Jeff West v. J. Greg Allen Builder, Inc., and Princeton Homes, and Greg Allen , 92 N.E.3d 634 ( 2017 )

FILED
Dec 28 2017, 9:11 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR ATTORNEYS FOR APPELLEES/CROSS-
APPELLANT/CROSS-APPELLEE APPELLANTS
Thomas W. Vander Luitgaren Timothy H. Button
Emily M. Gettum Laura S. Reed
Greenwood, Indiana Justin O. Sorrell
Riley Bennett Egloff LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Jeff West, December 28, 2017
Appellant/Defendant/Cross- Court of Appeals Case No.
41A01-1701-CT-182
Appellee/Counterclaim Plaintiff,
Appeal from the Johnson Superior
Court
v.
The Honorable Marla Clark, Judge
J. Greg Allen Builder, Inc., and Trial Court Cause No.
Princeton Homes, 41D04-1102-CT-14
Appellees/Plaintiffs/Cross-
Appellants/Counterclaim Defendants,
and
Greg Allen,
Cross-Appellant/Counterclaim
Defendant.
Bradford, Judge.
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Case Summary
[1] Appellant/Defendant/Cross-Appellee/Counterclaim Plaintiff Jeff West served
as president of J. Greg Allen Builder, Inc. (“GABI”), beginning in 2002 and
Princeton Homes (“Princeton”) beginning in 2008. Appellees/Plaintiffs/Cross-
Appellants/Counterclaim Defendants GABI and Princeton were founded and
owned by Cross-Appellant/Counterclaim Defendant Greg Allen (collectively,
“Cross-Appellants”). While president of GABI and Princeton, West, with the
assistance in some cases of Kim Hutchinson, directed multiple unauthorized
payments to himself and others, oversaw multiple unauthorized transfers of
funds from Princeton to GABI, borrowed money from GABI that he did not
repay, failed to maintain proper records, and caused GABI to fail to fulfill
certain contractual obligations. After discovering West’s activities, Allen sent a
letter to GABI’s and Princeton’s subcontractors, suppliers, and certain
customers indicating that West and Hutchinson had withdrawn company funds
for their own use and disguised the withdrawals as payments to a lumber
company.
[2] In February of 2011, Princeton and GABI sued Hutchinson and West, making
claims against West for violating GABI’s employee manual, conversion, theft,
unfair competition, negligence, tortious interference with a business
relationship, usurpation of corporate opportunity, misappropriation of trade
secrets, unjust enrichment, and fraud. West filed a countersuit against Cross-
Appellants for, inter alia, defamation. Following trial, a jury found in favor of
GABI and against West on the theft claim in the amount of $4000.00 and on
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the breach of fiduciary duty claim in the amount of $220,000.00. The jury also
found in favor of West on his defamation counterclaim, awarding him
presumed damages of $50,000.00 against each Cross-Appellant and punitive
damages in the amount of $300,000.00 against Allen, which the trial court later
reduced to $150,000.00. West contends that there is insufficient evidence to
sustain the jury’s verdict against him for breach of fiduciary duty or the amount
of damages awarded on that claim. Cross-Appellants contend that there is
insufficient evidence to sustain the jury’s verdict against them for defamation or
the award of punitive damages against Allen. While we disagree with the first
three contentions, we agree that there is insufficient evidence to sustain the
award of punitive damages against Allen.
Facts and Procedural History
[3] Allen founded GABI in 1986 and Princeton in the late 1990s. GABI built
custom homes, and Princeton built semi-custom homes. Allen was president of
GABI until West became president in 2002. West also became president of
Princeton in December 2008. West hired Kim Hutchinson to be his assistant,
type contracts and specifications, perform basic accounting and data entry,
issue checks, and keep the books for GABI and Princeton.
[4] As president of GABI and Princeton, West’s responsibilities included
supervising employees (including Hutchinson) meeting with customers, making
sales, managing customer relationships, creating budgets, controlling budgets
and costs, overseeing the construction process, bidding on construction projects,
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obtaining bids from subcontractors and suppliers, forecasting annual overhead,
reviewing reports of income and expenses, approving bills, and providing
monthly financial reports to Allen. West received compensation from GABI of
$338,367.80 during that time period.
