FILED Apr 28 2020, 8:34 am
CLERK Indiana Supreme Court Court of Appeals and Tax Court
ATTORNEYS FOR ATTORNEYS FOR APPELLANT/CROSS-APPELLEE APPELLEE/CROSS-APPELLANT CITY OF MARION LONDON WITTE GROUP, LLC Philip A. Whistler Crystal G. Rowe Derek R. Molter Kightlinger & Gray, LLP Eric McKeown New Albany, Indiana Ice Miller LLP Thomas F. Falkenberg Indianapolis, Indiana Falkenberg & Ives, LLP Thomas R. Hunt Chicago, Illinois City of Marion Marion, Indiana
IN THE COURT OF APPEALS OF INDIANA
City of Marion, April 28, 2020 Appellant-Plaintiff/Cross-Appellee, Court of Appeals Case No. 19A-MI-1762 v. Appeal from the Grant Superior Court London Witte Group, LLC, The Honorable Warren Haas, Chad Seybold, Estate of Judge Michael Y. An, Global Trial Court Cause No. Investment Consulting, Inc., and 27D03-1612-MI-168 World Enterprise Group, Inc., Appellees-Defendants/Cross-Appellants
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 1 of 22 Baker, Judge.
[1] In 2009, the City of Marion (the City) retained London Witte Group, LLC
(LWG), to provide financial advice regarding the financing of a construction
project. The project went unfinished for years. In 2017, the City filed a
complaint against LWG for negligence, breach of fiduciary duty, and
constructive fraud/unjust enrichment. LWG moved for summary judgment,
and the trial court granted its motion with respect to the first two counts after
finding those claims to be time-barred. The trial court denied the motion with
respect to the third count, finding a longer statute of limitations period applied
to that claim. We affirm the grant of summary judgment in LWG’s favor on
the first two counts and reverse the denial of the motion with respect to the
third count.
Facts [2] A few years before 2008 or 2009, the YMCA in Marion moved into a new
space, leaving the old YMCA building in downtown Marion vacant. In 2008
or 2009, the City began discussions with Michael An, a developer from
California. An proposed a redevelopment of the old YMCA building into a
combination of hotel, restaurant, retail, and commercial spaces. He estimated
that the project would cost around $5.5 million. The City was willing to
provide bond financing in the amount of $2.5 million, meaning that An had to
come up with $3 million from other sources.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 2 of 22 [3] The core of the City’s project team was Mayor Wayne Sebold, Director of
Development Darren Reese, Bruce Donaldson of Barnes and Thornburg, and
Bob Swintz of LWG. Reese was the point person on the project. Donaldson,
who served as bond counsel, reported to Reese. Swintz served as financial
advisor. The bonds would be funded from a tax-increment financing (TIF)
district, with Swintz’s role being to determine “how much room is in the TIF
district to do this project.” Appellant’s App. Vol. II p. 197. Essentially,
Swintz’s primary job was to ensure that the City could pay back the bonds.
[4] First Farmers Bank (the Bank) emerged as the prospective bond buyer. The
Bank and the City each expected that An would provide proof that he had
attained the additional $3 million in financing. In December 2009, shortly
before the bond issue, Swintz told the Bank that he had spoken with Reese and
Mayor Seybold and that the City had “the comfort they need[ed] for the
YMCA project.” Appellant’s App. Vol. III p. 231. Reese and Donaldson were
included on the email and Reese later said that he had no reason to dispute
Swintz’s statement. A few days later, the Bank again questioned whether An
had the full funding in hand in correspondence to Reese and Donaldson,
reminding them that the Bank “need[ed] to insure that there [were] sufficient
funds to complete the project at all times.” Id. at 234. Swintz responded to the
Bank, explaining that “[a]s far as the City is concerned the developer had
provided written documentation about the funding to complete the project.” Id.
at 237. Swintz later testified that he “would not have come up with [his
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 3 of 22 response] without talking to” Reese, Mayor Seybold, or Donaldson.
Appellant’s App. Vol II. p. 239-40.
