7th Circuit Court of Appeals
Criminal – Phone Numbers/Inadmissible Hearsay
United States v. Maurice Dimitrie Moore
The 7th Circuit Court of Appeals has ruled evidence of a deceased man’s phone numbers provided to his probation officer is not inadmissible hearsay and those records should be included in another man’s criminal case.
Marcus Hayden engaged in an armed battle with police in 2012, injured an officer and was later shot and killed. The government recovered the handgun Hayden used and charged Maurice Moore with selling the weapon to Hayden. Prosecutors moved to present evidence Hayden, who was on probation, gave to his probation officer regarding his cell phone number. Hayden first gave one number, then another to his probation officer. Moore’s phone communicated with the first number given to the officer several times, but then stopped and started communicating with the second number for equally as long.
Moore moved to exclude the probation report on hearsay grounds, and the District Court excluded them. The government filed an interlocutory appeal.
The 7th Circuit, in a decision written by Rebecca Pallmeyer, a District judge from the Northern District of Illinois sitting by designation, ruled the phone evidence was admissible under the residual exception in Federal Rules of Evidence Rule 807.
Pallmeyer wrote that Hayden is not able to testify, not because of any impropriety of the government, but because of his death and he never recanted the sworn statement that his phone number was the first one.
“But the most important factor here is Hayden’s motivation — or lack thereof — to lie about his phone number. The district court concluded that Hayden’s criminal history casts doubt on his motivation to tell the truth,” Pallmeyer wrote. “Hayden’s apparent willingness to break the law does not explain why he would lie in this instance, however.”
Pallmeyer wrote Hayden had no reason to lie about his second number so the evidence should be sound that these were his numbers.
“The purpose of Rule 807 is to make sure that reliable, material hearsay evidence is admitted, regardless of whether it fits neatly into one of the exceptions enumerated in the Rules of Evidence. That purpose is served by admitting the Reports, and the district court erred in excluding them from Moore’s trial,” Pallmeyer wrote.
Indiana Supreme Court
Domestic Relations – Postsecondary Expenses
David P. Allen v. Kimberly W. Allen
In a unanimous decision, the Indiana Supreme Court ruled divorced parents cannot be obligated to pay the graduate or professional school expenses of their adult children in a case where a mother and father were forced to share a child’s dental school expenses after she completed her undergraduate degree.
David and Kimberly Allen divorced in 2002 and agreed to share custody of their two children. They agreed to a modification in 2010 where David Allen would be responsible for their daughter’s educational expenses and Kimberly Allen would be responsible for her health insurance.
David Allen petitioned for another change of the agreed order in 2013, seeking to have the daughter’s dental school expenses divided between him and his ex-wife. The trial court denied his order, but the Court of Appeals reversed it, ruling the trial court erred by making David Allen liable for the expenses and rejecting mother’s cross-appeal argument that the trial court lacks authority to order the parents to pay for their child’s graduate school expenses. The mother sought transfer and it was granted by the Supreme Court.
In a decision written by Justice Steven David, the court examined Indiana Code 31-16-6-2, which states in part, “The child support order or an educational support order may also include, where appropriate, amounts for the child’s education in elementary and secondary schools and at postsecondary educational institutions … .”
David wrote “postsecondary” means an organized two-year or longer program of collegiate grade directly creditable toward a baccalaureate degree, citing the higher education title. David cited four other codes in support of this interpretation.
The Court of Appeals ruled the Legislature was free to enact a limit on education after high school but didn’t, so all expenses should be included. David pointed out the Legislature didn’t include graduate expenses. He also mentioned recent changes to the child support statutes mean the Legislature’s intent was to not include graduate school.
David wrote Indiana is one of the few states that have a statute providing for educational expenses once a child has reached the age of majority. Most states have no law requiring divorced parents provide college expenses, and of the states that do, the majority limit payment of the expenses to a certain age.
