Opinion
24A-CT-1666
10-25-2024
Associated Roofing Professionals, LLC and H.B. White Investments, Inc., Appellants-Plaintiffs/Counterclaim-Defendants v. J.D. Michael Glassburn, Appellee-Defendant/Counterclaim-Plaintiff Herman White, III, Third Party-Defendant v. J.D. Michael Glassburn, Third Party-Plaintiff
ATTORNEY FOR APPELLANTS Jeffrey A. Boyll Wilkinson, Goeller, Modesitt, Wilkinson &Drummy, LLP Terre Haute, Indiana ATTORNEYS FOR APPELLEE Christopher W. Bloomer Krieg DeVault LLP Indianapolis, Indiana Scott S. Morrisson Krieg DeVault LLP Carmel, 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 Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.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 Vigo Superior Court The Honorable Lakshmi Reddy, Judge Trial Court Cause No. 84D02-2112-CT-007050
ATTORNEY FOR APPELLANTS Jeffrey A. Boyll Wilkinson, Goeller, Modesitt, Wilkinson &Drummy, LLP Terre Haute, Indiana
ATTORNEYS FOR APPELLEE Christopher W. Bloomer Krieg DeVault LLP Indianapolis, Indiana Scott S. Morrisson Krieg DeVault LLP Carmel, Indiana
MEMORANDUM DECISION
Felix, Judge.
Statement of the Case
[¶1] In 2021, Associated Roofing Professionals ("ARP") discharged J.D. Glassburn as an employee and part owner for allegedly converting ARP funds and resources for his personal benefit. ARP and H.B. White Investments, Inc. ("HBW")-the majority-in-interest member of ARP-sued Glassburn, making multiple claims stemming from these allegations. Glassburn filed claims against ARP, HBW, and Herman White III, the only employee of HBW (collectively "Appellants"), alleging breach of contract, wrongful termination, breach of fiduciary duty, conversion, criminal conversion, and constructive fraud. Following a trial, a jury reached a verdict in favor of Glassburn in the amount of $162,072.14 and a verdict in favor of ARP and HBW in the amount of $101,978.78, netting Glassburn $60,093.36 in damages. Glassburn filed a motion for prejudgment interest, and the trial court granted his request, ordering Appellants to pay $33,462.35 in prejudgment interest. Appellants now appeal and present a single issue for our review: Whether the trial court abused its discretion in awarding prejudgment interest to Glassburn.
[¶2] We reverse. Facts and Procedural History
[¶3] In 2018, Glassburn moved from Westfield to Terre Haute, Indiana, to become the president of ARP. In 2020, Glassburn bought into and became a "member" of ARP, purchasing a 10% ownership stake in ARP. When he became a member of ARP, Glassburn entered into an Operating Agreement with ARP.
[¶4] The Operating Agreement delineated the prohibited acts for ARP members, also listing circumstances under which a member could be expelled from ARP. The Operating Agreement provides in relevant part: "If a Member engages in a prohibited transaction, such Member shall (and hereby agrees to) indemnify the Company for any costs (including, without limitation, reasonable attorney fees) or damages incurred by the Company as a result of the unauthorized action(s)/omission(s) of such Member." Appellant's App. Vol. II at 48. In the event that an ARP member was expelled due to a prohibited act or transaction, the Operating Agreement states that "the expelled Member shall be entitled to receive only 90 percent of the then value of his then [ownership stake] minus any expense incurred by [ARP] occasioned by the reason for the expulsion." Id. at 50 (emphasis in original).
[¶5] In April 2021, ARP alleged that Glassburn had committed prohibited acts under the Operating Agreement, including depositing checks made to ARP into his personal account, having his personal vehicles serviced by the company mechanic without reimbursing the company, and using ARP employees and resources to remodel his home without reimbursing the company. After a failed attempt to reach a settlement agreement with Glassburn, ARP terminated Glassburn's employment in July 2021. At the time of Glassburn's termination, his ownership stake was valued at $180,080.15. On September 20, 2021, Glassburn began demanding payment of the value of his ownership stake.
