Ingram v. Diamond Equip., Inc.

• Decision Date: 31 December 2018
• Docket Number: Court of Appeals Case No. 18A-CT-15
• Citation: 118 N.E.3d 1
• Parties: Benjamin P. INGRAM and Ben's Quarry, LLC, Appellants-Plaintiffs, v. DIAMOND EQUIPMENT, INC., Appellee-Defendant.
• Court: Indiana Appellate Court

118 N.E.3d 1

Benjamin P. INGRAM and Ben's Quarry, LLC, Appellants-Plaintiffs,

v.DIAMOND EQUIPMENT, INC., Appellee-Defendant.

Court of Appeals Case No. 18A-CT-15

Court of Appeals of Indiana.

Filed December 31, 2018

Attorneys for Appellants: F. Anthony Paganelli, Thomas D. Perkins, Stephanie L. Grass, Indianapolis, Indiana

Attorneys for Appellee: Brian P. Williams, Patrick C. Thomas, Kahn, Dees, Donovan & Kahn LLP, Evansville, Indiana

Brown, Judge.

[1] Benjamin P. Ingram ("Ingram") and Ben's Quarry, LLC ("Ben's Quarry") brought this cause of action for malicious prosecution and now appeal the entry of summary judgment in favor of Diamond Equipment, Inc. ("Diamond"). We affirm.

Facts and Procedural History

[2] In 2005, Diamond sold Ingram Enterprises, LLC ("Ingram Enterprises") heavy equipment at a purchase price in excess of $1.2 million, and Ingram Enterprises later defaulted on its payment obligations. In 2007, Ingram Enterprises sold its business to Ingram Quarry, LLC ("Ingram Quarry"), and Ingram Quarry assumed Ingram Enterprises' debt to Diamond. On September 29, 2009, Diamond filed suit against Ingram Quarry in Marion County in cause number 49D03-0909-CT-44859 (the "Marion County Lawsuit") to recover the unpaid balance from the 2005 sale. On October 19, 2010, Diamond filed a motion for summary judgment against Ingram Quarry, which filed a cross-motion for summary judgment on December 6, 2010.

[3] On January 18, 2011, Ingram filed papers with the Indiana Secretary of State to form Ben's Quarry, and the following day Ingram purchased certain assets from Ingram Quarry for approximately $1.4 million. According to the operating agreement of Ben's Quarry, Ingram was a founding member. In February 2011, a closing for the sale of assets took place at the office of Title Plus! in Bloomington "roughly three days before [a] hearing on the motion[s] for summary judgment." Appellants' Appendix Volume VI at 237.

[4] In late March and early April 2011, Diamond retrieved the heavy equipment from the property of Ben's Quarry, the "original site of Ingram Quarry's quarry operation," and sold it in August or September 2011 for salvage value. Appellants' Appendix Volume V at 37. In September 2011, the court entered summary judgment in favor of Diamond and against Ingram Quarry and entered a monetary judgment of $907,889.81 in favor of Diamond.

[5] On October 6, 2011, Diamond filed a motion for proceedings supplemental to execution against Ingram Quarry, which alleged that the judgment remained wholly unsatisfied and outstanding, as well as interrogatories and requests for production that contained Interrogatory No. 10, which inquired into "any liens or security interests against any of the foregoing inventory, accounts, equipment or assets." Appellants' Appendix Volume VIII at 22. On October 12, 2011, Diamond filed an Amended Verified Motion for Proceeding Supplemental to Execution, which "added Garnishee Defendant, [Ben's Quarry]. The purpose of the amendment was that Ingram Quarry was no longer a viable business and [Diamond] had knowledge that Ingram Quarry was being sold to Ben's Quarry." Id. at 193. In January 2012, the Marion Superior Court granted a motion to compel Ben's Quarry to fully respond to Interrogatory No. 10.

[6] On April 5, 2012, Diamond filed a complaint for fraudulent transfer in the Marion County Lawsuit against various defendants,¹ including "Garnishee Defendants, [Ingram and Ben's Quarry]," which sought assets fraudulently transferred to Ingram and Ben's Quarry "while Diamond's motion for summary judgment was fully-briefed and pending the Court's entry of summary judgment." Id. at 29-30. On August 19, 2013, Diamond filed its first amended complaint against Ingram and Ben's Quarry, alleging violations of the Indiana Uniform Fraudulent Transfer Act and which sought to hold Ben's Quarry liable for Diamond's judgment against Ingram Quarry "under the ‘de facto merger’ and ‘mere continuation’ doctrines of successor corporation liability." Id. at 89.

