Memory gardens Management Corporation, Inc. v. Liberty Equity Partners, LLC, and Old Bridge Funeral Home, LLC ( 2015 )

Sep 03 2015, 8:19 am
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEES
Andrea L. Ciobanu Edward F. Schrager
Alex Beeman Joshua T. Robertson
Ciobanu Law, P.C. Cohen Garelick & Glazier
Indianapolis, Indiana Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Memory Gardens Management September 3, 2015
Corporation, Inc., Court of Appeals Case No.
Appellant-Plaintiff, 49A02-1501-CC-1
Appeal from the Marion Superior
v. Court
The Honorable Heather A. Welch,
Liberty Equity Partners, LLC, Judge
and Old Bridge Funeral Home, Trial Court Cause No.
LLC, 49D12-1312-CC-45476
Appellees-Defendants.
Brown, Judge.
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[1] Memory Gardens Management Corporation, Inc. (“MGMC”) appeals the trial
court’s order granting summary judgment in favor of Liberty Equity Partners,
LLC, and Old Bridge Funeral Home, LLC (collectively, the “Old Bridge
Parties”). MGMC raises one issue which we revise and restate as whether the
trial court erred in granting summary judgment. Additionally, the Old Bridge
Parties request appellate attorneys’ fees. We affirm and remand.
Facts and Procedural History
[2] Ansure Mortuaries of Indiana, LLC (“Ansure”) owned several subsidiary
companies owning and operating funeral homes, cemeteries, and other
businesses in the funeral home and cemetery industry. MGMC was one of
these wholly-owned subsidiaries but, unlike Ansure’s other subsidiaries, was a
management company whose primary function was to provide centralized
managerial and administrative services to Ansure and its subsidiaries. Until
January 2008, Robert Nelms was the Managing Member and CEO of the Old
Bridge Parties, as well as the sole shareholder of Ansure and MGMC.
[3] On January 3, 2008, certain holders of a mortgage and other debt instruments
executed by Ansure filed a Motion For Appointment Of Receiver Over
Mortgagor Companies (the “Receivership Action”) in the Johnson Circuit
Court (the “Receivership Court”) seeking the appointment of a receiver on the
grounds that: (1) a receiver was necessary to protect their mortgage interest; (2)
property, rents, and profits were in danger of being lost, removed, or materially
injured; and (3) Ansure was in imminent danger of insolvency. Nelms, Ansure,
and MGMC, among other subsidiaries of Ansure, were named as defendants in
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the Receivership Action. On January 17, 2008, the State of Indiana filed a
separate complaint seeking injunctive relief, declaratory relief, restitution, and
appointment of a receiver in order to prevent continuing securities violations
and misappropriations of trust fund monies by the defendants in the
Receivership Action,1 and the Receivership Court entered a Temporary
Restraining Order “in order to maintain the status quo between the Parties and
to allow the Parties to conduct discovery and prepare for the preliminary
injunction hearing.” Appellant’s Appendix at 51.
[4] On January 22, 2008, by agreement of the parties in the Receivership Action,
Lynette Gray (the “Receiver”) was appointed as Temporary Receiver by the
Receivership Court. On January 25, 2008, the Receivership Court entered an
Order Extending Restraining Order and Appointment of Receiver, which
provided that the Receiver was to oversee and control Ansure and its
subsidiaries, including MGMC. On May 2, 2008, the Receivership Court
issued its Findings of Fact, Conclusions Thereon, Preliminary Injunction, and
Order of Continuing Receivership (the “Receivership Order”), which made the
receivership over Ansure and its subsidiaries, including MGMC, permanent. In
the Receivership Order, the Receiver was granted all of the rights and powers
available to her under Indiana law. Additionally, the Receivership Order
provided:
1
On August 3, 2009, Nelms entered into a plea agreement in which he pled guilty to theft and securities
fraud arising from his conduct relating to the funeral home, cemetery, and perpetual care requirements.
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262. The receiver shall, specifically:
A. Take control of [Ansure], including all wholly owned
subsidiaries;
B. Marshall and account for all assets of the business entities;
C. Marshall and account for all trust fund assets of the business
entities;
D. Assume the management of the day-to-day operations the
[sic] business entities; and,
E. Manage the business operations of each entity in the best
interests of the creditors and owner(s) thereof.
