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COA: Trial court is wrong to order shareholders to pay attorney fees

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In a case that stems from a failed transaction in 2000 to purchase an event-decorating company, the Indiana Court of Appeals has reversed the order that shareholders of a corporation are liable for attorney fees on a wrongful stop-payment claim.

Gregory Rankin, Robert Cochrane and John Bales created CBR Event Decorators Inc. to purchase Todd Gates’ event-decorating company. A $100,000 check and signed asset purchase documents were mailed to Gates, who signed and returned them to the shareholders. But the shareholders stopped payment on the check that same day after believing Gates misrepresented the value of the assets after speaking with some of his employees. Gates sued CBR and the shareholders when attempts to renegotiate the purchase agreement failed.

Gates alleged against CBR breach of the asset purchase agreement, wrongful stop payment of a check, and breach of the promissory note; and alleged fraudulent conveyance and wrongful withdrawal of capital against the shareholders. He also sought to pierce the corporate veil. The trial court ruled in favor of Gates and ordered the veil pierced. As part of an agreement staying execution of the judgment pending appeal, the shareholders provided Gates with an irrevocable letter of credit issued by PNC bank for $1 million.

The piercing of the corporate veil was reversed on appeal in 2012, but the appeals court wrote in its opinion that the trial court should determine the portion of the attorney fees the shareholders are liable for to Gates as a result of the wrongful stop payment. The trial court ordered attorney fees of $290,093 plus 18 percent interest.

The trial court, without holding a hearing, ordered the funds from PNC Bank deposited with the trial court clerk after Gates requested the deposit before the letter of credit expired. That order, along with the attorney fee issue, were before the Court of Appeals in CBR Event Decorators, Inc., Gregory Rankin, Robert Cochrane and John Bales v. Todd M. Gates, 49A02-1302-CT-159.

The judges noted there was some confusion based on the language of the 2012 opinion in CBR I as to whether the shareholders should have to pay attorney fees. The wrongful stop payment claim was pled only against CBR, not the shareholders, Judge Margret Robb wrote. The shareholders could only be liable for these fees if the corporate veil was pierced, but that decision was reversed in CBR I.

The judges rejected Gates’ argument that regardless of any allegedly incorrect outcome, the legal doctrines of claim preclusion, issue preclusion and law of the case preclude the trial court and COA from addressing the issue of attorney fees. None of those doctrines are applicable here, so the appeals court does not have to uphold the award of attorney fees against the shareholders.

The order granting Gates’ request to deposit the letter of credit funds with the trial court clerk was not an improper ex parte order, the COA ruled. The trial court’s order wasn’t necessary to effectuate transfer of the funds to the clerk, as the terms of the letter allowed Gates to draw down the available balance of the letter of credit by providing a written demand to the bank, which he did.


 

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  1. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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