[5] During West’s presidency, GABI and Princeton both used an accounting
software system called “Timberline.” Hutchinson was the primary employee
who input data into Timberline for both GABI and Princeton. West prepared
financial statements, such as balance sheets, which Hutchinson then typed into
the computer system. With some regularity, Allen received reports generated
by the Timberline system, and his knowledge of the condition of GABI was
limited to what West reported. Bills that came in for GABI and Princeton were
separated by company and job and sent to Hutchinson, who provided them to
West for approval. It was West’s responsibility to direct Hutchinson which bills
to pay, after which Hutchinson would issue the checks.
[6] West resigned from GABI and Princeton on June 3, 2010. Brent Glover
resigned a couple weeks later. Hutchinson resigned on August 27, 2010. After
West left, an internal investigation began in June of 2010. This investigation
uncovered numerous accounting discrepancies and financial irregularities.
[7] For example, before the end of December 2009, Allen sent an email to all
company employees stating that there would be no bonuses that year.
However, on December 29, 2009, Hutchinson, at West’s direction, issued
bonus checks, including a $2000.00 check to West, a $1000.00 check to
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Hutchinson, and a $1000.00 check to Glover. At West’s direction, these bonus
checks were posted from the construction account (not payroll) and were posted
in Timberline as if they had been written to Carter Lee Lumber Company.
Furthermore, approximately twenty additional unauthorized checks worth
approximately $80,000.00 or $90,000.00 were written to West from the
construction account. All of the checks were concealed by having been falsely
posted in the Timberline system. While Hutchinson was under West’s
supervision, similar checks were issued to Hutchinson totaling over $400,000.00
and were also concealed by being falsely posted as payments to Carter Lee.
[8] It was discovered that files were missing numerous documents and records,
including purged checks. Almost all of the checks that were missing were
posted in the Timberline system as being paid to Carter Lee. It also was
discovered that health insurance costs had been paid out of GABI’s
construction account as direct costs when they should have been paid and
characterized as indirect costs. Numerous unauthorized inter-company
transfers were uncovered, namely fifteen to sixteen unauthorized transfers from
Princeton to GABI between December 2008 and June 2010, totaling
approximately $655,000.00, for which the proper procedures were not followed.
All of these funds were transferred directly from Princeton to GABI, in
contravention of established company policy.
[9] Accounting discrepancies were discovered relating to homes which had been
built for West and his son, Evan. The investigation revealed that a promissory
note related to West’s house existed which had not repaid, and about which
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Allen had been unaware. Further, in August 2009, Allen discovered that West,
without Allen’s knowledge or approval, had begun building a home in
downtown Indianapolis for West’s son, Evan. When Allen asked West about
the home, West admitted it was for his son, and asked for an employee
discount, which Allen granted on the condition that West get accounting
personnel from another division to watch the books to avoid preferential
treatment. West built the home, but never obtained the required oversight from
another accounting division. West also made numerous improvements to
Evan’s home, which were not indicated in the budget presented to Allen and
were not charged to Evan. As of West’s resignation from GABI on in June
2010, GABI still was owed approximately $58,000.00 for Evan’s home and
approximately $54,000.00 for West’s home.
[10] Serious accounting discrepancies were uncovered regarding amounts due to
subcontractors and suppliers. Soon after West’s resignation, GABI began
receiving phone calls from subcontractors and suppliers, asking for the money
they were owed. Further investigation revealed that many of GABI and
Princeton’s records were inaccurate, including balance sheets, records of
outstanding debt, and accounts payable. For example, the accounts-payable
records consistently under-reported the amounts owed to subcontractors and
suppliers, in some cases by as much as ninety percent. The amount owed to
Carter Lee Lumber was under-reported by approximately $300,000.00, the
amount owed to Collins Drywall approximately $160,000.00, and the amounts
owed to several other subcontractors were under-reported as well. Allen ended
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up using $803,000.00 of his personal funds to cover the shortfall. As of West’s
resignation, GABI owed its subcontractors and suppliers approximately $2.4
million, all of which debt had been incurred before West’s resignation.
Moreover, on December 15, 2009, when Allen met with West to discuss cash
flow, West informed Allen that he projected $465,000.00 of gross profit. As it
happened, there was no meaningful profit.
