Newland Resources, LLC v. Branham Corp.

• Decision Date: 31 December 2009
• Docket Number: No. 06A01-0802-CV-79.,06A01-0802-CV-79.
• Citation: 918 N.E.2d 763
• Court: Indiana Appellate Court
• Parties: NEWLAND RESOURCES, LLC, Appellant/Cross Appellee-Defendant, Sam Sutphin; White River Venture Partners, L.P.; Cornelius M. Alig; Greenleaf, LLC; James B. Harmon; Ecoholdings, LLC; John Michael Kensill; and Ecosource, LLC, Cross-Appellees-Defendants v. The BRANHAM CORPORATION, Appellee-Plaintiff.

918 N.E.2d 763

NEWLAND RESOURCES, LLC, Appellant/Cross Appellee-Defendant, Sam Sutphin; White River Venture Partners, L.P.; Cornelius M. Alig; Greenleaf, LLC; James B. Harmon; Ecoholdings, LLC; John Michael Kensill; and Ecosource, LLC, Cross-Appellees-Defendants v. The BRANHAM CORPORATION, Appellee-Plaintiff.

No. 06A01-0802-CV-79.

Court of Appeals of Indiana.

December 31, 2009.

Melissa R. Garrard, Melissa R. Garrard, Attorney at Law, P.C., Lebanon, IN, Attorney for Appellant.

Donn H. Wray, Mickey J. Lee, Stewart & Irwin, Indianapolis, IN, Attorney for Appellee.

Bryan H. Babb, Bose McKinney & Evans LLP, Indianapolis, IN, Attorney for Cross-Appellees.

OPINION

FRIEDLANDER, Judge.

Newland Resources, LLC (Newland) appeals from the trial court's judgment on the jury's verdict in favor of The Branham Corporation (Branham) on Branham's breach of contract claim against Newland. Broadly speaking, the following issue is presented for our review: Did the trial court err in its interpretation of the contractual provisions triggering the entitlement to and calculation of a success fee?

We affirm.

Newland was organized on October 11, 1994 and originally formed to develop real estate. Sometime in 1992 or 1993, prior to its organization, Newland began to explore a possible development project in Boone County consisting of 270 acres at the intersections of State Road 334 and I-65 now known as Royal Run Subdivision. Newland considered several options for water and sewer utility service to its residential subdivision in the Royal Run area before ultimately forming a wholly-owned utility operating company in April 1996 known as Boone County Utilities, LLC, (BCU). BCU was to provide water and sewer utilities to the Royal Run area.

Newland entered into an agreement with Branham (the Branham Agreement) for assistance in negotiating a contract with the City of Indianapolis for the acceptance of sewage flow from the BCU service area, and in negotiating a contract with the Indianapolis Water Company for selling water to BCU for delivery to the BCU service area. The Branham Agreement contained the following compensation provision:

5. Compensation

Client shall:

(a) pay Branham a monthly, nonrefundable retainer of $3,000.00 ("Monthly Fee") commencing on the Effective Date and terminating when all services necessary to obtain the goals and objectives of this Agreement have been achieved as determined in the sole discretion of the Client; provided however, if this Agreement is executed on a day other than the first day of any month then the Monthly Fee shall be prorated by dividing the Monthly Service Fee by the total number of days in the commencement month and multiplying the resulting quotient by the remaining days in the commencement month;

(b) reimburse Branham reasonable out of pocket expenses upon receipt of Branham's invoice in accordance with Client's policy for travel, and long distance communications, such expenses to be supported by receipts or other proof of expenditures; and

(c) pay Branham a success fee calculated as follows upon the earlier of:

(i) 8% of the fair market value of the total ownership interest in BCU as may be determined by a qualified appraiser as mutually agreed upon by the Parties in excess of Three Million Five Hundred Thousand Dollars not later than five years from the first receipt of any utility service fee by BCU; provided however, in the event the Parties do not mutually agree upon a qualified appraiser, then each Party shall select its own appraiser who shall perform their own appraisals and who in turn shall select a third appraiser and the fair market value of the total ownership interest in BCU shall be determined by averaging the three appraisals; or

(ii) 8% of the total purchase price of BCU in any sale thereof to a third party in excess of Three Million Five Hundred Thousand Dollars.

Appellant's Appendix at 68.

BCU entered into a purchase agreement with the Town of Whitestown (the Whitestown Purchase Agreement) on February 11, 2004. Article I, 1.8, of the Whitestown Purchase Agreement defined the term "Purchased Assets" as:

(a) the Newland Real Estate and all of the tangible and intangible assets, properties, rights, or interests of every kind and description, whether real, personal, or mixed, that are owned, held, leased licensed, or used by BCU in the operation of the Utilities, including but not limited to contract rights, prepaid insurance, prepaid insurance premiums, any other prepaid assets, goodwill, intellectual property rights, software, vehicles, and customer information, and (b) all easements, rights-of-way, and rights of ingress or egress, whether now or hereafter in existence, currently utilized, necessary, proper, or desirable, for the installation, operation, construction, and maintenance of the Utilities.

