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Inc. v. PNC Multifamily Capital Institutional Fund XXVI Limited Partnership

Court of Appeals of Indiana

December 21, 2016

Shelby's Landing -II, Inc., Richard Deckard, Jr., Marilyn Deckard, and Deckard Realty & Development Co., Appellants-Defendants,
v.
PNC Multifamily Capital Institutional Fund XXVI Limited Partnership, Columbia Housing SLP Corporation and Shelby's Landing II - L.P., Appellees-Plaintiffs.

         Appeal from the Shelby Superior Court The Honorable Charles D. O'Connor, Special Judge Trial Court Cause No. 73D01-1108-CC-259

          Attorney for Appellees Kenneth J. Munson Hoover Hull Turner LLP Indianapolis, Indiana

          Attorney for Appellants Christopher J. McElwee Monday Jones & Albright Indianapolis, Indiana

          Pyle, Judge.

         Statement of the Case

         [¶1] Appellants-Defendants, Shelby's Landing-II, Inc. ("Shelby's Landing"); Richard Deckard, Jr. ("Richard"); Marilyn Deckard ("Marilyn"); and Deckard Realty & Development Co. ("Deckard Realty") (collectively, "the Defendants"), appeal the trial court's judgment in favor of Appellees-Plaintiffs, PNC Multifamily Capital Institutional Fund XXVI Limited Partnership ("PNC Multifamily"); Columbia Housing SLP Corporation ("Columbia"); and Shelby's Landing II-L.P. ("the Partnership") (collectively, "the Plaintiffs"), in their breach of contract claim. The Defendants argue that it was error for the trial court to find that they had misappropriated the Partnership's funds and committed theft because the Plaintiffs did not raise misappropriation or theft claims in their complaint. They also argue that the trial court abused its discretion by awarding the Plaintiffs an unreasonable amount of attorney fees.

         [¶2] We conclude that, regardless of the trial court's misappropriation and theft findings and conclusions, there were adequate uncontested findings and conclusions to support the trial court's judgment. Because we also conclude that the trial court awarded the Plaintiffs a reasonable amount for their attorney fees, we affirm the trial court's judgment.

         [¶3] We affirm.

         Issues

1. Whether the trial court erred when it entered findings that the Defendants had committed misappropriation and theft.
2. Whether the trial court abused its discretion in determining the amount of attorney fees to award the Plaintiffs.

         Facts

         [¶4] In April 2005, Shelby's Landing, Deckard Realty, Columbia, and PNC Multifamily entered into a limited partnership agreement ("Partnership Agreement"), forming the Partnership. The purpose of the Partnership was to "construct, rehabilitate, acquire, own, maintain, manage, lease, sell, mortgage, or otherwise dispose" of property in Shelbyville, Indiana, in order to profit from a tax credit system designed to encourage private investment in low-income housing developments. (App. 220). The Partnership Agreement named Shelby's Landing as the General Partner of the Partnership; PNC Multifamily and Columbia as the Limited Partners (collectively, "the Limited Partners") of the Partnership; and Deckard Realty as the developer of the Partnership. The President of Shelby's Landing, Richard, was also the President of Deckard Realty.

         [¶5] Pursuant to the Partnership Agreement, Shelby's Landing's duties as General Partner included, in relevant part: (1) managing the Partnership's business; (2) keeping and maintaining the Partnership's accounting records; (3) advancing all funds necessary to meet operating deficits; (4) maintaining tenant security deposits in separate accounts; and (5) making an immediate capital contribution to fund any necessary credit adjustment amounts. It was also prohibited from, without the consent of the Limited Partners, borrowing from the Partnership; commingling partnership funds with the funds of any other person; or causing the Partnership to make any loan or advance to any other person.

         [¶6] The same day that the partners executed the Partnership Agreement, Deckard Realty, Richard, and Marilyn (collectively, "the Guarantors") executed a guaranty agreement ("Guaranty Agreement"). In the Guaranty Agreement, the Guarantors guaranteed:

to the Partnership and the Limited Partners the full and prompt payment, performance, observance, compliance, and satisfaction of all obligations, covenants, representations, and warranties on the part of the General Partner to be paid, performed, observed, complied with, or satisfied with respect to the [Partnership] Agreement.