[5] Meanwhile, on December 4, 2009, An, through Chad Seybold,1 provided a
memorandum of understanding (the Memo) to Swintz. The Memo was non-
binding and signed by Se Kwon Cho; it stated that Cho would make $3 million
available to An to complete the project. The Memo also indicated that it was
not a final, legally binding agreement, though both An and Cho signed it. Chad
indicated to Swintz that the Memo was the proof requested by the City and the
Bank that An had the $3 million in financing on hand. Years later, at the time
of the litigation at issue herein, neither Mayor Seybold nor Reese recalled
knowing about the Memo. The City claims that Swintz intentionally withheld
the Memo from the Bank and the City.
[6] Evidently, Swintz’s assurances satisfied the Bank, because the bonds were
issued on December 16, 2009. At some point, construction began, but it was
never completed. The City refinanced the bonds in 2011, after which An
continued to work on the project and to look for investors.
[7] In December 2013, four years after the bond issue, the Marion Chronicle-Tribune
published several critical articles about the project and submitted several
information requests. In response, the City hired KPMG to perform a forensic
audit of the project; KMPG found no improprieties, though Chad failed to
1 Chad is Mayor Seybold’s brother.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 4 of 22 comply with KPMG’s document requests. The State Board of Accounts
(SBOA) also reviewed the project and found, in the spring of 2014, that it was
nearly completed.
[8] In December 2015, An died. The project remained unfinished. The City filed a
complaint against An’s estate on December 8, 2016. The City entered into a
tolling agreement with LWG on February 13, 2017, which tolled the statute of
limitations through September 30, 2017. On September 29, 2017, the City filed
an amended complaint, adding Chad and LWG as defendants. The primary
allegation from which the City’s claims against LWG stems is that LWG “not
only failed to tell the City that An lacked the money to complete the project, it
prevented the Bank from learning it—a fact which would have stopped, or at
least substantially changed, the bond issue.” Appellant’s Br. p. 8. The specific
claims remaining against LWG are for negligence, breach of fiduciary duty, and
constructive fraud/unjust enrichment.
[9] During the discovery process, the City allegedly first became aware of the
Memo. Additionally, discovery has revealed that bond proceeds were used to
provide personal benefits to Mayor Seybold, including payment of the premium
on a life insurance policy, cash payments to Mayor Seybold’s wife, and
contributions to Mayor Seybold’s political campaigns. Moreover, An was
allegedly told that the City would invest in his project only if he hired the
Mayor’s brother, Chad.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 5 of 22 [10] On May 17, 2019, LWG filed a motion for summary judgment on each of the
three claims against it. LWG’s motion focused on the statute of limitations for
each claim, arguing that the complaint was filed outside the limitations period.
During the oral argument on the summary judgment motion, counsel for the
City conceded that “in [the spring of] 2014, the City . . . certainly had some
concerns about the misapplication of bond proceeds.” Tr. Vol. II p. 36.
[11] On July 8, 2019, the trial court entered an order granting LWG’s motion with
respect to the claims for negligence and breach of fiduciary duty and denying it
with respect to the claim for constructive fraud/unjust enrichment. In pertinent
part, the trial court found as follows:
[The negligence and breach of fiduciary duty] Counts are based on the two-year statute of limitations contained in Ind. Code § 34-11-2-4(a). The two-year period had expired long before February 16, 2017 when [LWG] signed a tolling agreement with the City.
[LWG’s] work for the City as it relates to this case was divided into two parts:
• The December 1, 2009 Series 2009 Bonds for a principal amount of $2,500,000; and • The February 15, 2011 Refinancing of the 2009 Bonds and consolidation of obligations from other City projects.
[LWG’s] work on the 2009 Bonds and its work on the 2011 Refinancing are intertwined. At the latest the City became aware that bond funds may have been misappropriated in the Spring of 2014. As a result the City’s Corporate Counsel employed a forensic accounting firm to investigate and the City requested an
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 6 of 22 investigation by the State Board of Accounts. The Court determines that at the latest the statute of limitations . . . began to run as of the Spring of 2014.
The Court finds that the City may not rely upon the continuous representation nor the adverse domination nor fraudulent concealment . . . to extend the begin date for the two-year statute of limitations . . . .
***
The Court denies the relief requested in the SJ Motion as to [the constructive fraud/unjust enrichment claim. That claim] is based on the six-year statute of limitations contained in I.C. § 34-11-2- 7(4) and did not begin to run until [LWG’s] work on the 2011 Refinancing was completed.
