Indiana Department of Natural Resources v. Webster Lake Conservation Association, Inc. (mem. dec.) ( 2020 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Sep 03 2020, 8:31 am
court except for the purpose of establishing
the defense of res judicata, collateral CLERK
Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Curtis T. Hill, Jr. Stephen R. Snyder
Attorney General of Indiana Randall L. Morgan
Snyder Morgan Federoff &
Benjamin M.L. Jones
Kuchmay LLP
Deputy Attorney General
Syracuse, Indiana
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Indiana Department of September 3, 2020
Natural Resources, Court of Appeals Case No.
Appellant-Defendant, 19A-PL-2249
Appeal from the Kosciusko Circuit
v. Court
The Honorable Michael W. Reed,
Webster Lake Conservation Judge
Association, Inc., Trial Court Cause No.
Appellee-Plaintiff, 43C01-1902-PL-11
Robb, Judge.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 1 of 27
Case Summary and Issue
[1] In 1996, Webster Lake Conservation Association, Inc. (the “Association”),
owner of a water control facility that was built to maintain the lake level of
Webster Lake—an Indiana public freshwater lake—entered into an agreement
with the Indiana Department of Natural Resources (“DNR”) for the general
maintenance, reconstruction, and repair of the water control facility located on
the lake. A dispute arose between the parties as to DNR’s responsibility for the
reconstruction and repair of the water control facility, which led to the
Association filing a complaint against DNR. The complaint sought a
declaratory judgment as to the rights and obligations of DNR under the
agreement. Following a hearing and additional briefing on the matter, the trial
court entered a declaratory judgment in favor of the Association, finding that
the agreement was a valid and binding agreement between the parties. DNR
now appeals, arguing that the trial court erred in entering declaratory judgment
in favor of the Association. Concluding the trial court did not err, we affirm.
Facts and Procedural History
[2] Webster Lake is a public freshwater lake located in Kosciusko County. The
legal lake level for Webster Lake was established in the 1950s. The
Association, a corporation that was organized in 1950, is made up of the
individuals living around the lake and owns the water control facility that dams
the lake (the “Dam”). The Dam is controlled by a gated outlet structure which
requires periodic operation of the gates to maintain the lake at its legally
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 2 of 27
established level. The Dam is nearly 200 years old and likely originated as a
grist mill.
[3] On April 11, 1996, DNR entered into an agreement (the “1996 Agreement”)
with the Association. John Simpson, then director of the Division of Water for
DNR, executed the 1996 Agreement on behalf of the DNR.1 The 1996
Agreement provides, in relevant part, as follows:
THEREFORE, it is mutually agreed that:
1. The Association has the responsibility for the general
maintenance of the outlet control structure to maintain, as near as
possible, the legally established level of Webster Lake. The
responsibility for reconstruction or repair of the outlet control structure
shall remain with the Department of Natural Resources, State of
Indiana.
2. The Association has the sole responsibility of
maintaining Webster Lake as near as possible to the legally
established average normal level in compliance with the
Department’s direction and guidance by:
a. Opening and closing the gates of the primary
(eastern) control structure only according to the
immediate conditions to maintain the level of the
lake at [the legally established level].
b. Keeping, at all times, the secondary (western)
control structure closed, chained and locked, to be
1
A similar agreement was executed in 1993, but that agreement is not at issue in this proceeding.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 3 of 27
used as an operable structure only during an
emergency and with prior authorization from the
Department. Keys for the lock will be provided to
the operator of the structure and the Division of
Water, Department of Natural Resources.
c. Opening and closing the gate of the secondary
(western) control structure, with prior authorization
from the Department, at least once annually to keep
the structure’s gate from seizing.
d. Keeping on file with the Department at all times
a current roster of the names, addresses and phone
numbers of the designated operator and at least two
alternate operators.
Appellant’s Appendix, Volume 2 at 11 (emphasis added).
[4] On October 30, 2009, DNR performed a visual inspection of the Dam. In its
inspection report, the DNR rated parts of the Dam as being in “good” or
“acceptable” condition, while other parts were rated “deficient[.]” Id. at 82-84.
The overall condition of the Dam was found to be “Conditionally Poor[,]” and
DNR recommended that the Association’s “professional engineer, experienced
in dam design and construction,” evaluate the condition of the Dam and “direct
repairs/replacement as needed.” Id. at 84.2 DNR further recommended that
the Dam “be brought up to current dam design standards.” Id.
2
It is unclear from the record who, if anyone, served as the Association’s professional engineer.
