Bank One Indianapolis, N.A. v. Norton

• Decision Date: 31 July 1990
• Docket Number: No. 49A02-8902-CV-65,49A02-8902-CV-65
• Citation: 557 N.E.2d 1038
• Court: Indiana Appellate Court
• Parties: BANK ONE INDIANAPOLIS, N.A., (f/k/a American Fletcher National Bank & Trust Company), Appellant (Defendant Below), v. Charles E. NORTON, individually and as personal representative of the Estate of Louise L. Norton, deceased, and Charles A. Surber, individually and both as representatives of a class, Appellees (Plaintiffs Below).

Page 1038

557 N.E.2d 1038

BANK ONE INDIANAPOLIS, N.A., (f/k/a American Fletcher National Bank & Trust Company), Appellant (Defendant Below), v. Charles E. NORTON, individually and as personal representative of the Estate of Louise L. Norton, deceased and Charles A. Surber, individually and both as representatives of a class, Appellees (Plaintiffs Below).

No. 49A02-8902-CV-65.

Court of Appeals of Indiana Second District.

July 31, 1990.

Stephen W. Terry, Jr., David K. Herzog, Baker & Daniels, Indianapolis, for appellant.

Henry J. Price, Jennifer L. Graham, Price & Shula, Indianapolis, for appellees.

SHIELDS, Presiding Judge.

Bank One Indianapolis, N.A. (Bank) appeals the trial court's certification of a class action.

We affirm.

ISSUES

I. Whether the appellees are appropriate representatives of the class given their claims may be barred by the statute of limitation.

II. Whether the class met the necessary prerequisites of Trial Rule 23(A).

III. Whether the class met the necessary prerequisites of Trial Rule 23(B).

FACTS

Bank is the manager and trustee of "Common Trust Fund B" (Trust B). "Participating trust accounts purchase shares, called 'units,' which represent a proportionate interest in the total portfolio...." Appellant's Brief at 9. Participating trust accounts established by and for the benefit of Louise Norton, Charles Norton and Charles Surber purchased shares in Trust B.

Charles Norton, individually and as personal representative of the Estate of Louise Norton, and Charles Surber (Beneficiaries) sought a class action against Bank. Bank filed a motion for summary judgment asserting Beneficiaries's claims accrued before 1982 and thus were barred by the two-year statute of limitation found at IC 34-1-2-2(1) (1988). After a hearing, that motion was denied, and pursuant to an amended complaint specifically seeking an accounting, Bank was ordered to file an accounting of the activity in Fund B commencing December 1970, when Louise Norton established her trust. The accounting was filed on September 14, 1988; Beneficiaries filed objections on November 14, 1988. After hearings, the trial court issued the order from which Bank appeals. In pertinent part, the order reads: ¹

5. ....

The issue is, whether or not after the individual trust funds were placed in Fund B, did the trustee of Trust Fund B invest the trust funds in a reasonable and prudent manner, or were the losses that occurred the result of market forces outside the control of the defendant trustee.

Record at 4048.

19. This Court finds that Objection No. 2, that is, objections that Trust Fund B was mismanaged, should be, and hereby is certified as a class action....

20. The issue to be determined in the class action then is whether the trustee of Trust Fund B acted in a reasonable and prudent manner in the administration of said Trust, as required by I.C. 30-4-3-3(C).

21. The members of the class shall be all persons who currently are or who in the past have been equitable owners of interest as grantors or beneficiaries of trusts served by Bank One, as trustee, and whose trust funds were invested by Bank One in Fund B so that such funds were so invested at any time between May 31, 1976 and June 1, 1986.

Record at 4051.

On Bank's motion, the trial court certified the order for an interlocutory appeal; thereafter, pursuant to Ind.Appellate Rule 4(B)(6), this court granted permission to file the appeal.

DISCUSSION

I.

Bank argues Beneficiaries are unsuitable class representatives because their claims are barred by the two-year statute of limitation. Beneficiaries reply this issue is not properly on appeal; the only issue certified for interlocutory appeal is the order certifying the class. Beneficiaries also assert the issue is waived because Bank failed to include in the record a transcription of the summary judgment hearing based upon the statute of limitation defense.

We agree with Beneficiaries that the only issue on appeal is the trial court's class action certification. However, in Indiana, a person whose claim is barred by the statute of limitation may not be a class representative. Warram v. Stanton (1981), Ind.App., 415 N.E.2d 114. Therefore, the argument that the statute of limitation bars the claims of the named plaintiffs is a proper issue to consider as a part of the class certification issue. The issue is not waived although the record does not contain a transcription of the summary judgment hearing. We are not reviewing the trial court's ruling on the motion for summary judgment, and the summary judgment transcript is not necessary to our decision.