[¶6] On December 3, 2021, ARP and HBW filed a lawsuit against Glassburn, alleging breach of fiduciary duty, two claims of breach of contract, and five claims of conversion. Glassburn denied ARP's allegations that he had violated the terms of the Operating Agreement, he had been legally expelled from ARP, and that ARP was entitled to any costs related to his termination. On January 14, 2022, Glassburn filed a counterclaim against ARP and HBW, and on March 8, 2022, Glassburn filed a third-party complaint against Herman White III. Glassburn's allegations against ARP and HBW, as well as the allegations in his third-party complaint, included claims for breach of contract, wrongful termination, breach of fiduciary duty, conversion, criminal conversion, and constructive fraud. Glassburn also sought indemnification and declaratory relief, seeking payment for his ownership stake in ARP.
[¶7] After a three-day jury trial on the competing claims, the jury returned the following verdicts:
On the claims of [ARP] and [HBW], the jury reached a verdict on December 6, 2023 in favor of the Plaintiffs, [ARP] and
[HBW], and against the Defendant, J.D. Michael Glassburn, and decide Plaintiff[s'] damages are $101,978.78
* * *
On the counterclaim of J.D. Michael Glassburn against [Appellants], We, the Jury-decide in favor of the Counter-claim Plaintiff, J.D. Michael Glassburn and against the Counter-claim Defendants, [Appellants], and decide that Counter-claim Plaintiff's [sic] damages (excluding punitive damages, if any) are $162,072.14.
We, the Jury, further decide that the Counter-claim Plaintiff, J.D. Michael Glassburn is entitled to receive $zero in punitive damages....Appellant's App. Vol. VIII at 197 (emphases in original). The trial court set off the verdicts, entering final judgment in favor of Glassburn in the amount of $60,093.36.
Although Herman White III was a defendant in Glassburn's third party claim, the jury's verdict lists Herman White III as a counterclaim defendant. Additionally, the verdict forms do not address the third-party complaint in any capacity. We find no indication in the record on appeal as to why Herman White III was included as a counterclaim defendant or why the third-party complaint was not specifically addressed in the verdict. Neither party clarifies this discrepancy nor makes it an issue on appeal. The trial court's order granting prejudgment interest lists Herman White III as a third-party defendant owing prejudgment interest to Glassburn.
[¶8] On December 21, 2023, ARP and HBW filed a motion for attorney fees and legal expenses, claiming, in part, that the jury's verdict implicated provisions of the Operating Agreement. ARP and HBW pointed to the $162,072.14 awarded to Glassburn, which equals 90% of the value of Glassburn's ownership stake at the time of his termination. Based on this figure, ARP and HBW made the inference that, since the Operating Agreement allowed 90% recovery of an ownership stake when a member is expelled, the jury found that Glassburn had been legally expelled. Using this inference, ARP and HBW claimed that, per the Operating Agreement, they were entitled to recover their costs related to this expulsion. Glassburn filed a response, opposing ARP and HBW's claim for attorney fees and requesting prejudgment interest.
[¶9] On April 23, 2024, the trial court denied ARP and HBW's request for attorney fees based on the Operating Agreement. In denying the request, the trial court provided the following explanation:
While the Operating Agreement is a valid contract with enforceable provisions, the Court cannot say with certainty how the jury reached its verdict. In awarding damages to [ARP and HBW], the Court cannot conclude whether the jury determined that [Glassburn] engaged in "a prohibited transaction" or did the jury make a decision on what it deemed to be "fair" or perhaps there were other factors that led to its determination and calculation of damages for [ARP and HBW].
* * *
While it may appear that the jury awarded verdicts for damages to both sides based upon the figures they proposed, the Court cannot be certain of that and would have to engage in speculation. Because the Court cannot say that the jury determined that [Glassburn] engaged in [a] "prohibited transaction" or that [Glassburn] was expelled as a Member, the Court cannot determine if [ARP and HBW are] entitled to the attorney fees incurred as a result of [Glassburn's] alleged actions.Appellant's App. Vol. VIII at 198 (emphasis added).