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[5] In 2011 and 2012, DNR performed extensive rehabilitation work on the Dam—
for example, DNR rebuilt portions of spillway3 retaining walls, demolished a
deteriorated fish ladder, and replaced portions of the catwalk and gates.4 In
2013, DNR “completed a $420,000 repair project to the control structure
spillway features” of the Dam.5 Id. at 121.
[6] On October 12, 2017, DNR performed another visual inspection of the Dam
and issued its inspection report on March 21, 2018. While parts of the Dam
were rated as being in “acceptable” condition, many parts were found to be in
“deficient” or “poor” condition. Id. at 69-72. For example:
• The crest of the Dam, which had two homes built “in/on [the
D]am[,]” was in “poor” condition. Id. at 69.
• The downstream slope of the Dam was found to be deficient
because there appeared to be a few crayfish or crawdad
burrows that “if interconnected, could present a problem in a
high water seepage situation.” Id. at 70.
3
A “spillway” is “a passage for surplus water to run over or around an obstruction (such as a dam)[.]”
MERRIAM-WEBSTER.COM, http://www.merriam-webster.com/dictionary/spillway
[https://perma.cc/H87U-R527].
4
It is unclear from the record whether the Association asked DNR to perform the repairs or DNR undertook
the repairs based upon the findings of the 2009 inspection report.
5
It is unclear from the record when DNR began these repairs.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 5 of 27
• The principal and auxiliary spillways were found to be
deficient due to deterioration and inadequate freeboard6
between the lake and the top of the Dam.
[7] DNR recommended the following to improve the safety of the Dam:
• Clear trees and/or brush from the entire Dam and within
twenty-five feet of all concrete structures.
• Employ an experienced engineer to (among other things)
prepare plans and specifications for an adequate spillway
“[f]or overtopping protection” and “evaluate the need for
current dam design standards and recommended repairs.”
• Develop a maintenance plan to address “voids under the
primary spillway” and the “erosion and deterioration at the
end of the primary spillway apron” within the next two years.
• Develop studies and plans to address the inadequate spillway
system, and, “[a]t a minimum,” remove the two homes built
into the embankment between the spillways.
Id. at 71.
6
“Freeboard” is defined as “[t]he distance between [the] normal water level and the top of a structure or
mass that rises out of the water, such as a buoy, dam, or ice floe.” THE FREE DICTIONARY.COM,
http://www.thefreedictionary.com/freeboard [https://perma.cc/3526-BTZ5].
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 6 of 27
[8] DNR also recommended reclassifying the Dam from a “significant hazard”
dam to a “high hazard” dam.7 Id. at 72. DNR made this recommendation
based on modeling tools and emergency planning exercises that showed that
“multiple residential and business structures [were] at high risk” in the event of
a “catastrophic breach of the [D]am.” Id.
[9] Regarding whether previously recommended maintenance, repairs, and
upgrades to the Dam had been performed, DNR checked both the “yes” and
“no” boxes in the 2017 inspection report and then provided the following:
The 2011-2012 project did not address all of the
recommendations from the previous visual inspection. Part of
the “all” would include removal of the 2 homes between the east
and west spillways. The embankment is the responsibility of the
Webster Lake Association. However, many items were
addressed with the recent rehab.
Id. at 72 (emphasis added).
[10] On August 27, 2018, the Association, by counsel, sent a letter to DNR
demanding that DNR undertake the repairs identified in the 2017 inspection
report in accordance with the 1996 Agreement. Specifically, the Association
wrote:
7
A “significant hazard” dam is one that “the failure of which may damage isolated homes and highways, or
cause the temporary interruption of public utility services.” Appellant’s App., Vol. 2 at 74. A “high hazard”
dam is one that “the failure of which may cause the loss of life and serious damage to homes, industrial and
commercial buildings, public utilities, major highways, or railroads.” Id.; Ind. Code § 14-27-7.5-8(b)(1).
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It appears that a dispute has arisen in regard to the parties’
obligations under the 1996 Agreement. The [Dam] is in need of
significant repair and the DNR appears reluctant to perform its
obligations. In light of the significant issues with the structure
and the need for immediate attention, I have been directed by the
Association to contact you to obtain a position statement from
[DNR]. If a prompt response indicating that [DNR] will
undertake necessary repairs is not received, I have been directed
by the Association to file the enclosed complaint against [DNR]
asking the Court to enforce the 1996 Agreement.
