ILNews

Court: Records inspection needs testimony

Jennifer Nelson
January 1, 2008
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The Indiana Court of Appeals reversed a trial court decision to allow a couple to inspect a company's financial statements, finding the trial court relied only on an affidavit - and not testimony - to allow the inspection.

In Bacompt Systems, Inc. v. Angelina Peck and David C. Peck, No. 29A02-0708-CV-646, the Pecks made separate written requests to view Bacompt's financial documents. The Pecks, who lived in Pennsylvania, owned approximately 25 percent of the company's stock. Prior to David C. Peck's termination as president of Bacompt in May 2006, Angelina filed for divorce in Pennsylvania.

David C. Peck made his request to Bacompt for the financial documents to see if Buddy C. Stanley, the principal shareholder of Bacompt, had misappropriated funds. Stanley had filed a suit in federal court accusing David of writing unauthorized Bacompt checks for his and Angelina's personal use. Angelina requested Bacompt's financial documents to try to value her stock holdings in the company.

Initially, Bacompt refused to hand over the documents, citing David didn't specify his purpose for the documents in his written request and the company's belief that Angelina's request was untimely. Later, the company agreed to hand over certain documents, but would not turn over the KSM report, which is prepared by the company's outside accountant and included an analysis relating to the checks that are of issue in the federal lawsuit as well as a review of expenses charged to Bacompt from 2003 through 2005.

The Pecks then filed a petition for inspection of corporate records, which the trial court granted based on an affidavit submitted from Angelina with the pre-hearing brief that stated she needed to inspect the records to value her stock in her pending divorce.

Bacompt appealed, stating the Pecks didn't prove under Indiana Code 23-1-52-2 that their demand for inspection was in good faith and for a proper purpose, as well as the trial court erred in allowing the KSM report in the inspection of documents.

The Court of Appeals found no abuse of discretion when the trial court accepted Angelina's affidavit after a motion was filed. However, the appellate court did find the trial court erred in relying on Angelina's affidavit to enter its judgment.

Pursuant to Trial Rule 43(A), testimony was required to be given in open court in order to allow Bacompt the right to cross-examine and to observe witnesses' demeanor and determine credibility, wrote Judge Cale Bradford.

"In that Angelina's affidavit was introduced into evidence in lieu of her testimony for purposes of establishing - as a matter of fact - the Pecks's purpose in seeking to inspect Bacompt's corporate records, we conclude this was an error," he wrote.

In regards to Bacompt's appeal, the KSM report should not be included for inspection; the appellate court ruled the trial court should determine that on remand. Since there was no factual record in this case demonstrating a proper purpose, Judge Bradford wrote it was unnecessary for the appellate court to address this issue.
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  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

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