Bank argues that Beneficiaries are unsuitable representatives of the class because their claims are barred by the two-year statute of limitation. This argument is unavailing. ² Whether the Beneficiaries's claims subsequently are determined to be time-barred because any breach of trust occurred beyond the limitation period is not relevant to the certified issue.

The issue certified for resolution as a class action "is whether the trustee of Trust Fund B acted in a reasonable and prudent manner in the administration of said Trust, as required by I.C. 30-4-3-3(c)." Record at 4051. This order creates a class action which encompasses only the issue of breach of duty, expiration of the limitation period is a defense and is not relevant to the issue of whether a breach of trust occurred. Thus, whether a breach occurred is entirely a separate question from whether the breach will result in ultimate liability. Before the liability issue is reached, not only must there be a breach, there must also be an injury; only when those items are answered in the affirmative is the question reached whether the actionable breach is barred by the limitation period. It is possible there is a breach but no injury, or that there is a breach and an injury but recovery is barred because the action is barred by the statute of limitations. Here, the question of a breach is being considered separate and apart from the question whether there is an injury or whether an actionable claim is barred by the statute of limitations. See T.R. 23(C)(4)(a) ("[A]n action may be brought or maintained as a class action with respect to particular issues...."); 28 U.S.C.App. Rule 23, Notes of Advisory Committee on Rules--1966 Amendment, Subdivision (c)(4) (1988) ("This provision recognizes that an action may be maintained as a class action as to particular issues only. For example, in a fraud or similar case the action may retain its 'class' character only through the adjudication of liability to the class; the members of the class may thereafter be required to come in individually and prove the amounts of their respective claims."); Jenkins v. United Gas Co. (1968), 5th Cir., 400 F.2d 28, ("[T]he Court under F.R.Civ.P. 23 has the duty, and ample powers, both in the conduct of the trial and relief granted to treat common things in common and to distinguish the distinguishable."); Sterling v. Velsicol Chemical Corp. (1988), 6th Cir., 855 F.2d 1188, 1197 ("[T]he mere fact that questions peculiar to each individual member of the class remain after the common questions of the defendant's liability have been resolved does not dictate the conclusion that a class action is impermissible." "[W]here the defendant's liability can be determined on a classwide basis because the cause of the disaster is a single course of conduct which is identical for each of the plaintiffs, a class action may be the best suited vehicle to resolve such a controversy.").

It is important to recognize the role of partial class actions in our judicial system.

The theory of Rule 23(c)(4)(A) is that the advantages and economies of adjudicating issues that are common to the entire class on a representative basis should be secured even though other issues in the case may have to be litigated separately by each class member. Accordingly, even if only one common issue can be identified as appropriate for class action treatment, that is enough to justify the application of the provision as long as the other Rule 23 requirements have been met. As a result, cases have applied subdivision (c)(4)(A) to allow a partial class action to go forward and have left questions of reliance, damages, and other issues to be adjudicated on an individual basis.

C. Wright, A. Miller & M. Kane, Federal Practice and Procedure: Civil 2d Sec. 1790, at 271-74 (1986) (footnotes omitted).

The possibility Beneficiaries's claims may later be determined to be time-barred does not prevent Beneficiaries from being class representatives on the issue of breach of trust. ³ Indeed, the existence of any number of possible defenses is irrelevant to the certified issue. Those issues may be handled later in individual actions. ⁴

II.

A.

Bank argues the trial court erred in certifying the class under T.R. 23(A)(2) because the claims presented are not common to all members of the class but are primarily individual questions. ⁵ Bank argues in several sections of its brief that claims by some members of the class are time-barred, that some class members made a profit, that members of the class are subject to unique defenses requiring "testimony from [each] individual" (Appellant's Brief at 35) member of the class, and that the awareness of the class members is different. Therefore, Bank concludes, the class should not have been certified. We disagree.

The certified issue is "whether the trustee of Trust Fund B acted in a reasonable and prudent manner in the administration of said Trust." Record at 4051. This question is common to all members of the class. If Trust B was not administered in a reasonable and prudent manner, the resulting mismanagement is common to all unitholders. Individual questions, including lack of injury and possible individual defenses of the statute of limitation, laches, waiver, estoppel and ratification, will arise only after the common questions related to the...