(App. 305). The terms of the Guaranty Agreement also provided that:

. . . Upon any default by the Partnership or the General Partner or the Developer or Other Obligors relating to any obligation under the [Partnership] Agreement, the Limited Partners may, at either of their option, proceed directly and at once against the Guarantor[s] to collect the full amount of the Guarantor[s'] liability hereunder, or any portion thereof, without first proceeding against the Partnership, the General Partner, the Developer, any Other Obligors, or any person, corporation, partnership, or other entity.

(App. 306).

         [¶7] Subsequently, due to delays in the development of the Shelbyville property, the partners executed an amendment to the Partnership Agreement ("Adjuster Note") recognizing that the Partnership, Shelby's Landing, and the Guarantors owed the Limited Partners an adjusted amount of $950, 000 plus interest ("Adjuster Amount"), to be paid in installments.[1] Shelby's Landing, Richard, and Marilyn guaranteed the Adjuster Note as Guarantors.

         [¶8] Three years later, on or about November 10, 2010, the Limited Partners sent Shelby's Landing a written notice that it was in default under the Partnership Agreement. Specifically, they alleged that Shelby's Landing had: (1) failed to take all actions necessary to maintain and operate the Shelbyville property; (2) defaulted under the construction loan for the property; (3) defaulted in repaying the Adjuster Note; and (4) made loans or advances to itself or other affiliates without the consent of the Limited Partners. The Limited Partners demanded that Shelby's Landing cure its default by November 16, 2010, or face removal from its status as General Partner.

         [¶9] Shelby's Landing did not cure its alleged breaches of the Partnership Agreement, and the Limited Partners sent it another written notice of default on June 22, 2011. In this second notice, the Limited Partners again requested that Shelby's Landing cure the breaches they had identified in their November 10 notice of default. They also alleged that Shelby's Landing had committed additional breaches of contract since November 10, including failing to provide the Limited Partners with federal and state tax returns and audited Partnership financial statements. The Limited Partners demanded that Shelby's Landing cure all of the alleged defaults by July 5, 2011, or be subject to removal from being General Partner. They also stated that they were sending the notice to the Guarantors pursuant to the terms of the Guaranty Agreement, "to demand that Guarantor[s] immediately cure or cause to be cured the defaults of [Shelby's Landing]." (App. 171).

         [¶10] Shelby's Landing again failed to cure its defaults. Accordingly, on August 17, 2011, the Limited Partners and the Partnership sent Shelby's Landing a notice of its removal as General Partner. Five days later, on August 22, 2011, the Plaintiffs-the Limited Partners and the Partnership-filed a complaint against the Defendants-Shelby's Landing and the Guarantors. In their complaint, the Plaintiffs raised breach of contract and breach of guaranty claims. In addition to declaratory and other forms of relief, the Plaintiffs also requested recovery of their attorney fees.

         [¶11] On September 7, 2012, the Plaintiffs filed a motion for partial summary judgment requesting, among other judgments, a declaration that Shelby's Landing had been properly removed as General Partner and a judgment against Shelby's Landing and the Guarantors for the amounts due under the Adjuster Note. The trial court granted the motion for a partial summary judgment on July 19, 2013, and held a trial to determine the remaining issues of liability and damages on January 26, 2015.

         [¶12] At trial, the parties presented evidence of liability and damages, and the Plaintiffs attempted to admit two affidavits from their attorneys and invoices documenting the attorneys' fees. The Defendants objected to the admission of the affidavits and invoices on grounds of hearsay, but the trial court conditionally admitted them, pending post-hearing argument from the parties.

         [¶13] As a result of other evidence admitted at the January 26 trial, the trial court entered the following findings of fact and conclusions of law:

         Findings of Fact

* * *
29) [Shelby's Landing], as the General Partner through August 17, 2011, was responsible for the day-to-day management of the [Partnership], and, as such, was and is responsible to the [P]artnership for the misuse of partnership funds.
30) As Guarantors, [Richard] and [Marilyn] and Deckard Realty are jointly and severally responsible for the General Partner's obligations to the Partnership for any misuse of partnership funds.
* * *
33) The sum of $1, 596, 290.46 was paid with checks written to or for the benefit of Affiliates of the General Partner, as that term is defined on page ...

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