Id. at 120. On September 5, DNR sent a response letter to the Association’s
counsel rejecting the Association’s demand and denying any obligation “to
address or fund the resolution or rehabilitation” of the Dam. Id. at 121. The
letter provides in relevant part:
DNR has strived to work in cooperation with the . . . Association
for the operation and maintenance of the lake outlet works, and
committed substantial staff time to assist the Association in
recruiting and training operators, as well as facilitating
emergency response planning activities. In fact, DNR staff were
participating with the Association in emergency response
training, on August 27th, 2018—the day you drafted and sent
your letter.
The [1996 A]greement is operationally focused and contains no
project commitments or obligations owing to DNR. In addition,
DNR is not obligated by the [1996 A]greement to address or fund
the resolution or rehabilitation of dam safety deficiencies that
develop as this non-State owned dam structure deteriorates with age.
Id.Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 8 of 27
[11] On February 7, 2019, the Association filed a complaint against DNR, seeking a
declaratory judgment regarding the obligations of DNR under the 1996
Agreement and requiring DNR “to undertake reconstruction and repair” of the
Dam. Id. at 10. On March 1, DNR filed a motion to dismiss. After a hearing
on the matter, the trial court directed the Association to amend its complaint.
On April 1, the Association filed its amended complaint.
[12] On May 13, DNR filed its answer to the amended complaint, raising the
following affirmative defenses:
15. The Amended Complaint fails to state an actionable claim for
relief under the Indiana Constitution.
16. The state agency is immune from liability under the terms of
Indiana Code subsections 34-13-3-3(1), (2), (7) (11) and (21).
17. Further, [the Association] in this case has failed to show any
action on their part to mitigate the need for any repairs.
18. Plaintiff failed to join parties necessary for a just adjudication.
19. Relief sought in this Amended Complaint is not appropriate
for a declaratory judgment.
Id. at 125. DNR separately filed an Indiana Trial Rule 12(C) motion for
judgment on the pleadings. On May 28, the Association filed a motion for
judgment on the pleadings and a separate response to DNR’s Trial Rule 12(C)
motion, seeking a declaratory judgment.
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[13] A hearing on the cross-motions for judgment on the pleadings was held on July
18, 2019, during which the trial court heard arguments on the issues the parties
raised in their respective motions and responses, as well as new arguments
raised by DNR concerning whether the 1996 Agreement was a valid contract.
DNR specifically argued that the 1996 Agreement lacked consideration and the
DNR representative who executed the agreement lacked the authority to do so.
The trial court noted that DNR did not raise these arguments in its motion for
judgment on the pleadings but allowed DNR to continue presenting the
arguments at the hearing. The Association maintained that the only issue
before the court was whether a valid contract existed between the parties and
asked the trial court for a declaratory judgment that the 1996 Agreement was
valid.
[14] At the conclusion of the hearing, the trial court directed the parties to file post-
argument briefs addressing all of the arguments raised at the hearing. On
August 27, the trial court issued its final order, which reads in relevant part:
The [Association] argued for declaratory judgment at the
hearing held July 18, 2019, indicating the only issue for the Court
pending under the Amended Complaint is the validity of the
[1996 Agreement] as a contract. The Court having considered
the argument of counsel, having reviewed the Post-Argument
Briefs, having reviewed the Court’s file, and being duly advised
in the premises, NOW FINDS that declaratory judgment should
be entered in favor of the [Association].
IT IS, THEREFORE, ORDERED AND DECLARED
that the [1996] Agreement between [the Association] and [DNR]
. . . is a valid and binding agreement/contract.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 10 of 27
Appealed Order at 1-2. DNR now appeals.
Discussion and Decision
I. Standard of Review
[15] DNR contends that the trial court erred by entering declaratory judgment in
favor of the Association. Pursuant to the Indiana Uniform Declaratory
Judgment Act (the “Act”), declaratory judgments have the “force and effect of a
final judgment[,]” Ind. Code § 34-14-1-1, and are therefore reviewed in the
same manner as other judgments. Because the proceedings before the trial
court in this case were based on pleadings and briefs (that is, no evidentiary
hearing was held), a de novo standard of review applies. See Title Servs., LLC v.
Womacks, 848 N.E.2d 1151, 1154 (Ind. Ct. App. 2006) (applying de novo
standard of review where trial court ruled based on a paper record). In applying
the standard, the trial court’s order should be affirmed on any legal theory the
evidence of record supports. See GKN Co. v. Magness, 744 N.E.2d 397, 401 (Ind.
