Price v. Freeland

• Decision Date: 17 August 2005
• Docket Number: No. 49A02-0410-CV-881.,49A02-0410-CV-881.
• Citation: 832 N.E.2d 1036
• Parties: Gary PRICE, David W. Gray and Lewis & Kappes, P.C., Appellants-Defendants, v. Daniel L. FREELAND, Trustee of the Estate of Consolidated Industries, U.S. Bankruptcy Court No. 98-40533, Appellee-Plaintiff.
• Court: Indiana Supreme Court

832 N.E.2d 1036

Gary PRICE, David W. Gray and Lewis & Kappes, P.C., Appellants-Defendants, v. Daniel L. FREELAND, Trustee of the Estate of Consolidated Industries, U.S. Bankruptcy Court No. 98-40533, Appellee-Plaintiff.

No. 49A02-0410-CV-881.

Court of Appeals of Indiana.

August 17, 2005.

COPYRIGHT MATERIAL OMITTED

Cory Brundage, Indianapolis, for Appellants.

Mitchell A. Peters, Richard A. Miller, Richard A. Miller & Associates, Merrillville, for Appellee.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

Gary Price, David Gray, and Lewis & Kappes, P.C. (collectively "Price") appeal from the trial court's denial of their summary judgment motion in this legal malpractice action brought by Daniel L. Freeland, Trustee of the Estate of Consolidated Industries ("Freeland"). Price presents two issues for our review:

1. Whether the trial court abused its discretion when it denied Price's motion to strike Freeland's affidavit.

2. Whether the trial court erred when it denied his summary judgment motion.

We reverse and remand with instructions.

FACTS AND PROCEDURAL HISTORY

Consolidated Industries ("Consolidated") manufactured home heating furnaces. On March 18, 1994, consumers brought a class action lawsuit against Consolidated alleging that its furnaces were defective and caused property damage and personal injuries. Other class action and individual lawsuits were also filed. Consolidated had insurance policies with multiple insurance companies, all of which denied coverage for the claims. Consolidated hired Price to bring a declaratory judgment action against the insurers to determine whether Consolidated was covered under its policies.

In the meantime, Consolidated declared bankruptcy. The declaratory judgment action was merged with the bankruptcy proceeding, and the United States Bankruptcy Court for the Northern District of Indiana ("bankruptcy court") assumed jurisdiction over the matter. The bankruptcy court directed Consolidated and four of the insurance companies to enter into a stipulation of facts regarding, among other things, the definition of "occurrence" as that term is used in the relevant insurance policies. The interpretation of that term was critical because Consolidated was responsible for the first $250,000 in damages as a result of each "occurrence" the policies covered. On July 2, 1999, Consolidated and the four insurance companies submitted to the bankruptcy court a stipulation of facts that stated in relevant part:

If the plaintiffs in [the class action lawsuits] or Other Actions can succeed in proving that there was either (a) property damage as a result of physical injury to the real or personal property (other than the furnace) of the plaintiff caused by fire or excessive furnace temperature due to alleged defects in the Consolidated furnace, or (b) bodily injury which was caused from inhaling carbon monoxide fumes emitted by the Consolidated furnaces, the property damage or bodily injury allegedly caused by each such furnace would constitute a separate occurrence under the policies provided by Continental, Wausau, TIG and National Union.

Appellants' App. at 72 (emphasis added).

On December 29, 1999, the bankruptcy court issued a "Decision," which states in relevant part:

The parties have stipulated that damage caused by each furnace constitutes a separate occurrence . . . . This stipulation comports with the policies' language, which defines an occurrence as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Since the parties have stipulated as to what constitutes an "occurrence" under the policies in question, the court need not consider the issue further.

Id. at 160 (emphasis added). But the bankruptcy court never ruled on the declaratory judgment action against the insurance companies. Instead, Consolidated and all of the insurance companies entered into a settlement agreement. Under the terms of that agreement, the insurance companies provided coverage for the class action lawsuits, and Consolidated did not have to contribute any money to the individual settlements.