[11] On October 1, 2009, Mark and Alicia Fujihara entered into a contract to buy
their first home from GABI. At closing in June of 2010, the Fujiharas asked
whether they would receive documentation proving they owned their home,
and West informed them that Hutchinson was working on the deed and would
send it to them later. The Fujiharas did not receive a deed at closing, or even
shortly after. Instead, after closing, the Fujiharas received demand letters from
contractors who had not been paid by GABI under West’s watch, which forced
GABI to retroactively pay the contractors. Further, in breach of its contract
with the Fujiharas (again under West’s watch), GABI failed to provide the
Fujiharas with title insurance. Allen himself was forced to provide personal
funds of approximately $65,000.00 to pay for the lot on which the Fujiharas’
home had been built so that GABI could give a deed to the Fujiharas.
[12] After West’s departure, Allen and other staff discussed with Hutchinson the
unpaid promissory note and the unpaid vendor invoices, at which point
Hutchinson responded that she was just doing what West told her to do. On
June 30, 2010, Hutchinson prepared and signed a statement (“the Statement”).
In the Statement, Hutchinson admits that West directed her in late 2009 to
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write checks to herself, Glover, and West as bonuses and to book those
payments as payments to Carter Lee Lumber to conceal the payments from
Allen. Hutchinson also admits West directed her to make draws of
approximately $625,000.00 on Princeton’s line of credit, and rather than use
those funds for Princeton jobs as they were drawn, to transfer those funds to
GABI to pay its expenses, and to conceal the payments. West also instructed
Hutchinson not to tell Allen that GABI was operating at a substantial loss and
had incurred and accumulated substantial unpaid bills. Hutchinson later
testified that she signed the Statement despite believing it to contain falsehoods.
[13] Following these discussions with Hutchinson, Allen confronted West about
what he had done. Allen presented West with a document showing what Allen
knew about as of that date, and substantiating amounts West should pay back
to Allen and GABI. In total, Allen asked him to pay back $196,546.00. When
Allen showed West the Statement, he agreed that he would pay the amounts
back.
[14] Following that interaction, Allen discovered that West owed GABI and/or
Allen approximately $303,862.61, including: $56,765.00 for the promissory
note on West’s personal home; $82,448.76 for interest on the promissory note
through September 10, 2010; $55,000.00 which was underpaid on West’s son’s
home; and $2199.00 in interest due for using company money for an extra five
months after closing on West’s son’s home without Allen’s knowledge. On
January 18, 2011, Allen issued a letter through GABI and Princeton (“the
Letter”) to those entities’ subcontractors, suppliers, and certain customers in
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Marion and Johnson Counties, indicating that West and Hutchinson had
engaged in a mismanagement scheme, including financial misreporting and
unauthorized withdrawal of company funds.
[15] On February 8, 2011, Princeton and GABI filed suit, asserting four claims
against Hutchinson and eleven claims against West, namely, for violating
GABI’s employee manual, conversion, theft, unfair competition, negligence,
tortious interference with a business relationship, usurpation of corporate
opportunity, misappropriation of trade secrets, unjust enrichment, and fraud.
On April 1, 2011, West filed a counterclaim against GABI and Princeton for
breach of settlement agreement and contribution and filed a wage claim. West
also asserted a claim for defamation against all Cross-Appellants. On
September 8, 2011, West moved to dismiss the fraud and unjust enrichment
claims, which motion was granted as to the unjust enrichment claim and denied
as to fraud.
[16] On October 13, 2015, West moved for summary judgment on all remaining
claims against him. On November 30, 2015, GABI and Princeton voluntarily
dismissed the following claims against West: violation of GABI’s employee
manual, unfair competition, tortious interference with a business relationship,
usurpation of corporate opportunity, and misappropriation of trade secrets. On
February 10, 2016, the Court granted summary judgment in favor of West on
the negligence claim and denied summary judgment as to the claims for breach
of fiduciary duty, theft, conversion, and fraud.
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[17] Jury trial began on October 31, 2016, and concluded on November 10, 2016.