Appealed Order p. 1-2. The trial court deemed the grant of summary judgment
on the first two counts to be a final and appealable judgment; it later certified
the denial of summary judgment on the third count for interlocutory appeal.
The City now appeals and LWG cross-appeals.
Discussion and Decision [12] The City argues that the trial court erred in granting summary judgment in
LWG’s favor on the negligence and breach of fiduciary duty claims. LWG
cross-appeals, arguing that the trial court erred in denying summary judgment
on the claim for constructive fraud/unjust enrichment.
[13] Our standard of review on summary judgment is well established:
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 7 of 22 We review summary judgment de novo, applying the same standard as the trial court: “Drawing all reasonable inferences in favor of . . . the non-moving parties, summary judgment is appropriate ‘if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’” Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A fact is ‘material’ if its resolution would affect the outcome of the case, and an issue is ‘genuine’ if a trier of fact is required to resolve the parties’ differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences.” Id. (internal citations omitted).
Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).
[14] All the arguments on appeal and cross-appeal turn on statutes of limitations.
Statutes of limitations are “practical and pragmatic devices to spare the courts
from litigation of stale claims, and the citizen from being put to his defense after
memories have faded, witnesses have died or disappeared, and evidence has
been lost.” V. Ganz Builders & Dev. Co. v. Pioneer Lumber, Inc., 59 N.E.3d 1025,
1032 (Ind. Ct. App. 2016) (internal quotation omitted). A statute of limitations
defense is particularly well suited for determination by summary judgment. Id.
I. Appeal [15] It is undisputed that a two-year statute of limitations governs the City’s claims
against LWG for negligence and breach of fiduciary duty. Ind. Code § 34-11-2-
4. Because the City entered into a Tolling Agreement with LWG on February
13, 2017, and filed its complaint against LWG within the tolling period, LWG
is required to show that the statute of limitations for these claims began to run
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 8 of 22 before February 13, 2015, to be entitled to summary judgment. In other words,
as the movant, LWG had the burden of establishing as a matter of law that
(1) before February 13, 2015, (2) the City knew or should have known that it
had been damaged (3) as a result of misconduct.
[16] The City argues that there are four reasons that the claims did not begin to run
before February 13, 2015: the discovery rule does not apply; the continuous
representation doctrine tolled the limitations period; LWG’s fraudulent
concealment should prevent the limitations period from barring the claims; and
the adverse domination doctrine prevented the limitations period from
accruing.
A. Discovery Rule [17] Under the discovery rule, the statute of limitations does not begin to run until
the plaintiff actually knows, or in the exercise of ordinary diligence could have
discovered, that it has sustained an injury from tortious conduct. Wehling v.
Citizens Nat’l Bank, 586 N.E.2d 840, 843 (Ind. 1992). The discovery rule “does
not mandate that plaintiffs know with precision the legal injury that has been
suffered, but merely anticipates that a plaintiff be possessed of sufficient
information to cause him to inquire further in order to determine whether a
legal wrong has occurred.” Perryman v. Motorist Mut. Ins. Co., 846 N.E.2d 683,
689 (Ind. Ct. App. 2006).
[18] Here, the City’s claims focus on An’s lack of financing at the time the bonds
were issued. Because the bonds would not cover the full cost of the project, the
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 9 of 22 City and the Bank required that An would have sufficient financing on hand to
cover the rest. According to the City, LWG “not only failed to tell the City that
An lacked the money to complete the project, it prevented the Bank from
learning it[.]” Appellant’s Br. p. 8. In other words, the actual injury occurred
(if at all) at the time of the bond issue—in December 2009.2
[19] By pointing to the date of the alleged wrongdoing, LWG met its prima facie
burden as movant to show that the lawsuit was filed outside the two-year
statute of limitations. The burden then shifted to the City. See McDaniel v.
Erdel, 91 N.E.3d 617, 624 (Ind. Ct. App. 2017) (“Because the evidence shows
that the action was commenced more than two years after the date of the
alleged [wrongdoing], the burden shifts to the [non-movant] to establish an
issue of fact material to a theory that avoids the defense.”), trans. denied. But
here, the City submitted no evidence—not even a self-serving affidavit—to show
when or how the City was possessed of sufficient information to cause it to
inquire further. The City claimed that it had “designated evidence supporting
an inference that its claims did not accrue until sometime after December 31,
2015,” but we are unable to discern what that evidence might be. Appellant’s
App. Vol. VII p. 59.
