COA affirms for estate in dispute with former business associate

A man who found himself in a dispute with his former business partner’s estate failed to convince the Court of Appeals of Indiana to overturn rulings favorable to the estate but not to him.

In August 2001, Joel Beavins filed articles of organization for Stewart Properties LLC, listing himself as the organizer and registered agent. In 2012, Beavins and David Arnett began conducting business together.

Arnett was tasked with managing four of the properties that he believed were owned by Stewart Properties, including three rental properties and another property where Arnett resided and used for his business, Auto Annex. Arnett also collected rents, executed leases with tenants, made capital improvements, performed maintenance and paid utility bills.

In May 2019, Beavins and Arnett met with commercial loan broker Charles Ryder and signed a letter of intent for a private commercial loan that would finance a transfer of ownership of the rental properties to Arnett. They also allegedly executed an operating agreement for Stewart Properties in June 2019, with plans for Arnett to own 82% of the organization.

But no commercial loan was ever made. Instead, in August 2019, Beavins, on behalf of Stewart Properties, and Arnett, on behalf of Auto Annex, signed a promissory note whereby Auto Annex promised to pay to Stewart Properties $280,000 plus interest, to be paid in full by Aug. 31, 2029. The first payment under the note was due on Nov. 1, 2019.

But Beavins died in October 2019 before any payment could be made on the note. In March 2020, his estate, by its personal representative and his widow, Jill Beavins, filed a complaint against Arnett requesting possession of the residence he lived in, an accounting from Arnett for rent collected at all four properties, conversion against Arnett for rents collected, treble damages and past-due rent.

Arnett countered and the estate filed a motion for summary judgment on two issues, including the issue of whether Arnett was even a member of Stewart Properties. The estate then filed motions to strike when Arnett filed his designation of evidence in opposition to summary judgment.

The Johnson Superior Court ruled for the estate, granting in part the motions to strike and handing down a detailed order granting the estate partial summary judgment on the membership issue. Affirming in an interlocutory appeal, the COA found the trial court did not abuse its discretion in striking portions of Arnett’s designated evidence.

First, the appellate court had little difficulty concluding the trial court properly struck portions of Arnett’s affidavit regarding alleged business arrangements that occurred between Arnett and Beavins during his lifetime. That’s because, under the Indiana Dead Man’s Statute, it is “unquestionable that Arnett is a necessary party to the current suit as both a defendant and a counterclaimant and that his alleged membership interest in Stewart Properties is clearly adverse to the interest of the Estate.”

The appellate court also agreed with the trial court’s conclusion that neither an email from Ryder nor its attachment with “an executed copy of an Operating Agreement entered into between Joel Beavins and David Arnett” was properly authenticated, and therefore both were inadmissible.

Finally, the COA found no error in the trial court’s grant of partial summary judgment in favor of the estate regarding ownership of Stewart Properties. It agreed with the estate that because Jill’s consent was required for admission of any new member pursuant to the articles of organization and by statute, and because she testified that she did not give that consent, Arnett could not have acquired valid membership in Stewart Properties in 2019.

“Therefore, we conclude as a matter of law that Arnett is not a member of Stewart Properties. The trial court did not err in granting partial summary judgment in favor of the Estate,” the appellate panel concluded.

The case is David L. Arnett, Individually, and d/b/a Auto Annex, Inc. v. The Estate of Joel S. Beavins, By Its Personal Representative, Jill E. Beavins, and Stewart Properties, LLC, 21A-EU-1484.

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