Tully v. Haughee (In re Haughee)
| Decision Date | 26 March 2012 |
| Docket Number | ADVERSARY NO. 06-6079,CASE NO. 05-68688 JPK |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
| Parties | In re: MICHAEL BRYCE HAUGHEE, Debtor. MARY ANN TULLY, Plaintiff, v. MICHAEL BRYCE HAUGHEE, Defendant. |
This case arises from a complaint filed against the debtor, Michael Bryce Haughee ("Haughee"), in which the plaintiff, Mary Ann Tully ("Tully"), requests that a certain debt allegedly owed to her by Haughee be excepted from discharge pursuant to 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6). The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a), and N.D.Ind.L.R. 200.1(a)(2). This matter constitutes a "core" proceeding as defined by 28 U.S.C. § 157(b)(2)(I).
This adversary proceeding was initiated by a complaint filed on March 15, 2006. Prior to the defendant filing an answer, on April 3, 2006, Tully filed her first amended complaint. In response to the court's April 30, 2007 order, on June 13, 2007, Tully filed a Verified Second Amended Adversary Complaint ("Second Amended Complaint"), which she signed and verified that the allegations were true and correct to the best of knowledge and belief. In this complaint, Tully alleged that Haughee owed her a debt which is excepted from discharge pursuant to 11 U.S.C. § 523(a)(4) and 11 U.S.C. § 523(a)(6). On July 13, 2007 the court ordered that the clerkenter a default with respect to Haughee, and Tully then filed a motion for default judgment. However, in an order dated August 30, 2007, the court noted that the complaint was incomplete: The exhibits referenced throughout the complaint were not attached. On September 21, 2007, Tully re-filed her second amended complaint with the appropriate exhibits attached.1
The summons issued came back to Tully's counsel marked as "not deliverable as addressed" by the United States Postal Service. Thus, on September 26, 2007, Tully filed a motion requesting leave to attempt service upon the defendant at three alternative addresses.2 A default judgement was finally entered against Haughee on February 28, 2008 in the amount of $8,775.75.3
On January 20, 2009, Haughee re-surfaced and filed a motion to vacate the default judgment and argued that he was never properly served. Apparently, in the late summer/early fall of 2006 Haughee closed the post office box which he provided as his address on the bankruptcy petition.4 At this point Tully proceeded to conduct discovery. A hearing on the motion to vacate was held on September 17, 2009. In an order dated March 5, 2010, the motion to vacate the default judgment was granted and the court determined that Haughee wasnever properly served with the complaint and that the court did not have jurisdiction over the defendant. The court found that the adversary proceeding remained viable and indicated that it was up to either the plaintiff or defendant to take whatever action either may deem necessary to further pursue or terminate this case. Subsequently, Tully issued an alias summons on March 18, 2010.
On May 3, 2010 Haughee filed an answer denying the substantive allegations of the Second Amended Complaint, which raised the expiration of the statute of limitations as an affirmative defense.
A bench trial was held on July 7, 2011, and the parties were ordered to file briefs concerning the statute of limitations defense raised by Haughee. The record before the Court for the purposes of rendering a final determination is comprised of the plaintiff's Second Amended Complaint, the defendant's answer, the transcript of the bench trial conducted on July 7, 2011 and the exhibits entered into evidence at trial.5 This Memorandum and Decision constitutes the findings of fact and conclusions of law required by Fed.R.Bankr.P. 7052/ Fed.R.Civ.P. 52(a).
Tully's spouse passed away on September 25, 2003. Subsequently, on October 28, 2003, Tully met with Haughee, a licensed Indiana attorney at the time, for the purpose of retaining him to possibly open a probate estate and evaluate any assets due to her.6 On November 7, 2003, Tully entered into a fee agreement ("Fee Agreement") with Haughee whichset out the terms and conditions of his retention and the scope of his representation.7
One of Tully's husband's assets was a life insurance policy through Metropolitan Life. Tully was listed as the sole beneficiary on the policy. As Tully's attorney, Haughee obtained the proceeds of the policy in the amount of $68,865.84. He then proceeded to send Tully a billing statement for outstanding attorney fees and expenses totaling $8,775.75. But, by the time Tully received this statement, Haughee had already charged the balance due him against the $68,865.84. In the end, Tully received a check drawn on Haughee's trust account in the amount of $60,090.09. Subsequently she received a second billing invoice from Haughee in the amount of $3,590.07. Tully decided not to pay this amount, and Haughee indicated that he chose not to attempt collection, essentially writing off any fees in this statement.
