Allen Family Partnership 1, LLC Individually and Derivatively on Behalf of Station Place LLC v. Walter Swyers ( 2022 )

RENDERED: SEPTEMBER 30, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0322-MR
ALLEN FAMILY PARTNERSHIP #1,
LLC, ALISA ALLEN NASH, CHERYL
MELINDA ALLEN, JAN ALLEN
PFEIFER, PATRICIA GAIL ALLEN,
AND TYLER ALLEN,
INDIVIDUALLY AND
DERIVATIVELY ON BEHALF OF
STATION PLACE LLC APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE JUDITH E. MCDONALD-BURKMAN, JUDGE
ACTION NO. 17-CI-001736
WALTER SWYERS AND HYSINGER
GROUP APPELLEES
OPINION
REVERSING IN PART, VACATING IN PART, AND REMANDING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; K. THOMPSON AND L. THOMPSON,
JUDGES.
THOMPSON, K., JUDGE: This appeal asks us to determine whether the Jefferson
Circuit Court correctly interpreted an agreement setting forth the terms for
distributing funds from the sale of an office building in Indianapolis, Indiana. We
reverse and remand because the trial court’s distribution formula does not follow
the agreement’s unambiguous terms.
This litigation has been remarkably bitter, sprawling, and protracted.
The trial court record is over 8,000 pages long, and there are thousands of
additional pages of exhibits and deposition transcripts. To avoid this Opinion
becoming unwieldy, we shall discuss only the most necessary facts, procedural
history, and issues.1
Station Place, LLC owned and operated a commercial office building
in Indianapolis (the Building). At one time, Station Place was owned equally by
the Allen Family Partnership #1 (the Partnership), Walter Swyers, and the
Hysinger Group (Hysinger), but, in 2005, Swyers and Hysinger sold the majority
of their ownership interests to Tyler Allen, Patricia Gail Allen, Cheryl Melinda
Allen, Jan Allen Pfeifer, and Alisa Allen Nash (the Allens). Thereafter, Swyers
and Hysinger each owned 3.3%, the Allens collectively owned 60%, and the
Partnership owned 33.4% of Station Place.
Station Place sold the Building in 2017 for $10 million. This action
revolves around properly distributing the net funds from that sale.
1
We have considered all the arguments in the parties’ original and supplemental briefs but will
discuss only those we deem necessary as the remainder are redundant, irrelevant, or otherwise
without merit.
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Despite the large sums of money at stake, the parties did not draft a
pre-sale agreement setting forth in detail how the funds from selling the Building
would be distributed. Instead, they agreed to some basic distribution terms in two
similar, but not identical, memoranda.
The first memorandum was written in 2007 by Swyers (the 2007
memo) and it contains these relevant provisions:
Our December, 2005 transaction was based on an
$8,000,000 price, postponing any defeasance penalty[2]
until the time of ultimate sale to a third party, with each
of us then sharing 1/3 each of any proceeds above the
$8,000,000 plus the defeasance. [Hysinger] and I
[Swyers] each have retained a 3 1/3 % interest in the
building. The mortgage . . . balance at time of sale will
not be reduced much below the $4,500,000 amount . . . .
The mortgage is payable March, 2011 and at that
time there will be no defeasance, therefore, we should
have the additional $1,000,000 to distribute 1/3 each,
unless it is reduced by a commission on the sale[.]
In August 2010, the parties agreed to another memorandum (the 2010
memo), which the trial court found to be the controlling document. The parties do
not dispute that the 2010 memo controls. However, Swyers and Hysinger contend
the 2007 memo and 2010 memo together form the operative agreement, an
argument with which we do not agree.
2
The parties agree that defeasance in this context refers to a penalty for paying off the mortgage
before its due date. By the time the Building was sold, the defeasance was no longer relevant.
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The 2010 memo provides in relevant part:
In December 2005, Bill Hysinger and Walt Swyers
agreed with Nolen Allen to sell to Nolen’s five children
60% of the Station Place interest held by
Hysinger/Swyers . . . with the understanding that the
transfer was based upon an $8,000,000.00 value and
upon ultimate sale of the property, that the Allen interest,
Hysinger and Swyers would share proceeds above
$8,000,000.00 on a one-third each basis . . . .