[20] The trial court zeroed in on the lack of evidence supporting the City’s position
regarding when it discovered the wrongdoing. At the summary judgment
2 Although the City originally alleged additional injuries stemming from the 2011 refinancing, it has since abandoned that position.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 10 of 22 argument, the trial court pushed the City to answer when it had “discovered”
the claims against LWG. Tr. Vol. II p. 36. Counsel responded that “in 2014,
the City . . . certainly had some concerns about the misapplication of bond
proceeds.” Id.
[21] Generally, we prefer not to rely solely on a concession made by an attorney
during oral argument. And here, while we take that into consideration, it need
not be the sole focus of our analysis. We find five key undisputed facts to be
dispositive. See Perryman, 846 N.E.2d at 689 (holding that the law “does not
require a smoking gun in order for the statute of limitations to commence”).
[22] First, the YMCA project remained unfinished more than four years after the
2009 bond issue. By 2013, the local newspaper began printing a series of
articles criticizing the project and questioning its status. The fact that the
project was still unfinished years later and was attracting negative public
attention should have given the City reason to investigate whether An did, in
fact, have sufficient financing to complete the project.
[23] Second, the unfinished project and negative public attention did, in fact, give
the City reason to investigate. Specifically, the City retained KPMG to perform
a “forensic audit specific to the YMCA project, to determine if the
disbursements had been made . . . properly and if all the funds were accounted
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 11 of 22 for.” Appellant’s App. Vol. III p. 218.3 The City also allowed representatives
from the SBOA to tour and evaluate the unfinished building. The actual
commencement of an investigation clearly shows that the City had reason to
investigate.
[24] Third, KPMG’s investigation revealed that the Bank’s trustee “had not
obtained” the “documentation for the various distributions related to the
YMCA project.” Id. at 217. Additionally, in the course of KPMG’s audit,
Chad failed to comply with the firm’s documentation requests. The trial court
recognized the significance of this fact:
And . . . you have your forensic accounting from—because you have—and there’s smoke. You’re concerned. You, you want to do some investigation and the forensic accounting group comes back and says, “He[4] won’t give us the information.” Isn’t that more smoke? I mean, wouldn’t you be on notice at that point?
Tr. Vol. II p. 60.
[25] Fourth, as of May 2013—nearly four and one-half years after the bond issue—
An was actively seeking additional investments for the completion of the
3 The City argues that generally, the duty of an auditor does not extend to discovering fraud. That is beside the point in this case, however, as KPMG was hired to conduct a forensic audit. 4 “He” referred to the mayor’s brother, Chad, who was the project manager and did not comply with KPMG’s document requests.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 12 of 22 project. An’s continued fundraising triggered a duty to inquire further as to
whether his initial financing was falsified.
[26] Fifth, by 2014, An had not spent even close to $5.5 million on the project. The
estimates in the record vary from $2 million to over $3 million. The bonds were
issued on the understanding that An had another $3 million in hand. The fact
that, four years later, he had not spent close to the total amount, and the project
remained unfinished, should have caused the City to question the validity of the
financing information accompanying the original 2009 bond issue.
[27] All this evidence together clearly shows that, long before February 2015, the
City had sufficient information to cause it to inquire further to determine
whether a legal wrong had occurred. The City’s arguments to the contrary do
not change this conclusion.
[28] The City first contends that it did not suffer an injury until An died in
December 2015. This position, however, is inconsistent with the City’s claims,
which are premised on an allegation that the City was injured at the time of the
original 2009 bond issue because it was allegedly completed based on false
financing information.
[29] Next, the City argues that the statute of limitations did not begin to accrue
because it did not uncover any wrongdoing by LWG. It relies both on Mayor
Seybold’s statements that he believed that LWG had done a great job and
expected that the project would be a success and the fact that the KPMG audit
did not uncover actual wrongdoing. This argument is unavailing for two
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 13 of 22 reasons. First, we apply an objective, rather than a subjective, standard to the
discovery rule, asking when the plaintiff knew or should have known to inquire
further. Second, the City’s argument would mean that meritless claims could
never be time-barred, because the lack of merit would prevent the inexistent
wrongdoing from being discovered. The statute of limitations begins to accrue
when the plaintiff has enough information to begin the inquiry process, not
when, in the course of that process, actual wrongdoing is discovered.
