Levinson v. Citizens Nat. Bank of Evansville

• Decision Date: 16 August 1994
• Docket Number: No. 26A05-9304-CV-145,26A05-9304-CV-145
• Citation: 644 N.E.2d 1264
• Parties: Susan O'Halloran LEVINSON and Valerie Anne O'Halloran, Appellants-Plaintiffs, v. The CITIZENS NATIONAL BANK OF EVANSVILLE, Appellee-Defendant.
• Court: Indiana Appellate Court

Page 1264

644 N.E.2d 1264

Susan O'Halloran LEVINSON and Valerie Anne O'Halloran, Appellants-Plaintiffs, v. The CITIZENS NATIONAL BANK OF EVANSVILLE, Appellee-Defendant.

No. 26A05-9304-CV-145.

Court of Appeals of Indiana,

Fifth District.

Aug. 16, 1994.

Transfer Denied Dec. 30, 1994.

D. Timothy Born, Fine & Hatfield, Evansville, for appellant.

Robert T. Bodkin, Douglas W. Patterson, Bamberger, Foreman, Oswald and Hahn, Evansville, for appellee.

RUCKER, Judge.

This interlocutory appeal arises from a dispute between the parties concerning a certain asset of a trust, namely a parcel of real estate. As Trustee, defendants/appellees The Citizens National Bank of Evansville (Bank) sold the real estate and plaintiffs/appellants Susan O'Halloran Levinson and Valerie Anne O'Halloran (Trust Beneficiaries) filed suit. The case proceeded to trial by jury and ended in a mistrial. Thereafter, Trust Beneficiaries amended their complaint to include a claim of intentional interference with civil litigation and a claim of negligent retention and supervision. On motion by Bank, the trial court entered an order dismissing the additional claims and striking Trust Beneficiaries' demand for jury trial. We address the following issues:

1. Whether the trial court erred in striking Beneficiaries' demand for a jury trial?

2. Whether the trial court erred in holding that Indiana law does not recognize the tort of Intentional Interference with Civil Litigation?

3. Whether the trial court erred in holding that Beneficiaries failed to state a claim for negligent retention and supervision?

We affirm in part and reverse in part.

Susan O'Halloran Levinson and Valerie Anne O'Halloran are the daughter and granddaughter respectively of Lina B. O'Halloran. On May 9, 1983, Lina B. O'Halloran died leaving a trust administered by Bank. There are numerous trust beneficiaries including Susan O'Halloran Levinson, the income beneficiary, and Valerie Anne O'Halloran, a contingent remainderman beneficiary. At one point the trust res included a 28.22 acre parcel of real estate located in Vanderburgh County, Indiana. After Bank sold the parcel Trust Beneficiaries filed suit claiming the property was sold over their objection and at a price of approximately $14,000.00 less than its fair market value. According to Trust Beneficiaries the Bank sold the property to a particular group of purchasers for the sole purpose of taking advantage of an opportunity to engage in other business ventures with one of the purchasers. Trust Beneficiaries also allege that Bank depleted the trust corpus by overpaying capital gains tax in the amount of $25,428.29 and by using more than $52,000.00 in attorneys' fees and costs to defend itself in this lawsuit.

The case ultimately proceeded to trial by jury on August 3, 1992. ¹ During the lunch recess on the fifth day of trial, the trial judge was eating at a local restaurant. An attorney who had acted as counsel for Bank's Trust Department in another trust matter engaged the trial judge in conversation. During the conversation the attorney related information regarding a breach of trust allegation filed against the Bank by beneficiaries of another trust. After returning to the courtroom, the trial judge informed the parties of the general subject matter of the noontime conversation, but stated that if questioned further he would recuse himself from the case and declare a mistrial. Bank questioned the judge, the judge declared a mistrial.

After the parties selected a special judge to preside over the retrial, Bank renewed its motion to strike the jury demand. The trial court granted the motion. Thereafter, Trust Beneficiaries filed an amended complaint adding two new counts. Count II alleged that Bank intentionally interfered with the first trial by engaging the trial judge in an ex parte conversation which resulted in a mistrial. Count III alleged the negligent retention and supervision of the Bank employee who supervised the O'Halloran Trust. On motion by Bank the trial court dismissed Beneficiaries' additional claims for failure to state a claim upon which relief could be granted. This interlocutory appeal ensued in due course.

I.

Trust Beneficiaries first contend the trial court erred in striking their demand for jury trial. According to Trust Beneficiaries they are entitled to trial by jury on all legal issues raised in their complaint although the complaint also includes equitable issues. Bank counters that Trust Beneficiaries are not entitled to a jury trial for two reasons: (1) their essential claim is based in equity, and (2) the alleged legal claims stem directly from the equitable claim.