Sale of Station Place [i.e., the Building] is expected to
occur . . . and the distribution of net proceeds are agreed
to be as follows:
1. A sale up to $8,000,000.00 shall be distributed
33.34% to Allen Family Partnership #1 Ltd;
60% to the Nolen C. Allen family members
(12% each) and 3.3% each to Hysinger Group,
LLC and Walter J. Swyers, Jr.
2. If the ultimate net sales price is in excess of
$8,000,000.00, Hysinger, Swyers and Allen
Family Partnership #1 Ltd shall each be entitled
to one-third of net proceeds of the sale in
excess of $8,000,000.00[.]
The 2010 memo does not define net proceeds; the 2007 memo does not utilize the
term net proceeds.
After the Building was sold, Swyers, the managing member of Station
Place, distributed about $594,695 each to himself and Hysinger. Believing Swyers
had overpaid himself and Hysinger, the Partnership and the Allens (collectively
Appellants) filed this action against Swyers and Hysinger in the Jefferson Circuit
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Court. The parties agree that Kentucky is a proper venue, but that Station Place’s
operating agreement requires applying Indiana substantive law.
In addition to numerous other claims, Appellants sought an “accurate
accounting of the amount of all Station Place monies that Swyers has advanced to
himself since the January 2017 Building sale” and a “detailed statement of the
debits and credits between the parties arising from the operation and management
of Station Place.” Swyers filed counterclaims seeking, among other relief,
indemnification. For reasons unclear from the face of the record, the 2010 memo
was not produced until after discovery had begun.
During the course of the protracted litigation, the trial court made
several pertinent decisions. First, the trial court held that the 2010 memo controls.
Also, the trial court held that Swyers had performed in accordance with the 2010
memo, meaning he “did not act with willful misconduct.” In other words, the trial
court concluded that the non-accounting claims against Swyers were inherently
without merit because he had complied with the 2010 memo. Thus, the trial court
granted summary judgment to Swyers and Hysinger on all claims against them,
except the one seeking an accounting. The court also held that Swyers was a
prevailing party entitled to receive indemnification.
In November 2019, the court conducted a two-phase bench trial. The
first phase was to ascertain the amount of indemnification owed to Swyers. The
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second phase was devoted to Appellants’ accounting claim, at which the only
witness was an accountant, Faith Crump, called by Appellants.3
In her testimony, Crump generally opined that the funds from the sale
of the Building should be distributed in accordance with the master settlement
statement (the Settlement) prepared in conjunction with that sale. Notably, Swyers
signed the Settlement in his role as Station Place’s managing member.
On cross-examination, Crump agreed that the only expenses
specifically addressed in either the 2007 and 2010 memos were the mortgage,
defeasance, and the sales commission. In so doing, she acknowledged that the
numerous other costs and expenses listed on the Settlement were not explicitly
mentioned in either memo. However, Crump did not meaningfully waver from her
core position that all applicable expenses and costs had to be addressed in order to
properly calculate the amount of money available for distribution (i.e., net
proceeds).
3
Generally, an action for an accounting “require[s] a person in possession of financial records to
produce them, demonstrate how money was expended, and return pilfered funds in his or her
possession. An action for an accounting has the purpose of adjusting the account of the litigants
and of rendering complete justice in a single action.” 1 AM. JUR. 2d Accounts and Accounting §
50 (2022) (footnotes and citations omitted). “Thus, an accounting does not yield a judgment for
damages, but rather seeks to restore to the plaintiff what is rightfully his or hers.” 1A C.J.S.
Accounting § 6 (2022). Accordingly, “[a]n accounting is proper where there is an unascertained
amount owing that cannot be determined without an examination of the debits and credits on the
books to determine what is due and owing.” Id. Here, the trial court did not conduct a searching
examination of Station Place’s ledgers, so the bench trial was not a true accounting.
Nonetheless, for ease of reference, we shall refer to that phase of the bench trial as an
accounting.
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The trial court later issued its post-trial decision, the gist of which is
its agreement with Swyers and Hysinger that the only costs or expenses which
factor into determining net proceeds are the mortgage and realtor’s commission.
