Paramo v. Edwards

Decision Date12 December 1990
Docket NumberNo. 37S04-9012-CV-774,37S04-9012-CV-774
CourtIndiana Supreme Court
PartiesJesus PARAMO and Santa Paramo, (Plaintiff Below), Foss, Schuman, Drake & Barnard, doing business In Indiana As Cohen, Foss, Schuman & Drake, (Intervenor Below), Appellants, v. Roger D. EDWARDS, Artim Transportation Systems, Inc., and Steel and Machinery Transport, Co., Inc., (Defendants Below), Appellees.

Carmen A. Fernandez, Kowalski, Szarmach & Fernandez, East Chicago, for appellants.

Peter C. Bomberger, Friedrich, Bomberger, Tweedle & Blackmun, P.C., Highland, for intervenor-appellant.

Mark D. Gerth, Kightlinger & Gray, Indianapolis, for appellees.

DICKSON, Justice.

This case seeks clarification of the applicability of the doctrine of equitable estoppel to avoid a statute of limitations defense. We grant transfer to address the issue.

The plaintiffs-appellants Jesus Paramo and his wife Santa Paramo allege that they sustained injuries in a motor vehicle accident on September 6, 1983. Their resulting claims were asserted in an action not filed until December 27, 1985. The defendants Roger D. Edwards, Artim Transportation System, Inc., and Steel and Machinery Transport Co., Inc., filed a motion to dismiss affirmatively asserting the two-year statute of limitations, Ind.Code Sec. 34-1-2-2. The plaintiffs responded by alleging that the conduct of the defendants' insurer should estop defendants from asserting the defense.

In support of their claim of equitable estoppel to oppose summary judgment, the Paramos submitted affidavits of their attorneys, Stephen B. Cohen and Brian L. Burchett, who began representing the plaintiffs in this matter in September, 1984. Cohen's affidavit contains the following relevant information:

3. On or about July 23, 1985, he [Cohen] had a telephone conversation with one of the claims adjusters of American Interinsurance Exchange handling the file. He told the adjuster that they were having difficulty in obtaining information necessary to substantiate plaintiffs' claims, and that he thought it would be unwise to file suit and incur litigation expenses on a claim that might have either great value or small value depending upon the information obtained.

4. He and the adjuster agreed that no lawsuit would be required as long as the parties remained in contact with one another and due diligence was used to obtain the information necessary to substantiate plaintiffs' claims and indicate their value.

5. During the conversation he and the adjuster agreed not to file suit until all efforts at settlement had been exhausted.

Record at 69. Burchett's affidavit contains the following relevant assertion:

5. During his telephone conversations with Mr. Welsh [identified by implication as an adjuster for defendants' insurer] on October 4, 1985, and November 14, 1985, they continued to discuss settlement of plaintiffs' claims. On October 4, 1985, Mr. Welsh indicated he would negotiate based upon the information available. On November 14, 1985, Mr. Welsh indicated that the demand was beyond his authority and that he had evaluated the file and made a recommendation concerning settlement to his supervisor.

Record at 70.

Following submission of documentary evidence by the parties, the trial court treated the defendants' motion as one for summary judgment, which it granted on November 12, 1987. Thereafter, the trial court permitted the plaintiffs' former lawyers 1 to intervene as a party plaintiff for the purpose of participation in the taking of this appeal.

The single issue presented in the briefs of the plaintiffs and the intervening party plaintiff to the Court of Appeals was whether there existed a genuine issue of material fact regarding the Paramos' claim that the defendants were equitably estopped from raising the statute of limitations. The Court of Appeals reversed the summary judgment and remanded for trial. Paramo v. Edwards (1989), Ind.App., 541 N.E.2d 979.

Equitable Estoppel

The parties dispute whether the doctrine of equitable estoppel may be applicable under the facts presented by the plaintiffs. Their disagreement centers upon the elements of the doctrine.

The plaintiffs cite as principal authority Marcum v. Richmond Auto Parts Co. (1971), 149 Ind.App. 120, 270 N.E.2d 884. In Marcum, a personal injury plaintiff failed to commence the action within the applicable statute of limitations, which the defendant raised as an affirmative defense. The plaintiff's reply alleged that the delay resulted from representations of the defendant's insurer that the insurer admitted liability, would pay medical expenses, would pay lost wages, would "make a fair cash settlement," and specifically requested that plaintiff not consult an attorney. Describing the situation as one in which "guileless and trusting plaintiffs who through no fault of their own and by reason of the misrepresentation of their prospective adversary have been induced to allow the statutory period of limitation to expire" the Court of Appeals stated:

It is difficult to conceive of a stronger case for the application of the doctrine of equitable estoppel than that where a plaintiff has been induced by fraud on the part of the defendant to defer the commencement of suit.

