Bacompt Systems, Inc. v. Ashworth

• Decision Date: 20 July 2001
• Docket Number: No. 29A02-0009-CV-565.,29A02-0009-CV-565.
• Citation: 752 N.E.2d 140
• Parties: BACOMPT SYSTEMS, INC., Appellant-Defendant, v. Paul S. ASHWORTH, Appellee-Plaintiff.
• Court: Indiana Appellate Court

752 N.E.2d 140

BACOMPT SYSTEMS, INC., Appellant-Defendant, v. Paul S. ASHWORTH, Appellee-Plaintiff.

No. 29A02-0009-CV-565.

Court of Appeals of Indiana.

July 20, 2001.

Craig Pinkus, Sydney L. Steele, Steven L. Jones, Lowe, Gray, Steele & Darko, LLP, Indianapolis, IN, Attorneys for Appellant.

Richard R. Skiles, Janet M. Prather, Skiles, Hansen, Cook & DeTrude, Indianapolis, IN, Attorneys for Appellee.

OPINION

MATHIAS, Judge.

Bacompt Systems, Inc., appeals the trial court's entry of summary judgment in favor of Paul Ashworth. Bacompt raises six issues on appeal, which we consolidate and restate as:

I. Whether the trial court erred in granting summary judgment in favor of Ashworth regarding Bacompt's counterclaims; and

II. Whether the trial court erred in its award of attorney fees to Ashworth.

We affirm.

Facts and Procedural History

The facts most favorable to the non-movant reveal that Ashworth was one of the original employees of Bacompt Systems, Inc., a closely-held corporation. By mid-1994, Ashworth was also a director, officer, and minority shareholder of Bacompt. At all times pertinent, Ashworth was bound by an employee confidentiality and non-compete agreement.

In or around July of 1994, Buddy Stanley, acting on behalf of Bacompt as its president and chief executive officer, entered into negotiations with representatives of Copy Rite, Inc., regarding Copy-Rite's acquisition of Bacompt. At Stanley's request, Ashworth agreed not to communicate with CopyRite about its potential purchase of Bacompt without Stanley's knowledge and consent. The last contact Stanley had with CopyRite was at a meeting on September 8, 1994. Sometime thereafter, Ashworth contacted CopyRite and expressed interest in employment with their corporation. Copy-Rite hired Ashworth, and in December of 1994, he resigned from Bacompt to begin working for CopyRite.

On December 31, 1993, prior to the facts at issue, Bacompt borrowed nearly $45,000 from Ashworth. The promissory note provided that Bacompt would repay Ashworth the principal plus interest "on or before the 31st day of December, 1996." R. at 16. Bacompt made several interest payments totaling $4148.88, prior to March of 1995. In late April of 1995, Bacompt issued a letter through its attorney notifying Ashworth that it would "regard the loan balance owed Paul [Ashworth] as a set-off against the damages incurred to date," and that "[n]o further interest or principal payments" would be made. R. at 89. As of the December 1996 due date, the entire principal plus additional accrued interest remained unpaid.

On April 1, 1997, Ashworth filed a cause of action against Bacompt seeking payment of the promissory note plus attorney fees. On May 27, 1997, Bacompt filed its answer, affirmative defenses and counterclaims against Ashworth. In its counterclaims, Bacompt alleged (1) that Ashworth breached his fiduciary duty to Bacompt by undermining the sale negotiations with CopyRite when he contacted CopyRite seeking employment, and (2) that he committed corporate waste.¹ With respect to the promissory note, the trial court granted summary judgment without opinion in favor of Ashworth on October 1, 1998. Ashworth filed a motion for summary judgment on Bacompt's counterclaims, which was likewise granted without opinion in favor of Ashworth on October 27, 1999.

On March 9, 2000, the trial court conducted a hearing to determine damages and attorney fees arising from nonpayment of the promissory note. Ashworth also requested attorney fees incurred as a result of defending against Bacompt's counterclaims. On May 3, 2000, the trial court issued findings of fact and conclusions of law with regard to Ashworth's request for damages. The trial court awarded Ashworth $62,511.44 in principal and interest and $10,210.84 in attorney fees with regard to the promissory note. In addition, because the trial court found Bacompt's counterclaims to be groundless and time-barred, it awarded Ashworth $16,302.20 for attorney fees incurred between June 9, 1999, and December 6, 1999, that were attributable to defending against Bacompt's counterclaims.

