Hilliard v. Jacobs

• Decision Date: 18 May 2010
• Docket Number: No. 28A01-0911-CV-546.,28A01-0911-CV-546.
• Parties: Bonita G. HILLIARD, in her capacity as Trustee of the H. David and Bonita G. Hilliard Living Trust, Appellant-Plaintiff,v.Timothy E. JACOBS, Appellee-Defendant.
• Court: Indiana Appellate Court

927 N.E.2d 393

Bonita G. HILLIARD, in her capacity as Trustee of the H. David and Bonita G. Hilliard Living Trust, Appellant-Plaintiff,v.Timothy E. JACOBS, Appellee-Defendant.

No. 28A01-0911-CV-546.

Court of Appeals of Indiana.

May 18, 2010.

COPYRIGHT MATERIAL OMITTED

Edward W. Harris, III, Mary T. Doherty, Indianapolis, IN, Attorneys for Appellant.

Peyton L. Berg, Bose McKinney & Evans LLP, Indianapolis, IN, Attorney for Appellee.

OPINION

VAIDIK, Judge.

Case Summary

In the fourth appeal in this case, Bonita G. Hilliard, in her capacity as Trustee of the H. David and Bonita G. Hilliard Living Trust, appeals the trial court's dismissal of Timothy E. Jacobs' counterclaim, which was the last pending claim in litigation involving two insurance policies on the life of Hilliard's husband David worth a total of $2.5 million. Finding that the trial court did not abuse its discretion by denying her leave to file a third amended complaint, striking her reply counterclaim, and denying her motion to stay enforcement, we affirm.

Facts and Procedural History

Our recitation of the underlying facts is substantially taken from the three prior Court of Appeals opinions spawned in this case. See Hilliard v. Jacobs, 916 N.E.2d 689 (Ind.Ct.App.2009) trans. denied; Hilliard v. Jacobs, 874 N.E.2d 1060 (Ind.Ct.App.2007) reh'g denied, trans. denied, cert. denied, --- U.S. ----, 129 S.Ct. 287, 172 L.Ed.2d 150 (2008); Jacobs v. Hilliard, 829 N.E.2d 629 (Ind.Ct.App.2005) reh'g denied, trans. denied.

Jacobs and David became business partners in 1997, with each holding a 50% ownership interest in Advance Marketing Technology, LLC (“AMT”). To address the possibility of the unexpected death of one of them, in 1999 they executed a cross-purchase agreement which required each partner to insure the other's life in the amount of $200,000. The insurance proceeds were to be used to fund the buy-out of the deceased member's shares. In 2001, they increased the amount to $2 million. Pursuant to the agreement, Jacobs obtained two life insurance policies in the amount of $2.5 million on the life of David. AMT paid the premiums on Jacobs' and David's policies until the business was sold in 2002.

In anticipation of the sale of AMT, Jacobs and David entered into a Redemption and Settlement Agreement (“RSA”) with a mutual release provision stating that each of them released the other “from any and all claims, demands, rights of action or liabilities of whatsoever nature, whether known or unknown, which any party now has or may have against any other party ... as of the date of this Agreement, excluding rights of the parties arising out of this Agreement.” Appellant's App. p. 111. It also provided that “[a]ny party who breaches any provision of this Agreement shall pay all costs and expenses, including reasonable attorneys' fees, incurred by any other party as a result of the breach or as a result of having to enforce this Agreement.” Id. at 112.

After AMT was sold and dissolved, David suggested that he and Jacobs swap the policies they held on each other's lives. Jacobs declined and continued to pay the premiums on the policies he held on David's life. David stopped paying the premiums on Jacobs' life.

In January 2003 David filed a complaint in Monroe Circuit Court in which he ultimately requested that the trial court order Jacobs to convey the policies to him or, alternatively, order Jacobs to terminate the policies. David also requested conversion damages. David amended the complaint on the same day he filed the original complaint. The case was later transferred to Greene Circuit Court. David then filed a second amended complaint. In September 2003 Jacobs requested leave to file an amended answer, which included a counterclaim for attorney's fees for breach of the mutual release provision in the RSA. The trial court granted David's subsequent motion for partial summary judgment and ordered Jacobs to terminate the policies on David's life.

Jacobs filed an interlocutory appeal. The trial court granted Jacobs' motion for a stay pending appeal, but upon David's motion to reconsider, it vacated and instead ordered Jacobs to designate the trial court clerk as the beneficiary of the policies and transfer the physical policies to the clerk. While the interlocutory appeal was pending, David passed away from ventricular fibrillation in July 2004. Hilliard, as trustee for David, was substituted as plaintiff. In June 2005 this Court reversed and remanded, determining that neither the cross-purchase agreement nor equity required Jacobs to terminate the policies he held on David's life.