149 Ind.App. at 126, 270 N.E.2d at 887. Furthermore, the Marcum court expressly rejected limiting the term "fraud" to its "technical or classical sense," but rather utilized the concept of constructive fraud which arises by operation of law from a course of conduct which, if sanctioned by law, would "secure an unconscionable advantage, irrespective of the existence or evidence of actual intent to defraud." 149 Ind.App. at 126, 270 N.E.2d at 887, quoting with approval from Beecher v. City of Terre Haute (1956), 235 Ind. 180, 184-185, 132 N.E.2d 141, 143.

The defendants contend that the doctrine of equitable estoppel is not applicable to the present facts because of the failure of plaintiffs to satisfy the first two of the following three claimed prerequisite elements: (1) false representation or concealment of material facts made with actual or constructive knowledge of falsity; (2) representation made to one without knowledge or reasonable means of knowing true facts, with intent to induce reliance; and (3) detrimental reliance. These elements have been listed in several cases discussing equitable estoppel. See, e.g., Coghill v. Badger (1981), Ind.App., 418 N.E.2d 1201, 1208; AAA Wrecking Co. v. Barton, Curle & McLaren, Inc. (1979), 182 Ind.App. 418, 421, 395 N.E.2d 343, 345; Emmco Insurance v. Pashas (1967), 140 Ind.App. 544, 551, 224 N.E.2d 314, 318.

However, other cases have applied the Marcum "course of conduct" approach to equitable estoppel without requiring an actual false representation or concealment of existing fact. In Hoosier Insurance Co. v. Ogle (1971), 150 Ind.App. 590, 276 N.E.2d 876, the conduct of an insurer in making an inspection and in failing to send a notification letter was held to equitably estop it from denying coverage to its insured for alleged policy application misstatements. A promise to make future payment was held to satisfy the conduct requirement for application of equitable estoppel in Lawshe v. Glen Park Lumber Co., Inc. (1978), 176 Ind.App. 344, 347, 375 N.E.2d 275, 278:

The basis for the doctrine of equitable estoppel is fraud, either actual or constructive, on the part of the person estopped. Constructive fraud is fraud that arises by operation of law from conduct which, if sanctioned by the law, would secure an unconscionable advantage.... The result of the conduct triggers the application of the theory.

... [I]f one party is induced by another, on the faith of an oral promise, to place himself in a worse position than he would have been in had no promise been made, and if the party making the promise derives a benefit as a result of the promise, a constructive fraud exists which is subject to the trial court's equity jurisdiction. [Citations omitted.]

This language was recently quoted with approval in Stafford v. Barnard Lumber Co., Inc. (1988), Ind., 531 N.E.2d 202, 205. In Phar-Crest Land Corp. v. Therber (1969), 251 Ind. 674, 244 N.E.2d 644, Justice Arterburn discussed "principles of equity such as equitable estoppel" and quoted with approval from Pitcher v. Dove (1884), 99 Ind. 175, 177-78:

It is well settled that there need not be any design to defraud in order to constitute an estoppel. It is sufficient if the conduct of the party has been knowingly such as would make it unconscionable on his part to deny what his conduct had induced another to believe and act upon in good faith and without knowledge of the facts.

251 Ind. at 681, 244 N.E.2d at 647.

We therefore conclude that the doctrine of equitable estoppel is not limited to circumstances involving an actual false representation or concealment of existing material fact. But the availability of the doctrine is subject to limitations.

Guy v. Schuldt (1956), 236 Ind. 101, 138 N.E.2d 891, the authority upon which Marcum is based, recognized the application of equitable estoppel, but nevertheless stated:

Before the doctrine of estoppel may be used to bar the defendant's use of the statute of limitations, the fraud must be of such character as to prevent inquiry, or to elude investigation, or to mislead the party who claims the cause of action.

236 Ind. at 107, 138 N.E.2d at 894. Whether particular conduct actually prevents inquiry, eludes investigation, or misleads, reflects upon the unconscionability of the resulting advantage. These factors have often been significant in the reluctance of our courts to apply equitable estoppel to benefit persons represented by counsel. For example, Marcum was distinguished in Taylor v. Jensen (1985), Ind.App., 475 N.E.2d 315, which found no evidence that the insurer's conduct in negotiating with the plaintiff's attorney prevented the plaintiff from discovering her rights. In such cases, a fundamental question has been...

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