Thus, the trial court rejected Appellants’ claims that Swyers had overpaid himself
and Hysinger and, instead, held that Swyers and Hysinger were each entitled to
additional money. Specifically, the court held:
The mortgage balance of $4,048,272.25 was deducted
from the first $8,000,000.00 resulting in the sum of
$3,981,727.75 [sic][4] for distribution. Swyers and the
Hysinger Group received 3 1/3% in the amount of
$131,592.53 each with the balance of $3,688,542.69
going to the Plaintiffs. The sales commission was to be
deducted from the sales proceeds in excess of
$8,000,000.00, resulting in the sum of $1,700,000.00 for
distribution. This sum was to be distributed per the
[2010 memo] in thirds. Thus, each party was to receive
$566,666.67. Based on these calculations Swyers and the
Hysinger Group were to receive a total of $698,259.19
each. Swyers distributed the sum of $594,695 each,
leaving for distribution the sum of $103,564.20 each.
Ms. Crump confirmed that if the calculations are
performed in accordance with the parties’ agreement,
then “$698,259.19 is what you get.”
The trial court also held that Appellees were entitled to a substantial amount of
money in indemnification and interest. Appellants then filed this appeal.
Before we may address the merits, we must first resolve Appellees’
argument that Appellants failed to preserve the issues for our review. As Swyers
4
The court’s math is incorrect. $8,000,000 - $4,048,272.25 = $3,951,727.75.
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and Hysinger stress, Appellants now accept the primacy of the 2010 agreement but
formerly argued the funds should be distributed differently, such as pursuant to
Station Place’s operating agreement. Of course, the 2010 memo was not produced
until discovery had commenced, as the trial court noted in an order, so we cannot
fault Appellants for not initially relying on that document. After the trial court
found the 2010 memo controlled, Appellants accepted the ruling but continued to
argue that Swyers had overpaid himself and Hysinger. In other words, though
some of the finer points of their arguments have evolved, Appellants’ core position
– they are owed more money and Swyers and Hysinger less – has remained
constant.
For example, though it does not specifically cite the 2010 memo,
paragraph seventy-eight of the second amended complaint alleges that Swyers
“chose to pay himself and Hysinger more than they were owed, and chose to pay
Plaintiffs less than they were owed.” Similarly, Appellants’ prehearing statement
in this Court asserts that Swyers gave himself and Hysinger “much more than
[their] recoverable interest in the proceeds of the sale” and the trial court “fail[ed]
to calculate and incorporate [Appellants’] outstanding amounts owed under the
August 11, 2010 agreement[.]”5
5
We disagree with Swyers’ and Hysinger’s assertion that Appellants’ briefs impermissibly
contain arguments not addressed in their prehearing statement. Prehearing statements are
intended to provide the Court with a brief recitation of a party’s central arguments. Prehearing
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Essentially, Swyers and Hysinger contend that Appellants have
violated the principle whereby “a party may not generally assume successive
positions in the course of the same litigation with respect to the same fact or set of
facts which are inconsistent and mutually contradictory.” Gregory and Appel, Inc.
v. Duck, 459 N.E.2d 46, 50 (Ind. Ct. App. 1984). See also, e.g., Rowe v. Shepherd,
283 S.W.2d 188, 190 (Ky. 1955). But we do not perceive that Appellants have
adopted inherently contradictory positions since they all along have argued that
they received too little money and Swyers and Hysinger too much.
Finally, and crucially, as Appellants correctly note in their reply brief,
the trial court held a bench trial on their accounting claims. The purpose of that
trial was to ascertain how the funds received from selling the Building should be
distributed under the terms of the 2010 memo. Under Kentucky and Indiana law,
issues tried by express or implied consent are deemed to have been raised by the
pleadings. See, e.g., CR 15.02; Puckett v. McKinney, 175 Ind. App. 673, 676, 373
N.E.2d 909, 911 (1978). Therefore, notwithstanding Appellees’ disagreement, we
deem the issue of proper distribution of net proceeds pursuant to the 2010 memo to
have been sufficiently raised. After all, that was the sole purpose of the accounting
statements are not intended to be procedural pitfalls; substantial compliance with Kentucky Rule
of Civil Procedure (CR) 76.03 is sufficient. Capital Holding Corp. v. Bailey, 873 S.W.2d 187,
197 (Ky. 1994). Appellants’ prehearing statement substantially complies with CR 76.03.
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phase of the bench trial. In short, under these unique facts, we deem Appellants’
arguments to have been sufficiently preserved.
Turning to the merits, our review of a decision issued after a bench
trial is as follows:
Under CR 52.01, the trial court is required to make
specific findings of fact and state separately its
conclusions of law relied upon to render the court’s
judgment. Further, those findings of fact, shall not be set
aside unless clearly erroneous, and due regard shall be
given to the opportunity of the trial court to judge the
credibility of the witnesses. In fact, judging the
credibility of witnesses and weighing evidence are tasks
within the exclusive province of the trial court.