Tully contends that Haughee acted outside the scope of his representation when he administered the life insurance policy and offset his outstanding legal fees against the proceeds. Secondly, she contends that Haughee's fees were unreasonable and amounted to a "gouging attempt".8 At trial, Tully indicated that her sole focus at this point is to attempt to except from discharge the amount of $8,775.75 pursuant to § 523(a)(4) and/or § 523(a)(6). This is the amount Haughee withheld from the life insurance payout and used to offset his attorney fees.
Haughee argues that he was authorized to not only obtain the life insurance money, but also that Tully knew he was going to use a portion of it to pay his attorney fees prior to turning the remaining balance over to her. In his answer to Tully's complaint he also raised the affirmative defense that this action is barred by the statue of limitations. If true, then there would be no need for the court to rule on the merits of Tully's case. Therefore, before movingon to the ultimate question of whether there is a debt owing to Tully which is excepted from discharge, the court will first determine the validity of Haughee's affirmative defense.
Haughee argues that Indiana Code 34-11-2-3 bars this action from proceeding and contends that the statute began to run on January 5, 2004, which is around the time Haughee estimates that Tully terminated his representation. Tully argues that the applicable statue of limitations is found at Indiana Code 34-11-2-4 and takes the position that the statute began to run on January 20, 2004.9 According to the statute relied upon by Haughee, any action brought in contract or tort based on professional services rendered must be filed within two years, "from the date of the act, omission, or neglect complained of." Haughee contends that the complaint "was not properly filed with service of process perfected upon the Debtor until March 31, 2010." Since this is more than six years after the dispute arose, Haughee concludes that the action is barred by the statute of limitations.
It is not altogether clear whether Haughee is arguing that: 1) the summons and complaint were not served timely and therefore the case should be dismissed or; 2) the complaint was not originally filed timely under state law or; 3) the case is not considered filed until the summons and complaint are properly served, and as a result this action was filed six years too late under state law. In any event, this defense fails for several reasons.
In support of his position, Haughee partly relies on this court's order of March 5, 2010, in which the court stated that as of that date it did not have personal jurisdiction over Haughee. Although the court did in fact find at that time that it did not have personal jurisdiction over Haughee, the order specifically stated that "the adversary proceeding remains viable."
Under Indiana law - which is the law applicable to Haughee's statute of limitations affirmative defense - an action is commenced for the purpose of tolling a statute of limitation when the complaint is filed, summons is tendered (a consideration irrelevant in this case, because summons is not tendered by a litigant in an adversary proceeding, but rather is issued by the court clerk), and the required filing fee is paid; Ray-Hayes v. Heinamann, Ind., 760 N.E. 2d 172 (2002). In this case, all of the required three actions for tolling occurred on March 15, 2006, and the action was commenced on that date for the purpose of tolling a statute of limitation.
Haughee confuses the requirement that an action be commenced within a certain period of time with the requirement that the complaint be served within a fixed period of time. Indiana Code 34-11-2-3 provides as follows:
An action of any kind for damages, whether brought in contract or tort, based upon professional services rendered or which should have been rendered, may not be brought, commenced, or maintained, in any of the courts of Indiana against physicians, dentists, surgeons, hospitals, sanitariums, or others, unless the action is filed within two (2) years from the date of the act, omission, or neglect complained of. (Emphasis added.)
In order for this particular state statute to be satisfied it is not required that the complaint be served within a certain period of time as long as the complaint is filed within the prescribed period of time.
Perhaps Haughee is referring to the requirement in the Bankruptcy Rules that the summons and complaint be served within a certain period of time. Bankruptcy Rule 7004(e) provides that service of process is made by delivery of the summons and complaint within ten (10) days after a summons is issued and further provides that if the summons is not timely...
To continue reading
Request your trial