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Blacklidge v. Blacklidge

Court of Appeals of Indiana

March 13, 2018

Mark Blacklidge, Appellant-Defendant,
Kent Blacklidge, Appellee-Plaintiff.

         Appeal from the Howard Superior Court The Honorable Richard A. Maughmer, Special Judge Trial Court Cause No. 34D04-1602-PL-120

          Attorney for Appellant Jeremy A. Peelle Peelle Law Office Kokomo, Indiana.

          Attorney for Appellee Alan D. Wilson Kokomo, Indiana.

          Bailey, Judge.

         Case Summary

         [¶1] Mark Blacklidge ("Mark") appeals the trial court's judgment against him personally, and in favor of Kent Blacklidge ("Kent"), Mark's father, for $40, 623.55 in past-due appraisal fees, following a bench trial.

         [¶2] We affirm.


         [¶3] Mark raises two issues which we restate as follows:

I. Whether the trial court clearly erred when it disregarded the parties' formation of a limited liability company ("LLC") and found Mark personally liable to Kent under the parties' oral appraisal fee contract.
II. Whether the trial court erred when it applied the six-year statute of limitations contained in Indiana Code Section 34-11-2-7 to the parties' oral agreements, rather than the two-year statute of limitations contained in Indiana Code Section 34-11-2-1 that is applicable to employment disputes.

         Facts and Procedural History

         [¶4] The facts favorable to the judgment are as follows. Kent and Mark are father and son, and both are real estate appraisers. In the year 2000, they orally agreed to start a business together. The business, based in Kokomo, was called Blacklidge Appraisals (hereinafter, "the appraisal entity"). They did not create any formal documentation of either the appraisal entity or their business relationship with each other. They did, however, have an oral contract under which they were equals in the appraisal entity and each person was entitled to seventy percent of the appraisal fees for appraisals that person performed, with the other thirty percent being used to pay overhead expenses.

         [¶5] In December of 2004, the appraisal entity became a limited liability company ("LLC") with Kent and Mark having 49/51 percent interests, respectively.

          Although the parties filed Articles of Organization with the Indiana Secretary of State, that document is not contained in the record. And the parties took no further formal steps related to the establishment of the LLC; they did not create a written operating agreement, a management agreement, or any other written agreement between Kent, Mark, and the LLC, and they held no LLC meetings. Neither Kent nor Mark were employees of the LLC. Rather, after creation of the LLC, the parties continued to operate under the oral agreement that each individual was still entitled to seventy percent of the fees from appraisals that individual completed, after overhead expenses were paid.

         [¶6] In 2013, the appraisal entity made an election for Subchapter S status.[1] Effective January 1, 2014, Kent voluntarily relinquished all of his interest in the appraisal entity to Mark. However, neither the Subchapter S status election nor Kent's relinquishment of interest in the appraisal entity changed the business relationship and division of appraisal income between Kent and Mark that had been created by their oral agreement.

         [¶7] Nancy Nicholson ("Nicholson") of the McNeal Accounting Firm did the accounting for the appraisal entity beginning in 2010. She kept track of what Kent was owed based on the parties' oral agreement for the distribution of appraisal profits. According to an "Unpaid Bills Detail" report Nicholson generated on December 31, 2013, from her accounting records, Kent was owed $28, 607.35 in appraisal fees that had already been collected for the period from May 16, 2011 through December 31, 2013. Tr. at 69-70; Appellee's App. at 11-13. Nicholson provided a copy of that Unpaid Bills Detail report to both Kent and Mark on or around February 9, 2014. Tr. at 78-79.

         [¶8] Nicholson terminated her business relationship with the appraisal entity at the end of 2013. After that time, Mark handled the appraisal entity's finances. Beginning in January 2014, Mark wrote all the checks and made all checkbook entries, and Kent received no accounting records regarding his appraisal fees. However, Kent kept his own detailed, separate records of all the income from the appraisals he performed from the beginning of the appraisal entity until he left it.

         [¶9] After Nicholson left the appraisal entity-i.e., approximately January 1, 2014- Kent began receiving smaller and smaller payments for the appraisals he did. Kent terminated his business relationship with Mark on June 24, 2015.[2] On February 16, 2016, Kent filed a complaint against Mark for damages arising out of Mark's breach of the parties' oral appraisal fees agreements. On March 28, Mark filed his answer, a counterclaim for "bad faith litigation, " and affirmative defenses, including the defenses that Kent's "[c]omplaint is subject, in part or in whole, to the Statute of Limitations" and "the Statute of Frauds." Appellant's App. at 13-16. Mark filed a motion for summary judgment which was subsequently denied.

         [¶10] The trial court held a bench trial on September 29, 2017, at which Kent, Mark, and Nicholson testified. The court entered judgment in favor of Kent, and made the following findings and judgment:

1. Kent and Mark are father and son.
2. Kent and Mark are both real estate appraisers.
3. In the year 2000, Kent and Mark orally agreed to establish an appraisal entity wherein Kent and Mark were equals.
4. Appraisal entity overhead and expenses were to be paid first before any profit would be taken by Kent or Mark.
5. The goal of the appraisal entity was to show no profit.
6. The appraisal entity became a Limited Liability Company (LLC) in 2004 with Kent and Mark having 49/51 per cent equitable interest.
7. No articles regarding the establishment of the LLC have been provided to the court.
8. Except for required filings with the Indiana Secretary of State, no LLC formalities were accomplished ...

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