On remand, in April 2006, Hilliard filed a motion for leave to file a third amended complaint “in order to state express theories of recovery that relate to specific actions and communications by Jacobs and his attorney in 2002 relating to the Policies.” Id. at 274. The proposed third amended complaint included claims for declaratory judgment, breach of contract, breach of fiduciary duties, constructive fraud, fraud in the inducement, estoppel, and quasi-contract, all of which called for Jacobs to terminate the policies. The trial court held a hearing on pending motions, which included Hilliard's motion for leave to file a third amended complaint and Jacobs' September 2003 motion for leave to file an amended answer to Hilliard's second amended complaint. In May 2006 the trial court denied Hilliard's motion and granted Jacobs' motion. Jacobs then filed his amended answer, which added his counterclaim for attorney's fees.

Jacobs moved for summary judgment. Hilliard filed a counterclaim in reply, which pled the same claims set forth in her proposed third amended complaint, and Jacobs subsequently filed a motion to strike the counterclaim in reply. Hilliard then moved for summary judgment. The trial court granted Jacobs' motion to strike the reply counterclaim. In January 2007 the trial court granted Jacobs' motion for summary judgment and denied Hilliard's motion for summary judgment. The trial court stayed its summary judgment order on the condition that Hilliard post a $250,000 letter of credit as security pending Hilliard's appeal.

In the second appeal, both parties agreed that when the policies were issued, Jacobs had an insurable interest in David's life. Hilliard, however, argued that the insurable interest must continue throughout the term of a life insurance policy. In October 2007 this Court held that the insurable interest need only exist at the time the policy was issued and therefore affirmed summary judgment for Jacobs.

After the Indiana Supreme Court denied transfer, the trial court lifted the stay and ordered the clerk to return the policies to Jacobs. Hilliard then filed a motion to stay enforcement, requesting that the trial court order Jacobs to return the policies to the clerk, pending her petition for a writ of certiorari to the United States Supreme Court. The trial court denied Hilliard's motion to stay enforcement. Jacobs presented the policies to the insurance companies and received $2.5 million plus 3% interest, or $289,771.52. ¹

In October 2008 Hilliard filed a new complaint against Jacobs in Greene Superior Court, which alleged five of the seven claims she had proposed in both her third amended complaint and her counterclaim in reply. The trial court entered an order of consolidation.

In November 2008 Hilliard filed a motion to reconsider the May 2006 ruling denying her motion for leave to file a third amended complaint and the October 2006 ruling striking her counterclaim in reply. The trial court denied the motion in March 2009. In October 2009 Jacobs moved to dismiss his counterclaim. The trial court dismissed the case the same day. Hilliard now appeals.

Discussion and Decision

Hilliard contends that the trial court abused its discretion by denying her leave to file a third amended complaint, striking her reply counterclaim, and denying her motion to stay enforcement.

I. Third Amended Complaint

Hilliard contends that the trial court abused its discretion by denying her leave to amend. Indiana Trial Rule 15(A) provides that “[a] party may amend his pleading once as a matter of course” if within a certain time frame. “Otherwise a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be given when justice so requires.” Although amendments to pleadings are to be liberally allowed, the trial court retains broad discretion in granting or denying amendments to pleadings. MAPCO Coal Inc. v. Godwin, 786 N.E.2d 769, 777 (Ind.Ct.App.2003). We will reverse only upon a showing of an abuse of that discretion. Id. An abuse of discretion may occur if the trial court's decision is clearly against the logic and effect of the facts and circumstances before the court, or if the court has misinterpreted the law. Fleming v. Int'l Pizza Supply Corp., 707 N.E.2d 1033, 1036 (Ind.Ct.App.1999) trans. denied. We consider whether a trial court's ruling on a motion to amend is an abuse of discretion by evaluating a number of factors, including “undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to cure deficiency by amendment previously allowed, undue prejudice to the opposing party by virtue of the amendment, and futility of the amendment.” Palacios v. Kline, 566 N.E.2d 573, 575 (Ind.Ct.App.1991).

Although Hilliard addresses all of the factors above, we find two to be dispositive: undue delay and prejudice. Regarding undue delay, David filed his initial complaint in January 2003. Hilliard attempted to bring new claims in a third amended complaint in April 2006, over three years after David filed his original complaint. Hilliard asserts that she acted “promptly” in seeking leave to amend after summary judgment was reversed in favor of Jacobs. Appellant's Br. p. 27. However, since the new claims were available to David at the time he filed his original complaint, we find that the relevant...