“We also note that married parents have no legal obligation to pay for their children’s educational expenses beyond high school, let alone graduate school expenses,” David wrote.
He ended by noting that divorced parents can still agree to pay a portion or all of their child’s graduate expenses, and that agreement can be enforceable by the court.
Indiana Court of Appeals
Civil Tort – Karate Kick/Injuries
Tresa Megenity v. David Dunn
The Indiana Court of Appeals ruled 2-1 that a man’s kick in karate class, which injured a woman, constituted an issue of material fact and reversed summary judgment in his favor.
Tresa Megenity volunteered to hold the bag for a drill called “kicking the bag.” Megenity’s bag was supposed to be for a front kick, where a person stands with one foot on the ground and kicks with their other foot. However, when David Dunn kicked the bag, he jumped. Megenity, was holding the bag in front of her face and did not see it. The force of Dunn’s kick “sheared out” Megenity’s ACL and damaged her menisci.
Nine months later Megenity filed a complaint against Dunn saying he recklessly caused her injuries. Dunn filed for and was granted summary judgment, and Megenity appealed.
In the majority decision written by Judge Edward Najam, who was joined by Judge Melissa May, Najam wrote the analysis turned on what constitutes reasonable and appropriate conduct in karate class. He wrote that unlike some more well-known sports like baseball, football, basketball and golf, karate is not a sport most people are familiar with, especially the details of the different types of kicks.
Dunn said jump kicks like his are within the ordinary behavior of a karate student in practice drills, but Megenity presented evidence to show this kick was outside the range of normal behavior for those drills. Najam wrote that because of the obscurity of karate and how most people don’t know what is or isn’t normal in a karate class, that constitutes an issue of material fact, and the issue should be remanded for full trial. Also, Megenity designated evidence to say Dunn’s kick was a jump kick and not a regular kick in these drills.
“We hold that the general nature of the conduct reasonable and appropriate for a participant in a karate practice drill is not commonly understood and subject to ascertainment as a matter of law,” Najam wrote.
Judge Patricia Riley dissented in the opinion, saying the majority ruled too narrowly on just the kick without taking in the entire sport of karate, which she argues should have been done like it was in Pfenning v. Lineman, 947 N.E.2d 392 (Ind. 2011), on which both sides based their decision.
“By focusing on whether Dunn’s particular kick was ‘outside the range of ordinary behavior for a karate student engaged in a kicking-the-bag practice drill,” the majority limits its review to the particular exercise instead of the broader scope of karate, as instructed by Pfenning,” Riley wrote.
Civil Tort – Identity Protection/Caller
John Doe #1, et al. v. Indiana Department of Child Services
The Indiana Court of Appeals ruled in a 2-1 decision the Indiana Department of Child Services had a duty to protect a man’s identity after he called the DCS hotline and reported his neighbors’ children as children in need of services.
The man, who is referred to as John Doe in the COA decision, called DCS after he believed children in five homes on his street were children in need of services due to dangerous living conditions. When he was just about through with the call, a DCS representative asked for his name and phone number. Doe was at first hesitant, but then after being reassured his identity would not be revealed, gave the representative his information.
About a week later, Doe was confronted in his front yard by a neighbor who accused him of calling DCS. She had the unredacted copy of the report he had called in. Other neighbors found out and Doe became a pariah in the neighborhood. He sued DCS for damages arguing DCS was negligent in failing to protect his identity but the trial court granted summary judgment for DCS, ruling the code DCS violated, IC 31-33-18-2, did not include a private right of action.
Judge Robert Altice, writing for the majority and joined by James Kirsch, wrote that it didn’t need to be determined whether the code provides a right of action because Doe was owed a private duty based on common law. A special relationship was clearly established when Doe made the call to the DCS hotline and the DCS employee said his information would be kept confidential.