*****
267. [Ansure], its owner(s), directors, employees, agents, and the
Defendants herein, shall fully cooperate with the Receiver or
any of her employees or agents, including, but not limited to:
A. Replying promptly as requested to any inquiry from the
Receiver, her employees, or agents;
B. Making available all books, records, accounts, documents,
information, and property;
C. Abstaining from obstructing, interfering, frustrating, and /
or interrupting the Receiver, her employees, or agents, in
the conduct of her duties.
268. Pursuant to Indiana Trial Rule 66(B), the Board of Directors of
[Ansure] shall direct its employees to file with this Court,
within thirty (30) days of this Order, a full, complete, itemized
statement, in affidavit form, setting forth in detail all the assets
and all the liabilities of [Ansure], including those assets and
liabilities of the wholly owned subsidiaries, along with the
names and addresses of all known creditors.
*****
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271. Robert Nelms and [Ansure] and their respective owners,
directors, agents, employees, and / or assignees are hereby
PRELIMINARILY ENJOINED from:
*****
C. Altering, disposing, destroying, erasing, or secreting away
any and all records . . . pertaining to the operating,
management, or control of [Ansure] or any of its wholly-
owned subsidiaries and the trust funds associated therewith;
*****
F. Obstructing, interfering with, frustrating, and / or
interrupting the Receiver, her employees, or agents, in the
conduct of her duties; and
G. Conducting business or directing business decisions for or
on behalf of [Ansure] or any of its wholly-owned
subsidiaries.
Id. at 70-72.
[5] On June 2, 2008, MGMC’s Controller filed an affidavit with the Receivership
Court which purported to itemize the assets of Ansure and each of its wholly-
owned subsidiaries. The itemization of MGMC’s assets identified items such
as office equipment, including tables, chairs, microwaves, and computer
monitors, construction equipment, and automotive equipment. The
Controller’s affidavit did not identify any loans made by MGMC to the Old
Bridge Parties. In an affidavit submitted to the Receiver, David Hernandez, a
funeral director at the Old Bridge Funeral Home, stated that “during the
construction of the Old Bridge Funeral Home, approximately $450,000.00 was
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lent by Memory Gardens to Old Bridge Funeral Home, LLC to complete the
construction.” Id. at 460.
[6] On May 18, 2009, the Receiver filed her First Annual Report, which reported
that she concentrated her efforts on the management of MGMC because it
oversaw the business operations of all the entities controlled by Ansure. In her
report, the Receiver confirmed that she had received MGMC’s Controller’s
affidavit itemizing Ansure’s assets. In addition, the Receiver reported that she
interacted daily with members of MGMC’s management team, including the
acting CEO and Controller, the Trust and Compliance Officer, the Vice
President of Sales and Marketing, and Ansure’s Board Members. The Receiver
also reported that she exchanged information with Nelms and his attorneys
regularly. Neither Nelms, Ansure, nor MGMC objected to the Receiver’s First
Annual Report or the contents of the affidavit detailing Ansure’s assets and
creditors included with the report.
[7] On September 15, 2009, the Receivership Court made findings that the
liabilities of the Ansure entities exceeded its assets, that Ansure and its
subsidiaries were not able to pay their debts as they became due, and, as a
result, Ansure and its subsidiaries were either insolvent or in imminent danger
of becoming insolvent. The Receivership Court ordered Nelms or Ansure to
propose a definitive plan by October 16, 2009, providing for the restoration of
liquid assets into the cemetery trust of the Ansure entities. The Receivership
Court provided that in the absence of such a plan the court would likely
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authorize the Receiver to begin liquidating the Ansure entities, including
MGMC.
