Sacks v. American Fletcher Nat. Bank & Trust Co.

Decision Date15 March 1972
Docket NumberNo. 172S2,172S2
Citation258 Ind. 189,279 N.E.2d 807
PartiesJerome SACKS et al., Appellants, v. AMERICAN FLETCHER NATIONAL BANK AND TRUST COMPANY et al., Appellees.
CourtIndiana Supreme Court

HUNTER, Judge.

This is an appeal from an order of the Marion Circuit Court sustaining the defendants' motions to dismiss and dismissing appellant's second amended complaint. This Court has accepted jurisdiction of this cause by virtue of its having been transferred from the Court of Appeals with the consent of all the parties. The second amended complaint seemingly asserts a stockholder's derivative action alleging deceit and misrepresentation on the part of the defendants. The principal grounds of the defendants' motions to dismiss are that the receiver of the corporation involved had not properly been made a party, leave of the receivership court having been sought and denied, and that the receiver is an indispensable party to this stockholder's deprivative action.

The case arose out of a loan transaction between JJS Co., Inc. and American Fletcher National Bank and Trust Co. (hereinafter after referred to as AFNB). JJS is an Indiana corporation with the appellant Jerome Sacks, Janet Blue, and one of the appellees Sherwood Blue as its only stockholders and directors. The Corporation ran a musical instrument store known as Pearson Music Center. The corporation sought financing and obtained it from AFNB. Appellant alleges that he was assured that the bank would provide continual financing of the venture. Loans were made with appellant and appellee Blue personally guaranteeing them. The loan was not paid at maturity and AFNB refused to renew the loan or to extend additional credit and brought suit to foreclose the security interests it held and for the appointment of a receiver. Appellee Ensley was then appointed the receiver of JJS Co., Inc. by the Superior Court of Marion County.

Appellant then instituted the action in question in the Marion Circuit Court. Appellant had petitioned the Superior Court of Marion County, Room No. 3, for leave to sue Ensley in his capacity as receiver, but the petition was denied. Appellant's second amended complaint essentially asserted a stockholders derivative action charging both Blue and AFNB with misrepresentation, deceit, and breach of fiduciary obligations.

Pleas in abatement were filed by all the appellees to which Sacks filed demurrers. The new Indiana Rules of Procedure then became effective. The trial court sustained the demurrers to the pleas in abatement and ruled the appellees to answer under the new rules within thirty (30) days.

The appellees then filed motions to dismiss pursuant to TR. 12(B), contending a failure to join an indispensable party. Appellant responded by filing motions for judgment against the appellees on the ground that the appellees failed to answer the second amended complaint pursuant to the trial court's rule to answer. The trial court overruled the appellant's motions for judgment. The trial court sustained the appellees' motions to dismiss and dismissed the action. Appellant then filed a motion to correct errors which was denied and this appeal followed.

Appellant makes several allegations of error. He first contends the motions to dismiss were not properly before the court. Secondly, he claims the trial court should have heard evidence before granting the motions to dismiss. The third contention is that the trial court erred in failing to specify the basis for granting the Motions to Dismiss. The fourth allegation is that it was error to sustain the motions to dismiss. Lastly it is asserted that even if the derivative action was dismissed for failure to join an indispensable party, the entire action could not be dismissed because appellant also had a personal action against the appellees.

Appellant's first contention that the motions to dismiss were not property before the court has no merit. Appellant claims the motions to dismiss were not responsive to the trial court's 'rule to answer.' However, the 'rule to answer' is satisfied if the one to whom it is directed files any of the pleadings 'which are ordinarily submitted after a complaint is filed.' Davis v. Thiede (1965), 138 Ind.App. 537, 544, 203 N.E.2d 835, 839. Also the acceptance of motions is within the sound discretion of the trial court. See Davis v. Thiede, supra. If the trial court was willing to accept the motions to dismiss we surely cannot say it was an abuse of discretion to do so.