2001).
II. Declaratory Judgment
[16] Declaratory judgments are governed by the Act, which in relevant part
provides:
Any person . . . whose rights, status, or other legal relations are
affected by a statute, municipal ordinance, contract, or franchise,
may have determined any question of construction or validity
arising under the instrument, statute, ordinance, contract, or
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franchise and obtain a declaration of rights, status, or other legal
relations thereunder.
Ind. Code § 34-14-1-2. The Act is remedial, and its purpose is to “settle and to
afford relief from uncertainty and insecurity with respect to rights, status and
other legal relations; and is to be liberally construed and administered.” Ind.
Code § 34-14-1-12. Thus, the purpose of a declaratory judgment action is to
quiet and stabilize legal relations and thereby provide a remedy in a case or
controversy when there is still an opportunity for peaceable judicial settlement.
Volkswagenwerk, A.G. v. Watson, 181 Ind. App. 155, 159, 390 N.E.2d 1082,
1084-85 (1979).
[17] When considering the appropriateness of declaratory judgment, the test to be
applied is: (1) whether the issuance of a declaratory judgment will effectively
solve the problem, (2) whether it will serve a useful purpose, and (3) whether or
not another remedy is more effective or efficient. Dible v. City of Lafayette, 713
N.E.2d 269, 272 (Ind. 1999). “The determinative factor is whether the
declaratory action will result in a just and more expeditious and economical
determination of the entire controversy.” Id. (quoting Volkswagenwerk,
A.G., 181 Ind. App. at 160, 390 N.E.2d at 1085). The use of a declaratory
judgment is discretionary with the trial court and is usually unnecessary where
a full and adequate remedy is already provided by another form of
action. Id. However, pursuant to Indiana Trial Rule 57, ‘“[t]he existence of
another adequate remedy does not preclude a judgment for declaratory relief in
cases where it is appropriate.’” Id. (quoting Ind. Trial Rule 57).
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[18] DNR contends that the trial court’s declaratory judgment in favor of the
Association, determining that the 1996 Agreement is a valid contract, should be
reversed for a number of reasons. First, DNR claims that the 1996 Agreement
is not a valid contract because: (1) it was not supported by consideration, and
(2) the director of the DNR’s Division of Water, the signor of the 1996
Agreement, lacked authority to act on behalf of DNR. DNR also asserts that
assuming the 1996 Agreement is a valid contract, DNR terminated the contract
in 2018 when it denied any obligation to perform under the contract. We
address each of DNR’s arguments in turn.
III. Validity of the 1996 Agreement
A. Lack of Consideration
[19] DNR claims that the 1996 Agreement is invalid because it lacks consideration.
The Association correctly points out that failure of consideration must be
specifically pled as an affirmative defense under Indiana Trial Rule 8(C).8 The
Association states, and DNR does not refute, that DNR did not raise the
8
Indiana Trial Rule 8(C) reads in relevant part: “Affirmative defenses. A responsive pleading shall set forth
affirmatively and carry the burden of proving: accord and satisfaction, arbitration and award, discharge in
bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license,
payment, release, res judicata, statute of frauds, statute of limitations, waiver, lack of jurisdiction over the
subject-matter, lack of jurisdiction over the person, improper venue, insufficiency of process or service of
process, the same action pending in another state court of this state, and any other matter constituting an
avoidance, matter of abatement, or affirmative defense. A party required to affirmatively plead any matters
. . . shall have the burden of proving such matters. . . .” (Emphasis added.)
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affirmative defense of lack of consideration in its answer to the Association’s
amended complaint.
1. Waiver of Affirmative Defense
[20] Generally, an affirmative defense must be submitted in a responsive pleading at
the earliest possible opportunity. Ind. Trial Rule 8(C); see City of South Bend v.
Dollahan, 918 N.E.2d 343, 349 (Ind. Ct. App. 2009) (observing that Trial Rule
8(C) “provides that a party seeking to raise an affirmative defense must
specifically plead said defense in its responsive pleading”), trans. denied. “While
[T.R.] 8(C) appears to impose an absolute duty to raise an affirmative defense
in a responsive pleading, Indiana courts have modified the mandatory nature of
the rule by interpreting it in conjunction with [T.R.] 15(B)[.]” Elkhart Cty. Farm
Bureau Co-op. Ass’n, Inc. v. Hochstetler, 418 N.E.2d 280, 282 (Ind. Ct. App. 1981).
