Purcell v. Old Nat'l Bank

• Decision Date: 31 July 2012
• Docket Number: No. 49S02–1201–CT–4.,49S02–1201–CT–4.
• Citation: 972 N.E.2d 835
• Parties: James C. PURCELL, Appellant (Plaintiff below), v. OLD NATIONAL BANK, Appellee (Defendant below).
• Court: Indiana Supreme Court

972 N.E.2d 835

James C. PURCELL, Appellant (Plaintiff below),

v.OLD NATIONAL BANK, Appellee (Defendant below).

No. 49S02–1201–CT–4.

Supreme Court of Indiana.

July 31, 2012.

Thomas D. Collignon, Patrick J. Dietrick, Michael B. Knight, Indianapolis, IN, William W. Wilkins, Dennis J. Lynch, Travis C. Wheeler, Columbia, SC, Attorneys for Appellant.

Mark J.R. Merkle, Greg A. Small, Indianapolis, IN, Attorneys for Appellee.

On Petition to Transfer from the Indiana Court of Appeals, No. 49A02–1005–CT–482

DAVID, Justice.

This case involves a trial court's issuance of a directed verdict under Trial Rule 50(A). The issue presented in this case is whether the trial court abused its discretion under Rule 50(A) in its determination that the evidence presented by Purcell was insufficient to merit presentation of the evidence to the jury. We hold that the trial court properly exercised its discretion and affirm the ruling of the trial court in all respects.

Facts and Procedural History

In 1998, Richard Knight and James Purcell established Midwest Fulfillment, a company that provided order fulfillment services for various companies. In late 2001, Joseph Stein joined Midwest Fulfillment as a ten percent shareholder and Chief Financial Officer. In June 2002, the parties executed a stock redemption agreement, in which Purcell sold his majority interest in Midwest Fulfillment to Knight and Stein. The redemption agreement called for payments to Purcell of $1.2 million in four annual installments and monthly interest payments on the outstanding balance. Furthermore, the redemption agreement gave Purcell a security interest in Midwest Fulfillment's assets and required Midwest Fulfillment to provide Purcell with monthly and yearly financial statements. Under the redemption agreement, if Midwest Fulfillment's assets-to-liabilities ratio (or “current ratio”) fell below a certain level for three consecutive months, Midwest Fulfillment would be in default and Purcell would gain 100% ownership of the company.

In late 2002, Midwest Fulfillment applied for a line of credit with Old National Bank. Prior to issuing the loan, Old National Bank (Old National), through loan officer Joseph Howarth, required Purcell to sign a subordination agreement that made Purcell's security interest in Midwest Fulfillment's assets subordinate to Old National's security interest in those assets. Purcell signed the subordination agreement on December 30, 2002. Both Purcell and Old National received monthly financial statements prepared by Midwest Fulfillment.

In February and March 2003, Midwest Fulfillment's current ratio fell below the level specified in the redemption agreement. A third month of the current ratio falling below 1.0 as specified in the redemption agreement would be a default and allow Purcell to exercise his rights under the redemption agreement, subject to the overriding obligations of the subordination agreement. Midwest Fulfillment's April balance sheet included a line item for income designated as “Misc. Billing to Customers” in the amount of $613,461.19. The April profit and loss statement reported Midwest Fulfillment's net ordinary income as $695,210.44, which prevented a technical default of the redemption agreement.

Stein later admitted that this figure was based on invoices to Midwest Fulfillment's landlord for work that was neither ordered nor completed, and that the April 2003 balance sheet given to Purcell was not intended to reflect an accurate financial picture for Midwest Fulfillment. But for the “Misc. Billing to Customers” line item, the current ratio would have been below the designated level for three consecutive months, and Purcell would have had the right to take over the company.

By July 2003, Midwest Fulfillment was going out of business. The landlord chained the doors, and without a space to conduct business, Midwest Fulfillment ceased operations and turned remaining assets over to Old National. Old National liquidated those assets, but that was still insufficient to pay off the loans.

In a proceeding separate from the instant case, Purcell sued Midwest Fulfillment. During that lawsuit, an interrogatory was posed to Stein asking for an explanation of several balance sheet items between the months of February and June of 2003, one of which was the “Misc. Billing to Customers” line item in the April 2003 balance sheet. Under oath, Stein answered generally, “[a]ll instances were adjustments made to the receivable from Meridian Properties, Inc. and /or Sharp Companies done in accordance with instruction from Joe Howarth at Old National Bank to remain in compliance with the loan documents between Midwest and Old National Bank.” More specifically, Stein had noted in the previous answer that “Midwest was accrual basis ... [and] that the receivable due from Meridian Properties, Inc. and/or Sharp Companies was included as income. The inclusion of this receivable as income was done at the instruction of Joe Howarth at Old National Bank.”