Still, on June 29, 2001, Freeland filed a complaint against Price alleging that "in creating and agreeing to a Stipulation of Facts wherein Defendant accepted without argument Insurers' interpretation of what constituted an `occurrence' under the insurance policies and the damages limitations for such occurrences" Price "fail[ed] to exercise the ordinary skill and knowledge of a prudent attorney." Id. at 90. Freeland alleged that Consolidated had suffered "considerable financial damages" as a result of the alleged malpractice. Id. Price filed a summary judgment motion alleging that: (1) the stipulation could not have been a proximate cause of the alleged injury because it was not binding on the bankruptcy court; (2) the stipulation was legally correct; and (3) the stipulation had no effect on the underlying litigation and could not have caused any harm. Following a hearing, the trial court denied Price's summary judgment motion. This appeal ensued.

DISCUSSION AND DECISION

Issue One: Motion to Strike

Price first contends that the trial court abused its discretion when it denied his motion to strike Freeland's affidavit designated as evidence in opposition to Price's summary judgment motion. The trial court has broad discretion in ruling on the admissibility of evidence. Heritage Dev. of Ind., Inc. v. Opportunity Options, Inc., 773 N.E.2d 881, 886 (Ind.Ct.App.2002). This discretion extends to rulings on motions to strike affidavits on the grounds that they fail to comply with the summary judgment rules. Id.

Indiana Trial Rule 56(E) provides in relevant part that affidavits submitted in support of or in opposition to a summary judgment motion "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Further, "[s]worn or certified copies not previously self-authenticated of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith." Id. "The requirements of T.R. 56(E) are mandatory — therefore, a court considering a motion for summary judgment should disregard inadmissible information contained in supporting or opposing affidavits." Interstate Auction, Inc. v. Cent. Nat'l Ins. Group, Inc., 448 N.E.2d 1094, 1101 (Ind.Ct.App.1983).

In response to Price's summary judgment motion, Freeland designated the following evidence: (1) the December 29, 1999 decision of the bankruptcy court regarding the definition of "occurrence," and (2) his affidavit. Freeland's affidavit provides in relevant part:

7. [The] stipulation of facts, by defining an "occurrence" as relating to each individual furnace rather than the design and/or manufacture of the allegedly defective furnaces, had the effect of holding Consolidated Industries responsible for the first $250,000.00 in damages for each separate injury sustained by each individual plaintiff.

8. As reflected in the record, Gary Price attempted to reverse this stipulation of facts by motion as being an inaccurate statement of both the law and the language in the insurance policies, and when he failed to do so I also attempted it; but on December 29, 1999 the bankruptcy court upheld the stipulation.

9. Though I attempted to argue otherwise before the bankruptcy court, the court's decision upholding the stipulation of facts was found to be binding on myself as the party entering into the stipulation on Consolidated Industries' behalf.

10. The bankruptcy court proceeded to act upon this stipulation of facts, by relying upon its particulars in entering judgment against Consolidated Industries in several summary judgment motions filed by insurance carriers.

11. Based upon my knowledge of the law and years of experience therein, this stipulation of facts is not an accurate statement of the law or reflection of the insurance policy, because it effectively defines the property damage and/or bodily injury suffered by each plaintiff as an "occurrence" itself, rather than it being caused by the occurrence of the design and/or manufacture of the allegedly defective furnaces.

12. On March 17, 2000, I met with Defendant Gary Price in the law offices of Steven Ancel in Indianapolis, Indiana. At that time, Gary Price advised me that there was presently pending before Judge Grant a Motion to Reconsider what he said was an erroneous interpretation of his intended meaning of the language previously quoted in Paragraph 6 of the Affidavit. He stated that he intended the language that each fire equaled an occurrence to only affect when the fire started thus bringing into play more insurance policies, and never intended it to have an effect on the self-insured retention. He went on to explain what he referred to as "triple trigger" which was an occurrence in the policy, a continuing series of events, and if the policy being in place in the event of injury [sic]. He then advised me as to the theories as to why the Judge's initial decision was incorrect based on [the] reasonable expectation of policy owners, illusory policy and the difference between limits and deductibles. The discussion went on for a period of time; however, it was clear that Mr. Price at no time believed Judge Grant's decision to be correct or a correct statement of law.

13. I also believe in my professional judgment that the case of Stillwell v. Brock Bros., Inc. (S.D.Ind.1990), 736 F.Supp. 201, a true and accurate copy of which is attached hereto, is not applicable to our stipulation of facts because it interprets Kentucky state law, not Indiana [law]; Indiana law has not consistently applied the Stillwell definition of "occurrence"; and definition of the word "occurrence" was not in any case germane to any settlement agreement with Consolidated Industries before Gary Price...