Trial Rule 15(B) provides: “When issues not raised by the pleadings are tried
by express or implied consent of the parties, they shall be treated in all respects
as if they had been raised in the pleadings.”
Either party may timely demand strict adherence to the
predetermined route (pleadings) or, if deviation is permitted, the
time necessary to prepare to meet the new issue. But when the
trial has ended without objection as to the course it took, the
evidence then controls.
Hochstetler, 418 N.E.2d at 282 (quoting Indianapolis Transit Sys., Inc. v. Williams,
148 Ind. App. 649, 658, 269 N.E.2d 543, 550 (1971)).
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[21] While our courts have not expressly extended this modification to declaratory
judgments, later decisions of this court have extended this to matters raised on
summary judgment, and have identified the critical issue to be “‘not whether
the defendant could have raised his affirmative defense earlier,’ but ‘whether the
defendant’s failure to raise the affirmative defense earlier prejudiced the
plaintiff.’” Dollahan, 918 N.E.2d at 350 (quoting Borne by Borne v. Nw. Allen Cty.
Sch. Corp., 532 N.E.2d 1196, 1199 (Ind. Ct. App. 1989), trans. denied.) “[A]
plaintiff must affirmatively show prejudice to his case before [a belatedly
raised affirmative defense] can be rejected.” Id. (allowing city to assert
governmental immunity defense first raised in its motion for summary
judgment). We now examine whether the Association was prejudiced by DNR
belatedly raising the lack of consideration defense.
[22] DNR raised the affirmative defense of lack of consideration for the first time at
the hearing held on July 18, 2019, where the trial court heard arguments on the
parties’ pleadings. The Association did not object when DNR raised the lack of
consideration defense. Nevertheless, the trial court recognized that DNR was
raising the defense for the first time; and, at the conclusion of the hearing,
directed the parties to file post-argument briefs, thereby affording the
Association a full and fair opportunity to address the defense. Furthermore, the
Association has not shown how it was prejudiced by DNR’s failure to
affirmatively raise the defense in its answer to the Association’s amended
complaint. We, therefore, decline to find that DNR has waived the lack of
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consideration issue. We now decide whether the 1996 Agreement was
supported by consideration.
2. Consideration
[23] As stated above, the 1996 Agreement provides that the Association
• “has the responsibility for the general maintenance of the
outlet control structure to maintain, as near as possible, the
legally established level of Webster Lake[;]”
• is required to operate the gates of the primary control
structure so as to maintain the lake level of Webster Lake;
• must keep the secondary control structure closed, chained,
and locked except in an emergency and with prior
authorization from DNR;
• must provide the keys to the lock to DNR;
• is required to at least once annually and with the prior
authorization from the DNR, open and close the gates of the
secondary control structure to keep the gates from seizing;
• must keep on file with DNR “at all times a current roster of
the names, addresses and phone numbers” of the designated
operator of the Dam “and at least two alternate operators.”
Appellant’s App., Vol. 2 at 11. DNR has “[t]he responsibility for
reconstruction or repair of the [Dam].” Id.Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 16 of 27
[24] DNR argues that the 1996 Agreement was not valid because of lack of
consideration. According to DNR, the 1996 Agreement “[i]s not supported by
consideration because the Association only agreed to do what it was already
obligated to do by law.” Brief of Appellant at 12. In support of its argument,
DNR turns our attention to the statutes governing the regulation of dams.
DNR notes that under Indiana Code section 14-27-7.5-7, the Association, as the
owner of the Dam, is required to “maintain and keep the structure in the state
of repair and operating condition” required by “[t]he exercise of prudence[,]”
“[d]ue regard for life and property[,]” and “[t]he application of sound and
accepted technical principles.” Indiana Code section 14-27-7.5-14 provides in
relevant part that “[t]he owner of a structure shall . . . (3) Furnish upon request
the plans, specifications, operating and maintenance data, or other information
that is pertinent to the structure.” Under Indiana Code section 14-27-7.5-
8(a)(1)-(2), DNR has “jurisdiction and supervision over the maintenance and
repair of structures in, on, or along the rivers, streams, and lakes of Indiana”
and “shall exercise care to see that the structures are maintained in a good and
sufficient state of repair and operating condition[.]”
[25] Thus, DNR maintains that under the 1996 Agreement, the Association merely
promised to perform pre-existing obligations. Because the Association owned
the Dam, and “was already under a legal obligation to maintain and operate”
the Dam and provide information as to who would operate the Dam, the
Association’s “promise to perform its pre-existing legal obligation was not valid
consideration [and] the 1996 Agreement was merely an unenforceable
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 17 of 27
gratuitous act by DNR.” Br. of Appellant at 13-14 (citation and internal
quotations omitted). We disagree.