[30] Finally, the City argues that LWG has not met its burden as the movant
because it has not established that before February 2015, the City was aware
that its damages were attributable to LWG. Initially, we note again that the
City’s alleged damages stem from the 2009 bond issue. And in the context of
that process, the City viewed LWG as a fiduciary that was responsible for
disclosing information about An’s financial status. Consequently, the City was
on notice to investigate claims against LWG once it was on notice that the
bonds may have been issued based on incorrect financing information.
[31] Moreover, this Court has found claims to be time-barred where the victim was
aware of an injury but unaware of the identity of the tortfeasor until after the
limitations period had ended. See Dotson v. Stryker Corp., 108 N.E.3d 376, 384 &
n.10 (Ind. Ct. App. 2018) (statute of limitations began to run when plaintiff
“knew that [defendants] were in her operating room, though she did not know
who they were”); Rieth-Riley Constr. Co. v. Gibson, 923 N.E.2d 472, 476-77 (Ind.
Ct. App. 2010) (declining to “extend the discovery rule to apply to cases like
this one where the indeterminate fact is not the existence of an injury, but rather
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 14 of 22 the identity of a tortfeasor”); Richards-Wilcox, Inc. v. Cummins, 700 N.E.2d 496,
498 (Ind. Ct. App. 1998) (holding that the fact that the plaintiff “did not
determine until over two years later the actual identity of the party causing the
injury did not suspend the running of the statute of limitations”).
Consequently, while the record shows that the City should have been aware of
its potential claims against LWG before February 2015, even if that were not
the case, the limitations period would not have been tolled.
[32] In sum, the undisputed evidence in the record shows that the City had enough
information long before February 2015 to have caused it to inquire further
regarding possible wrongdoing. And, in fact, it did inquire further by instituting
investigations from KPMG and the State Board of Accounts. Therefore, we
find that the discovery rule bars these two claims against LWG.
B. Continuous Representation [33] Next, the City argues that the continuous representation doctrine prevents its
claims from being time-barred. This doctrine tolls the statute of limitations
when a professional advisor, such as an attorney,5 commits an error during the
course of a professional engagement. Biomet, Inc. v. Barnes & Thornburg, 791
N.E.2d 760, 765 (Ind. Ct. App. 2003). Under those circumstances, the statute
does not begin to run until the professional relationship relating to the matter at
5 This Court has expressly refused to extend this doctrine to financial advisors. Landmark Legacy, LP v. Runkle, 81 N.E.3d 1107, 1118-19 (Ind. Ct. App. 2017).
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 15 of 22 issue has been terminated. Id. The purpose of the doctrine is to allow
professionals to try to mitigate the effects of their errors, potentially avoiding
litigation altogether. A collateral benefit is that the professional relationship is
preserved while the professional attempts to mitigate the effects of its error. Id.
at 765-66.
[34] The City neglects to address the fact that this doctrine applies only if the
defendant continued to represent the plaintiff in the “specific matter” in which
the alleged misconduct occurred. Bambi’s Roofing, Inc. v. Moriarty, 859 N.E.2d
347, 358 (Ind. Ct. App. 2006). We agree with LWG that the specific matter in
which the alleged misconduct occurred was not the YMCA project as a whole;
it was the original bond issue, which was concluded in 2009. Specifically,
Mayor Seybold and Swintz agreed that LWG’s role was to determine “how
much room is in the TIF district to do this project” and ensure that the City
could “pay back the bonds.” Appellant’s App. Vol. II p. 197, 227. That is a
specific role in connection with a particular bond issue rather than the role of a
project developer. Every witness who addressed the issue understood that
LWG’s responsibilities concluded when the bond issue closed. Id. at 202-03
(Mayor Seybold); id. at 224 (Swintz); Appellant’s App. Vol. III p. 95
(Donaldson). No witness disputed this or suggested any ambiguity. Moreover,
LWG was paid out of the bond proceeds, meaning that its compensation
structure also confirms that the 2009 bond issue was a discrete engagement.
Under these circumstances, we find that the continuous representation doctrine
does not apply to toll the statute of limitations period.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 16 of 22 C. Fraudulent Concealment [35] Next, the City argues that LWG fraudulently concealed its alleged misconduct.
