Clary v. Lite Machines Corp.

• Decision Date: 11 July 2006
• Docket Number: No. 79A05-0411-CV-610.,79A05-0411-CV-610.
• Parties: Brent E. CLARY, Roger W. Bennett, and Bennett, Boehning & Clary, Appellants-Defendants/Cross-Appellees, v. LITE MACHINES CORPORATION, Appellee-Plaintiff/Cross-Appellant.
• Court: Indiana Appellate Court

850 N.E.2d 423

Brent E. CLARY, Roger W. Bennett, and Bennett, Boehning & Clary, Appellants-Defendants/Cross-Appellees, v. LITE MACHINES CORPORATION, Appellee-Plaintiff/Cross-Appellant.

No. 79A05-0411-CV-610.

Court of Appeals of Indiana.

July 11, 2006.

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Richard R. Skiles, Skiles DeTrude, Indianapolis, IN, Attorney for Appellants.

Ronald J. Waicukauski, Carol A. Nemeth, Price Waicukauski Riley & DeBrota, LLC, Indianapolis, IN, Attorneys for Appellees.

OPINION

CRONE, Judge.

Case Summary

Brent E. Clary, Roger W. Bennett, and Bennett, Boehning & Clary (collectively, "BB & C") appeal the trial court's entry of summary judgment in favor of Lite Machines Corporation ("Lite") and the jury's subsequent award to Lite of $3,612,574.00. On cross-appeal, Lite challenges the trial court's denial of its motion for prejudgment interest. We affirm.

Issues

BB & C presents seven issues, which we consolidate and restate as the following six:

I. Whether the trial court erred by denying its motion for summary judgment;

II. Whether the trial court abused its discretion by admitting three documents from the underlying case—specifically, Judge Donald C. Johnson's findings of fact, conclusions of law, and judgment; his subsequent order; and the memorandum decision of this Court;

III. Whether the trial court abused its discretion by denying BB & C the opportunity to examine Judge Johnson, who presided over the underlying case;

IV. Whether the trial court abused its discretion by admitting evidence of Lite's alleged lost profits from 1998 through 2004;

V. Whether there was sufficient evidence to sustain the jury's award; and

VI. Whether Lite was required to prove that a greater damages award would have been collectible.

On cross-appeal, Lite presents one issue, which we restate as whether the trial court erred by denying Lite's motion for prejudgment interest.¹

Facts and Procedural History

In January 1991, brothers Paul Arlton and Dave Arlton formed Lite for the purpose of manufacturing radio-controlled model helicopters. In June 1991, Lite purchased a milling and routing machine (the "Mill") manufactured by Techno, Inc., a division of Designatronics, Inc. Lite planned to use the Mill, which cost approximately $12,000, to produce aluminum molds, cut plywood parts, and trim molded plastic parts. In January 1992, Lite began to notice problems with the Mill's performance. Because the Mill was unique at that time, Lite would have had to purchase three different machines at a cost of approximately $200,000 in order to replace it. For over a year, Techno attempted to fix the Mill several times and promised Lite that it would resolve the problems. Because of the Mill's failure to perform, Lite was unable to produce its model helicopters on schedule.

In December 1993, Lite filed a complaint against Techno and Designatronics, alleging negligence and breach of warranty. Lite was represented by BB & C. At trial in October 1997, Lite sought damages in the amount of approximately four million dollars for its alleged lost profits between 1992 and 1996. At least one year before trial, Techno informed BB & C that it planned to raise Lite's failure to mitigate damages as an affirmative defense. In a memorandum dated October 17, 1996, which BB & C later admitted receiving the next day, counsel for Techno explained the mitigation defense and cited several cases on the issue. Approximately one month prior to trial, Techno identified Robert McDonald as an expert witness who would testify on several issues, including Lite's failure to mitigate. Techno offered to make McDonald available for deposition at its own expense, but BB & C declined the offer. At the bench trial, McDonald testified that in early 1992, Lite could have purchased a "knee mill" for between $17,000 and $28,000 to replace the defective Mill and mitigate its damages. BB & C presented no rebuttal evidence to McDonald's testimony and declined the opportunity to cross-examine McDonald.² In pre- and post-trial briefs, Techno argued a mitigation defense. BB & C failed to address this issue in its pre-trial brief and did not file a post-trial brief.³

On January 29, 1998, Judge Johnson entered the trial court's findings of fact, conclusions thereon, and judgment. The court found, among other things, that Lite had sustained $2,609,608 in net lost profits due to the malfunctioning of the Mill. Appellants' App. at 2156 (Finding 280). The judgment reads in pertinent part: "The Court now enters judgment against [Techno and Designatronics] in favor of [Lite] in the amount of Two Hundred and Sixty Thousand Dollars ($260,000.00) which compensates [Lite] for the damages caused by [Techno and Designatronics] and after finding [Lite] failed to mitigate its damages by replacing the defective machine in a more timely manner." Appellants' App. at 2173.