[8] On January 12, 2010, the Receivership Court granted the Receiver approval to
seek a purchaser of Ansure and its subsidiaries. On January 28, 2010, the
Indiana Securities Commissioner, who was a party to the Receivership Action,
filed a Motion to Revoke Receivership following the closing of a proposed sale
of Ansure and its assets to a company named StoneMor pursuant to the terms
of an Asset Purchase Agreement negotiated and executed among the Securities
Commissioner, Nelms, and StoneMor on January 11, 2010. On February 2,
2010, the Receiver filed an objection to the Securities Commissioner’s Motion
to Revoke Receivership on the grounds that the Receiver was excluded from the
negotiations, that Nelms had no authority to execute the Asset Purchase
Agreement on behalf of Ansure, and that the terms of the agreement were not
in the best interest of creditors. On April 2, 2010, having negotiatied an
Amended and Restated Asset Purchase Agreement (the “APA”) with
StoneMor, the Receiver sought court approval of the APA, which the court
granted on April 29, 2010. Under the APA, StoneMor did not acquire an
equity interest in MGMC.
[9] On July 6, 2010, the Receiver filed a Motion for Order to: 1) Terminate
Receiver’s Control Over Certain Entities, 2) Turn Over Assets, and 3) File Final
Report (the “Turnover Motion”). With the APA having been consummated on
June 22, 2010, resulting in the vast majority of Ansure’s assets being sold to
StoneMor, the Receiver sought permission from the Receivership Court to
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return certain assets to Nelms and to retain control over MGMC for the
purpose of closing out its accounts and winding down its business affairs. The
Turnover Motion provided that the sale of Ansure’s assets resolved the primary
reason for the Receivership and eliminated the need for a corporate office and
“the continuation of [MGMC], whose complex affairs must be wound down at
a significant cost.” Id. at 104. Neither Nelms, Ansure, nor MGMC objected to
the Turnover Motion.
[10] On July 26, 2010, the Receivership Court approved the Turnover Motion,
providing in part:
IT IS THEREFORE ORDERED THAT the Receiver shall retain
control over MGMC, its operating accounts, and the Receiver’s
Closeout Account until further order of this Court.
. . . the Receiver’s Final Report [] shall be filed no later than September
27, 2010.
*****
. . . any objections and / or exceptions to the Receiver’s Final Report
may be filed no later than October 28, 2010.
. . . pursuant to Indiana Code 32-30-5-18, any claims or exceptions not
filed on or before October 28, 2010 are forever barred for all purposes.
Id. at 901-902. No appeals were taken from the Receivership Court’s Order
Granting Turnover Motion.
[11] On October 29, 2010, the Receiver filed her Receiver’s: (1) Final Report; (2)
Final Accounting; (3) Motion to Determine That All Previous Interim Fees and
Expenses Awarded to Receiver and Her Counsel are Final Allowances; (4)
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Request For Release and Discharge of Bond (the “Final Report”) in which she
reported that the wind down of MGMC was begun immediately after the sale
to StoneMor and had been essentially completed except to the extent necessary
to maintain tax records. Neither Nelms, Ansure, nor MGMC objected to the
Final Report. On December 27, 2010, the Receivership Court issued an Order
Approving Final Report that specifically identified the assets to be returned to
Nelms, and did not list MGMC among those assets. On April 6, 2011, the
Receiver filed Articles of Dissolution for MGMC with the Indiana Secretary of
State, which issued a Certificate of Dissolution certifying that MGMC’s
dissolution was effective as of April 6, 2011.
[12] On September 14, 2011, the Receiver filed a Supplemental Final Report.
Nelms, Ansure, and MGMC did not object to the Supplemental Final Report,
and it was approved by the Receivership Court on December 12, 2011. On
April 25, 2013, the Receiver filed a Final Supplemental Report, which stated
that the Receivership was no longer necessary and requested that the Receiver
be discharged. The Receivership Court approved the Final Supplemental
Report on April 30, 2013, and discharged the Receiver.
[13] On December 24, 2013, approximately two years and eight months after
MGMC’s dissolution, Nelms, purporting to act as President of MGMC, filed a
Verified Complaint for Damages on Commercial Note, Security Agreement,
and for Replevin (the “Complaint”) in the present action. As alleged in the
Complaint, on March 3, 2006, the Old Bridge Parties executed and delivered a
Demand Note in favor of MGMC in the amount of $450,000 with an effective
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date of March 1, 2005.2 The Complaint also alleged that the Old Bridge Parties
entered into a Security Agreement with MGMC on March 3, 2006 to secure
repayment of the Demand Note,3 and that the Old Bridge Parties breached the
terms of the Demand Note and the Security Agreement (together, the “Demand
Note”) and are indebted to it in the amount of $450,000 plus interest.
