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COA reverses ruling in right of contribution case

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The Indiana Court of Appeals used common law today to reverse a judgment in favor of a man suing his business partner for failing to contribute to guarantee payments.

Frank Rogers co-owned two businesses with Equicor Development, in which Gregory Small is president – Plainfield Place and Patriot’s Place. In Plainfield Place, Equicor owned about 40 percent membership interests, Rogers had nearly 54 percent and another man had nearly 6 percent. Equicor and Rogers each owned a 50 percent membership interest in Patriot’s Place.

The men purchased property to develop and entered into loan agreements with Busey Bank on the Plainfield Place land and with Monroe Bank for the Patriot’s Place land. The men executed personal guaranties as security for the promissory notes.

They defaulted on the notes; Rogers paid some money to the banks, but Small did not. Rogers sued Small, asserting a “right of contribution” against him for the amount paid by Rogers in excess of his pro rata share and for the disproportionate benefit received by Small through Equicor’s management fees and real estate commissions. Both men filed for summary judgment; the trial court ruled in favor of Rogers, finding it wasn’t necessary for Rogers to have paid the liability in full and the law finds the right of contribution when one party pays more than his share of the common obligation. It awarded $43,050.47 in damages to Rogers.

But the trial court erred in ruling in favor of Rogers, the appellate court held in Gregory M. Small v. Frank A. Rogers, No. 29A02-1001-PL-30. Using common law because Indiana Code is silent as to the liability between co-guarantors, the Court of Appeals applied the same theory of contribution that has been applied to co-sureties – “the right of contribution operates to make sure those who assume a common burden carry it in equal portions.”  

In order to be entitled to contribution, Rogers had to have paid the debt or more than his proportionate share of it. But the evidence showed he only paid a portion of the amounts due under the promissory notes and far less than his share of the debts.

Judge Carr Darden wrote that Rogers’ reliance on Balvich v. Spicer, 894 N.E.2d 235, 243 (Ind. Ct. App. 2008), is misplaced. In Balvich, the banks reduced the co-guarantors’ debt to two judgments and the Spicers had paid more than their proportionate share, thereby satisfying the judgments. In the instant case, the debt owed by Rogers and Small hadn’t been reduced to judgment, so there can be no satisfaction of the judgment and no discharge of the debt, wrote Judge Darden.

“Rather, in this case, the debt still exists. Rogers did not discharge the debt, either by paying the debt or a judgment on the debt. Furthermore, the amounts paid by Rogers do not constitute more than his proportionate share of the more than $5,000,000.00 of debt incurred,” wrote the judge.

“To hold otherwise would result in a claim for contribution being asserted upon each and every payment made toward a debt until the debt is discharged,” he wrote in a footnote. “Of course, this is not to say that the amounts paid toward a debt cannot, or will not, be credited to the party asserting the right of contribution once the guaranteed debt is discharged.”
 

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  1. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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