[26] The concept of consideration evolved from the law of contracts. Monarch
Beverage Co., Inc. v. Ind. Dep’t of State Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax
Ct. 1992). And in order to have a legally binding contract there must be
generally an offer, acceptance, and consideration. Id. “To constitute
consideration, there must be a benefit accruing to the promisor or a detriment to
the promisee.” Paint Shuttle, Inc. v. Cont’l Cas. Co., 733 N.E.2d 513, 523 (Ind.
Ct. App. 2000) (quoting A & S Corp. v. Midwest Commerce Banking Co., 525
N.E.2d 1290, 1292 (Ind. Ct. App. 1988)), trans. denied. A benefit is a legal right
given to the promisor to which the promisor would not otherwise be entitled.
DiMizio v. Romo, 756 N.E.2d 1018, 1023 (Ind. Ct. App. 2001), trans. denied. A
detriment on the other hand is a legal right the promisee has forborne. Id. “The
doing of an act by one at the request of another which may be a detrimental
inconvenience, however slight, to the party doing it or may be a benefit,
however slight, to the party at whose request it is performed, is legal
consideration for a promise by such requesting party.” Harrison–Floyd Farm
Bureau Co-op. Ass’n v. Reed, 546 N.E.2d 855, 857 (Ind. Ct. App. 1989). In the
end, “consideration—no matter what its form—consists of a bargained-for
exchange.” Horseshoe Hammond. LLC v. Ind. Dep’t of State Revenue, 865 N.E.2d
725, 729 (Ind. Tax Ct. 2007), trans. denied. The adequacy of the consideration is
not relevant. See Harrison–Floyd Farm Bureau Co-op., 546 N.E.2d at 857.
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[27] “[I]t is fundamental that a contract is unenforceable if it fails to obligate the
parties to do anything[.]” Licocci v. Cardinal Assocs., Inc., 445 N.E.2d 556, 559
(Ind. 1983). Long ago, our supreme court established that a promise to do what
one “is already bound to do by law or by contract” is insufficient consideration.
Ritenour v. Mathews, 42 Ind. 7, 14 (1873).
[28] Under the 1996 Agreement, the Association not only agreed to maintain the
Dam and maintain Webster Lake at its legal level, but agreed to do so in a very
specific manner, that is, by opening and closing the primary gate, keeping the
secondary gate locked (except for opening the gate once each year with prior
authorization from DNR), and providing the keys to the lock to DNR. The
Association also agreed to provide to DNR, “at all times[,]” contact
information for the designated and the alternate operators of the Dam.
Appellant’s App., Vol. 2 at 11. In exchange, DNR agreed to reconstruct or
repair the Dam. However slight the inconvenience or benefit, viewing the 1996
Agreement as a whole, we cannot say that the Association was not subjected to
a detrimental inconvenience or that DNR did not receive a benefit of the
bargain. Thus, the 1996 Agreement was not invalid on the basis of lack of
consideration.
B. Authority to Execute the Agreement
[29] Next, DNR contends that the 1996 Agreement is not valid because the director
of DNR’s Division of Water (“Director Simpson”) did not have the authority to
execute the agreement on behalf of DNR. The Association counters that
DNR’s argument is waived because DNR (1) failed to affirmatively plead lack
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 19 of 27
of authority as a defense in its answer to the Association’s amended complaint
as required by Indiana Trial Rule 8(C); and (2) failed to properly deny the
execution of the agreement pursuant to Indiana Trial Rule 9.2. We conclude
that DNR’s argument is not waived under either Trial Rule but find that the
trial court properly presumed the execution of the agreement.
1. Waiver of Affirmative Defense
[30] DNR seeks to invalidate the 1996 Agreement on the ground that Director
Simpson lacked the authority to execute the agreement. As such, it seeks to
avoid the agreement. A matter of avoidance must be specifically pled as an
affirmative defense under Indiana Trial Rule 8(C). The Association asserts that
DNR has waived the defense for failure to plead it affirmatively under Trial
Rule 8(C). DNR maintains, however, that the defense is not waived because
the Association has failed to show that it was prejudiced by the belated pleading
of the defense. We agree with DNR.