[14] On March 24, 2014, the Old Bridge Parties filed a motion for summary
judgment together with designated evidence and a memorandum in support of
the motion. In their memorandum, the Old Bridge Parties argued that
MGMC’s claims under the Demand Note were forever barred by operation of
law and that, having been dissolved, MGMC did not have standing to bring the
claims. On August 22, 2014, MGMC filed its response in opposition to the Old
Bridge Parties’ motion for summary judgment and cross-motion for summary
judgment. MGMC argued that its claims were not barred and that MGMC had
standing to bring claims under the Demand Note despite having been dissolved
during the Receivership. Specifically, MGMC claimed that it is attempting to
be reinstated as an ongoing concern and that MGMC, along with the Demand
Note, were returned to Nelms.
[15] On December 4, 2014, following a hearing on the matter held on June 27, 2014,
the trial court entered an order granting the Old Bridge Parties’ motion for
2
Nelms signed the Demand Note on behalf of the Old Bridge Parties.
3
Nelms signed the Security Agreement on behalf of MGMC and the Old Bridge Parties.
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summary judgment and denying MGMC’s cross-motion for summary
judgment. In its order, the trial court stated:
[T]he $450,000 Demand Note was an asset subject to the Receivership.
As such, the Receiver was able to consider collecting the $450,000. By
omitting any mention [of] the $450,000 Demand Note at issue in her
Inventory or failing to collect the $450,000, the Receiver effectively
abandoned this claim. Indiana Code § 32-30-5-18(b) placed an
affirmative duty upon Ansure, MGMC, and/or Nelms to file their
objections or exceptions to the Receiver’s Inventory and Final
Report/Accounting within the 30 day period. Since neither Ansure,
MGMC, nor Nelms filed an objection, MGMC is forever barred from
its claim as to the $450,000 Demand Note.
Since MGMC is forever barred from bringing its claim as to the
$450,000 Demand Note [the Old Bridge Parties] are entitled to
summary judgment as a matter of law on MGMC’s Complaint. . . .
Id. at 1079.
Discussion
I.
[16] The issue is whether the trial court erred in granting the Old Bridge Parties’
motion for summary judgment. In Indiana, the procedure and standard by
which appellate courts review challenges to a trial court’s order granting or
denying summary judgment is clear. Manley v. Sherer, 992 N.E.2d 670, 673
(Ind. 2013). “Our standard of review is the same as it is for the trial court.” Id.
(citing Kroger Co. v. Plonski, 930 N.E.2d 1, 4 (Ind. 2010)). “The moving party
‘bears the initial burden of making a prima facie showing that there are no
genuine issues of material fact and that it is entitled to judgment as a matter of
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law.’” Id. (quoting Gill v. Evansville Sheet Metal Works, Inc., 970 N.E.2d 633, 637
(Ind. 2012)). Summary judgment is improper if the moving party fails to carry
its burden, but if it succeeds, then the non-moving party must come forward
with evidence establishing the existence of a genuine issue of material fact. Id.
We construe all factual inferences in favor of the non-moving party and resolve
all doubts as to the existence of a material issue against the moving party. Id.
(citing Plonski, 930 N.E.2d at 5). An appellate court reviewing a challenged
trial court summary judgment ruling is limited to the designated evidence
before the trial court, see Ind. Trial Rule 56(H), but is constrained to neither the
claims and arguments presented at trial nor the rationale of the trial court
ruling. Id.
[17] The fact that the parties make cross-motions for summary judgment does not
alter our standard of review. Huntington v. Riggs, 862 N.E.2d 1263, 1266 (Ind.
Ct. App. 2007), trans. denied. Instead, we must consider each motion separately
to determine whether the moving party is entitled to judgment as a matter of
law. Id.
