Morris v. Crain

• Decision Date: 07 March 2017
• Docket Number: Court of Appeals Case No. 32A05-1604-PL-761
• Citation: 71 N.E.3d 871
• Parties: Don MORRIS and Randy Coakes, Appellants–Plaintiffs, v. Brad CRAIN and Richard Redpath, Appellees–Defendants
• Court: Indiana Appellate Court

71 N.E.3d 871

Don MORRIS and Randy Coakes, Appellants–Plaintiffs,

v.Brad CRAIN and Richard Redpath, Appellees–Defendants

Court of Appeals Case No. 32A05-1604-PL-761

Court of Appeals of Indiana.

March 7, 2017

Attorney for Appellants : James E. Ayers, Wernle, Ristine & Ayers, Crawfordsville, Indiana

Attorneys for Appellees : Sean M. Clapp, Ian T. Keeler, Clapp Ferrucci, Indianapolis, Indiana

Crone, Judge.

Case Summary

[1] Don Morris and Randy Coakes (collectively "Plaintiffs") appeal the trial court's entry of summary judgment in favor of Brad Crain and Richard Redpath ("Crain").¹ The sole restated issue presented for our review is whether the trial court erred when it entered summary judgment for Crain. Concluding that genuine issues of material fact remain for trial, we reverse and remand for further proceedings.

Facts and Procedural History

[2] This is essentially the third appeal surrounding an alleged business relationship that existed among these parties. In one of those prior appeals, this Court set out the relevant underlying facts and procedural history.

The facts most favorable to [Plaintiffs], the non-movants for summary judgment, are as follows. In 2006, Morris was employed by Waste Recovery, which provided biological effluent destruction systems products. When it became apparent that the company was insolvent, Morris approached Redpath in regard to forming a new company to "take control of the niche industry." On November 15, 2006, Waste Recovery ceased doing business; Morris paid a rent installment and agreed to execute a five-year lease for the premises previously occupied by Waste Recovery. He initiated remodeling of the premises and began to investigate financing.

Later in November, Crain, Coakes, Redpath, and Morris conducted a conference call regarding the new business. Morris and Coakes drafted a spreadsheet of proposed ownership shares (45% to Morris, as President, 25% and 20% to Crain and Redpath, respectively, as Vice–Presidents, and 2% each to Coakes, Biesecker, Johnson, Ross, and Sollars). After negotiation, the shares allocation was changed to 40% for Morris, 30% for Crain, and 20% for Redpath (with the others retaining 2% each).

Marketing materials were distributed indicating that Redpath, Morris, and Crain were "principals" of BioSafe. Nonetheless, in January of 2007, Articles of Organization for BioSafe were filed with the Indiana Secretary of State, indicating that Crain and Redpath were the sole members, each having 50% ownership.

In August of 2007, Crain advised Morris that a building in Brownsburg had been leased in anticipation of acquiring Waste Recovery assets. The following month, Morris asked Crain about signing to purchase Waste Recovery assets, and was told that Crain and Redpath had been representing that they were each 50/50 owners. Later that month, BioSafe successfully bid for the assets of Waste Recovery. Redpath advised Morris that new investors now owned 50% of BioSafe.

The new owners of record were Justin Bisland ("Bisland") and LPM Investments, LLC. In October of 2007, Bisland came into the BioSafe offices and fired Morris. Morris was unable to locate the electronic document he had drafted with regard to shared ownership; he reached the conclusion that it had been deleted from the company files.

On March 5, 2010, Morris and Coakes filed their complaint. An amended complaint asserted that Morris and Coakes had equitable interests and contractual rights in BioSafe and that they had standing to bring a shareholder derivative action. They sought the appointment of a receiver, an accounting and disgorgement of funds, and BioSafe's dissolution. The defendants answered, denying that Redpath and Crain had created a false document, made false representations, brought about the plaintiff's ouster, diverted funds, or met with Morris to discuss ownership participation. The defendants also denied that Morris and Coakes held an equitable interest, or that they had standing to bring a shareholder derivative claim.

On February 8, 2011, the majority of the defendants moved for summary judgment; Crain and Redpath subsequently joined in the motion. The parties made their respective designations of materials. The trial court conducted a hearing on July 26, 2011, at which argument of counsel was heard. BioSafe's counsel argued that the shareholder derivative claims were unfounded or, at a minimum, were premature, and that the case distilled to "a case of an oral contract at best between Mr. Crain and Mr. Redpath and Mr. Morris and Mr. Coakes ... of dubious merit." Counsel for Crain and Redpath argued that there had, at most, been discussion about a business yet to be formed, "an offer that was never accepted."

