Brown v. Jones

• Decision Date: 18 March 2004
• Docket Number: No. 18A02-0306-CV-469.,18A02-0306-CV-469.
• Citation: 804 N.E.2d 1197
• Parties: F. Scott BROWN, Total Business Solutions, Inc., and Brown Financial Company, Inc., d/b/a Total Business Solutions, Appellants-Defendants/Counterclaimants, v. Michael P. JONES, Appellee-Plaintiff/Counterdefendant.
• Court: Indiana Appellate Court

804 N.E.2d 1197

F. Scott BROWN, Total Business Solutions, Inc., and Brown Financial Company, Inc., d/b/a Total Business Solutions, Appellants-Defendants/Counterclaimants, v. Michael P. JONES, Appellee-Plaintiff/Counterdefendant.

No. 18A02-0306-CV-469.

Court of Appeals of Indiana.

March 18, 2004.

David W. Stone IV, Stone Law Office & Legal Research, Anderson, IN, Donald H. Dunnuck, Dunnuck & Associates, Muncie, IN, Attorneys for Appellants.

Eric N. Allen, Kevin G. Harvey, Allen Wellman McNew, Greenfield, IN, Attorneys for Appellee.

OPINION

BAILEY, Judge.

Case Summary

Appellants/Defendants/Counterclaimants F. Scott Brown ("Brown"), Total Business Solutions, Inc. and Brown Financial Company, Inc., d/b/a Total Business Solutions, appeal a jury verdict in favor of Appellee/Plaintiff/Counterdefendant Michael P. Jones ("Jones") on his conversion claim.¹ We reverse and remand.

Issue

Brown presents two issues for review, the following of which we find dispositive:

Whether the trial court invaded the province of the jury by reading Plaintiff's Exhibit I—Findings of Fact, Conclusions of Law and Judgment dissolving the corporations owned by Brown and Jones—and instructing the jury that the facts contained therein were judicially noticed and conclusive.

Facts and Procedural History

In April of 1997, Brown, Jones and Doug Poling ("Poling") incorporated Total Business Solutions, Inc. ("TBS"), an employee leasing business. Initially, Brown owned 50% of the corporation's stock, and Jones and Poling each owned 25%. Brown was also the owner of Brown Financial Company, Inc. ("BFC"), which had been in business since 1991. The incorporators of TBS decided that TBS should be operated as part of BFC, in order to take advantage of the workers compensation insurance rates and unemployment compensation rates available to BFC as a long-standing business.

Jones, a regional sales director for AFLAC insurance, also became an employee of TBS during late 1997 or early 1998, with responsibilities in sales and marketing. Jones was to receive a $6,000.00 monthly salary from TBS, but agreed to tender to TBS his commissions from the sales of AFLAC policies. In February 1999, Brown informed Jones that he would receive a bi-weekly check of only $2,000.00, and that he would receive a 1099 form instead of a W-2 form for tax purposes. On July 28, 1999, Jones purchased Poling's stock. Thereafter, Brown informed Jones that he would receive no salary, but would receive monthly distributions as an equal owner of TBS.

Jones requested access to the financial records of TBS, without success. On March 27, 2000, Jones delivered to Brown a letter drafted by Jones' attorney demanding access to TBS documents. Brown responded by demanding that Jones leave the business premises. Later that day, Jones returned to find that he had been locked out.

On April 24, 2000, Jones filed a complaint against Brown, TBS and BFC (hereinafter collectively referred to as "Brown"), seeking conversion damages, inspection of corporate records, appointment of a receiver and corporate dissolution. The complaint alleged that the assets of TBS and BFC were improperly commingled, the shareholders were deadlocked, and that Brown failed to properly account for the income and assets of TBS while receiving excess distributions to himself. Brown counterclaimed, alleging that Jones breached employment and expense contracts and committed fraud and conversion.

On September 12, 2000, the trial court held a hearing on the request for the appointment of a receiver. On October 3, 2000, the trial court entered "Findings of Fact, Conclusions of Law and Judgment Dissolving Corporations and Appointing Receiver." App. 86. On November 1, 2001, the receiver filed a final accounting, which was approved by the trial court on January 8, 2002.

On February 12, 2002, Brown filed a motion for summary judgment on the remaining claims of Jones' complaint, which motion was denied by the trial court on April 17, 2002. On September 9, 2002, Jones filed a motion for summary judgment as to all claims in Brown's counterclaim. On November 21, 2002, following a hearing, the trial court granted summary judgment to Jones on all of Brown's claims except the fraud claim.