[¶10] On June 24, 2024, Glassburn filed a motion for ruling on his request for prejudgment interest. Glassburn sought prejudgment interest on the $162,072.14 judgment in his favor, arguing that this amount represented the value of his ownership stake he was owed pursuant to the Operating Agreement. On July 8, 2024, the trial court granted Glassburn's request and awarded him $33,462.35 in prejudgment interest based on the statutory 8% interest rate. This appeal ensued.
Discussion and Decision
[¶11] Appellants argue that the trial court erred in awarding prejudgment interest to Glassburn. "We review a decision regarding the award of prejudgment interest for an abuse of discretion." Dana Cos., LLC v. Chaffe Rentals, 1 N.E.3d 738, 751 (Ind.Ct.App. 2013), trans. denied. We focus on "the trial court's threshold determination as to whether the facts satisfy the test for making such an award." Thomson Inc. v. Ins. Co. of N. Am., 11 N.E.3d 982, 1032 (Ind.Ct.App. 2014) (quoting Bopp v. Brames, 713 N.E.2d 866, 872 (Ind.Ct.App. 1999), trans. denied (2000)), trans. denied. "An award of prejudgment interest rests on a factual determination and this Court may only consider the evidence most favorable to the appellee." Dana Cos., 1 N.E.3d at 751 (quoting Bd. of Sch. Trs. of Baugo Cmty. Schools v. Ind. Ed. Emp. Rels. Bd., 412 N.E.2d 807, 811 (Ind.Ct.App. 1980)).
[¶12] "Prejudgment interest is awarded to fully compensate an injured party for the lost use of money." Song v. Iatarola, 76 N.E.3d 926, 939 (Ind.Ct.App. 2017) (citing Fackler v. Powell, 923 N.E.2d 973, 977 (Ind.Ct.App. 2010)), trans. denied.
We have explained the test for prejudgment interest awards in breach of contract actions:
An award of pre-judgment interest in a breach of contract action is warranted if the amount of the claim rests upon a simple calculation and the terms of the contract make such a claim ascertainable. The test for determining whether an award of prejudgment interest is appropriate is whether the damages are complete and may be ascertained as of a particular time. An award of prejudgment interest is proper when the trier of fact does not have to exercise judgment in order to assess the amount of damages. Therefore, an award of pre-judgment interest is generally not considered a matter of discretion.Sollers Point Co. v. Zeller, 145 N.E.3d 790, 801 (Ind.Ct.App. 2020) (emphasis added) (quoting WESCO Distrib., Inc. v. ArcelorMittal Ind. Harbor LLC, 23 N.E.3d 682, 714 (Ind.Ct.App. 2014)).
[¶13] Here, the trial court awarded prejudgment interest in the amount of $33,462.35, applying the 8% statutory rate to Glassburn's $162,072.14 damages award. Appellants argue that the jury exercised its judgment in determining the amount of Glassburn's damages. Glassburn argues that the damages were ascertainable due to the terms of the Operating Agreement and ARP's valuation of his shares. We agree with Appellants.
[¶14] Appellants point us to this court's decision in City of Indianapolis v. Twin Lakes Enterprises, Inc., 568 N.E.2d 1073 (Ind.Ct.App. 1991), trans. denied, to argue that the jury exercised its judgment in determining Glassburn's damages due to his multiple claims and theories of recovery. In Twin Lakes, the plaintiff made claims under a breach of contract theory as well as a quasi-contract theory of liability, arguing that its damages were from $256,782, the value of the original contract, to $1,250,000. Id. at 1086. The jury returned a verdict in favor of Twin Lakes for $550,000, and the trial court awarded Twin Lakes $66,974.25 in prejudgment interest. Id. at 1086-87. On appeal, Twin Lakes argued that the damages were ascertainable because "one of its theories of recovery requested an amount close to that eventually awarded by the jury." Id. at 1087. We noted that this argument ignored the "wide disparity in the alternative amounts requested" and failed to show that the damages were ascertainable without trial. Id. Although a calculation could have been gleaned from the record "in hindsight," we reversed the trial court's award of prejudgment interest. Id.