Specifically, the City argues that LWG fraudulently concealed the Memo and,
as a result, the statute of limitations period should be tolled.
[36] The fraudulent concealment doctrine “operates to estop a defendant from
asserting the statute of limitations as a bar to a claim whenever the defendant,
by his own actions, prevents the plaintiff from obtaining the knowledge
necessary to pursue a claim.” Doe v. Shults-Lewis Child & Family Servs., 718
N.E.2d 738, 744 (Ind. 1999). And where the parties are in a fiduciary
relationship, the concealment need not be active, and a mere failure to disclose
information for which there is a duty to disclose gives rise to fraudulent
concealment. Farmers Elevator Co. of Oakland, Inc. v. Hamilton, 926 N.E.2d 68,
79-80 (Ind. Ct. App. 2010).
[37] However, when “the plaintiff obtains information that would lead to the
discovery of the cause of action through ordinary diligence, the statute of
limitations begins to run, regardless of any fraudulent concealment perpetrated
by the defendant.” Snyder v. Town of Yorktown, 20 N.E.3d 545, 551 (Ind. Ct.
App. 2014) (internal quotation omitted). Here, as noted above, the City knew
or should have known well before February 2015—even without the Memo—
that it needed to inquire further as to possible damages caused by a tortfeasor.
Therefore, even with the alleged fraudulent concealment, the City was on
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 17 of 22 notice of the situation in 2014 at the very latest. Under these circumstances, the
doctrine of fraudulent concealment does not toll the limitations period.
D. Adverse Domination [38] Finally, the City argues that the adverse domination doctrine tolled the statute
of limitations until at least the end of Mayor Seybold’s administration on
December 31, 2015. This doctrine is based on the principle that a corporate
entity “can only ‘discover’ an injury to itself, and act to redress that injury, to
the extent that those individuals who control it know of the injury and are
willing to act on that knowledge.” Resolution Trust Corp. v. O’Bear, Overholser,
Smith & Huffer, 840 F. Supp. 1270, 1284 (N.D. Ind. 1993). In other words,
where an entity is dominated “by those whose own malfeasance might be
revealed in the course of litigating a complaint, it follows the entity has not
‘discovered’ the injury to its interests in any meaningful way.” Id. This
doctrine has never been applied in Indiana by an Indiana appellate court.
[39] In invoking this doctrine, the City argues that Mayor Seybold controlled the
City, that he committed malfeasance, and that the City could not have
discovered its injuries in any meaningful way. The City notes the following
evidence in the record:
• On May 25, 2011, Mayor Seybold signed an application for a $1 million life insurance policy, naming himself as the insured, his wife and children as beneficiaries, and An as the payor. An used bond proceeds to pay at least one premium on that life insurance policy. • An’s companies used bond proceeds to make campaign contributions to Mayor Seybold and cash payments to the mayor’s wife.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 18 of 22 • An hosted a political fundraiser for Mayor Seybold in California in 2011. • Mayor Seybold had a conflict of interest because An employed the mayor’s brother, Chad, as the manager on the YMCA project. Indeed, it appears that the mayor conditioned the provision of bond funds to An on An’s agreement to hire Chad. • Chad did not comply with KPMG’s document requests during the forensic audit and the mayor did not ask him to. • Mayor Seybold may have been unwilling to pursue legal action against LWG because the company was a significant financial contributor to the mayor’s campaigns and Swintz was a close political advisor.
The City argues that this evidence creates a genuine issue of material fact “as to
whether Mayor Seybold could have been expected to redress the City’s interests
by filing suit over the project during his administration.” Appellant’s Br. p. 56-
57.
[40] The primary problem with the City’s argument is that it does not, and cannot,
show that Mayor Seybold “dominated” the City. Several individuals could
have discovered and pursued claims against LWG, including the two different
Directors of Development, the City Attorney, and at least one member of the
City Council. Nothing in the record shows that Mayor Seybold could have
prevented these individuals from redressing the City’s interests. It is the head of
the City’s law department, rather than the mayor, who commences proceedings
needed to protect the City’s interests. Ind. Code § 36-4-9-12. It is simply not
credible, based either on this record or common knowledge of the way
municipalities operate, to conclude that Mayor Seybold dominated the City in
any form or fashion. Consequently, this argument is unavailing.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 19 of 22 [41] In sum, the discovery rule applies because long before February 2015, the City
had sufficient information that it knew or should have known that it needed to
conduct further inquiry to determine if it had been damaged as a result of
tortious conduct. And none of the exceptions to the discovery rule, including
the doctrines of continuous representation, fraudulent concealment, and
adverse domination, toll the limitations period in this case. Therefore, the trial
court did not err by granting summary judgment in favor of LWG on the City’s
two claims that have a two-year statute of limitations.