On the following day, the trial court issued an order dismissing defendants Biesecker, Johnson, Ross, and Sollars and ordering the remaining parties to submit documents:

1. Plaintiffs, within ten (10) days, must file with the Court a document stating with specificity the legal theories the Plaintiffs assert against the Defendants.

2. Within ten (10) days thereafter, the Defendants must file a document stating with specificity the legal elements of the Plaintiffs theories that the Defendants assert have not been met.

On August 8, 2011, Morris and Coakes submitted a document indicating that their theories of recovery were breach of contract, unjust enrichment, and estoppel. Crain and Redpath jointly, and BioSafe separately, submitted "statements of elements not met by plaintiffs."

On August 19, 2011, the trial court granted summary judgment to all defendants in an order providing in pertinent part:

Plaintiff's theory is in contract. The Defendant's [sic] Statement of Elements Not Met of Defendants BioSafe Engineering LLC, [Biesecker, Johnson, Ross and Sollars] correctly sets out the current state in [sic] the law regarding Plaintiffs['] complaint.

Based upon application of the law to the facts of this case at this pleading stage, the court must GRANT the Defendant's [sic] Motion for Summary Judgment for the reasons set out in the Statement of Elements Not Met filed 8–16–11 and enters Summary Judgment on behalf of the Defendants and against the Plaintiffs. There is no reason for any delay in this Order.

Morris v. Crain , 969 N.E.2d 119, 122–23 (Ind. Ct. App. 2012) (footnotes and citations to record omitted) (" Morris 1 ").

[3] On appeal in Morris 1 , we reversed the trial court's entry of summary judgment in favor of Crain on the ground that the judgment had been "improvidently granted." Id. at 125. In particular, we noted that, one day after the summary judgment hearing, the court had ordered Plaintiffs to clarify their causes of action in writing within ten days. They did so by counsel, limiting their theories of recovery to "breach of contract, unjust enrichment [,] and equitable estoppel." Id. at 123. Following that clarification, "[t]he trial court ordered the defendants to identify how the plaintiffs had failed to meet the elements of the specified claims." Id . at 124. We rejected this procedure employed by the trial court, specifically concluding:

This effectively challenged [Plaintiffs] to establish each of their claims in order to withstand summary judgment. Indeed, as there had been no trial of issues, the documents purporting to "state elements not met" necessarily assumed that all factual disputes had been resolved in the defendants' favor. The focus upon [Plaintiffs'] purported failure to establish a claim is not consistent with our summary judgment standard.

Id. (footnotes omitted). Thus, we reversed the entry of summary judgment in favor of Crain. Id .

[4] Thereafter, BioSafe filed a second motion for summary judgment against Plaintiffs on " ‘each of the three (3) claims asserted by the Plaintiffs,’ namely, ‘breach of contract, unjust enrichment[,] and equitable estoppel [.]’ " Morris v. BioSafe Eng'g, Inc. , 9 N.E.3d 195, 198–99 (Ind. Ct. App. 2014) (citations omitted) (" Morris 2 "), trans. denied . Plaintiffs responded by stating that their claims against BioSafe included an action for declaratory judgment, a shareholder derivative action, and a demand for an accounting. They made no mention of their previous representation to the trial court that they were only pursuing theories of breach of contract, unjust enrichment, and equitable estoppel against all defendants, including BioSafe. Following a hearing, the trial court entered summary judgment for BioSafe " ‘on each of the Plaintiffs' three (3) claims' " and later clarified by order that its entry of summary judgment was a final judgment for BioSafe. Id . at 199.

[5] Morris appealed,² and in Morris 2 , we affirmed the trial court's entry of summary judgment in favor of BioSafe. Specifically, we noted that "[t]he only clear legal argument that Morris proffers on appeal is that summary judgment for BioSafe was inappropriate with respect to Morris' shareholder derivative claim." Id .³ Concluding that Morris expressly and unambiguously abandoned his shareholder derivative claim when he admitted to the trial court that his only claims were for breach of contract, unjust enrichment, and equitable estoppel, we determined that Morris was estopped from asserting that claim as grounds to deny summary judgment in favor of BioSafe. Id . at 201.

[6] Following this Court's decision in Morris 2 , Crain filed a motion for summary judgment on Plaintiffs' claims for breach of contract, unjust enrichment, and equitable estoppel. In the motion, Crain assumed, arguendo, that Plaintiffs can prove that the parties had a contract and that the contract was breached by Crain.

Crain's sole argument for purposes of summary judgment was that Plaintiffs have suffered no damages relating to any of those three claims.

[7] In response, Plaintiffs filed a second amended complaint raising additional claims for conversion, breach of fiduciary duty, and interference with a business relationship. Crain filed a motion to strike the amended complaint, but the trial court...