[31] As with the affirmative defense of lack of consideration, the trial court
recognized that the lack of authority defense was not pled in DNR’s answer to
the Association’s amended complaint but, nevertheless, allowed DNR to raise
the argument at the hearing and then directed the parties to file post-argument
briefs. The Association had the opportunity to respond to the defense and,
thus, was not prejudiced by the late pleading of the defense. The lack of
authority argument is not waived under Trial Rule 8(C).
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2. Waiver Under Indiana Trial Rule 9.2
[32] Indiana Trial Rule 9.2 governs the pleading and proof of written instruments. It
provides in relevant part:
(A) When Instrument or Copy, or an Affidavit of Debt Shall
be Filed. When any pleading allowed by these rules is founded
on a written instrument, the original, or a copy thereof, shall be
included in or filed with the pleading. Such instrument, whether
copied in the pleadings or not, shall be taken as part of the
record. . . .
(B) Proof of Execution of Instruments Filed with Pleadings.
When a pleading is founded on a written instrument and the
instrument or a copy thereof is included in or filed with the
pleading, execution of such instrument, indorsement, or assignment
shall be deemed to be established and the instrument, if otherwise
admissible, shall be deemed admitted into evidence in the action
without proving its execution unless execution be denied under oath
in the responsive pleading or by an affidavit filed therewith. . . .
(C) Oath or Affidavit of Denial of Execution Must be Made
Upon Personal Knowledge. An oath or affidavit denying
execution as required and made under subdivision (B) of this rule
shall be made upon the personal knowledge of the person making
it, and, if general in form (Rule 11(B)), shall be deemed to be
made upon such personal knowledge.
(D) Burden of Proving Execution. The ultimate burden of
proving the execution of a written instrument is upon the party
claiming its validity, but execution is presumed. “Presumed” means
that the trier of fact must find the existence of the fact presumed unless
and until evidence is introduced which would support a finding of its
nonexistence.
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***
(F) Effect of Non-Compliance–Amendments. Non-
compliance with the provisions of this rule requiring a written
instrument . . . to be included with the pleading may be raised by
the first responsive pleading or prior motion of a party. The
court, in its sound discretion, may order compliance, the reasons
for non-compliance to be added to the pleadings, or allow the
action to continue without further pleading. Amendments to correct
the omission of a required written instrument, an assignment or
indorsement thereof, [or] the omission of a denial of the execution of a
written instrument as permitted or required by this rule, . . . shall
be governed by Rule 15[.]
***
(H) “Execution” of a Written Instrument. “Execution” of a
written instrument includes the following requirements:
(1) That a signature was made with express, implied or
apparent authority and was not forged; . . . .
T.R. 9.2(A)-(H). Indiana Trial Rule 15 provides in relevant part: “When issues
not raised by the pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects as if they had been raised in the pleadings.”
T.R. 15(B).
[33] Trial Rule 9.2(B) permits the execution of written instruments, which are the
foundation of a pleading but which may be used as evidence in the pleader’s
case, to be established and challenged at the pleading stage of a lawsuit. Master
Copy & Reprod. Ctr., Inc. v. Copyrite, Inc., 750 N.E.2d 824, 829 (Ind. Ct. App.
Court of Appeals of Indiana | Memorandum Decision 19A-PL-2249 | September 3, 2020 Page 22 of 27
2001), trans. denied. The rule does not conclusively establish the genuineness of
a signature. See Moehlenkamp v. Shatz, 396 N.E.2d 433, 438 (Ind. Ct. App.
1979). Rather, the purpose of the provision is to eliminate the technicalities of
formally introducing into evidence matters that are not disputed by either party.
Master Copy & Reprod. Ctr., Inc., 750 N.E.2d at 830. While execution of a
written instrument is presumed, the ultimate burden of proving execution is
upon the party claiming its validity. T.R. 9.2(D). “‘Presumed’ means that the
trier of fact must find the existence of the fact presumed unless and until
evidence is introduced which would support a finding of its nonexistence.” Id.
[34] Here, the Association’s amended complaint is founded on a written instrument,
and the Association complied with Trial Rule 9.2(A) by filing a copy of the
1996 Agreement with its amended complaint. See Mechanics Laundry & Supply,
Inc. v. Wilder Oil Co., Inc., 596 N.E.2d 248, 253 (Ind. Ct. App. 1992), trans.
denied. Having done so, the agreement became a part of the record, and
execution of the agreement was deemed established pursuant to Trial Rule
9.2(B). See id. Unless DNR denied execution of the 1996 Agreement under
oath in a responsive pleading or by affidavit filed therewith, the agreement was
deemed established without proving its execution. See id. Pursuant to Trial
Rule 9.2(D), the trial court “must have presumed execution unless and until
[DNR] introduced evidence supporting a finding otherwise.” See id. However,
DNR did not follow the pleading procedures set forth in Trial Rule 9.2(B), and
its answer to the Association’s amended complaint did not include a denial of
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execution within the meaning of the rule. Thus, DNR’s execution of the
agreement was deemed “established.” See T.R. 9.2(B).