[18] Where a trial court enters findings of fact and conclusions thereon in granting a
motion for summary judgment, the entry of specific findings and conclusions
does not alter the nature of our review. Rice v. Strunk, 670 N.E.2d 1280, 1283
(Ind. 1996). In the summary judgment context, we are not bound by the trial
court’s specific findings of fact and conclusions thereon. Id. They merely aid
our review by providing us with a statement of reasons for the trial court’s
actions. Id.
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[19] MGMC argues that Ind. Code § 32-30-5-18 (the “Non-Claim Statute”) does not
apply in the present situation because the Demand Note was not referenced in
the Receiver’s Final Report or any of the Receiver’s accountings of Ansure’s
assets and “[o]ne is under no obligation to object or make exceptions to
something that is not contained in the final report by the plain language of the
statute.” Appellant’s Brief at 12. Additionally, MGMC asserts that the trial
court erred when it determined that, by not referencing the Demand Note in her
Final Report, the Receiver had abandoned all claims to it.
[20] Ind. Code § 32-30-5-7 outlines the receiver’s powers and duties, providing:
The receiver may, under control of the court or the judge:
(1) bring and defend actions;
(2) take and keep possession of the property;
(3) receive rents;
(4) collect debts; and
(5) sell property;
in the receiver’s own name, and generally do other acts respecting the
property as the court or judge may authorize.
Also, the Non-Claim Statute provides as follows:
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(a) During the thirty (30) day period referred to in section 17[4] of this
chapter, any creditor, shareholder, or other interested party may file
objections or exceptions in writing to the account or report.
(b) Any objections or exceptions to the matters and things contained in
an account or report and to the receiver’s acts reported in the report or
account that are not filed within the thirty (30) day period referred to
in section 17 of this chapter are forever barred for all purposes.
Ind. Code § 32-30-5-18 (emphasis added). Additionally, the finality of the
receiver’s report once it is accepted by the trial court is governed by Ind. Code §
32-30-5-21:
Upon the:
(1) court’s approval of the receiver’s final account or report, as
provided in section 14 of this chapter; and
(2) receiver’s performance and compliance with the court’s
order made on the final report;
the receiver and the surety on the receiver’s bond shall be fully and
finally discharged and the court shall declare the receivership estate
finally settled and closed subject to the right of appeal of the receiver or
any creditor, shareholder, or other interested party who has filed objections
or exceptions as provided in section 18 of this chapter.
4
Ind. Code 32-30-5-17 provides in part:
(a) [U]pon the filing of an account or report, the clerk of the court in which the receivership is
pending shall give notice of the date on which the account or report is to be heard and
determined by the court.
*****
(c) The date in the notice on which the account or report is to be heard and determined by the
court shall be fixed not less than thirty (30) days after the date of the filing of the account or
report.
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(emphases added).
[21] First, we address MGMC’s argument that it had no obligation to object to the
Receiver’s treatment of the Demand Note. We have previously clarified that
the Non-Claim Statute extends not only to the “matters and things contained in
an account or report” but also to the matters and things omitted from an
account or report that should have been included in the report. Ratcliff v.
Citizens Bank of W. Ind., 768 N.E.2d 964, 970 (Ind. Ct. App. 2002) (“Without
timely exceptions or objections to the receiver’s Final Report, [the Non-Claim
Statute5] bars the Ratcliffs from now raising issues that should have been
included in that report.”), trans. denied; see also Eryk-Midamco Co. v. Bank One,
N.A., 841 N.E.2d 1190, 1195 (Ind. Ct. App. 2006) (holding that a bank’s claims
against a mortgagee stemming from a monetary transfer were barred by the
Non-Claim Statute, and further noting that the bank “could—and should—
have objected to the omission of any mention of the disputed funds in the
receiver’s final report”), trans. denied. In Ratcliff, one of the Ratcliffs’ banks
promised that it would provide financing for the expansion of the Ratcliffs’
business. Ratcliff, 768 N.E.2d at 966. The Ratcliffs did expand their business,
but the bank did not provide the promised financing. Id. As a result, the
Ratcliffs could not pay their creditors, and a receiver was appointed over their
assets. Id. While the receivership was pending, the Ratcliffs filed a complaint
5
In Ratcliff, the court cited to Ind. Code § 34-48-4-5, which was repealed and recodified at Ind. Code § 32-30-
5-18 by Pub. L. No. 2-2002, § 128 and § 15 respectively.