The jury found in favor of West on fraud, conversion, and his counterclaim of
contribution, awarding him $9135.35 against Princeton. The jury also found in
favor of West on his defamation counterclaim, awarding him presumed
damages of $50,000.00 against each Cross-Appellant and punitive damages in
the amount of $300,000.00 against Allen, which the trial court later reduced to
$150,000.00. Finally, the jury found in favor of GABI and against West on the
theft claim in the amount of $4000.00 and on the breach of fiduciary duty claim
in the amount of $220,000.00.1
Discussion and Decision
Appeal Issues
[18] West appeals from the trial court’s denial of his motion to correct error.
In general, we review a trial court’s ruling on a motion to correct
error for an abuse of discretion. Hawkins v. Cannon, 826 N.E.2d
658, 661 (Ind. Ct. App. 2005), trans. denied. However, to the
extent the issues raised by the City are purely questions of law,
our review is de novo. See Ind. BMV v. Charles, 919 N.E.2d 114,
116 (Ind. Ct. App. 2009) (“Although rulings on motions to
correct error are usually reviewable under an abuse of discretion
standard, we review a case de novo when the issue … is purely a
question of law.”)[.]
1
The jury also found in favor of GABI and Princeton and against Hutchinson for breach of fiduciary duty,
awarding GABI and Princeton $500,000.00 and $100,000.00 in damages, respectively. Hutchinson does not
participate in this appeal.
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City of Indpls. v. Hicks, 932 N.E.2d 227, 230 (Ind. Ct. App. 2010), trans. denied.
So, to the extent that West’s claims present questions of law, we will review
them de novo.
I. Whether Sufficient Evidence Supports
the Jury’s Verdict Against West for
Breach of Fiduciary Duty to GABI
[19] The jury found that West breached his fiduciary duty to GABI and awarded it
$220,000.00 in damages. West argues that GABI introduced insufficient
evidence to sustain the verdict. “Upon appellate review the standard by which
the sufficiency of the evidence is measured is that such evidence must have the
fitness to induce conviction; it must be adequate to support a conclusion in the
mind of reasonable persons.” Beaman v. Hedrick, 146 Ind. App. 404, 405, 255
N.E.2d 828, 829 (1970). “When a party seeks to reverse an adverse judgment
on the basis of insufficient evidence,” the court will not weigh the evidence or
assess witness credibility. Beck v. Mason, 580 N.E.2d 290, 291(Ind. Ct. App.
1991) (citing In re Paternity of Tompkins, 542 N.E.2d 1009, 1013 (Ind. Ct. App.
1991)). Rather, the court “will look to the evidence most favorable to the
judgment and all reasonable inferences to be drawn therefrom, and will affirm if
there is substantial evidence of probative value to support the judgment.” Id.
[20] “Substantial evidence” is defined as “[a]dequate to support a conclusion[.]”
Haney v. Meyer, 139 Ind. App. 663, 668, 215 N.E.2d 886, 889 (1966). When the
court uses the term “probative value” it has been said that it means “evidence
having quality of proof and having fitness to induce conviction.” Id. (citing
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McCague v. N.Y., Chicago & St. Louis R.R. Co., 225 Ind. 83, 89, 71 N.E.2d 569,
571 (1947)). Where there is no evidence to support the verdict of the jury on a
material point, it is well-settled that the judgment will not be allowed to prevail.
Michalik v. Pazdur, 105 Ind. App. 325, 328, 13 N.E.2d 870, 872 (1938).
[21] “A claim for breach of fiduciary duty requires proof of three elements: (1) the
existence of a fiduciary relationship; (2) a breach of the duty owed by the
fiduciary to the beneficiary; and (3) harm to the beneficiary.” Farmers Elevator
Co. of Oakville v. Hamilton, 926 N.E.2d 68, 79 (Ind. Ct. App. 2010), trans. denied.
“The standard imposed by a fiduciary duty is the same whether it arises from
the capacity of a director, officer, or shareholder in a close corporation.” G & N
Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 240 (Ind. 2001) (citing Hartung v.