If the trial judge’s findings of fact in the
underlying action are not clearly erroneous, i.e., are
supported by substantial evidence, then the appellate
court’s role is confined to determining whether those
facts support the trial judge’s legal conclusion. However,
while deferential to the lower court’s factual findings,
appellate review of legal determinations and conclusions
from a bench trial is de novo.
Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016) (internal quotation marks,
brackets, and citations omitted).6 Because contract interpretation is deemed a
6
Though we accept the parties’ agreement that Indiana substantive law controls, “the law of the
forum controls remedies and procedures.” Ley v. Simmons, 249 S.W.2d 808, 808 (Ky. 1952). In
any event, Indiana’s standards of review are similar. See, e.g., Carmichael v. Siegel, 754 N.E.2d
619, 625 (Ind. Ct. App. 2001). We will apply Kentucky’s summary judgment standards.
Lipsteuer v. CSX Transp., Inc., 37 S.W.3d 732, 735 (Ky. 2000).
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substantive issue, Bourke v. Dun & Bradstreet Corporation, 159 F.3d 1032, 1036
(7th Cir. 1998), we shall apply Indiana contract interpretation principles.
Under Indiana law, a court must give the terms of an unambiguous
contract their plain, ordinary meaning. Reuille v. E.E. Brandenberger Const., Inc.,
888 N.E.2d 770, 771 (Ind. 2008). And if a contract is unambiguous, a court “may
not look to extrinsic evidence to expand, vary, or explain the instrument but must
determine the parties’ intent from the four corners of the instrument.” Celadon
Trucking Services, Inc. v. Wilmoth, 70 N.E.3d 833, 839 (Ind. Ct. App. 2017).
Kentucky law is similar. See, e.g., Cantrell Supply, Inc. v. Liberty Mut. Ins. Co.,
94 S.W.3d 381, 384-85 (Ky.App. 2002).
We begin with a broad overview of what we perceive to be the trial
court’s two main errors. First, the court should not have adopted the parties’
complicated bifurcation for determining and allotting net proceeds. Under the
parties’ approach, the gross sales price was cleaved into two discrete portions – the
first $8 million and the remaining $2 million. The mortgage was to be deducted
from the first $8 million, with the remaining balance of that portion to be
distributed pursuant to the parties’ ownership interest in Station Place. The
realtor’s commission (and, in Appellants’ view, sundry other costs and expenses)
was to be deducted from the remaining $2 million of the gross sales price, with the
remaining balance of that $2 million distributed one-third each to Swyers,
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Hysinger, and the Partnership. However, that under/over $8 million bifurcation
has no explicit textual support in the plain language of the 2010 memo, and the
parties’ understanding is not controlling.
Instead, the 2010 memo bases its distribution formulae on whether
there were $8 million in net proceeds. If not, the memo requires all net proceeds
to be distributed pursuant to the parties’ ownership interests; if so, the memo
requires only the net proceeds over $8 million to be distributed under the one-third
each formula, with the first $8 million in net proceeds to be distributed according
to the parties’ ownership interests. There is nothing in the memo which states that
the gross sales price is to be split, with the mortgage being deducted from the first
$8 million and the realtor’s commission (and other costs) deducted from the
remaining $2 million.
In other words, the entire first $8 million of the net proceeds must be
distributed according to the parties’ ownership interests in Station Place. The one-
third each formula only takes effect if there are net proceeds above $8 million, and
only applies to net proceeds above $8 million. However, given a $10 million gross
sales price and over $4 million in mortgages, basic math shows that there cannot
possibly have been $8 million in net proceeds:
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$10,000,000.00 (gross sales price)
- $3,781,326.44 (first mortgage)
- $266,945.81 (second mortgage)
- $300,000.00 (realtor’s commission)
$5,651,727.75 (absolute maximum possible net
proceeds)
Thus, the one-third each formula never came into play, so the entirety of the net
proceeds must be distributed according to the parties’ ownership interests.