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against the bank for not extending the promised financing. Id. Meanwhile, the
receiver filed his final report. Id. The Ratcliffs did not object to the final report,
and the court ordered the receivership closed. Id. Subsequently, the trial court
presiding over the Ratcliffs’ complaint against the bank dismissed the
complaint, “concluding . . . that Indiana’s non-claim statute forever barred their
claims because they were assets subject to the receivership . . . .” Id. The
Ratcliffs appealed the trial court’s decision, and argued in part that their claim
against the bank was not an asset subject to the receivership. Id. at 970. We
concluded that “[t]he Ratcliffs’ claims against the Bank . . . were assets subject
to the receivership. And [the Non-Claim Statute] makes clear that they were
required to file any objections or exceptions to the receiver’s Final Report,
which they failed to do.” Id.
[22] We held in Ratcliff that, to determine whether the Non-Claim Statute applies,
“[t]he question is . . . whether the [parties’] claims should have been
administered in the receivership proceedings.” Id. Thus, we must determine
whether MGMC’s claims under the Demand Note should have been
administered in the receivership. The record reveals that the Receiver was
ordered to take control of MGMC and its assets, and there is no question that
the Demand Note was an asset of MGMC subject to this order. See Appellant’s
Appendix at 70 (“The receiver shall, specifically: . . . Marshall and account for
all assets of the business entities; . . . .”). Additionally, the Receiver was vested
with the power to collect all debts owed to Ansure and its subsidiaries, and the
Demand Note constitutes a debt that was collectible by the Receiver. See Ind.
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Code § 32-30-5-7(4). Because we determine that the Demand Note was an asset
of MGMC and a debt owed to it, we find that all claims under the Demand
Note should have been administered in the receivership proceedings. Further,
because neither Nelms, Ansure, nor MGMC objected to the absence of the
Demand Note in the Receiver’s Final Report or the Receiver’s failure to collect
upon the Demand Note within the thirty day period provided by the Non-
Claim Statute, we conclude that MGMC’s claims under the Demand Note are
forever barred for all purposes. See Ind. Code § 32-30-5-18(b); see also Ratcliff,
768 N.E.2d at 970; Eryk-Midamco Co., 841 N.E.2d at 1195 (“Once the trial court
in the foreclosure action approved the receiver’s final report and Bank One did
not object, any claim Bank One may have had to money that was collectible by
the receiver was extinguished except in the context of an appeal in that
action.”).
[23] We next turn to MGMC’s argument that the trial court erred in finding that the
Receiver abandoned MGMC’s claims under the Demand Note. As noted
above, Ansure was required to file with the Receivership Court an affidavit
“setting forth in detail all the assets and all the liabilities of [Ansure], including
those assets and liabilities of the wholly owned subsidiaries.” Appellant’s
Appendix at 71. As noted above, based upon this dictate it was incumbent
upon MGMC to provide the Receiver with knowledge of the Demand Note’s
existence, and accordingly to the extent the Demand Note existed, the Receiver
should have had knowledge of the Demand Note or a copy of it in her
possession. As well, it is undisputed by the parties that the Receiver was vested
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with the power to enforce and collect upon the Demand Note. See Ind. Code §
32-30-5-7(4). Similarly, the Receiver was also able to consider and abandon
such an action. See Eryk-Midamco Co., 841 N.E.2d at 1195 (holding that “[i]n
omitting any mention of the funds at issue from his final report, the receiver
effectively abandoned this claim” and noting that whether the receiver was
specifically aware of the transfer “is of no moment, inasmuch as the receiver
requested all records, information, and sums of money that were derived from
the mortgaged premises”) (citing Ind. Code § 32-30-5-18(b))), trans. denied. By
omitting any mention of the Demand Note in her final report, we conclude that
the Receiver effectively abandoned MGMC’s claims under the Demand Note.