In early June of 2000, the trial court heard Bacompt's motion for sanctions. In its findings and conclusions issued shortly thereafter, the trial court ruled in favor of Bacompt and ordered that the appropriate remedy would be to allow Bacompt to re-open the issue of Ashworth's attorney fees. In accordance with its ruling, on July 7, 2000, the trial court heard additional evidence pertaining to Ashworth's request for attorney fees and also heard evidence on Bacompt's motion to correct error. On July 25, 2000, the trial court issued an order affirming its previous findings and conclusions issued on May 3, 2000, and denying Bacompt's motion to correct error. It is from this ruling that Bacompt now appeals.

I. Summary Judgment

Bacompt contends that the trial court erred in granting summary judgment in favor of Ashworth as to Bacompt's counterclaims. In reviewing a grant of summary judgment, we stand in the shoes of the trial court, utilizing the same standards and resolving any questions of fact or inferences drawn therefrom in favor of the non-moving party. Bamberger & Feibleman v. Indianapolis Power & Light Co., 665 N.E.2d 933, 936 (Ind.Ct.App. 1996). Summary judgment should be granted when the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). The trial court's grant of summary judgment will be affirmed if it is sustainable on any theory found in the evidence designated to the trial court. Bamberger, 665 N.E.2d at 936.

The trial court did not enter findings and conclusions with its order granting summary judgment in Ashworth's favor as to Bacompt's counterclaims. However, the trial court included its reasons for granting summary judgment in its May 3, 2000, findings and conclusions entered subsequent to Ashworth's request for attorney fees. The pertinent portion of the trial court's conclusion of law number eight states that:

Although pursuing the counterclaim after June 2, 1999, was probably unreasonable, the Court need not reach that issue because Defendant's claim was groundless. First, the statute of limitations had run on Defendant's counterclaim. Second, even if the statute of limitations had not run, there were no facts which supported Defendant's claim that Plaintiff breached his fiduciary duties.

R. at 536.

Bacompt asserts that the trial court erred in granting summary judgment in favor of Ashworth on the basis that Bacompt's counterclaims were time-barred. Specifically, Bacompt claims that the balance owed on the promissory note is a proper set-off to the amount of damages Ashworth caused by breaching his fiduciary duty. We disagree.

Until 1969, the authority to assert a set-off in Indiana courts was derived from statute, and limited to actions arising from an "independent contract, express or implied."² When the statutes pertaining to set-off were repealed in 1970, the "declared intention" of the 1970 Civil Code Study Commission was to incorporate the doctrine of set-off and its history into the newly drafted Indiana Trial Rules. See 1A William F. Harvey, Indiana Practice § 13.16. The result of the Commission's effort was Indiana Trial Rule 13, whereby a set-off could be pleaded in the form of a counterclaim. However, despite this "declared intention," what constitutes a "set-off" and how it fits within modern trial procedure are questions with cloudy answers. Id.

Trial Rule 13 does not mention the concept of set-off by that term. Trial Rule 13 instead distinguishes between two types of counterclaims that may be asserted in a cause of action. Counterclaims are either compulsory (required to be made) or permissive (at the option of the defendant or the court). Rees v. Panhandle Eastern Pipe Line Co., 452 N.E.2d 405, 408 (Ind. Ct.App.1983). The compulsory counterclaim is further described in subsection (A) of T.R. 13, which provides in pertinent part:

A pleading shall state as a counterclaim any claim, which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject-matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

Ind.T.R. 13(A)(emphasis added). The permissive counterclaim is further described in subsection (B) as: "any claim against an opposing party not arising out of the transaction or occurrence that is the subject-matter of the opposing party's claim." Ind.T.R. 13(B)(emphasis added). Like its federal counterpart, Indiana Trial Rule 13(B) is presently the avenue through which defensive claims denominated as set-offs are asserted.

Indiana Trial Rule 13(J)(1) provides that a counterclaim, otherwise barred by a statute of limitations, may be asserted when "it diminishes or defeats the opposing party's claim if it arises out of the transaction or occurrence that is the subject-matter of the opposing party's claim, or if it could have been asserted as a counterclaim to the opposing party's claim before it (the counterclaim) was barred." Ind. T.R. 13(J)(1). The first type of counterclaim described in 13(J)(1) is clearly a compulsory counterclaim. It follows then that the second type of counterclaim described would be any permissive counterclaim, including a set-off, that was a viable claim against the opposing party but which does not arise out of the same transaction or occurrence which is the subject of the opponent's complaint.

Bacompt insists that its counterclaims arise out of the same operative facts as Ashworth's claim for payment of the promissory note. Bacompt offers Reddick v. Carfield, 656 N.E.2d 518 (Ind.Ct.App. 1995), in support of its contention. In Reddick, this court stated:

We have held that

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