[7] On February 24 and 25, 2014, the court held a bench trial. At the conclusion of the trial, the court stated that "quite honestly, I have followed the evidence very closely, I think I understand the issues" and that "these kind of cases" are "not easy because the issues are obviously complicated, but you guys were very well[-]prepared." Appellants' Appendix Volume VI at 66-67. On May 11, 2015, the court issued Findings of Fact, Conclusions of Law, and Judgment for Garnishee Defendants, in which it found in favor of Ingram and Ben's Quarry on all counts. The court found that there was "no basis to deem this sale to be a fraudulent conveyance of assets" and that the effort by Diamond to "position this case into the narrow de facto merger doctrine must fail." Appellants' Appendix Volume VIII at 208, 213. The court also found in part that Ingram Quarry entered into a purchase agreement "to sell some (but not all) of its assets to [Ingram] or his assignee for a purchase price of $1,246,000" and under the same contract, Ingram Quarry sold stone inventory to Ingram or his assignee for a purchase price of $104,000. It found that Ingram and Ben's Quarry "applied with German American Bank for loans to finance the purchase of equipment and stone from Ingram Quarry"; that a closing took place at the offices of Title Plus! in Bloomington, Indiana, on February 25, 2011, in which Ingram Quarry was represented by its lawyer, Michael Carmin; that Carmin did not represent Ingram or Ben's Quarry in the transaction; and that, according to Carmin, Ingram Quarry became defunct some time in the Summer of 2011. Id. at 198. The order further states:

This Court concludes that the only "badge of fraud" present in this case is Item No. 1 on the above-quoted list: "the transfer of property by a debtor during the pendency of a suit." It is true that this transaction occurred while the lawsuit was pending, and that [Ingram] knew about the lawsuit.... Specifically, the transaction was executed in January 2011 and closed in February 2011, just after cross-motions for summary judgment by both Diamond and by Ingram Quarry had been fully briefed. The cross-motions would remain under advisement for another seven months before the prior court issued its summary judgment order in September 2011.... However, the transaction between Ingram Quarry and Ben's Quarry specifically excluded the assets at issue in the lawsuit. In other words, Ben's Quarry did not buy from Ingram Quarry any of the assets that were the subject of Diamond's claim against Ingram Quarry.

Id. at 206.

[8] On October 30, 2015, Ingram and Ben's Quarry filed a complaint with the Vanderburgh Superior Court in cause number 82D05-1510-CT-5582 (the "Vanderburgh County Lawsuit"), the cause from which this appeal arises, which alleged that Diamond "acted with malice in instituting and prosecuting" the Marion County Lawsuit against Ingram, "had no probable cause to institute and/or maintain" the Marion County Lawsuit against Ingram and Ben's Quarry, and "failed to make a reasonable or suitable inquiry and lacked any probable cause" to hold Ingram and Ben's Quarry personally liable. Appellants' Appendix Volume II at 42. On June 16, 2017, Diamond filed a motion for summary judgment, and Ingram and Ben's Quarry filed a motion for partial summary judgment.

[9] On September 8, 2017, the trial court held a hearing on the summary judgment motions in the Vanderburgh County Lawsuit and, on December 5, 2017, granted Diamond's summary judgment motion, finding as a matter of law that Ingram and Ben's Quarry could not prove their malicious prosecution claim because Diamond "had probable cause in initiating the underlying lawsuit against [them]" and it did not act maliciously.² Id. at 32. The order states in part that the Marion Superior court's conclusion in finding a badge of fraud "exceeds the threshold for probable cause and therefore [Ingram and Ben's Quarry] cannot prove that Diamond lacked probable cause" and that several connections between Ingram and Ben's Quarry and the original debtor, Ingram Enterprises, and the judgment debtor, Ingram Quarry, established probable cause. Id. at 23. With regard to the malice element of the malicious prosecution claim, the order states:

Diamond and its attorneys made a reasonable inquiry by thoroughly investigating and discovering the facts above before filing the underlying lawsuit.... On October 17, 2011 Diamond served interrogatories on Ben's Quarry. Diamond had already filed for a proceeding supplemental against Ingram Quarry and a hearing was scheduled for November 29, 2011. Diamond had to file two motions to compel against [Ingram and Ben's Quarry] in order to obtain information regarding the asset sale. When Diamond received the information, Diamond discovered that the sale between [Ingram and Ben's Quarry] and Ingram Quarry had occurred just three days before the hearing on Diamond's Motion for Summary Judgment against Ingram Quarry. Diamond and its counsel made a reasonable inquiry into the facts before filing suit against [Ingram and Ben's Quarry] on April 5, 2012. Diamond chose to pursue the underlying action not out of animosity but out of an honest belief that [Ingram and Ben's Quarry] had acted fraudulently in the transfer of Ingram Quarry's assets.

37. Diamond voluntarily dismissed one of its counts against [Ingram and Ben's Quarry] prior to trial because Diamond did not believe it could prove the claim at trial. Chronological Case Summary attached to [Diamond's] Response in Opposition to [the Motion for Partial Summary Judgment by Ingram and Ben's Quarry] as Exhibit C, p. 10. This further displays that Diamond acted in good faith in the underlying lawsuit against [Ingram and Ben's Quarry].

38. There was no evidence [sic] personal animosity between Diamond and [Ingram and Ben's Quarry]. There is nothing in the record that indicates that Diamond or its representatives had any sort of ill feeling or bad history

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