See id.; Ind. Code § 32-30-5-7 (providing that a receiver has the power to
“generally do other acts respecting the property as the court or judge may
authorize”).6
[24] We conclude that the court did not err in granting summary judgment in favor
of the Old Bridge Parties.
II.
[25] We turn next to the Old Bridge Parties’ request for appellate attorneys’ fees.
Ind. Appellate Rule 66(E) provides in part that this court “may assess damages
6
The Old Bridge Parties raise additional issues in their brief, including that the doctrine of judicial estoppel
bars MGMC from enforcing the Demand Note, that MGMC lacks standing, and that the court correctly
denied MGMC’s cross-motion for summary judgment. Because we affirm the court’s grant of summary
judgment in favor of the Old Bridge Parties based on the foregoing reasons, we need not address these issues.
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if an appeal, petition, or motion, or response, is frivolous or in bad faith.
Damages shall be in the Court’s discretion and may include attorneys’ fees.”
Our discretion to award attorneys’ fees under Ind. Appellate Rule 66(E) is
limited to instances when “an appeal is permeated with meritlessness, bad faith,
frivolity, harassment, vexatiousness, or purpose of delay.” Thacker v. Wentzel,
797 N.E.2d 342, 346 (Ind. Ct. App. 2003) (citing Orr v. Turco Mfg. Co. Inc., 512
N.E.2d 151, 152 (Ind. 1987)). In addition, while Ind. Appellate Rule 66(E)
provides this court with discretionary authority to award damages on appeal,
we must use extreme restraint when exercising this power because of the
potential chilling effect upon the exercise of the right to appeal. Id. (citing
Tioga Pines Living Ctr., Inc. v. Ind. Family & Social Serv. Admin., 760 N.E.2d 1080,
1087 (Ind. Ct. App. 2001), aff’d on reh’g, trans. denied.). A strong showing is
required to justify an award of appellate damages and the sanction is not
imposed to punish mere lack of merit but something more egregious. Harness v.
Schmitt, 924 N.E.2d 162, 168 (Ind. Ct. App. 2010).
[26] Indiana appellate courts have classified claims for appellate attorneys’ fees into
substantive and procedural bad faith claims. Thacker, 797 N.E.2d at 346 (citing
Boczar v. Meridian St. Found., 749 N.E.2d 87, 95 (Ind. Ct. App. 2001)). 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.” Id.
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, or files
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briefs written in a manner calculated to require the maximum expenditure of
time both by the opposing party and the reviewing court. Id. at 346-347. Even
if the appellant’s conduct falls short of that which is “deliberate or by design,”
procedural bad faith can still be found. Id. at 347.
[27] Here, we find that MGMC repeatedly omits, misstates, and misrepresents the
relevant contents of the record as it relates to the return of MGMC and the
Demand Note to Nelms at the conclusion of the Receivership Action, and we
cannot characterize these omissions, misstatements, and misrepresentations as
being within the bounds of acceptable advocacy. For instance, MGMC asserts
that “the Receiver moved to terminate the receivership in nearly all aspects and
return the remaining Ansure property, including MGMC, to Nelms . . . ,” and
cites to the Turnover Motion to support this assertion. Appellant’s Brief at 9
(emphasis added). However, our review of the Turnover Motion reveals that
the Receiver specifically identified eight entities to be returned to Nelms, which
did not include MGMC. Indeed, the Turnover Motion provided that “[t]he
Receiver will retain control over MGMC for the purpose of winding up its
affairs,” and requested that the Receivership Court “terminat[e] the Receiver’s
control over and return[] to Ansure its remaining assets – except for MGMC . . .
.” Appellant’s Appendix at 105-106 (emphasis added).
[28] Further, MGMC asserts that “the [Receivership Court] granted the Receiver’s
[Turnover Motion] and ordered the remaining Ansure property . . . , including
MGMC, be returned to Nelms’s designee.” Appellant’s Brief at 9. However,
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the Receivership Court’s order granting the Turnover Motion actually states the
following:
4. . .
