agree on who should be appointed. But the parties did not reach an agreement and instead submitted written proposals. Bazinga proposed Hanlin or third party Kevin Bol be appointed as receiver. Appellants' App. Vol. 2 at 36. Appellants proposed third party Gregory D. Vogel be appointed, but requested Trennepohl be allowed to "aid" Vogel in his duties. Id. at 41.
[¶6] After considering both proposals, the trial court issued an "Order Appointing Receiver" appointing Hanlin to "wind up the business affairs, notify claimants and potential claimants, liquidate the assets of the company and do all other things required by law to finalize the dissolution of 421 Storage, LLC." Id. at 13.
[¶7] Appellants then filed a Motion to Correct Error citing Indiana Code Chapter 32-30-5 for the first time in this litigation. Chapter 32-30-5 applies to receiverships in causes of action concerning real property and prohibits appointment of a party or a person interested in the action as a receiver. Appellants claimed Hanlin's fifty percent ownership of Bazinga Farms made him ineligible to serve because he is a person interested in the action. The trial court denied the motion, stating "Dan Hanlin has been appointed to wind up business under I.C. § 23-18-9-4, not to serve as receiver under I.C. § 35-30-5-2 [sic]." Id. at 57.
Indiana Code Section 35-30-5-2 is a repealed criminal statute relating to child prostitution. It is clear this is merely a scrivener's error, and the court intended to cite Indiana Code Section § 32-30-5-2, which was cited by Appellants and governs the appointment of receivers.
[¶8] Appellants then filed a notice of appeal, citing Indiana Appellate Rule 14(A) as the basis for appellate jurisdiction. This Rule allows an interlocutory appeal as a matter of right from certain enumerated orders, including orders appointing receivers.
The trial court's order did not appoint a receiver and therefore this Court does not have jurisdiction over the appeal.
[¶9] Appellants have proceeded as though the Court has jurisdiction over this appeal because the appealed order appointed a receiver. But Bazinga Farms claims this Court lacks jurisdiction because the order did not appoint a receiver; rather, it merely identified an individual to wind up and liquidate 421 Storage.
[¶10] This Court has a duty to determine whether it has jurisdiction to review a trial court's order before proceeding to the merits of a case. Allstate Ins. Co. v. Scroghan, 801 N.E.2d 191, 193 (Ind.Ct.App. 2004), trans. denied. "Jurisdiction is a question of law we review de novo." Matter of Adoption of S.L., 210 N.E.3d 1280, 1282 (Ind. 2023) (citation omitted). The Indiana Rules of Appellate Procedure grant this Court jurisdiction in appeals from final judgments, interlocutory orders, and agency decisions. Ind. Appellate Rule 5. In turn, Appellate Rule 14 authorizes this Court to review interlocutory orders as: (1) an interlocutory appeal of right; (2) a certified discretionary interlocutory appeal; or (3) an interlocutory appeal from the grant or denial of a class action. Relevant to this case, Appellate Rule 14(A)(6) categorizes an interlocutory order "[a]ppointing or refusing to appoint a receiver, or revoking or refusing to revoke the appointment of a receiver" as an order appealable as a matter of right.
[¶11] The purpose of a receivership "is to secure and preserve property or assets for the benefit of all interested parties, pending litigation." Steingart v. Musgrave, 221 N.E.3d 725, 728 (Ind.Ct.App. 2023); see In re Marriage of Gore, 527 N.E.2d 191, 195-97 (Ind.Ct.App. 1988) (discussing the propriety of appointing a receiver over husband's business to preserve wife's claim on the marital estate pending dissolution); see generally 24 Ind. Law Encyc. Receivers § 2 ("The purpose of appointing a receiver is to secure and preserve the property or thing in controversy, pending the litigation, so that it may be subject to such order or decree as the court may make or render."). Here, there was no property in controversy subject to court order as 421 Storage had already been dissolved by judicial decree. All that remained to be done was wind up the business and distribute its assets. See I.C. § 23-18-9-6.
[¶12] Despite using the word "receiver" in its title, Appellants' "Petition to Appoint Receiver to Liquidate Company" was devoid of any reference to Indiana Code Chapter 32-30-5 and Appellants did not ask the court to appoint someone to preserve the business property pending litigation. Rather, they asked the trial court to appoint someone to wind up 421 Storage's business affairs, liquidate its assets, and "do all things required by Indiana Code sections 23-18-9-3 and 2318-9-6" to finalize the dissolution of 421 Storage. Appellants' App. Vol. 2 at 33; see I.C. § 23-18-9-3(a) (stating a dissolved limited liability company "may only carry on business that is appropriate to wind up and liquidate its business and affairs"). It was not until after the trial court appointed Hanlin to wind up 421 Storage's business affairs that Appellants first cited to Indiana Code Chapter 32-30-5. In denying Appellants' motion to correct error, the trial court clarified it appointed Hanlin "to wind up business under I.C. § 23-18-9-4, not to serve as receiver under 35-30-5-2." Id. at 57. The parties and the trial court used the term "receiver" as a type of shorthand rather than in its strict legal sense. But Appellants did not request, and the trial court did not appoint, a receiver under Chapter 32-30-5.
