Balvich v. Spicer
| Decision Date | 29 September 2008 |
| Docket Number | No. 37A03-0803-CV-101.,37A03-0803-CV-101. |
| Citation | 894 N.E.2d 235 |
| Parties | John J. BALVICH, Arlene Balvich, Jordan Balvich and Beth Balvich, Appellants-Defendants, v. Stephen C. SPICER and Maureen Spicer, Appellees-Plaintiffs. |
| Court | Indiana Appellate Court |
David A. Rosenthal, Lafayette, IN, Attorney for Appellants.
John T. Casey, Rensselaer, IN, Attorney for Appellees.
Appellants-defendants John, Arlene, Jordan, and Beth Balvich (collectively, the Balviches) appeal the trial court's judgment entered in favor of the appellees-plaintiffs Stephen and Maureen Spicer (the Spicers) regarding the Spicers' claim against them for contribution on various deficiency judgments that had been entered against the Spicers. Specifically, the Balviches argue that the Spicers' action against them was barred by the statute of limitations, that joint and several liability should not have attached, and that the Spicers erroneously obtained a judgment against them with regard to tax liabilities of the various business entities because the Indiana Tax Court had exclusive jurisdiction over such matters. Finding no error, we affirm the judgment of the trial court.
Dr. James Balvich (Dr. Balvich) and several of his family members owned and operated various Hardee's Restaurant franchises in Indiana. More specifically, the business named Group Management, Inc. (GMI), owned and operated a Hardee's in Rensselaer, Group Management II operated the Hardee's in Middlebury, and Group Management III engaged in business in Remington. Each restaurant was separately incorporated, and the distinct corporate entities did not share common ownership.
At some point, Dr. Balvich asked the Spicers to participate in the business. After agreeing to do so, the Spicers jointly owned 25% of GMI, 50% of Group Management II, and 16.55% of Group Management III. Beth and Jordan Balvich jointly owned a 5% interest in GMI and a 5.34% combined interest in Group Management III. However, neither Beth nor Jordan actively participated in the operation of the businesses.
Dr. Balvich was the president of the GMI entities beginning in October 1991, and Stephen served as the treasurer of all three corporations. GMI borrowed $700,000 from Bank One in Rensselaer as a small business loan. Several of the Balviches and the Spicers personally guaranteed the loan on October 15, 1991.
At some point, the corporate Board of Directors, which consisted of Balvich family members, voted Stephen out of office after he questioned some financial dealings. The businesses began to fail, and during the summer of 1995, John and Beth Balvich and the Spicers took control of the corporate records in an attempt to salvage the businesses. Dr. Balvich eventually left Monticello and relocated his medical practice to South Carolina. As a result, the Spicers and John and Arlene Balvich became the shareholders who operated the three businesses.
GMI ultimately defaulted on the loan and Bank One filed an action to foreclose the mortgage liens on the property that secured the loan. After Bank One obtained judgment on November 8, 1996, the properties were sold through a Sheriff's sale on May 21, 1997, which resulted in a deficiency judgment in the amount of $199,000. The judgment was entered against all guarantors jointly and severally.
Four of the guarantors were released because of bankruptcy proceedings, and no service was ever obtained on Joann Balvich. On January 14, 2002, the Spicers obtained a release of the judgment following their payment to Bank One in the sum of $152,500.
On July 9, 1998, John and Arlene Balvich paid $5000 to obtain a release from Bank One, and Jordan and Beth Balvich also paid $5000 to obtain a release on judgment.
Group Management II had obtained its financing from AT & T Financial Corporation (AT & T). After that loan went into default, a judgment was entered against Group Management II in a New Jersey court in the amount of $247,998.57. Thereafter, AT & T registered its judgment in Indiana. The Spicers paid AT & T $60,000 on September 13, 1997, and obtained a release of the judgment. AT & T also released John and Arlene Balvich after they paid the sum of $15,000.