*****
D. Aside from continuing the operations of the remaining
businesses owned by Ansure, the sale of most of Ansure’s
cemeteries and funeral homes eliminates the need for the
existing corporate office and the continuation of the day to
day operations of [MGMC];
i. MGMC’s complex affairs must be wound down
at a significant cost; and
ii. The Receiver has implemented the wind down of
MGMC and reasonably believes it can be
substantially completed within 30-45 days from the
filing date of the Receiver’s Turnover Motion.
5. The Closeout Account negotiated in conjunction with the sale
to StoneMor should have sufficient funds to wind up the affairs
of MGMC and sufficient operating funds to allow the operating
entities which were not sold to continue their respective
businesses.
6. The Receiver has met with representatives of Nelms and
Ansure’s Board of Directors concerning restoring control of
Ansure and its assets and affiliated entities to Nelms and
Ansure’s board.
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7. The Receiver, Nelms, and Ansure have agreed that the
following actions need to occur in order to wind up the
Receivership as it relates to Ansure.
A. The Receiver should retain control over MGMC for the
purpose of winding up its business and pay the windup costs from
the operating accounts of MGMC or the Closeout Account;
B. The Receiver should return control over the following
entities to Robert Nelms or his designee:
1. Quality Marble,
2. Memorial Planning Agency,
3. Meyer Industries,
4. Memory Gardens Logistics,
5. American Bronze Craft, Inc.,
6. Quality Printers,
7. Mercury Development Services, Inc., and,
8. Hamden Memorial Funeral Home.
*****
8. The Receiver’s Turnover Motion is therefore GRANTED.
IT IS THEREFORE ORDERED THAT the Receiver shall
return control over Ansure and Quality Marble, Memorial
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Planning Agency, Meyer Industries, Memory Gardens Logistics,
American Bronze Craft, Inc., Quality Printers, Mercury
Development Services, Inc., [and] Hamden Memorial Funeral
Home to Robert Nelms or his designee.
IT IS FURTHER ORDERED THAT the Receiver is
RELEASED from responsibility for any action, event,
occurrence or liability of Ansure Mortuaries of Indiana, LLC, or
its affiliates identified in paragraph 7(B) above, arising on or after
the date of this Order, excepting Memory Gardens Management
Corporation.
IT IS FURTHER ORDERED THAT the Receiver shall retain control
over MGMC, its operating accounts, and the Receiver’s Closeout Account
until further order of this Court. . . .
Appellant’s Appendix at 899-901 (emphases added). Thus, the Receivership
Court was explicit in that it returned certain entities to Nelms but did not return
MGMC to him, specifically ordering that MGMC “must be wound down” and
“that the Receiver shall retain control over MGMC . . . until further order of
this Court.” Id. at 900-901.
[29] Additionally, MGMC cites to the Securities Commissioner’s motion to revoke
the receivership and the purchase agreement negotiated between the
Commissioner and Nelms as further evidence of the return of MGMC to
Nelms. However, MGMC fails to acknowledge that the Securities
Commissioner’s motion to revoke the receivership was never approved by the
Receivership Court and was objected to by the Receiver and tacitly denied by
the Receivership Court when it approved the Receiver’s re-negotiated APA,
which included no provision for the return of MGMC to Nelms. Based upon
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MGMC’s appellant’s brief and our review of the record, we conclude that the
Old Bridge Parties have demonstrated procedural bad faith on the part of
MGMC. Moreover, we find that the totality of the violations discussed above
transcends procedural bad faith and constitutes substantive bad faith. The
misrepresentations of the record made by MGMC are at the heart of its claim
on appeal, and after setting aside those misrepresentations, MGMC’s
arguments are left devoid of all plausibility. Accordingly, the Old Bridge
Parties are entitled to appellate attorney fees, and we remand to the trial court
to determine the proper amount of the appellate fee award.
Conclusion
[30] For the foregoing reasons, we affirm the trial court’s grant of the Old Bridge
Parties’ motion for summary judgment, affirm the trial court’s denial of
MGMC’s cross-motion for summary judgment, grant the Old Bridge Parties’
request for appellate attorney fees, and remand for a determination of the Old
Bridge Parties’ reasonable appellate attorney fees.
[31] Affirmed and remanded.
Riley, J., and Friedlander, Sr. J., concur.
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