Architects Hartung/Odle/Burke, Inc., 157 Ind. App. 546, 552, 301 N.E.2d 240,
243 (1973)). “‘The fiduciary must deal fairly, honestly, and openly with his
corporation and fellow stockholders. He must not be distracted from the
performance of his official duties by personal interests.’” Id. (quoting Hartung,
157 Ind. App. at 552, 301 N.E.2d at 243).
[22] We have little trouble concluding that the jury heard sufficient evidence to
sustain its verdict that West breached his fiduciary duty to GABI. The record
contains evidence that, at West’s direction, unauthorized bonus checks were
issued to himself, Hutchinson, and another employee, despite Allen’s previous
instruction that none of his entities were to issue bonuses. Also at West’s
direction, the true nature of these bonus checks was concealed in GABI’s
accounting software, with the checks made to look as if they had been issued to
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a lumber supplier. All told, twenty additional unauthorized checks, totaling
$80,000.00 to $90,000.00, were written to West, and were similarly concealed.
Unauthorized health insurance costs were also paid out of GABI’s construction
account and had been improperly accounted for.
[23] The record also contains evidence tending to show that despite Allen allowing
West essentially interest-free credit to build his own home, and in allowing
West to build his son a home for a discounted rate, West did not pay back the
more than $100,000.00 he owed to GABI and/or Allen. In fact, when asked by
Allen whether he had paid the more than $50,000.00 balance on his home,
West falsely replied that he had, when he had not. West even exceeded the
budget which had been authorized, causing additional expense and damage to
GABI.
[24] The jury heard evidence that West consistently and severely under-reported the
amounts owed by GABI. As of West’s resignation from GABI and Princeton,
subcontractors and suppliers were owed approximately $2.4 million by GABI,
of which debt Allen personally paid approximately $803,000.00. West
specifically had instructed Hutchinson to not inform Allen that GABI was
operating at a substantial loss and had substantial unpaid bills.
[25] Finally, the jury heard evidence that West failed to fulfill his duties as president
by allowing GABI to breach its contracts. For example, although contractually-
bound to provide a deed and title insurance to the Fujiharas for their newly-
built home, West participated in the closing and allowed it to proceed without
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the deed, title insurance, or land having been procured. Further, West allowed
closing to proceed without having fully paid all subcontractors and suppliers,
leaving GABI to make up the shortfall. This evidence provides ample support
for the jury’s finding that West breached his duty to deal fairly, honestly, and
openly with GABI. The jury’s verdict that West breached his fiduciary duty to
GABI is supported by more than sufficient evidence.
II. Whether Sufficient Evidence Supports the
Jury’s Award of $220,000.00 to GABI
[26] West also challenges the sufficiency of the evidence to sustain the jury’s award
of $220,000.00 to GABI.
We apply a “strict standard” when we review an appellate claim
that a jury’s damages award was excessive. Id. “A jury’s
determination of damages is entitled to great deference when
challenged on appeal.” Sears Roebuck and Co. v. Manuilov, 742
N.E.2d 453, 462 (Ind. 2001).
Damages are particularly a jury determination. Appellate
courts will not substitute their idea of a proper damage
award for that of the jury. Instead, the court will look only
to the evidence and inferences therefrom which support
the jury’s verdict. We will not deem a verdict to be the
result of improper considerations unless it cannot be
explained on any other reasonable ground. Thus, if there
is any evidence in the record which supports the amount of
the award, even if it is variable or conflicting, the award
will not be disturbed.
Id. (quoting Prange v. Martin, 629 N.E.2d 915, 922 (Ind. Ct. App.
1994), reh’g denied, trans. denied). When considering a claim of an
excessive jury verdict, we [do not] reweigh the evidence, and we
“look only to the evidence and the reasonable inferences
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therefrom which uphold the verdict.” Lutheran Hosp. of Indiana,
Inc. v. Blaser, 634 N.E.2d 864, 873 (Ind. Ct. App. 1994), reh’g
denied. “To warrant reversal, the award ‘must appear to be so
outrageous as to impress the Court at “first blush” with its
enormity.’” Ritter, 745 N.E.2d at 844 (quoting Kimberlin v.
DeLong, 637 N.E.2d 121, 129 (Ind. 1994) (quoting New York Cent.
R.R. Co. v. Johnson, 234 Ind. 457, 127 N.E.2d 603 (1955)), reh’g
denied, cert. denied).
Reed v. Bethel, 2 N.E.3d 98, 113–14 (Ind. Ct. App. 2014).
