Budden v. Board of School Com'rs of the City of Indianapolis

• Decision Date: 10 June 1997
• Docket Number: No. 49A05-9609-CV-380,49A05-9609-CV-380
• Citation: 680 N.E.2d 543
• Parties: Herb BUDDEN, Bonnie Budden and Christine Muller, Individually, and as Representatives of a Class of Teachers, Appellants-Plaintiffs, v. The BOARD OF SCHOOL COMMISSIONERS OF THE CITY OF INDIANAPOLIS, Ash Financial Group, Inc., Shirl Gilbert, Individually, and Brent W. Ash, Individually, Appellees-Defendants.
• Court: Indiana Appellate Court

Page 543

680 N.E.2d 543

Herb BUDDEN, Bonnie Budden and Christine Muller Individually, and as Representatives of a Class of Teachers, Appellants-Plaintiffs, v. The BOARD OF SCHOOL COMMISSIONERS OF THE CITY OF INDIANAPOLIS, Ash Financial Group, Inc., Shirl Gilbert, Individually, and Brent W. Ash Individually, Appellees-Defendants.

No. 49A05-9609-CV-380.

Court of Appeals of Indiana.

June 10, 1997.

Rehearing Denied Sept. 3, 1997.

Michael K. Sutherlin, Patricia Orloff Grow, Indianapolis, for Appellants-Plaintiffs.

Reuben B. Hill, Indianapolis, Donald L. Dawson, Robert M. Kelso, Robert J. Smith, Kightlinger & Gray, Indianapolis, for Appellees-Defendants.

OPINION

SHARPNACK, Chief Judge.

This case is before us on interlocutory appeal. Herb Budden, Bonnie Budden, and Christine Muller (collectively "appellants") appeal the entry of partial summary judgment and denial of their class certification in favor of defendants-appellees, the Board of School Commissioners of the City of Indianapolis ("IPS"), Ash Financial Group, Inc. ("AFG"), Shirl Gilbert, and Brent W. Ash (collectively "appellees"). The appellants challenge both rulings.

We affirm.

The facts most favorable to the appellants, the nonmovants, follow. ¹ The appellants are employed by IPS as teachers. As IPS employees, they participated in a tax sheltered annuity program ("TSA") and a mutual fund 403(b)(7) investment plan ("investment plan") in which money was deducted from their wages and invested. On July 25, 1991, IPS entered into an agreement with AFG to serve as the administrator for the TSA and investment plan. Under the agreement, AFG was required to distribute the appellants' money received from IPS into a TSA or investment plan held by one of the insurance or investment companies specified in the agreement. The agreement was to continue until June 30, 1994. Thereafter, the agreement would continue year to year unless either party provided written notice of termination within sixty days from the expected termination date.

In 1992, IPS began to receive complaints regarding AFG's administration of the funds. The complaints concerned AFG's failure to timely forward the IPS deductions to the investment companies. On June 23, 1992, Donald Barr, the assistant business manager for IPS, sent Ash, AFG's president, a letter stating in part that "[o]nce again I have received complaints concerning the sending of monies to different companies for our employee's [sic] TSA plans. This time, as opposed to earlier complaints, this round appears to be a mortal wound." Record, p. 38.

On November 25, 1992, Barr sent a memorandum to Rodney Black, IPS' Business Manager, regarding AFG's administration of the funds. In the memorandum, Barr summarized the problems with AFG's administration. Barr also indicated that he had begun to oversee AFG's administration and concluded that with supervision, AFG's performance "appears to be better." Record, p. 217. On March 24, 1994, IPS sent written notice to AFG to terminate the contract effective June 30, 1994.

In September of 1994, IPS' superintendent, the Board, and representatives of the union directed Donald Ragland, IPS' internal auditor, to gather information from the investment companies with regard to whether there were "any missing funds that they may discover." Record, p. 219. This investigation was prompted because they "had had some indication from a couple of the annuity companies that payments were not being made .... [and] were interested in trying to determine how many people were affected, how many companies were affected." Record, p. 220.

On September 21, 1994, Duncan Pritchett, the interim IPS superintendent, composed a letter to IPS employees. The letter provided in part as follows:

"It is my unfortunate responsibility to inform you of a potential problem which may impact your voluntary employee annuity account.

We have reason to believe that [AFG] which administered [TSA] accounts for approximately 941 IPS employees from July, 1991 through June 30, 1994, failed to distribute approximately $350,000 in funds deducted from employees' salaries to the insurance/annuity companies selected by the employees.

At this time, IPS does not know how many of the employees whose TSA payments were being serviced through AFG are affected. IPS has begun an examination of AFG's records to ascertain the number and identity of the employees...."