Id. at 724. Article III of the Whitestown Purchase Agreement provided that Whitestown would transfer to BCU $4,200,000 at closing. Id. at 728. Article II, 2.4, of the Whitestown Purchase Agreement further provided in pertinent part:

In addition to the Purchased Assets, on and after the Closing Date, Whitestown shall assume the following:

(i) the obligations of BCU to Valenti Held Real Estate Group, LLP, as set forth on the attached Schedule 2.4(i), which obligations will be assumed pursuant to a Novation and Substitution Agreement, to be negotiated between Whitestown, BCU, and Valenti Held Real Estate Group, LLP; and

(ii) the obligations of BCU pursuant to those agreements set forth on the attached Schedule 2.4(h); provided, however, that Whitestown shall not assume BCU's obligation to pay any funds pursuant to any recoupment agreements listed on Schedule 2.4(ii) to the extent BCU received such funds prior to the Closing of this transaction; and no other obligations.

Id. at 727-28.

BCU (debtor) ultimately filed a petition for Chapter 11 bankruptcy (the Bankruptcy Matter). Valenti Held Real Estate Group, LLP (Valenti) was a named creditor and interested party in the Bankruptcy Matter. In addition to the Bankruptcy Matter, there was a matter pending before the Indiana Utility Regulatory Commission (IURC) relating to the continued operation of BCU (the IURC Matter). Valenti claimed that the order issued by the IURC in the IURC Matter entitled Valenti to refunds of $1,743,678.33 (Refund Claim) and Valenti claimed and certified in the Bankruptcy Matter that it was entitled to an additional $2,478,496.00 (Certified Claim) in reimbursement for sewer and water facilities previously constructed and dedicated to BCU. Valenti's Refund Claim and Certified Claim totaled $4,222,174.33.

On February 11-12, 2004, Whitestown, BCU, and Valenti entered into a Novation and Substitution Agreement (the Novation Agreement) that provided that Whitestown would pay Valenti a cash amount of $900,000.00 and Whitestown would issue a Series B Junior Bond (Valenti Bond) for $3,322, 175.00. The Novation Agreement was conditioned upon approval by the Bankruptcy Court in the Bankruptcy Matter and any other regulatory approval of the Novation Agreement and the Purchase Agreement. Upon such approval, Valenti agreed that the Whitestown obligations under the Novation Agreement operated as a novation and substitution of any and all obligations of BCU under prior agreements.

BCU, Debtor, filed in the Bankruptcy Court a Disclosure Statement Relating To Debtor's Amended Liquidating Plan of Reorganization (Disclosure Statement) and an Amended Liquidating Plan of Reorganization (Amended Plan). The Disclosure Statement and the Amended Plan established that Whitestown would pay $4,200,000.00 to BCU, and would pay $4,222,175.00 to Valenti to resolve BCU's obligations to Valenti. A Motion to Sell was submitted to the Bankruptcy Court seeking approval for the sale of BCU to Whitestown. The Bankruptcy Court held a hearing on the Motion To Sell and issued its Memorandum of Decision granting the Motion to Sell and approving the Purchase Agreement and the Novation Agreement in its entirety subject to immaterial modification. The closing occurred on July 20, 2004.

On October 31, 2005, Branham filed its First Amended Complaint against Newland and others. After the answer and affirmative defenses were filed and several orders were issued, the only remaining count of the Branham complaint alleged a breach of contract against Newland, the only remaining party, pertaining to the calculation and payment of the success fee. Newland filed a motion for partial summary judgment that was denied, and the matter proceeded to a jury trial. Newland's motions for judgment on the evidence were denied by the trial court and the jury, after determining liability, ultimately returned a verdict in favor of Branham for damages in the amount of $397,853.92 using the formula provided in Jury Instruction No. 5. The trial court entered judgment on the jury verdict. Newland's subsequent motion to correct error was denied after a hearing on the matter and Newland now appeals.¹

Newland first argues that the trial court erred by denying its motion for partial summary judgment on the issue of damages. Summary judgment is appropriate when the evidence establishes that there exists no designated issue of material fact and that the moving party is entitled to judgment as a matter of law. Cincinnati Ins. Co. v. Davis, 860 N.E.2d 915 (Ind.Ct. App.2007). On appeal, we consider all of the designated evidence in the light most favorable to the nonmoving party. Walton v. First Am. Title Ins. Co., 844 N.E.2d 143 (Ind.Ct.App.2006). When reviewing a trial court's denial on a motion for summary judgment, the appellate court undertakes the same inquiry as the trial court. Liberty Mut. Fire Ins. Co. v. Beatty, 870 N.E.2d 546 (Ind.Ct.App.2007).

Here, both sides argued below that the Branham Agreement was unambiguous, but argued differing interpretations of the meaning of "total purchase price" and the calculation of the success fee. Newland argued that...