[27] We also have little trouble concluding that the jury’s award of damages is
amply supported by the record. At the very least, the jury heard evidence that
West was breaching his fiduciary duties from 2008 to 2010, a period for which
he received approximately $339,000.00 in compensation. Because an
appropriate remedy for breach of fiduciary duty can include return of
compensation for the period of breach, the return of West’s compensation
supports the jury’s award by itself. See SJS Refractory Co., LLC v. Empire
Refractory Sales, Inc., 952 N.E.2d 758, 768 (Ind. Ct. App. 2011) (“The remedy
for the breach of a fiduciary duty is requiring the agent to disgorge all
compensation received during the period of employment in which the agent
was also breaching his fiduciary duty.”).
[28] In any event, the jury also heard evidence that West directed as much as
$90,000.00 in unauthorized payments to himself and others from GABI funds.
The record contains evidence that GABI owed subcontractors and suppliers
$2.4 million when West left GABI, a situation caused by West providing false
accounts-payable reports. It is reasonable to conclude that at least some of this
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debt would not have been incurred without West’s breach of his fiduciary duty.
The jury heard evidence that West owed approximately $300,000.00 to GABI,
only some of which was paid back. Although we do not have a detailed
accounting of the jury’s calculations, we conclude that the award of
$220,000.00 to GABI is amply supported by the record.
Cross-Appeal Issues
III. Whether Sufficient Evidence Supports the Jury’s
Verdict Against Cross-Appellants for Defamation
[29] A defamatory communication is one that “tend[s] to harm a person’s reputation
by lowering the person in the community’s estimation or deterring third persons
from dealing or associating with the person.” Rambo v. Cohen, 587 N.E.2d 140,
145 (Ind. Ct. App. 1992), trans. denied. “Whether [a communication] is
defamatory ‘depends, among other factors, upon the temper of the times, the
current of contemporary public opinion, with the result that words, harmless in
one age, in one community, may be highly damaging to reputation at another
time or in a different place.’” Journal-Gazette Co., Inc. v. Bandido’s, Inc., 712
N.E.2d 446, 451 n.6 (Ind. 1999) (citations omitted). In order to maintain an
action for defamation, the plaintiff must demonstrate (1) a communication with
defamatory imputation, (2) malice, (3) publication, and (4) damages. Id.
“Whether a communication is defamatory or not is a question of law for the
court, unless the communication is susceptible to either a defamatory or
nondefamatory interpretation—in which case the matter may be submitted to
the jury.” Kelley v. Tanoos, 865 N.E.2d 593, 596 (Ind. 2007) (citation omitted).
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[30] West’s defamation counterclaim against Cross-Appellants was based entirely
upon the Letter, which Allen wrote and sent through GABI and Princeton on
January 18, 2011 to customers, subcontractors, and suppliers in Marion and
Johnson Counties. The Letter contains the following allegation, which the
parties seem to agree is the most serious against West:
After [West’s and Hutchinson’s] departure[s], I learned that both
homebuilding companies they managed were in substantial
arrears to several of their suppliers and subcontractors.… We
discovered through a recent and on-going audit that [West and
Hutchinson] collectively made over 100 unauthorized
withdrawals from company funds which total in excess of One
Million Dollars. Most of these unauthorized withdrawals were
check payments posted in the accounting system as if those check
payments were being made to suppliers or subcontractors when
in fact the corresponding checks were being written by
[Hutchinson] to herself and [West].
Plaintiff’s Exs. 68, 69. West’s counterclaim alleged, inter alia, that Cross-
Appellants published the Letter “with the intent to charge West with the offense
of embezzlement and/or theft of money.” Appellee’s App. p. 19.
[31] Cross-Appellants contend that the jury’s verdict against them for defamation
cannot stand because the jury’s verdict on the breach of fiduciary duty and theft
claims conclusively establish that the statements in the Letter are true. Article I,
section 10, of the Indiana Constitution provides that “[i]n all prosecutions for
libel, the truth of the matters alleged to be libellous, may be given in
justification.” We have recognized that
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as a general proposition, proof of the truth of an alleged
defamation has been held to be a complete defense to a civil
action for libel. Palmer v. Adams, (1894) 137 Ind. 72, 36 N.E. 695,
citing Ind. Const., art. 1, s 10. See also 18 I.L.E. Libel and
Slander s 62 (1959). We also observe, however, that whenever
the question arises, the defamer bears the burden of proof on this
issue of fact, since ‘truth’ is an affirmative defense to a claim for
libel. Weenig v. Wood, [169 Ind. App. 413, 440, 349 N.E.2d 235,
251 (1976)]. Moreover, when an alleged defamer … appeals a
negative judgment on the issue of truth, a Court on appeal may
hold in his favor only if it determines no reasonable trier of fact
could have decided his accusations were untrue. Id.
