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Landmark Legacy, LP v. Runkle

Court of Appeals of Indiana

August 10, 2017

Landmark Legacy, LP and Dennis W. Fahlsing, Appellants-Plaintiffs/Counter Defendants,
v.
Dennis Runkle, D.R. Financial, Inc., and D.R. Financial Group, Inc., Appellees-Defendants/Counter-Plaintiffs.

         Appeal from the Allen Superior Court The Honorable Craig J. Bobay, Judge Trial Court Cause No. 02D02-1411-PL-431

          ATTORNEYS FOR APPELLANTS Bradley Kim Thomas Aaron Westlake Thomas Law Firm, PC Auburn, Indiana.

          ATTORNEYS FOR APPELLEES Michael H. Michmerhuizen Barrett McNagny, LLP Fort Wayne, Indiana Paul S. Sauerteig Snow & Sauerteig, LLP Fort Wayne, Indiana

          Riley, Judge.

         STATEMENT OF THE CASE

         [¶1] Appellants-Plaintiffs/Counter-Defendants, Landmark Legacy, L.P. (Landmark) and Dennis W. Fahlsing (Fahlsing) (collectively, Appellants), appeal the trial court's grant of attorney fees to Appellees-Defendants/Counter-Plaintiffs, Dennis Runkle (Runkle), D.R. Financial, Inc. (Financial) and D.R. Financial Group (Financial Group) (collectively, Appellees).

         [¶2] We affirm and remand.

         ISSUES

         [¶3] Appellants present us with four issues, which we consolidate and restate as the following single issue: Whether the trial court erred by awarding attorney fees to Appellees pursuant to Indiana Code section 34-52-1-1(b).

         [¶4] In their Appellate Brief, Appellees request this court to award appellate attorney fees pursuant to Indiana Appellate Rule 66(E).

         FACTS AND PROCEDURAL HISTORY

         [¶5] Around 2002, Fahlsing engaged the financial planning and asset protection services of Runkle, the owner of Financial. Runkle had worked as a financial planner since 1986 and created Financial in 2001, offering a "combined team" of CPAs and attorneys to "agree on a best solution" for his clients. (Transcript p. 12). Fahlsing especially inquired about limited partnerships and Runkle assisted Fahlsing and his then-wife, Linda Jackson (Jackson), in setting up a family limited partnership, named Shangela, L.P. Runkle advised Fahlsing and Jackson about the duties and responsibilities of a general partner versus a limited partner and specifically informed them that they could not use partnership assets for their own personal use. However, during the bench trial, Fahlsing denied ever having received this advice, and instead maintained that Runkle had told him that he could freely dispose of the partnership assets. Although Attorney John Wray (Attorney Wray) prepared the documentation for Shangela, he did not consult with Fahlsing as to the purpose of the partnership, nor did he advise Fahlsing about his rights and responsibilities.

         [¶6] In 2003, Runkle retired and moved to Florida. He ceased to have any ownership in Financial, which was taken over by Jim Miller (Miller) and Kris Hannah (Hannah), who had both previously worked with Runkle. In 2006, Miller and Hannah split, after which Hannah created Financial Group and moved the company to a new location. Runkle continued to work as a consultant for Financial Group.

         [¶7] In late 2004 or early 2005, Fahlsing sought Runkle's assistance in setting up an additional limited partnership, known as Landmark. At the time, Runkle advised Fahlsing of his rights and responsibilities with regard to the partnerhip. At the bench trial, the parties disputed the substance of the advice rendered by Runkle. Again, Attorney Wray prepared the documentation for the creation of Landmark, but did not consult with Fahlsing as to the purpose of the partnership or as to Fahlsing's rights and responsibilities. Landmark was formed on February 8, 2005, with Fahlsing as 1% General Partner and 99% Limited Partner. On February 15, 2005, Fahlsing's interests in Landmark were assigned to the 2005 Dennis Wayne Fahlsing Revocable Living Trust. The following day, Fahlsing's daughters, Angela Taylor (Angela) and Shannon Fahlsing (Shannon), were each given 44% limited partnership interests in Landmark.

         [¶8] Between 2005 and 2009, after the creation of Landmark, Fahlsing executed twenty-one promissory notes whereby he personally agreed to repay Landmark for loans he had taken from Landmark which were collateralized by titles of certain motor vehicles. Runkle did not assist Fahlsing with the preparation of the promissory notes, nor did he recommend that Fahlsing execute these notes.

         [¶9] On June 7, 2011, Angela and Shannon filed a lawsuit against Fahlsing and Landmark in the Dekalb Superior Court, alleging that Fahlsing had committed wrongful acts in his capacity as general partner of Landmark, including breach of fiduciary duties, failure to provide accounting, use of partnership assets for personal obligations, accepting an unreasonable salary, and failure to provide financial records. Shortly after receiving the complaint, Fahlsing met with Attorney Wray who represented him in the suit. At the time, Attorney Wray and Fahlsing discussed the rights and responsibilities of a general partner in a limited partnership. On June 29, 2011, Fahlsing filed a complaint against Angela and Shannon in the Noble Circuit Court seeking payment of the 44% limited partnership shares held by each of his daughters. In connection with this proceeding, Fahlsing filed an affidavit with the Noble Circuit Court wherein he affirmed under oath that he had assigned the limited partnership shares to his daughters in exchange for a loan. The Noble Circuit Court stayed the case and ordered the parties to arbitration. Fahlsing was eventually able to settle the issue by granting Angela and Shannon each a $480, 000 mortgage, secured by four real estate parcels owned by Landmark, in exchange for Angela's and Shannon's transfer of their respective 44% limited partnership shares to Fahlsing.

         [¶10] On November 21, 2014, Fahlsing and Landmark filed their Complaint in the underlying matter, contending that Runkle, Attorney Wray, Financial, and Financial Group had breached their fiduciary duty, and had committed negligence and malpractice. On October 16, 2015, Runkle, Financial, and Financial Group filed a motion for summary judgment, as well as a motion for leave to file a counterclaim, alleging that Fahlsing's contentions were disputed by Jackson and his daughter and that the statute of limitations barred Appellants' claim. In addition, Runkle, Financial, and Financial Group requested an award of attorney fees for Appellants' groundless and frivolous litigation, pursuant to Ind. Code § 34-52-1-1. At the same time, Attorney Wray also filed a motion for summary judgment. On December 2, 2015, Appellants filed their answer and affirmative defenses to the counterclaim, and on December 18, 2015, they filed their memorandum in opposition to the respective motions for summary judgment.

         [¶11] On January 12, 2016, the trial court conducted a hearing on the motions for summary judgment. On February 12, 2016, the trial court issued its summary judgment, finding that Financial Group was not liable for the actions of Financial based on the alter ego doctrine, and the statute of limitations barred the claims against Runkle, Financial, and Financial Group. However, the trial court also concluded that because the continuous representation doctrine applied with respect to Attorney Wray, the statute of limitations did not bar Appellants' contentions against him. After Runkle, Financial, and Financial Group received summary judgment-which Appellants did not appeal-the trial court bifurcated the matter and allowed the counterclaim for attorney fees to proceed formally to trial. The trial court conducted a bench trial on the request for attorney fees on November 2, 2016. On January 20, 2017, the trial court issued its Order, concluding that Appellants' claims were frivolous, unreasonable, and groundless, and entered a judgment in favor of Appellees in the amount of $55, 003.17.

         [¶12] Appellants now appeal. Additional facts will be provided as necessary.

         DISCUSSION AND DECISION

         I. Indiana Code ...


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