A more accurate descriptive term for a person acting under Indiana Code Chapter 23-18-9 might be "agent" or "liquidator."
[¶13] Because the trial court's order did not appoint a receiver, this Court lacks jurisdiction to hear this appeal under Appellate Rule 14(A)(6). The order does not fit within any other category of interlocutory orders appealable as a matter of right which would alternatively grant this Court jurisdiction. This Court also lacks discretionary authority to hear the case as the trial court did not certify the order for interlocutory appeal. Therefore, we dismiss this appeal for lack of subject matter jurisdiction.
Bazinga Farms is entitled to damages, including attorney fees, under Indiana Appellate Rule 66(E).
[¶14] Bazinga Farms asserts this appeal is "meritless and devoid of all plausibility." Appellee's Br. at 16. Accordingly, Bazinga Farms asks this Court to award it appellate damages, including attorney fees.
[¶15] We may assess damages, including attorney fees, "if an appeal . . . is frivolous or in bad faith." App. R. 66(E). "Our discretion to impose damages is limited, however, to instances when an appeal is permeated with meritlessness, bad faith, frivolity, harassment, vexatiousness, or purpose of delay." Basic v. Amouri, 58 N.E.3d 980, 986 (Ind.Ct.App. 2016) (internal quotation omitted). We do not impose the sanction for mere lack of merit, but reserve damages for more egregious cases. Id.
[¶16] Indiana appellate courts categorize claims for appellate attorney fees into "substantive" and "procedural" bad faith claims. Thacker v. Wentzel, 797 N.E.2d 342, 346 (Ind.Ct.App. 2003).
To prevail on a substantive bad faith claim, the party must show that the appellant's contentions and arguments are utterly devoid of all plausibility. Procedural bad faith, on the other hand, occurs when a party flagrantly disregards the form and content requirements of the rules of appellate procedure, omits and misstates relevant facts appearing in the record, and files briefs written in a manner calculated to require the maximum expenditure of time both by the opposing party and the reviewing court.Id. at 346-47 (citations omitted). Substantive bad faith "implies conscious wrongdoing because of dishonest purpose or moral obliquity." Harness v. Schmitt, 924 N.E.2d 162, 168 (Ind.Ct.App. 2010) (internal quotation omitted). We use "extreme restraint when exercising this power because of the potential chilling effect upon the exercise of the right to appeal." Thacker, 797 N.E.2d at 346.
[¶17] Bazinga Farms claims Appellants' appeal constitutes substantive bad faith. We agree. Appellants asked the trial court to appoint a person to wind up 421 Storage's business affairs under Indiana Code Chapter 23-18-9 and suggested Trennepohl. When the trial court appointed Hanlin instead, Appellants completely switched gears and for the first time-and in direct contradiction to its own request to appoint Trennepohl-claimed Indiana Code Chapter 32-30-5 applied and excluded Hanlin as an option. The trial court rebuffed that allegation of error, stating it had not appointed a "receiver" under that chapter but had appointed someone to carry out the dictates of Chapter 23-18-9-as Appellants had requested. Ignoring the statutory basis for their original request and the trial court's clarification of its order, Appellants filed an interlocutory appeal of right alleging the order appointed a receiver. They then filed an appellate brief that contains no discussion of Chapter 23-18-9, focusing solely on the requirements of Chapter 32-30-5. They also appear to intentionally mischaracterize the appealed order, relying on the "express language" appointing a "receiver" and ignoring the substance of the order appointing a person to wind up and liquidate the business-not to secure and preserve its real property while other litigation plays out. Appellants' Br. at 10.
Appellants also ignore that they introduced the term "receiver" into the litigation.
[¶18] In light of the record and our decision above that this appeal was improperly initiated as an interlocutory appeal of right, Appellants' appeal is frivolous and the arguments set forth in Appellants' brief are devoid of plausibility. Bazinga Farms expended time and accrued fees to respond to an appeal that had no basis in law or fact. Accordingly, we conclude Bazinga Farms is entitled to damages, including attorney fees. We remand to the trial court with instructions to calculate appropriate damages.
Conclusion
[¶19] This Court lacks jurisdiction to review the trial court's order because it appointed Hanlin to wind up business affairs under Indiana Code Section 2318-9-4, not to serve as a receiver under Indiana Code Section 32-30-5-1. This is therefore not an interlocutory appeal of right. Further, Bazinga Farms is entitled to appellate damages, including attorney fees, to be calculated by the trial court on remand.
[¶20] Dismissed and remanded.
Mathias, J., and Brown, J., concur.