“The reasonable foreseeability of harm to Doe and his family upon improper disclosure of this information was evident, as implicitly recognized by DCS’s own policies and IC 31-33-18-2,” Altice wrote. “Ultimately the Does were left in a far worse position after Doe called the hotline and relied on DCS’s promise.
Chief Judge Nancy Vaidik dissented, writing Indiana Code 31-33-18-2 does not create a private right of action, and thus no special relationship exists. She would affirm the judgment for DCS.
“Put differently, no special relationship was created when Doe called the DCS hotline and was told by the DCS employee that his information was confidential, because the DCS employee’s response was nothing more than a statement of what Section 31-31-18-2 requires,” Vaidik wrote.
Juvenile – Restitution/Civil Judgment
J.B. v. State of Indiana
The Indiana Court of Appeals ruled a trial court may not order a juvenile to pay restitution as a civil judgment after a minor was ordered to pay restitution in two cases where he violated his probation.
J.B. violated his probation in four causes and the trial court held a disposition hearing, ordering him to pay $500 in restitution in each of the two causes. Later, the trial court reduced the orders to civil judgments and added judgment fees of $252.50 and $315.63. Three days later, the court entered a separate judgment ordering $500 in restitution for the same two causes and a $250 civil judgment fee.
J.B. then filed a motion to correct error and rescind order for the civil judgment fee asking for clarification on which order he was supposed to follow and asking to rescind the order in both. The trial court rescinded the first order but not the second. J.B. appealed.
After J.B. appealed, the court rescinded the second order as well, rendering the case moot, but the COA in an opinion written by Judge Melissa May said it would still rule on the merits of a case because of public interest. She also noted that whether a juvenile court may reduce a restitution order to a civil judgment has not been addressed in any published Indiana opinion.
May wrote there is no judgment lien in Ind. Code 31-37-19-5(b)(4) in the juvenile statute and the COA is not going to read into the code a provision not expressly stated. Because of that, the trial court did not have the authority to order J.B. to pay the restitution owed his victims as a civil judgment.
Civil Plenary – Breach of Contract
Edward Rusnak and Rebecca Rusnak v. Brent Wagner Architects
Owners of a shabbily built house will get another chance to hold their architects accountable for the construction headaches after the Indiana Court of Appeals found there are questions of material fact that should be considered.
Edward and Rebecca Rusnak filed a third-party complaint against Brent Wagner Architects after the builder of the couple’s home sued them for failure to pay the $376,448.44 promissory note in full. The Rusnaks hired BWA to design their house in Valparaiso’s Pepper Creek subdivision and then contracted with Alan R. Sommers Construction Co. to build the residence between 2008 and 2010.
Under an agreement signed by BWA and the Rusnaks, the architects had specific responsibilities during the construction of the home including visiting the building site and rejecting any nonconforming work. The Rusnaks assert the architectural firm breached its duty by failing to correct substandard work. Problems with the construction included poor drywall finish, leaks in the roof and gas line, sewer backups, damage to wood trim and poor concrete installation.
BWA countered the agreement makes clear the architects cannot be held liable to any alleged defects or mistakes done by the contractors. Porter Superior Court agreed and granted summary judgment in favor of architectural firm.
Writing for the court, Judge Margret Robb agreed with the Rusnaks’ assertion that “the clause relieving BWA of liability for the contractor’s performance of the work does not excuse BWA from meeting its own obligation to reject work it knows fails to conform to the contract documents, plans, and specifications. If the exculpatory clause were interpreted to mean that BWA cannot be held accountable for failing to reject non-conforming work because the work itself is the province of the contractor, then BWA’s clearly stated responsibility to reject non-conforming work is essentially meaningless.”
However, the Court of Appeals acknowledged the term “reject” as used in the contract is ambiguous, which should be addressed by a factfinder. Also, the court noted there is a question of fact as to what BWA should have done when it found work that did not meet the homeowners’ specifications.
The appellate court remanded for further proceedings.