[35] We note that DNR’s failure to comply with the procedures under Trial Rule
9.2(B) would not have precluded the trial court from allowing DNR to present
evidence that Director Simpson lacked the authority to execute the 1996
Agreement. See, e.g., Master Copy & Reprod. Ctr., Inc., 750 N.E.2d at 831
(Appellant’s failure to comply with Trial Rule 9.2(B) procedures did not
preclude trial court from allowing Appellant to present evidence at trial that the
altered agreement was a unilateral alteration). Absent a denial of execution
under oath as described in Trial Rule 9.2(B), execution of the 1996 Agreement
was simply presumed, and the agreement was deemed established without
proof of execution by the Association. This presumption could still have been
refuted by any evidence that DNR might have presented. See id. However,
DNR presented no evidence to refute the presumption.
[36] Based on the foregoing, we decline to find that this issue is waived under
Indiana Trial Rule 9.2. However, we conclude that we need not address
whether Director Simpson had the authority to execute the 1996 Agreement
because execution of the agreement was deemed established. The trial court
properly presumed the agreement was deemed established, and the agreement is
not invalid on the basis of lack of authority to execute the agreement.
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IV. Termination of the 1996 Agreement
[37] Finally, DNR contends that assuming the 1996 Agreement is a valid contract,
the trial court still erred when it declared the agreement a valid and binding
agreement. DNR maintains that the agreement required continuous
performance without a time limit and, thus, could be terminated at will by
either party. According to DNR, it exercised its right to terminate the
agreement in 2018 when it sent its letter to the Association disclaiming any
responsibility to perform under the agreement and because it did so, the
agreement could not be declared valid and binding. The Association maintains
that the agreement remains in effect and binding upon the parties.
[38] It is ordinary law that a contract containing no specific termination date is
terminable at will and that where the parties fix no time for the performance or
discharge of obligations created by the contract, they are assumed to have had
in mind a reasonable time. City of East Chicago, Ind. v. East Chicago Second
Century, Inc., 908 N.E.2d 611, 623 (Ind. 2009); House of Crane Inc. v. H. Fendrich,
Inc., 146 Ind. App. 478, 482, 256 N.E.2d 578, 579 (1970). Here, however, we
cannot say that the period of time from April 1996 to present is not a reasonable
period of time for an agreement concerning the maintenance, reconstruction,
and repair of a dam.
[39] Furthermore, we note that a party to an at-will contract cannot avoid its liability
to the other party, once that party has performed, simply by terminating the
contract. See Wright Mfg. Corp. v. Scott, 172 Ind. App. 154, 161, 360 N.E.2d 2, 7
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(1977) (finding that under an agreement, Appellee was entitled to a 5%
commission on orders he secured for Appellant before he was terminated by
Appellant because “[Appellee], before he was terminated . . . , obtained from
various customers blank purchase orders [that ran] through the [following]
year[]”). Without deciding whether the Association performed as obligated
under the agreement or DNR had an accrued liability under the agreement, we
conclude that DNR did not terminate the agreement. The letter that DNR sent
to the Association stated that “DNR is not obligated by the [1996 A]greement
to address or fund the resolution or rehabilitation of dam safety deficiencies that
develop as this non-State owned dam structure deteriorates with age.” Appellant’s
App., Vol. 2 at 121. The letter challenged DNR’s obligation under the
agreement but did not express DNR’s desire to terminate the agreement. The
trial court did not err in declaring the 1996 Agreement a valid and binding
agreement.
Conclusion
[40] We conclude that DNR’s arguments regarding the validity of the 1996
Agreement were not waived under either Indiana Trial Rules 8(C) or 9.2. The
trial court properly determined that the agreement was supported by
consideration, and properly presumed the agreement was deemed established.
And, the agreement was not terminated by DNR. Thus, the trial court did not
err in entering declaratory judgment in favor of the Association, declaring the
1996 Agreement to be a valid and binding agreement.
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[41] Affirmed.
May, J., and Vaidik, J., concur.
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