The Indiana Department of Revenue (Department of Revenue) sought payment of Trust Withholding Tax Accounts that were for sales tax and employee withholding taxes. The Spicers paid the State the sum of $75,182 to satisfy the obligations of the businesses. The Department of Revenue entered a finding declaring that the Spicers were the responsible parties for paying the taxes.
On February 13, 2004, the Spicers instituted an action against the Balviches for contribution for the $152,500 payment to Bank One, the $60,000 payment to AT & T, and the $75,182 payment to the Department of Revenue.
Following the trial, which commenced on October 19, 2007, the trial court took the matter under advisement. The parties were ordered to submit proposed findings of fact and conclusions of law, and on December 26, 2007, the trial court entered judgment for the Spicers and issued the following findings:
FINDINGS OF FACT
The evidence at trial showed that on July 9, 1998, John and Arlene Balvich paid ... $5,000 to gain a release from Bank One; Jordan and Beth Balvich paid ... $5,000 to gain a release from Bank One on the deficiency judgment previously entered. It was represented by the parties at trial that no one conveyed that information to Stephen or Maureen Spicer.
...
Further, the Court finds that A.T. & T. entered a release of judgment against John and Arlene Balvich in which John and Arlene Balvich paid to A.T & T the sum of ... $15,000.
...
The Court finds that there are three issues to be decided:
First, what statute of limitations controls the actions before the Court for the purposes of an action on contribution, and when does the time on that particular action begin to run.
Second, are the Spicers entitled to contribution from the other guarantors and shareholders within the particular corporation; and
Third, are the Spicers entitled to contribution from the remaining shareholders, John and Arlene Balvich, for the payment of Indiana trust account taxes.
[T]he Court makes the finding that it makes no difference whether the Court determines whether the six (6) year statute applies or the ten (10) year statute because of the following reasoning: Steve and Maureen had no right to seek contributions from any of the Defendants until such time as they had been forced to pay sums of money to Bank One to satisfy the obligation under [GMI's] ... $700,000 loan and deficiency of ... $199,000 plus. Until they had been forced to pay certain sums of money and until Bank One had released them of obligations thereunder, they had no right to ask for contributions since that contribution could not be established with any certainty until they had been released from any obligations by Bank One.
The Court finds that that release by Bank One was filed with the Court on January 14, 2002. Therefore, whether the Court applies the ten ... year statute or the six ... year statute, neither is of a concern since as to that litigation the Spicers' right to ask for contribution in which they were no longer liable to Bank One was established by court order on January 14, 2002.
As a side note, the Court finds that the statute of limitations on the judgment entered in which contribution is requested by implication would be a ten (10) year statute as it would apply to those seeking contribution. As previously stated, the Court finds that it is of no materiality since the release was obtained within either of the statutes.
...
The Court further notes that the guarantee that was executed by the parties in this matter was a joint and several obligation, and the judgment entered by Bank One was a joint and several obligation.
As to the Defendant[s'] argument that this matter is based on the promissory note existing by and among John, Arlene, Jordan, Beth, Steve, and Maureen, the Court finds that the promissory note does not exist as between those parties; but that the promissory note exists as between Bank One and [GMI]. There is no "bill of exchange" existing between the parties with Bank One.
It is further obvious to this Court this is not an action for breach of contract as there is no contract between the Spicers and either Balvich family.
Therefore, the Court finds in the Bank One litigation and the A.T. & T. litigation, the Spicers were within the statute of limitations as previously determined by this Court, and therefore finds that they may proceed with this litigation and the Court must proceed with further analysis of this matter.
Plaintiff has directed the Court to I.C. 26-1-3.1-116 which provides, in part The Court notes that the two judgments entered in this matter were entered with joint and several liability against all parties before the Court. All of the parties involved in these investments are not responsible because of certain members of the group receiving discharge in bankruptcy, or as in one case, secreting herself to avoid service to become a part of the litigation, thus switching the burden to the six ... parties appearing before the Court.
The statute cited above has an exception found in Section 419(e) which defines and applies the "principle of an accommodating party." Thus, the litigants before this Court are accommodation parties or accommodating parties. The Court finds that by applying the facts of this case, the...
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