Civil Plenary – Home Improvement Contract Act
Faye E. Warfield and Keyotta Warfield a/k/a Nicole Warfield v. Jim Dorey d/b/a JRD Construction Services and JRD Enterprises, LLC
The Indiana Court of Appeals ruled a contractor violated the Home Improvement Contract Act when he misled a family into thinking he was locally licensed and voided the contract between the two. However, the court said he should still be paid for the work he did because the family would be unjustly enriched if he was not paid.
Faye Warfield, her daughter Keyotta Warfield, and Keyotta’s husband and daughter all lived together in a house. After it sustained hail damage, Faye Warfield filed a claim with Liberty Mutual Insurance to pay for the damage to the home’s roof. The company sent Jim Dorey and his business JRD Construction Services to look at the damage and perform the repairs. The Warfields also asked that the fireplace be rebuilt, and Dorey said he would do that, but the fireplace would not be covered by insurance.
Three months after the work was completed, Dorey was not paid and filed a complaint asserting breach of contract and unjust enrichment. He later filed a motion for summary judgment, which was granted. After a denied motion to correct error filed by the Warfields, the trial court vacated summary judgment anyway and granted Dorey 10 days to amend his complaint. The trial court conducted a bench trial and entered judgment in favor of Dorey. The Warfields appealed.
The Court of Appeals, in a decision written by Judge Patricia Riley, noted there were several violations of HICA in Dorey’s contract. It did not include the address of the home improvement supplier, failed to specify the approximate starting and completion dates of the home improvement, did not provide signature lines and did not include a notice of cancellation. While Faye Warfield is identified as the consumer, she never signed it.
Also, while Dorey was a licensed contractor, he was not licensed in Marion County at the time of his work. He also never applied for the permit for the decking work he did on the roof, even though local regulations required a permit.
“Because Dorey was yet to be licensed at the time he solicited the roofing work and failed to apply for the required permit, we conclude that he committed an incurable deceptive act as he intended to mislead Faye that he was a licensed contractor providing work in compliance with the statutory requirements and local ordinances,” Riley wrote. “While we acknowledge that ‘the General Assembly did not intend that every contract made in violation of HICA to automatically be void;’ the violation before us is precisely one of the ‘well-known abuses found in the home improvement industry’ which the HICA intended to protect the consumer against.” Because of that, the judges declared the contract void.
However, the COA ruled Dorey was still entitled to reimbursement for his work under the theory of unjust enrichment or quantum meruit. The work is a valuable benefit the Warfields would retain unjustly in the absence of making payment, Riley wrote.
The measure is usually the fair market value of services rendered, which in this case is $8,548 for the roof, $3,677.10 for the decking and $1,700 for the fireplace rebuild. The court also remanded the case to the trial court for determination of prejudgment interest at 8 percent annum.
Juvenile – Child Support Calculation
Tracy K. Barber v. Amy Henry
In a child support case in which a man challenged the decision by his son’s mother to quit her job as a doctor to stay at home with her children, the Indiana Court of Appeals found she had just cause to do so based on the sons’ special needs.
Tracy Barber appealed the modification of the child support order entered in Kentucky regarding his son, S.B., born in 1999 while he was married to Amy Henry. Henry is now married to Dr. Dan Henry, and they have a son together. She also has a son from a prior marriage, and all three sons have special needs requiring therapy and services. S.B. and B.H, her youngest, have been diagnosed with autism spectrum disorder. Her middle son, C.R., has attention deficit hyperactivity disorder.
In 2014, S.B. pleaded guilty following an incident involving a family member of his father’s and was required under probation terms to not contact the victim or the victim’s family until they had received counseling. S.B. was also on house arrest for a time after the incident and could not be left alone with any children or his siblings.
Based on these terms, as well as the children’s constant therapy and doctor appointments, Henry cut down the hours she worked as a doctor until she decided she had to stay home to care for the children. Her husband also changed jobs, which meant a pay cut, in order to spend more hours with the family.