Appellant's second contention is that the trial court should have heard evidence, on the issue before granting the appellees' motions to dismiss. Appellant asserts that if the dismissal is for lack of jurisdiction then the trial court must hear evidence, and cites State ex rel. Green v. Gibson Circuit Court (1965), 246 Ind. 446, 206 N.E.2d 135, in support of this proposition. However, in that case there were pertinent unresolved fact issues and the party made a request to introduce evidence. In the case at bar appellant made no effort to seek a hearing. Appellant's only response to the motions to dismiss was to file motions for judgment asserting the motions to dismiss were not responsive to the trial court's rule to answer. The motions to dismiss were filed in April of 1970 and the court did not rule on them until August of 1970. This would seem a sufficient amount of time for appellant to make any responses he wished. The rules contain no indication that such a hearing is required. Certainly if no party seeks a hearing on the issue of a motion to dismiss the judge is not required to conduct one.

Appellant's third allegation is that the trial court erred in not specifying the basis for granting the motions to dismiss However, the rules make no such requirement and appellant has cited us no authority for such a requirement. Appellant merely contends that it is impossible to ascertain the trial court's basis for sustaining the motions to dismiss if he does not so specify. It seems that appellant made no request of the trial court to specify its reasons. If he had we have no reason to believe the trial court would not have obliged. After the trial court's ruling the appellant made no attempt to seek clarification nor did he seek to amend his complaint. His only action was the filing of a motion to correct errors. Clearly, under the circumstances of this case, the trial court committed no error in failing to specify its reasons for sustaining the motions to dismiss.

Appellant's fourth assertion is that it was error to sustain the motions to dismiss. However, appellees contend there was a failure to join an indispensable party according to TR. 12(B)(7) and TR. 19 when the receivership court denied appellant leave to sue the receiver in another court. A corporation is a necessary party in a derivative suit. See, Ross v. Bernhard (1970), 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729; Carter v. Ford Plate Glass Co. (1882), 85 Ind. 180. This action is, as appellant admiss, at least in part a derivative suit.

'The corporation is a necessary defendant. In other words, the corporation on behalf of which plaintiffs sue must be made a party defendant so that a decree may appropriately give the corporation the fruit of any recovery by the plaintiffs. The corporation is not merely a proper party, but is an essential, indispensable party, and the failure to make the corporation a party is not a mere defect of parties but leaves the stockholder without a cause of action and the court without jurisdiction.' 13 Fletcher Cyclopedia Corporations (Perm. Ed., Revised Vol., 1970), § 5997, p. 456.

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  • In re Krause
    • United States
    • U.S. Bankruptcy Court — Northern District of Indiana
    • September 9, 1988
    ...of duty owed specially to a stockholder separate and distinct from the duty owed the corporation. See Sacks v. American Fletcher National Bank & Trust Co., 279 N.E.2d 807 (Ind.S. Ct.1972), citing Buschmann v. Professional Men's Association, 405 F.2d 659 (7th Cir.1969), where it was noted th......
  • Conk v. Richards & O'Neil, Llp
    • United States
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    • December 8, 1999
    ...of an individual shareholder's claim, however, was also recognized by the Supreme Court of Indiana in Sacks v. American Fletcher Nat. Bank & Trust Co., 258 Ind. 189, 279 N.E.2d 807 (1972). In that case, the court explained: "A personal cause of action arises when there is a breach of a duty......
  • Citizens Nat. Bank of Grant County v. First Nat. Bank in Marion
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    • July 23, 1975 appears to a certainty that the plaintiff would not be entitled to relief under any set of facts. Sacks v. American Fletcher National Bank and Trust Co. (1972), Ind., 279 N.E.2d 807. See also Gladis v. Melloh (1971), Ind.App., 273 N.E.2d 767; Wyant v. Lobdell (1972), Ind.App., 277 N.E.2d......
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    ...481; Dale v. City Plumbing & Heating Supply Company (Ct.App.Ga.1965), 112 Ga.App. 723, 146 S.E.2d 349; Sacks v. American Fletcher National Bank & T. Co. (Ind.1972), 279 N.E.2d 807; and Buschmann v. Professional Men's Association (7th Cir. 1969), 405 F.2d The facts in the record on appeal am......
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