Elliott v. Roach, 409 N.E.2d 661, 681 (Ind. Ct. App. 1980) (footnote omitted).
[32] Cross-Appellants’ argument is, essentially, that the jury rendered inconsistent
verdicts that must be reconciled.2 Specifically, Cross-Appellants point to the
jury’s verdicts of breach of fiduciary duty and theft in favor of GABI and
against West as proof that the allegations in the Letter are all “true.” “The Law
indulges every reasonable presumption in favor of the legality of jury verdicts,
and corrective action should only be taken when the verdict or verdicts are
‘inconsistent because [of] a logical or legal impossibility.’” Tincher v. Davidson,
2
Cross-Appellants do not argue that West’s defamation claim must fail because he failed to show malice,
even though they argue in the next section that the award of punitive damages against Allen must be reversed
for that reason. This is, perhaps, because the allegations against West seem to clearly qualify as libel per se.
As Judge Faulconer of this court explained, the law presumes damages in cases of defamation per se, which
includes “[w]ords in the form of libel which, on their face, without resort to extrinsic facts or circumstances,
that is to say, ‘per se,’ tend to degrade another person, impeach his honesty, integrity, or reputation, or bring
him into contempt, hatred, ridicule, or causes him to be shunned or avoided.” Gibson v. Kincaid, 140 Ind.
App. 186, 201, 221 N.E.2d 834, 843 (1966) (Faulconer, J., concurring in result). While a communication
that contains libel per se would seem to relive a plaintiff of the burden of proving malice, it does not
necessarily follow that malice is automatically presumed for purposes of punitive damages in such a case. In
any event, we address Cross-Appellants’ arguments as stated.
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762 N.E.2d 1221, 1226 (Ind. 2002) (quoting Indpls. Newspapers, Inc. v. Fields, 259
N.E.2d 651, 668 (Ind. 1970)).3
[33] The most damning accusation against West in the Letter is that he and
Hutchinson collectively made over 100 unauthorized withdrawals of over one
million dollars disguised as payments to suppliers or subcontractors. The only
fair reading of this is that Cross-Appellants were essentially accusing West (and
Hutchinson) of stealing over one million dollars from GABI and Princeton.
Cross-Appellants’ argument that the jury’s verdicts are fatally inconsistent must
fail, however. The jury found that West’s breach of fiduciary duty caused
GABI $220,000.00 in damages, which is far less than the over one million
dollars that he was alleged to have stolen. Similarly, the jury found that West’s
theft from GABI was $4000.00, again falling far short of rendering the
accusation against him “true,” even if added to the damages for breach of
fiduciary duty. Put another way, the jury could have found that West “stole”
$224,000.00 from GABI but that Cross-Appellants defamed him by alleging
that he stole far more. Because the jury’s verdicts are not inconsistent based on
logical or legal impossibility, Cross-Appellants have failed to establish that the
jury’s verdict that they defamed West must be overturned on that basis.
3
This proposition is still good law in a civil context. We note, however, that in a somewhat recent criminal
case, the Indiana Supreme Court held that “inconsistent jury verdicts are not subject to appellate review[.]”
Beattie v. State, 924 N.E.2d 643, 649 (Ind. 2010).
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IV. Whether Sufficient Evidence Supports the
Jury’s Award of Punitive Damages to
West from Allen for Defamation
[34] The jury awarded $50,000.00 in presumed damages to West for Allen’s
defamation and $300,000.00 in punitive damages, later reduced to $150,000.00.
The standard for review of a verdict on an award of punitive damages is
whether a reasonable trier of fact could find by clear and convincing evidence
that the defendant acted with malice, fraud, gross negligence, or oppressiveness
that was not the result of a mistake of fact or law, honest error of judgment,
overzealousness, mere negligence, or other human failing. Budget Car Sales v.