Purcell brought claims against Old National for negligence, constructive fraud, actual fraud, deception, and tortious interference with a contract. The matter proceeded to trial, and the evidence at trial included Stein's sworn interrogatory response from the Midwest Fulfillment litigation. Plaintiff took the position that the interrogatory answer by Stein was proof that Howarth, on behalf of Old National, directed Stein to knowingly make the false statements. However, during their trial testimony in the instant case, both Stein and Howarth denied that the April 2003 balance sheet was falsified at Howarth's direction. Specifically, Stein disavowed his response to interrogatory in the separate case; Stein explained that it was his decision to include the inaccurate $613,461 amount under “Misc. Billing to Customers” and that Joe Howarth did not instruct Stein to make the entry. In fact the trial testimony was stated clearly:

Q: Did Mr. Howarth direct you to make that entry in the April 2003 financial statement under Miscellaneous Billing to Customers?

A: He did not.

...

Q: Now, the next line in your response says: “The inclusion of this receivable as income was done at the instruction of Joe Howarth of Old National Bank.” ...

...

A: Mr. Howarth did not instruct me to do that.

At the close of Purcell's case-in-chief, the trial court granted Old National's motion for judgment on the evidence on all claims including finding that Old National owed no duty to Purcell.¹ The trial court denied Old National's request for statutory attorney fees. The Court of Appeals affirmed the trial court's ruling as to the issues of duty and attorney's fees but reversed the trial court's judgment on the evidence as to Purcell's claims of fraud, deception, and tortuous interference with contract based on the interrogatory answer in the other litigation. We granted transfer.

I. Trial Rule 50(A) Sufficiency Requirement

The trial court granted Old National's motion for judgment on the evidence pursuant to Indiana Trial Rule 50(A). The Court of Appeals reversed, finding that Stein's interrogatory answer constituted sufficient evidence to preclude an entry of judgment on the evidence, despite evidence to the contrary at trial, including an adamant denial from Stein that the interrogatory was incorrect. Purcell v. Old Nat. Bank, 953 N.E.2d 527, 532 (Ind.Ct.App.2011).

This Court reviews a trial court's issuance of judgment on the evidence by applying the same standard that the trial court uses, looking only to the evidence and reasonable inferences most favorable to the non-moving party. See Smith v. Baxter, 796 N.E.2d 242, 243 (Ind.2003); American Optical Co. v. Weidenhamer, 457 N.E.2d 181, 183 (Ind.1983). Thus, the Court turns to the text of Trial Rule 50, which provides the standard for judgment on the evidence.

Trial Rule 50(A) states in relevant part: “Where all or some of the issues in a case tried before a jury ... are not supported by sufficient evidence ... the court shall withdraw such issues from the jury and enter judgment thereon ... A party may move for such judgment on the evidence.” Ind. Trial Rule 50(A) (emphasis added). The purpose of a party's motion for judgment on the evidence under Rule 50(A) is to test the sufficiency of the evidence presented by the non-movant. Nesvig v. Town of Porter, 668 N.E.2d 1276, 1282–83 (Ind.Ct.App.1996).

In American Optical, this Court articulated the means by which a trial court may determine whether evidence is “sufficient” to survive a motion for judgment on the evidence. In that case, this Court stated that determining whether evidence was sufficient “requires both a quantitative and a qualitative analysis.” American Optical, 457 N.E.2d at 184. Evidence fails quantitatively only if it is wholly absent; that is, only if there is no evidence to support the conclusion. Id. If some evidence exists, a court must then proceed to the qualitative analysis to determine whether the evidence is substantial enough to support a reasonable inference in favor of the non-moving party. See Dettman v. Sumner, 474 N.E.2d 100, 104–105 (Ind.Ct.App.1985) (discussing and applying the two-part analysis of American Optical ).

“Qualitatively, ... [evidence] fails when it cannot be said, with reason, that the intended inference may logically be drawn therefrom; and this may occur either because of an absence of credibility of a witness or because the intended inference may not be drawn therefrom without undue speculation.” American Optical, 457 N.E.2d at 184. The use of such words as “substantial” and “probative” are useful in determining whether evidence is sufficient under the qualitative analysis. Id. Ultimately, the sufficiency analysis comes down to one word: “reasonable.” See, e.g., Raess v. Doescher, 883 N.E.2d 790, 793 (Ind.2008) (“A motion for judgment on the evidence should be granted only when there is a complete failure of proof because there is no substantial evidence...