We first observe that the right to a jury trial is immemorial and is a fundamental right in our democratic judicial system. Hiatt v. Yergin (1972), 152 Ind.App. 497, 284 N.E.2d 834. Indeed, Article I § 20 of our State Constitution provides, "In all civil cases the right of trial by jury shall remain inviolate." Our courts have scrupulously guarded this right against encroachment. Kettner v. Jay (1940), 107 Ind.App. 643, 26 N.E.2d 546. However, the law is well settled that a plaintiff is not entitled to a jury trial when claiming a cause in equity. Stacey-Rand, Inc. v. J.J. Holman, Inc. (1988), Ind.App., 527 N.E.2d 726, reh'g denied. If any essential part of a cause of action is equitable, then the rest of the case is drawn into equity and the whole is tried by the court. Jones v. Marengo State Bank (1988), Ind.App., 526 N.E.2d 709, 713. As our supreme court has noted "[w]henever the cause of action is one that can only be enforced by invoking the equitable powers of the court, then the right of trial by jury does not maintain; but if the cause of action does not depend on the equity jurisdiction of the court, then a jury trial may be demanded." Martin v. Martin (1889), 118 Ind. 227, 237, 20 N.E. 763, 768. See also Indiana Trial Rule 38(A).

A direct and continuing trust is a creature of equity. Mack v. American Fletcher Nat'l Bank (1987), Ind.App., 510 N.E.2d 725, 736, trans. denied. Thus, an action for breach of a trust agreement is generally a matter properly triable to the bench without the intervention of a jury. However, this general proposition is not set in concrete. Where an action contains mixed issues of fact, the court must examine the complaint and pleadings as a whole to determine if the action sounds in equity or in law. Hiatt, 284 N.E.2d at 834. "[W]e must look to the complaint, the rights and interest involved, and the relief demanded." Id., 284 N.E.2d at 846.

In this case the complaint alleges that Bank sold the real estate for less than fair market value, thus breaching its duty as trustee. Further, the complaint alleges that Bank sold the property in order to profit from proceeds of the loan and for the opportunity to engage in unrelated business ventures with the purchasers. The complaint also alleges Bank overpaid capital gains taxes on the sale and has on a continuing basis extracted money from the Trust for attorneys' fees to defend itself in this litigation. In addition, Trust Beneficiaries allege intentional interference with civil litigation and negligent retention, both of which are discussed below.

Trust Beneficiaries' action contains elements of both law and equity. However, the main theory outlined by the facts pleaded is one for damages. Specifically, the complaint seeks compensatory damages and punitive damages both of which are legal remedies. It is significant that the complaint makes no mention of such remedies as specific performance, accounting, injunction, or replenishment of trust corpus. All of which are matters of equity. As we observed in Mack, "[i]t is the remedy we must look to, not the injury, for determining whether law or equity will apply," 510 N.E.2d at 737 (emphasis in the original). Because Trust Beneficiaries are seeking money damages, we deem the claims against Bank for alleged breaches of trust as well as alleged tortious conduct arising therefrom to be actions at law rather than equity. Thus, Trust Beneficiaries are entitled to have their claims tried by a jury. The trial court's ruling to the contrary is erroneous and must be reversed.

II.

The trial court dismissed Trust Beneficiaries' amended complaint alleging intentional interference with civil litigation on grounds that it failed to state a claim upon which relief can be granted. See Ind. Trial Rule 12(B)(6). Citing Murphy v. Target Products (1991), Ind.App., 580 N.E.2d 687, 690, trans. denied, Trust Beneficiaries contend that this state recognizes the tort of intentional interference with civil litigation and thus the trial court erred in dismissing their claim.

We first observe that the tort of intentional interference with civil litigation has been recognized in only four other jurisdictions, and then only in a limited context, namely: (1) destruction of evidence which has been called "spoliation of evidence," see Smith v. Superior Court (1984), 151 Cal.App.3d 491, 198 Cal.Rptr. 829, reh'g denied; Bondu v. Gurvich (1984), Fla.Dist.Ct.App., 473 So.2d 1307, reh'g denied; Hazen v. Municipality of Anchorage (1986), Alaska, 718 P.2d 456; and (2) "concealment of evidence," see Viviano v. CBS, Inc. (1991), Ct.App.Div., 251 N.J.Super. 113, 597 A.2d 543, certif. denied, (1992), 127 N.J. 565, 606 A.2d 375.

The only case in this jurisdiction addressing the question of interference with civil litigation is Murphy, 580 N.E.2d at 687. In that case plaintiff Murphy filed a products liability action against the manufacturer of an allegedly defective power saw. Murphy later amended his complaint to include an action against his employer for spoliation of evidence arising out of the manufacturer's failure to preserve the allegedly defective saw. On motion by the manufacturer, the trial court dismissed the amended complaint for failure to state a claim upon which relief could be granted. On review we affirmed the trial court...