2006 Year-End Indiana Case Review

Third Party Spoliation of Evidence

Third-party spoliation is the loss or destruction of evidence caused by a non-party to the principal litigation. Indiana does not recognize independent claims for spoliation of evidence in the first party context, but has expressly provided for independent third-party claims based on spoliation where there is an agreement, statute or other special relationship that arises because of the conduct of the parties making it reasonable to impose a duty to preserve evidence. For instance, third-party spoliation claims have been recognized where an insurance company improperly destroys evidence. Thompson v. Owensby, 704 N.E.2d 134 (Ind.Ct.App. 1998). However, the Indiana Supreme Court in Glotzbach v. Froman, 854 N.E.2d 337 (Ind. 2006), on the facts of that case, held an employee whose injuries are covered by the Worker’s Compensation Act has no independent claim against the employer for third-party spoliation.

Jurisdiction Over the Case

The distinction between subject matter jurisdiction and jurisdiction over the case was discussed in three separate opinions during 2006. Packard v. Shoopman, 852 N.E.2d 927 (Ind. 2006); K.S. v. State, 849 N.E.2d 538 (Ind. 2006); and Ind. St. Bd. of Health Facility Administrators v. Werner, 841 N.E.2d 1196 (Ind. Ct. App. 2006). These cases hold that a defendant may attack jurisdiction over the case when the plaintiff fails to meet procedural requirements for asserting a claim. Jurisdiction over the case, in this context, is not a limitation on the court’s subject matter jurisdiction. Accordingly, a defendant may waive an objection to the plaintiff’s failure to satisfy statutory procedural requirements if the objection is not timely asserted. Importantly, Chief Justice Shepard stated in K.S. that the term “jurisdiction over the case” confuses the concept of jurisdiction with legal error, and suggested that the term not be used.

Admissibility of Affidavits under Trial Rule 56(E)

Supporting and opposing affidavits, for purposes of summary judgment, shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. The Indiana Supreme Court, interpreting Trial Rule 56(E), has held that “[a]n affidavit that would be inadmissible at trial may be considered at the summary judgment stage of the proceedings if the substance of the affidavit would be admissible in another form at trial.” Reeder v. Harper, 788 N.E.2d 1236, 1241-1242 (Ind. 2003). However, in City of Gary v. McCrady, 851 N.E.2d 359 (Ind. Ct. App. 2006), the Indiana Court of Appeals held an affidavit was inadmissible under Trial Rule 56 because it contained legal conclusions and hearsay and was not based upon the affiant’s personal knowledge. The McCrady court did not specify whether the substance of the affidavit would be admissible in another form at trial, and it did not discuss Reeder.

Belated Grants of Motions to Correct Errors

Trial Rule 53.3(A) provides that a motion to correct errors will be deemed denied if the court fails to rule within thirty days following a hearing on the motion. In Garrison v. Metcalf, 849 N.E.2d 1114 (Ind. 2006), a judgment was entered against Metcalf. Metcalf did not file a notice of appeal, but rather filed a motion to correct errors. The trial court held a hearing on the matter and granted the motion thirty-six days later. Garrison appealed on grounds that the motion had been denied by operation of Trial Rule 53.3(A).

The Indiana Supreme Court agreed with Garrison and held that a trial court may not belatedly grant a motion to correct errors where a party has failed to file a notice of appeal and the motion to correct errors has been deemed denied. Significant to the court’s decision was Metcalf’s failure to file a notice of appeal. Where a party files a notice of appeal, together with a motion to correct errors, the Supreme Court has permitted a trial court to rule belatedly on the motion to correct errors. The court noted that to permit a late ruling, where a notice of appeal had not been filed, would undermine the intended operation of Trial Rule 53.3(A).

Trust Interpretation

In construing a trust instrument, the court must ascertain and give effect to the settlor’s intent. The Indiana Supreme Court, in University of Southern Indiana Foundation v. Baker, 843 N.E.2d 528 (Ind. 2006), rejected its traditional approach that a court may not consider extrinsic evidence where the ambiguity is patent and not latent. The distinction, the court noted, is not useful and has been inconsistently applied. Accordingly, where an instrument is ambiguous, all relevant extrinsic evidence may properly be considered in resolving the ambiguity.

Relation Back Doctrine

There are three requirements under Trial Rule 15(C) which must be satisfied before an amended complaint may relate back to the date of the original complaint. First, the claim in the amended complaint must arise out of the conduct, transaction or occurrence set forth in the original complaint. Second, within 120 days of commencement of the action, the new defendant must have received notice of the lawsuit such that he will not be prejudiced in maintaining a defense on the merits. Third, within the same 120 day period, the defendant must have known or should have known that, but for a mistake concerning the identity of the proper party, the action would have been filed against him.

The Indiana Supreme Court addressed these requirements in Porter County Sheriff Department v. Guzorek, 2006 WL 3410824 (Ind. 2006). There, a plaintiff sued an immune government employee. The plaintiff amended his complaint after the statute of limitations had run to name the government agency as the defendant. The Supreme Court determined that each of the requirements under Trial Rule 15(C) had been satisfied. Importantly, the majority noted that the mistake requirement of Trial Rule 15(C) may be satisfied by establishing a mistake of fact or a mistake of law.

Lost Profits Improper in Real Estate Actions

The general measure of damages for a vendor’s failure or refusal to convey land is usually the difference between the contract price and the fair market value of the land at the time of the breach, plus the return of any payment made and interest. This is referred to as the loss of the bargain. This measure of damages in the context of real estate actions was examined in McGehee v. Elliott, 849 N.E.2d 1180 (Ind. Ct. App. 2006). The court held an award of lost profits was erroneous. The general measure of damages for a breach of a land contract is the difference of the land’s fair market value and its value at the time of breach. Future profits are relevant as they apply to the fair market value of the property, but are an erroneous measure of damages in an action arising from a seller’s refusal to convey land.

Principal Office

Preferred venue, under Trial Rule 75(A)(4), is conferred upon the county where either (1) the principal office of a defendant organization is located or (2) the office of agency of a defendant organization or individual to which the claim relates or out of which the claim arose is located, if one or more such organizations or individuals are included as defendants in the complaint. In American Family Ins. Co. v. Ford Motor Co., 2006 WL 3491625 (Ind. 2006), the phrase “principal office” was held to mean “registered office.” This is different from the definition of “principal office” under the Business Corporation Act, enacted after adoption of the Trial Rules. The Business Corporation Act defines “principal office” as “the office (in or out of Indiana) so designated in the annual or biennial report where the principal executive offices of a domestic or foreign corporation are located.”

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Stephen Arthur is a partner with Harrison & Moberly, LLP, in Indianapolis (harrisonmoberly.com) concentrating his practice in federal and state complex commercial litigation. Mr. Arthur is the author of Indiana Civil Trial Practice (West Publishing Co) and co-author of Professor Harvey’s Indiana Practice treatise. The author thanks Paul Carroll for his assistance in preparing this review. The opinions and analysis expressed in this column are those of the author.