We are aware that this conclusion is not in accordance with the
parties’ subjective interpretation of the 2010 memo in their briefs (though
Appellants seem to recognize in their supplemental brief that there were not $8
million in net proceeds). But, under longstanding Indiana precedent, the terms of
an unambiguous contract prevail over any contrary, subjective intent of a party:
It is fundamental that one who executes a contract
of a certain character is bound by its terms even though
he meant something different and thought the words
conveyed his meaning. A court must give effect to the
meaning and intent of the parties as expressed in the
language of their contract. . . . In absence of anything to
show legal impediment to prevent their entering into any
contract they see fit or expressing it in the language of
their own choice, the rights of the parties must be
determined according to the contract. The sole duty of a
trial court in a proceeding, such as before us, is to
determine what is meant by the language of the
instrument. In other words, the object to be attained in
interpreting a contract is to ascertain the meaning and
intent of the parties as expressed in the language used.
Miller v. Frankfort Bottle Gas, Inc., 136 Ind. App. 456, 460, 202 N.E.2d 395, 397-
98 (1964). See also, e.g., 11 WILLISTON ON CONTRACTS, The parties’ expressed
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intent governs any subjective, unexpressed intent § 31:4 (4th ed. 2022); Cantrell
Supply, Inc., 94 S.W.3d at 385; Claire’s Boutiques, Inc. v. Brownsburg Station
Partners LLC, 997 N.E.2d 1093, 1098 (Ind. Ct. App. 2013). Therefore, since the
net proceeds did not exceed $8 million, the trial court erred by not allocating them
pursuant to the parties’ ownership interests, notwithstanding their contrary
arguments.
The second main error made by the trial court is accepting Swyers’
and Hysinger’s argument that the only costs and expenses which may be deducted
from the gross sales price to determine net proceeds are the mortgages and
realtor’s commission. That position is unsupported by any specific language in the
2010 memo.
Though it is the contract’s key term, the 2010 memo does not define
net proceeds. The parties could have intended for net proceeds to have a
specialized meaning since, generally, parties may agree to any contractual terms
which do not violate the law or public policy. See, e.g., Ransburg v. Richards, 770
N.E.2d 393, 395-96 (Ind. Ct. App. 2002). However, since the plain language of
the contract contains nothing showing the parties intended net proceeds to have an
idiosyncratic meaning, we must use the term’s ordinary meaning. Hilbert v.
Conseco Services, L.L.C., 836 N.E.2d 1001, 1008 (Ind. Ct. App. 2005).
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We asked for supplemental briefing, mainly on the issue of whether
the ordinary definition of net proceeds should apply. The parties seem to agree
that it does.
When interpreting a term undefined within a contract, as here, Indiana
courts turn to dictionaries for guidance. See, e.g., Reuille, 888 N.E.2d at 771.
Black’s Law Dictionary defines net proceeds in relevant part as “[t]he amount
received in a transaction minus the costs of the transaction (such as expenses and
commissions).” Net proceeds, BLACK’S LAW DICTIONARY (11th ed. 2019). A
financial dictionary similarly defines net proceeds in relevant part as “[t]he money
one receives from a transaction after all commissions, fees, and related expenses.
For example, if one sells his/her house, the net proceeds are the funds one receives
from the buyer after all realtor’s fees and other closing costs.”7 Thus, the
definition of net proceeds here is the typical one: the amount of money remaining
for distribution after all applicable expenses and fees have been deducted.
What are the applicable costs and expenses? Crump did not testify
that the mortgages and realtor’s commission were the only proper costs or
expenses. Instead, she generally testified that the distribution should align with the
7
Farlex Financial Dictionary (2009), available for viewing at https://financial-
dictionary.thefreedictionary.com/net+proceeds (last visited Sep. 9, 2022). See also
INVESTOPEDIA https://www.investopedia.com/terms/n/netproceeds.asp. (last visited Sep. 9, 2022)
(defining net proceeds in relevant part as “the amount the seller receives following the sale of
an asset after all costs and expenses are deducted from the gross proceeds”).
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Settlement, which lists over $1 million in additional costs and expenses. And no
other witnesses testified at the accounting trial, so Crump’s testimony is essentially
unrebutted. In fact, Swyers signed the Settlement, and neither he (nor Hysinger)
has explained the dichotomy between his signing a document at or near closing
which he now attacks as somehow inapplicable. And there is nothing in the 2010
memo specifically limiting the costs and expenses to be considered when
determining net proceeds. In sum, the trial court’s conclusion that the mortgage
and realtor’s commission are the only expenses relevant to determining net
proceeds is unsupported by the plain language of the contract, witness testimony,
or the applicable principles of contract interpretation.