Record, p. 254. In December of 1994, a decision was made to turn the investigation over to the U.S. Attorney's Office and the Department of Insurance.

On January 27, 1995, counsel for the appellants filed a tort claim notice to advise "that our office has been retained by Herb Budden, Bonnie Budden, and Christine Muller, teachers in the Indianapolis Public School system, and potentially all teachers who had 403 funds embezzled by [AFG] to represent their interests in any claims they may have against the Indianapolis Public School Corp and [AFG]." Record, p. 98.

On June 13, 1995, the appellants filed a class action complaint for damages alleging that the appellees "engaged in negligent actions and intentional wrongdoing with resulted in the theft of funds that the plaintiffs placed in the mutual funds pension plan." Record, p. 19. The first count of the complaint alleged that IPS negligently selected AFG and Ash as the administrator, failed to control the conduct of AFG and Ash, and breached a fiduciary duty to the appellants for negligently selecting and retaining AFG as the administrator. The second count alleged that Gilbert, the former superintendent of IPS, failed to share information with appellants and misrepresented the status and competency of AFG and Ash to IPS. The third count alleged that AFG and Ash embezzled and stole approximately $400,000 from the appellants.

On November 14, 1995, the appellants filed a motion for certification of class pursuant to Ind. Trial Rule 23. On November 30, 1995, the appellees filed a brief in opposition to the motion for class certification. On December 4, 1995, the defendants filed a motion for partial summary judgment, along with a designation of evidence and a memorandum in support of the motion.

On December 19, 1995, the trial court held a hearing on the appellants' motion to certify a class and later issued the following preliminary ruling:

"The Court having heard evidence and argument on Plaintiffs' Motion to Certify Class Action finds that Plaintiffs have complied with Trial Rule 23. The basic problem with Plaintiffs [sic] motion is the adequacy of notice under the Indiana Tort Claims Act.

The Court finds that at the present posture of the case, the Plaintiffs are entitled to proceed with the class action. However, the Court will have to conduct a hearing on Defendants' Motion for Partial Summary Judgment before the certification issue is finally resolved."

Record, p. 171.

On May 10, 1996, the appellants filed a designation of evidence and response in opposition to the appellees' motion for partial summary judgment. On May 16, 1996, the appellees filed a supplemental designation of evidence and a motion to strike portions of the appellants' designation of evidence. ² On May 23, 1996, the appellants filed a supplemental designation of evidence. On the following day, before the trial court held a hearing on the motion for partial summary judgment, the appellees filed a motion to strike the appellants' supplemental designation of evidence. On July 18, 1996, the trial court issued the following order:

"(1) Defendant's [sic] Motion to Strike Plaintiffs' Supplemental Designation and Tender of Evidence of affidavits is granted. Likewise Defendant's [sic] Supplemental Designations and Tender of Evidence is stricken.

* * * * * *

(3) Plaintiff's [sic] Motion to Certify this case as a class action is denied. This cause ... will proceed as a claim by the plaintiffs Herb Budden, Bonnie Budden and Christine Mueller. [sic] (Perhaps, the stringent notice requirements as set out in Alonso [v]s. City of Hammond, 648 N.E.2d 1221, should be revisited by the Court of Appeals.

However, this Court is bound to follow the ruling of the Court of [A]ppeals.)

(4) The Court ... finds that no genuine issue of material facts exists and that defendants' Motion for Partial Summary Judgement [sic] should be and is hereby granted as a matter of law."

Record, p. 346. The appellants now appeal.

I.

The first issue raised is whether the trial court properly granted the appellees' motion for partial summary judgment. In reviewing the entry of partial summary judgment, we apply the same standard as the trial court, and we must reverse the judgment if an unresolved issue of material fact appears in the record or if the law was incorrectly applied to undisputed facts. Winona Mem. Found. v. Lomax, 465 N.E.2d 731, 733 (Ind.Ct.App.1984).

The primary basis of the appellees' motion was that the appellants, as class representatives for "potentially all teachers who had 403 funds embezzled by [AFG]," record, p. 98, failed to satisfy the notice requirements under the Indiana Tort Claims Act ("ITCA"). Specifically, the appellees claimed the notice failed to include the specific number and names of the potential class plaintiffs. In addition, the appellees objected to the appellants' failure to indicate that the potential class plaintiffs authorized the appellants to submit notice on their behalf. In response, the appellants asserted that their complaint should survive summary judgment under the theories of estoppel and substantial compliance.

Under the ITCA, the plaintiff must provide written notice within 180 days after the alleged loss of a claim to the defendant before initiating suit. Ind.Code § 34-4-16.5-7. ³ The notice must describe the facts upon which the claim is based and include "the circumstances which brought about the loss, the extent of the loss, the time and place the loss occurred, the names of all persons involved if known, the amount of the damages...