In March 1998,⁴ Lite filed a motion to correct error that stated, "Because [Techno] bore the burden of proof on failure to mitigate damages, and because there was no evidence that Lite did fail to mitigate, Lite may have neglected this topic in its trial brief and post-trial submissions." Plaintiff's Exh. 54 at 7. On June 1, 1998, the trial court entered an order modifying some findings and conclusions without altering the judgment against Techno and Designatronics. Appellants' App. at 2175-78. The trial court made additional findings and conclusions, including the following: "A suitable replacement for the Techno machine could have been purchased by Lite for $17,000 to $28,000 on or about May 11, 1992[,]" and "[a] substantial part of the consequential damages of Lite reasonably could have been avoided by cover—buying a replacement machine—on or about May 11, 1992." Id. at 2176, 2177 (Finding 294, Conclusion 39).

In June 1998, BB & C attorney Bennett began to prepare for an appeal to this Court of the Techno court's judgment. At that time, he researched—for the first time—the issue of mitigation of damages under Indiana law and discovered two reported Indiana cases and one reported Seventh Circuit case which suggested that Lite would have had no legal duty to mitigate its damages if it could show that Techno had continued to promise an imminent solution to the problems with the Mill. In a memo to Dave Arlton dated June 12, 1998, Bennett attached his research file on the subject, briefly explained its significance, and stated, "It would be legitimate to ask why I didn't find these cases before. On the mitigation cases, the short answer is that we didn't think failure to mitigate would be an issue when the evidence was heard." Plaintiff's Exh. 43.

On appeal to another panel of this Court, Lite cited cases discovered in Bennett's post-trial research and argued that it was not required to mitigate its damages because Techno had "`continually' provided assurances to Lite that the problems would be remedied and that it would place the machine in a working capacity." Lite Mach. Corp. v. Techno, Inc., No. 79A02-9807-CV-568, 720 N.E.2d 776, slip op. at 7-8 (Ind.Ct.App. Nov. 29, 1999), trans. denied (2000). In that review, however, this Court was limited to the evidence within the record. At the Techno trial, Lite presented no evidence of vendor assurance. BB & C's failure to timely identify the legal doctrine that could have countered Techno's claim regarding Lite's duty to mitigate damages may have precluded the presentation of any such evidence that would have been necessary to prevent the trial court's reduction in damages for Lite's failure to mitigate. Based upon Techno's evidence, including McDonald's unchallenged testimony, this Court affirmed the trial court's judgment that Lite had a duty to mitigate and failed to do so.⁵ Id. at 10.

Lite filed suit against BB & C in December 2000. Lite filed a first amended complaint on August 12, 2003. The complaint alleged, among other things, that BB & C provided negligent representation to Lite in its case against Techno and Designatronics and that BB & C committed criminal conversion and breach of fiduciary duty by failing to deliver to Lite—for more than one year—the Techno judgment proceeds to which Lite was entitled. On February 20, 2004, BB & C moved for summary judgment. After a hearing on April 26, 2004, the trial court denied BB & C's motion.

A jury trial began on June 1, 2004. On June 10, 2004, the jury returned a verdict in favor of Lite in the amount of $3,612,574.00. On July 12, 2004, BB & C filed a motion to correct error. On July 13, 2004, the trial court issued its final order and judgment, awarding the total amount of the jury's verdict. On August 9, 2004, BB & C filed a renewed motion to correct error. On October 17, 2004, the trial court issued an order denying BB & C's motion to correct error and renewed motion to correct error. This appeal and cross-appeal ensued.

Discussion and Decision

I. Denial of Summary Judgment

A. Standard of Review

BB & C claims that the trial court erred by denying its motion for summary judgment. Our standard of review is well settled.

On appeal from the denial of a motion for summary judgment, we apply the same standard applicable in the trial court. Summary judgment is appropriate only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). We therefore must determine whether the record reveals a genuine issue of material fact and whether the trial court correctly applied the law. A genuine issue of material fact exists where facts concerning an issue, which would dispose of the litigation are in dispute, or where the undisputed material facts are capable of supporting conflicting inferences on such an issue. If the material facts are not in dispute, our review is limited to determining whether the trial court correctly applied the law to the undisputed facts. When there are no disputed...