The trial’s post-trial rulings do not meaningfully discuss the
Settlement. Substantively, the trial court held:
The [$300,000] sales commission was to be deducted
from the sales proceeds in excess of $8,000,000.00,
resulting in the sum of $1,700,000.00 for distribution.
This sum was to be distributed per the August 11, 2010
agreement in thirds. Thus, each party was to receive
$566,666.67. . . . Ms. Crump confirmed that if the
calculations are performed in accordance with the
parties’ agreement, then “$698,259.19 is what you get.”
The trial court did not address the numerous other costs and expenses listed in the
Settlement or Crump’s testimony that, generally, a proper distribution should align
with the Settlement.
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Crump testified that the 2007 memo – upon which the Swyers and
Hysinger rely greatly – mentions only defeasance, mortgage, and a realtor’s
commission. But Crump consistently maintained that all necessary expenses and
costs had to be considered to determine net proceeds and the distributions should
align with the Settlement.8
We will not flyspeck the litany of costs and expenses listed on the
Settlement. Crump generally testified that the Settlement was the controlling
document in determining the relevant costs and expenses, Swyers signed the
Settlement, and neither he nor Hysinger presented any witnesses at the accounting
trial to contradict Crump. Accordingly, Swyers’ and Hysinger’s self-serving
protestations that the Settlement is incorrect or somehow violates the plain terms of
the 2010 memo are belated and unavailing. The roughly $1 million in additional
costs and expenses listed on the Settlement must be taken into account. The costs
8
Swyers misleadingly asserts in his brief that Crump admitted that “no expenses, other than the
mortgage and the sales commission, should be deducted . . . in order to arrive at Appellees’ share
of the sales proceeds . . . .” We strongly disagree.
Swyers points to his counsel’s asking Crump as recorded on video, whether, in the 2007
memo, “the only expense that is to be taken other than the mortgage if there’s no defeasance is
the commission, correct? In this letter, the only expense that is supposed to be taken is the
commission?” Crump responded, “that’s the only one addressed in the letter.” In other words,
all Crump admitted was an uncontested fact – the realtor’s commission and mortgages (along
with the defeasance, which had been rendered obsolete) are the only expenses specifically
mentioned in the 2007 memo. Crump did not testify that those were the only costs and fees
which may be properly considered when determining net proceeds, nor can such an inference be
reasonably drawn from her testimony.
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and expenses listed on the Settlement shall be used on remand to determine the
proper distribution of net proceeds.
In sum, the 2010 memo is unambiguous. The one-third each clause
was never triggered because there were less than $8 million in net proceeds. The
trial court erred in holding to the contrary, and its decision is thus reversed. On
remand, the costs and expenses listed on the Settlement should be subtracted from
the gross sales price to determine net proceeds, which shall then be distributed
according to each party’s ownership interest in Station Place.
Finally, our conclusion is not altered by Swyers’ and Hysinger’s
insistence that the 2007 memo also controls. We will not extend this already
lengthy Opinion by addressing the 2007 memo in detail as the trial court plainly
held that the 2010 memo controls. The 2010 memo is unambiguous, so the 2007
memo is impermissible, extrinsic evidence, Swyers’ and Hysinger’s arguments to
the contrary notwithstanding. Celadon Trucking Services, Inc., 70 N.E.3d at 839.
Nonetheless, even if we were to consider it, the 2007 memo does not
change our conclusions. Though Swyers and Hysinger insist that it does, there
simply is no explicit statement in the 2007 memo that the realtor’s commission,
mortgages, and defeasance were the only costs and expenses to be considered
when allocating the net funds received from selling the Building. Instead, the 2007
memo discusses the mortgage balances and realtor’s commission in its
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hypothetical discussion of the amounts which would be available for distribution if
the Building were to be sold at various times. It is common knowledge that there
are a host of costs and expenses inevitably associated with any real estate
transaction. The 2007 memo contains no language whatsoever eliminating those
inevitable other expenses from consideration in determining the amount of funds to
be distributed after the sale. In other words, discussing the hypothetical impact of
a couple of expenses – standing alone – does not eliminate all other expenses from
consideration.
Tellingly, Swyers and Hysinger do not cite to specific, concrete
evidence to support their assertions that the defeasance, mortgage, and realtor’s
commission were the only ones relevant under the 2007 memo. For example,
while Hysinger’s brief argues they are the only relevant costs and expenses, the
brief does not cite to any specific portions of the record to support that argument
other than Crump’s unremarkable acknowledgement that those were the only costs
or expenses specifically mentioned in the 2007 memo. We again emphasize that
neither Hysinger nor Swyers presented any witnesses at the accounting trial. No
matter how vehemently or frequently made, arguments made by counsel are not
evidence. Nevel v. State of Indiana, 818 N.E.2d 1, 5 (Ind. Ct. App. 2004); Dixon v.