Henry sought a protective order after Barber contacted his son by text message before Barber had completed therapy services. That protective order later was withdrawn and the court only ruled on Henry’s request for reimbursement of half of S.B.’s legal expenses. The judge ruled Barber should pay Henry more than $14,000 in those expenses, and altered his child support obligation from $230 a month to $262 a week.
Barber claimed the trial court abused its discretion in calculating Henry’s income at minimum wage when she is a doctor but chooses to stay home with her children. But the judges concluded she was unemployed for just cause and was not trying to skirt any child support obligations.
“Mother’s life revolves around her three minor sons and their therapy, and is focused on getting them the best care she can give them so they may each reach their full potential. It is not our function to ‘force parents to work to their full economic potential or make their career decisions based strictly upon the size of potential paychecks,’” Judge Patricia Riley wrote, quoting Matter of Paternity of Buehler, 576 N.E.2d at 1356 (Ind. Ct. App. 1991).
The judges found the Indiana court could order him to reimburse Henry for certain expenses related to S.B.’s criminal case, pointing out he agreed with the terms of the partial agreed order. But the judges ordered the case back to the trial court to recalculate how much Barber should pay. Henry submitted the amount of attorney fees of $14,018 but did not provide any details. The trial court should determine how much of that amount can be attributed to the protective order petition Henry originally filed.
Indiana Tax Court
Tax – Adjusted Gross Income Tax
John and Sylvia Von Erdmannsdorff v. Indiana Department of State Revenue
The owner of two shops that sold books, music and other items, as well as rented movies, got a favorable ruling regarding his adjusted gross income tax owed in the Indiana Tax Court.
John von Erdmannsdorff has operated Von’s Shops in West Lafayette since 1968, where he sells comic books, music and other gifts. Another site at issue sold comic books and rented VHS movies. The Department of State Revenue audited Von’s Shops for the 2007 and 2008 tax years, which led to the department discovering no federal or state income tax returns have been filed. The audit expanded and led to the DOR using the best information available to calculate the shops’ Indiana adjusted gross income tax liabilities. It relied on a sales financial ratio derived from BizStats, an online provider of free business stats and financial ratios, to estimate Von’s Shops’ cost of goods sold.
The von Erdmannsdorffs protested the $244,686.87 assessment, providing copies of their 2000 through 2009 income tax returns prepared by a CPA firm, two inventories of Von’s Shops derived from inventories as of Jan. 1, 2000, and Jan. 1, 2010, and several credit card statements. The DOR upheld its findings, leading to the original tax appeal in 2011.
Both parties dispute the credibility of each other’s designated evidence. The DOR claimed that the von Erdmannsdorffs couldn’t offer evidence generated post audit. But Judge Martha Wentworth pointed out, “Neither the statutes nor the case law upon which the Department relied support its claim that only contemporaneously prepared and maintained books and records may rebut the presumption of correctness afforded to its BIA Assessments as a matter of law.”
Wentworth also determined that the credibility issue couldn’t be determined on summary judgment and denied the state’s motion with regard to this issue.
Also, both parties agreed that the DOR’s methodology for computing the von Erdmannsdorffs’ Indiana adjusted gross income did not comport with the law. It does not matter, as the DOR argued, that the errors actually decreased the adjusted gross income by nearly half a million dollars for the years at issue, Wentworth ruled, because once raised, this issue must be resolved based on what the law requires.
As such, she granted the couple’s motion for partial summary judgment on this issue.
Wentworth noted she would direct the parties regarding the remaining issues for trial under separate cover.
In a memorandum decision also issued in this case, Wentworth granted the von Erdmannsdorffs’ motions to strike with respect to the DOR’s statements and designated evidence regarding the couple’s purported failure to file income tax returns for the dates before the years at issue. Wentworth denied their motions to strike with respect to the depositions, statements regarding the inventory records and statements regarding BizStats.•