II. Cross-Appeal [42] The trial court found that the City’s claim for constructive fraud/unjust
enrichment is governed by a six-year statute of limitations, meaning that the
claim was not time-barred and survived summary judgment. LWG argues that
this conclusion was erroneous.
[43] We ascertain the applicable statute of limitations “by identifying the nature or
substance of the cause of action and not of the form of the pleadings.”
Whitehouse v. Quinn, 477 N.E.2d 270, 273 (Ind. 1985). Generally, fraud claims
are governed by a six-year statute of limitations. I.C. § 34-11-2-7. But a two-
year statute of limitations may apply to constructive fraud claims if the
substance of the claims warrants it. For example, in one case, the plaintiff filed
a legal malpractice claim against his former attorney. Keystone Distrib. Park v.
Kennerk, Dumas, Burke, Backs, Long & Salin, 461 N.E.2d 749 (Ind. Ct. App.
1984). The plaintiff also alleged constructive fraud, but after inspecting the
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 20 of 22 substance of the claims, this Court found that the alleged constructive fraud was
“merely one example of the asserted attorney malpractice . . . .” Id. at 752.
This Court had disallowed the attorney malpractice claim as being barred by
the two-year statute of limitations and was compelled to do the same to the
constructive fraud count because it was “of the same ilk.” Id. This Court has
reached similar conclusions in at least two other cases. See Myers v. Maxson, 51
N.E.3d 1267, 1277 n.10 (Ind. Ct. App. 2016) (applying a two-year limitations
period to all claims because the allegations of constructive fraud were
“substantively part of his legal malpractice claim”); Small v. Centocor, Inc., 731
N.E.2d 22, 29 (Ind. Ct. App. 2000) (applying a two-year limitations period to
all claims, including fraud and constructive fraud, because “at the root of all the
claims” was the medical care given to the plaintiff’s father).
[44] In this case, the constructive fraud/unjust enrichment count is comprised of just
six paragraphs. One incorporates the prior allegations and three more deal with
damages. As the basis of the claim, the City alleges that LWG breached
fiduciary duties, “amounting to constructive fraud,” and those breaches
included, among other things, failing to disclose material facts to the City—as
set forth in the preceding paragraphs on the other claims. Appellant’s App.
Vol. III p. 41-42. The City has never explained how a trial on the constructive
fraud claim would differ at all from a trial on the other two counts. If the City
were permitted to extend the statute of limitations merely by asserting a claim
for constructive fraud, it would make “all actions for” breach of fiduciary duty
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 21 of 22 “governed by the longer statute of limitations merely by reason of the fact that
some” constructive fraud “could be alleged.” Whitehouse, 477 N.E.2d at 274.
[45] The City rests its argument on the fact that constructive fraud has legal elements
that are different from the elements of breach of fiduciary duty or negligence.
Obviously, that is and has always been the case, but this Court has found
repeatedly that, depending on the nature of the facts and allegations, a
constructive fraud claim may be so substantively similar to the other claims at
issue that it is nonetheless governed by the shorter limitations period.
[46] Consequently, we agree with LWG that the two-year statute of limitations
should govern the constructive fraud/unjust enrichment claim in this case. And
for all the reasons already expressed herein, this claim is time-barred.
Accordingly, we reverse the trial court’s denial of LWG’s summary judgment
motion on the constructive fraud claim and remand with instructions to enter
summary judgment in LWG’s favor.
[47] The judgment of the trial court is affirmed in part, reversed in part, and
remanded with instructions to enter summary judgment in LWG’s favor on the
City’s claim for constructive fraud/unjust enrichment.
Bradford, C.J., and Pyle, J., concur.
Court of Appeals of Indiana | Opinion 19A-MI-1762 | April 28, 2020 Page 22 of 22