Commonwealth, 263 S.W.3d 583, 593 (Ky. 2008).
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Where does that leave us? The trial court’s conclusions based on the
accounting trial are clearly erroneous because they are not supported by the record
or applicable contract principles. Failing to consider all pertinent costs and
expenses and applying the inapplicable one-third each formula led the trial court to
significantly inflate the amount due to Swyers and Hysinger. In turn, that
conclusion caused the trial court to conclude erroneously that Swyers could not be
found liable for the non-accounting claims because he had complied with the 2010
memo. Actually, Swyers significantly overpaid himself and Hysinger and, in so
doing, violated the plain terms of the 2010 memo.
We need not delve deeply into the minutiae of the non-accounting
claims, given the trial court’s holding. We note that, standing alone, the fact that
Swyers overpaid himself and Hysinger is insufficient for Appellants to prevail on
their non-accounting claims. Swyers would likely not be liable on Appellants’
claims if he, for example, merely made a good faith mistake in calculating the
amount of money due to himself and Hysinger. Instead, Appellants must generally
show that Swyers acted willfully, recklessly, or in bad faith. Given the
concentration on the accounting claim in the parties’ briefs, the non-accounting
claims received only fleeting attention. The parties’ mistaken interpretation that
the one-third each formula did apply likely in part negates the needed showing to
the extent that Swyers followed this joint understanding in overpaying. Thus, it is
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sufficient for us to state that the parties have not pointed to evidence showing
definitively that Swyers did, or did not, act culpably regarding the non-accounting
claims.
In other words, Swyers or Appellants may potentially prevail on the
non-accounting claims. At absolute bare minimum, it is certainly not impossible
for Appellants to prevail on those claims. Accordingly, the trial court erred by
granting summary judgment. See, e.g., Blackstone Mining Co. v. Travelers Ins.
Co., 351 S.W.3d 193, 198 (Ky. 2010) (holding that a trial court must view the
evidence “in the light most favorable to the nonmoving party” and summary
judgment is proper only if, in a practical sense, “it appears impossible that
the nonmoving party will be able to produce evidence at trial warranting a
judgment in his favor”) (citations omitted). Therefore, the trial court’s decision to
grant summary judgment on the non-accounting claims must be vacated and
remanded for further proceedings. Appellants seem to concede that their unjust
enrichment claims fail in light of the trial court’s conclusion that the 2010 memo
controls the parties’ rights; accordingly, the trial court’s denial of this claim is
conclusive.
The trial court’s erroneous conclusions on Appellants’ claims also
means the trial court erred when it concluded that Swyers is entitled to
indemnification and he and Hysinger are entitled to receive attorney’s fees and
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interest as prevailing parties. Neither Hysinger nor Swyers should be a prevailing
party on the accounting claims, and it is not yet known with certainty who will
prevail on the non-accounting claims. Therefore, the trial court’s determination
that Swyers and Hysinger are entitled to indemnification/attorney’s fees and
interest is vacated and remanded for further proceedings, which shall be conducted
after the non-accounting claims so that it will then be known who has prevailed on
those claims.
For the foregoing reasons, 1) the Jefferson Circuit Court’s post-trial
decision on the accounting claims is reversed. On remand, we instruct the trial
court to recalculate net proceeds by using the costs and expenses listed on the
Settlement, after which the net proceeds shall be distributed according to each
party’s ownership interest in Station Place; 2) the grant of summary judgment on
Appellants’ non-accounting claims is vacated and remanded for further
proceedings; 3) the order awarding Swyers and Hysinger
indemnification/attorney’s fees and interest is vacated and remanded for further
proceedings, to be conducted after the resolution of the non-accounting claims.
ALL CONCUR.
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BRIEFS FOR APPELLANTS: BRIEFS FOR APPELLEE WALTER
SWYERS:
Christopher E. Schaefer
Emily P. Mattingly William F. McMurry
Louisville, Kentucky Mikell T. Grafton
Louisville, Kentucky
BRIEFS FOR APPELLEE
HYSINGER GROUP:
W. Edward Skees
New Albany, Indiana
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