Stott, 662 N.E.2d 638, 639 (Ind. 1996). Punitive damages are awarded upon a
showing of intentional conduct which focuses on the defendant’s state of mind.
Peterson v. Culver Educ. Found., 402 N.E.2d 448, 458 (Ind. Ct. App. 1980).
[35] Allen contends that the record contains insufficient evidence to sustain the
jury’s finding that he acted with actual malice4 in publishing the Letter.
Actual malice must be shown by clear and convincing evidence.
Actual malice exists when the defendant publishes a defamatory
statement with knowledge that it was false or with reckless
disregard of whether it was false or not. Reckless conduct is not
measured by whether a reasonably prudent man would have
published, or would have investigated before publishing. To
demonstrate reckless disregard, there must be sufficient evidence
to permit the conclusion that the defendant in fact entertained
4
West argues only that the jury properly found actual malice on Allen’s part and does not allege that the
record would support findings of fraud, gross negligence, or oppressiveness.
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serious doubts as to the truth of his publication or proof that the
false publication was made with a high degree of awareness of
their probable falsity. Hence, a defendant’s actual state of mind
is a critical factor in the analysis. A defendant’s state of mind is a
subjective fact and may be shown by indirect or circumstantial
evidence.
The question of whether there is sufficient evidence to support a
finding of actual malice is a question of law to be determined by
the court. This rule is premised on two important considerations:
(1) the national commitment to the free exchange of ideas, as
enshrined in the First Amendment and (2) the recognition that
judges as expositors of the Constitution have a duty to
independently decide whether the evidence in the record is
sufficient to cross the constitutional threshold that bars the entry
of any judgment that is not supported by clear and convincing
proof of actual malice. We [have already] discussed … the need
to conduct an examination of the factual record in full. In an
independent review, each piece of evidence may be considered
cumulatively.
Journal-Gazette Co. v. Bandido’s, Inc., 712 N.E.2d 446, 456 (Ind. 1999) (citations
and quotation marks omitted).
[36] We conclude that there is insufficient evidence to sustain a finding, by clear and
convincing evidence, that Allen had actual malice when defaming West. The
only evidence West points to relates to a June 30, 2010, encounter between
Allen and Hutchinson, during which Hutchinson signed the Statement, which
indicated that she had acted under West’s direction. See Defendant’s Ex. K.
West first argues that Hutchinson’s testimony that she believed the Statement to
contain falsehoods is evidence of Allen’s actual malice. Hutchinson’s belief
that the statement was false—even if this is true—has nothing to do with
whether Allen believed it to be false, and so does not support a finding of actual
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malice. West also points to Hutchinson’s testimony that Allen hugged her after
she signed the Statement and told her, “I’m not going to do anything to you,
this is all about [West], I’m going to get [West,]” and claims that this is clear
proof of Allen’s malicious intent. We conclude that this testimony is no more
probative of actual malice than Hutchinson’s uncommunicated beliefs
regarding the falsity of the Statement. Allen’s stated desire to “get” West in no
way indicates a belief that the Statement was false or that Allen harbored a
reckless disregard for its truth. On the whole, Allen’s behavior during the
meeting with Hutchinson (and throughout the rest of the case) was entirely
consistent with a firm belief that the allegations against West were true, leaving
no impression of a belief that they were false. Because we conclude that there is
insufficient evidence to sustain the jury’s finding that Allen acted with actual
malice, we reverse its award of punitive damages to West.5
Conclusion
[37] We conclude that sufficient evidence supports (1) the jury’s finding that West
breached his fiduciary duty to GABI, (2) the jury’s award to GABI of
$220,000.00 for West’s breach of his fiduciary duty, and (3) the jury’s finding
that Cross-Appellants defamed West in the Letter. We also conclude, however,
5
Because we conclude that the jury’s award of punitive damages was unsupported by sufficient evidence, we
need not reach Allen’s argument that presumed damages do not qualify as compensatory damages for
purposes calculating the maximum award of punitive damages.
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that the jury’s award of $150,000.00 in punitive damages to West based on
Allen’s defamation is not supported by sufficient evidence.
[38] We affirm the judgment of the trial court in part and reverse in part.
Robb, J., and Crone, J., concur.
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