On February 5, 2003, trial upon the conversion and fraud claims of the complaint and counterclaim commenced. On February 7, 2003, the jury returned a verdict in favor of Jones upon his conversion claim in the amount of $132,000.00. The jury found against Brown on the fraud counterclaim. This appeal ensued.

Discussion and Decision

Conclusiveness of Plaintiff's Exhibit 1

Article I Section 20 of the Indiana Constitution provides as follows: "In all civil cases, the right of trial by jury shall remain inviolate." Brown contends that the trial court "effectively nullified that right," Appellant's Br. at 13, by reading to the jury, who was charged with determination of the fraud and conversion claims the entire text of Plaintiff's Exhibit 1, Findings of Fact, Conclusions of Law and Judgment Dissolving Corporations and Appointing Receiver, and by instructing the jury as follows:

The Court has taken judicial notice of its Findings of Fact, Conclusions of Law, and Judgment Dissolving Corporations and Appointing Receiver, which were issued by the Court in the case on October 3, 2000. This means that, in your deliberations, you must accept the facts contained in those Findings, which have been offered into evidence, as having been conclusively proved.

(Tr. 659-60.) As a threshold matter, we consider whether Brown waived his allegation of error, as Jones contends. At the jury trial, Jones' counsel proffered Plaintiff's Exhibit 1, without objection from Brown, who initially agreed that "the court obviously can take judicial notice of its own records[.]" (Tr. 42.) However, when it became apparent that the trial court intended to read to the jury the findings and conclusions of Exhibit 1 in their entirety, Brown immediately objected that the procedure invaded the province of the jury:

I object to it being read to the jury because that was a hearing that was for the sole purpose of appointing a receiver and declaring the corporations insolvent. The trier of fact is to determine what the agreement was between the parties and whether the parties breached the agreement. So, for that reason, I object to the Court, the Court's decisions on the—the reasoning behind the Court's decision of appointment of a receiver and the liquidation of the corporation, and the reason is that there's evidence that the Court did not have presented before it that it will have—the jury will have today. So, I would object to the Court's Order of that date preempting the province of the jury.

(Tr. 42-43.) As such, Brown's contention that the trial court invaded the province of the jury was adequately preserved for appellate review.

The findings and conclusions of Plaintiff's Exhibit 1 reveal the bases for the trial court's decision that the business of TBS could not be conducted advantageously to the deadlocked shareholders and thus TBS should be dissolved. However, the findings include several statements indicating that the trial court found Brown's conduct wrongful and his testimony lacking in credibility.² It is these findings, in particular, that Brown finds invasive of the province of the jury in deciding whether Brown committed conversion. In response, Jones contends that a court may take notice of its own records, and every fact incorporated within court records, once final, may be judicially noticed and given conclusive effect in subsequent proceedings between the same parties. This case invokes the principles of both judicial notice and claim preclusion.

Indiana Evidence Rule 201 provides in relevant part as follows:

(a) Kinds of Facts. A court may take judicial notice of a fact. A judicially-noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court, or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned....

(g) Instructing the Jury. In a civil action or proceeding, the court shall instruct the jury to accept as conclusive any fact judicially noticed. In a criminal case, the court shall instruct the jury that it may, but is not required to, accept as conclusive any fact judicially noticed.

Accordingly, a court may take judicial notice of a fact not subject to reasonable dispute. Sanders v. State, 782 N.E.2d 1036, 1038 (Ind.Ct.App.2003). Judicial notice excuses the party having the burden of establishing a fact from the necessity of producing formal proof. Id. (citing Hutchinson v. State, 477 N.E.2d 850, 854 (Ind.1985)). As a general rule, a trial court may not take judicial notice of its own records in another case previously before the court even on a related subject with related parties. Henderson v. State, 544 N.E.2d 507, 512 (Ind.1989). However, a trial judge may take judicial notice of the pleadings and filings in the very case that is being tried, and a rebuttable presumption arises, which requires the defendant to come forward with evidence to dispute the presumption. Sanders, 782 N.E.2d at 1038 (citing Owen v. State, 272 Ind. 122, 129, 396 N.E.2d 376, 381 (1979)). Even so, facts recited within the pleadings and filings that are not capable of ready and accurate determination are not suitable for judicial notice. Id.

Although the trial court and the parties have couched the issue of conclusiveness of the facts contained in the receivership decree in terms of "judicial notice," we are not concerned with "generally known" facts within the purview of Evid. R. 201(a)(1). "The impossibility of reasonable dispute marks such facts, and justifies their acceptance as true without proof." Miller, INDIANA EVIDENCE § 201.103 (2d ed.1995). Alternatively, Evid. R. 201(a)(2) encompasses facts ascertainable...