[¶15] Similarly, Glassburn sought damages on multiple theories of liability, including breach of contract, wrongful termination, breach of fiduciary duty, conversion, criminal conversion, and constructive fraud. The record on appeal does not include a trial transcript, so we are unaware of the range of damages requested at trial. However, in his filings during the pendency of these proceedings, Glassburn's estimated damages ranged from $240,482.75 to $739,448.25.
[¶16] Glassburn points to our decision in Song v. Iatarola to argue that the jury did not exercise discretion in awarding him damages because the damages are the result of a simple calculation. Song entered a contract with Iatarola to purchase real estate and provided $150,000 of earnest money per the terms of the purchase agreement. Song, 76 N.E.3d at 931. Due to Iatarola's failure to obtain new zoning for the property, Song terminated the purchase agreement and demanded his $150,000 earnest money. Id. 932. Song then filed a lawsuit against Iatarola, alleging actual fraud, constructive fraud, breach of contract, and contract rescission. Id. The jury returned a verdict in favor of Song determining that he "shall have the return of his earnest money in the amount of $150,000." Id. at 938. The trial court denied Song's request for prejudgment interest, id. at 932, but we reversed this ruling on appeal because the purchase agreement provided the amount of earnest money to be returned, making the damages award a simple calculation. Id. at 939-40.
[¶17] Glassburn argues that his damages are based on a simple calculation because the jury used ARP's valuation of Glassburn's ownership stake and the terms of the Operating Agreement to reach its result. Glassburn claims the jury's verdict reflects 90% of his ownership stake valued at $180,080.15, resulting in $162,072.14 in damages. However, nothing in the record on appeal demonstrates that the jury reached its verdict in reliance on the terms of the Operating Agreement or found that a breach of contract occurred. Most importantly, unlike in Song, the jury's verdict does not specify how damages were calculated or which claims prevailed.
[¶18] Interestingly, at trial, Appellants made the argument that Glassburn makes now that the verdict rested on a plain reading of the Operating Agreement-a 90% valuation- and therefore, the Appellants deserved attorney fees. However, the trial court noted: "While it may appear that the jury awarded verdicts for damages to both sides based upon the figures they proposed, the Court cannot be certain of that and would have to engage in speculation." Appellant's App. Vol. VIII at 198. We, also, will not engage in speculation about the jury's verdict in hindsight. See Twin Lakes, 568 N.E.2d at 1087. Due to the multiple claims for damages and the lack of explanation in the jury's verdict, we conclude that damages were not ascertainable without the jury exercising its judgment.
[¶19] Alternatively, Glassburn argues that prejudgment interest was proper even if the jury exercised its judgment in determining the damages. Glassburn cites Hayes v. Chapman, 894 N.E.2d 1047, 1054 (Ind.Ct.App. 2008), trans. denied, to argue that judgment exercised by the jury does not preclude an award of prejudgment interest when the damages may be ascertained with reasonable precision. Here, Glassburn again claims that the damages were ascertained with reasonable precision because they were derived from ARP's valuation of Glassburn's ownership stake and terms of the Operating Agreement. We reiterate that this assumption regarding the jury's verdict is not supported by the record. We rely heavily on the trial court's own words in denying Appellants' request for attorney fees. Consistency in the law is important. If the trial court could not be certain how the jury reached its decision when it came to determining an attorney fee award, the trial court was in the same position when it came to determining whether prejudgment interest was available. Thus, we conclude that the trial court abused its discretion, and we reverse the trial court's award of prejudgment interest.
[¶20] Reversed.
Pyle, J., and Weissmann, J., concur.