Linda H. Gavel v. Vaughan & Vaughan and Charles v. Vaughan (mem. dec.) ( 2016 )

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.
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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
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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,
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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.
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[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
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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.)).
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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).
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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
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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.
****
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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.
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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.
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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
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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
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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.
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