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FOR PUBLICATION

ATTORNEYS FOR APPELLANTS: MICHAEL F. DREWRY MICHAEL P. BISHOP ROBERT J. ORELUP BRIAN M. FALCON PATRICK M. MILLER Drewry Simmons Vornehm, LLP Indianapolis, Indiana

ATTORNEYS FOR APPELLEES: MICHAEL A. WUKMER BRIAN D. GWITT DONALD R. HOSTETLER Ice Miller LLP Indianapolis, Indiana

IN THE COURT OF APPEAL OF INDIANA
GEIGER & PETERS, INC. and CARL L. PETERS, Appellants, vs. MICHAEL R. BERGHOFF and LENEX STEEL COMPANY, Appellees. ) ) ) ) ) ) ) ) ) )

No. 49A02-0509-CV-832

APPEAL FROM THE MARION CIRCUIT COURT The Honorable Theodore M. Sosin, Judge Cause No. 49C01-0401-MF-31

August 22, 2006

OPINION - FOR PUBLICATION

BAILEY, Judge

Case Summary Appellants-Third Party Plaintiffs Geiger & Peters, Inc. ("G&P") and Carl L. Peters ("Peters"), (collectively referred to as "Appellants"), appeal the trial court's grant of summary judgment to Appellees-Third Party Defendants Michael R. Berghoff ("Berghoff") and Lenex Steel Company ("Lenex Steel"), (collectively, "Appellees"). We affirm. 1 Issues Appellants raise four issues, which we consolidate, reorder, and restate as whether the trial court erred by granting summary judgment to Appellees because genuine issues of material fact exist regarding whether: (I) (II) Berghoff owed a fiduciary duty to G&P, as a creditor of FSC; G&P, via its status as FSC's corporate guarantor, has standing to pursue a personal cause of action against Berghoff for breach of fiduciary duty; and With regard to Peters's derivative claim for tortious interference of contract, Berghoff intended to tortiously interfere with FSC and Duke Construction's business contracts. Facts and Procedural History I. Background: The Parties The relevant facts are undisputed. G&P and Ferguson Steel Company, Inc., ("FSC") are engaged as competitors in the steel fabricating business. G&P is owned, in part, by Peters, who is also a shareholder of FSC. Apart from Peters's ownership interest in the two corporations, G&P and FSC "have no common ownership or corporate officers," and "no joint venture or similar relationships have been undertaken between the two companies for

(III)

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any project or contract." Appellants' App. at 107. Instead, each corporation "is a separate and distinct company and operation, with separate officers, managers, physical offices, fabrication facilities, banking relationships, bonding arrangements, customer lists, contracts and operations." Id. On March 20, 2002, Peters and J. Russell Sutton ("Sutton"), 2 the other owner of FSC, in their capacity as directors, appointed Berghoff as the President of FSC. Berghoff served as FSC's president until February of 2003, and "was entrusted with the ongoing daily operations and activities of FSC." Id. at 106. In November of 2002, Berghoff became part owner and officer of Lenex Steel, which is also engaged in the construction industry as a steel fabricator and supplier. Prior to December of 2002, Marvin E. Ferguson ("Ferguson") served as a director of FSC and as an officer and owner of Marvin E. Ferguson, Inc. ("MEFI"). MEFI is engaged in the construction industry as a "steel fabrication consultant and brokerage firm." Id. Prior to 2003, FSC entered into a consulting agreement with Ferguson and MEFI, pursuant to which "Ferguson and MEFI were to solicit and obtain steel purchase orders and contracts on construction projects for FSC." Id. at 107. In particular, Ferguson and MEFI were contracted to maintain FSC's existing business relationship with Duke Construction Company and Duke/Weeks companies ("Duke Construction"), as well as to develop future and ongoing work for FSC with Duke Construction.

We hereby grant Appellees' motion to strike portions of the Appendix, which include evidence that was not designated to the trial court. 2 Sutton entered an appearance in this appeal but did not submit a brief.

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II. The Controversy: G&P's Guaranty and FSC's Default A. The Bank and the FSC Guaranties In 2001, G&P tendered $3,000,000.00 to FSC as an unsecured loan, to be repaid in full by April of 2001. At the same time, FSC attempted to secure a line of credit with First Indiana Bank, N.A. (the "Bank"), to fund the working capital of FSC's business. In March of 2001, the Bank increased FSC's line of credit from $10,000,000.00 to $13,000,000.00, "so that FSC could repay G&P the [$3,000,000.00] owed." Id. at 108. In exchange, on April 13, 2001, G&P executed a Corporate Limited Guaranty ("Bank Guaranty"), wherein G&P agreed to guarantee "when due, whether by acceleration, anticipatory repudiation, or otherwise, each of the following . . .: (a) The full and prompt payment of all Credit Obligations and any extension or renewal thereof, and all interest, expenses, reasonable costs of collection, reasonable attorney's fees or other obligations due in connection with or on account of such Credit Obligations up to, but not exceeding, an amount equal to the lesser of: (i) the difference between the Borrowing Base (as determined as of the date the particular Advances were made to the Borrower [i.e., FSC] giving rise to the Credit Obligations and $3,000,000.00; or (ii) $3,000,000.00; and All interest, expenses, reasonable costs of collection, reasonable attorneys' fees or other obligations due in connection with or on account of this Guaranty.

(b)

Id. at 175. That same day, FSC and G&P executed an Agreement to Provide Guaranty (the "FSC Guaranty"). The FSC Guaranty provided that G&P would guarantee FSC's line of credit with the Bank "to a maximum sum of $3,000,000.00," in exchange for: (1) 2% interest per annum "on the greatest amount that [FSC's] Credit Note exceeded the Borrowing Base [i.e.,

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$10,000,000.00] during such calendar quarter;" (2) reimbursement and indemnification for all payments made by G&P on the Bank Guaranty; and (3) an assignment of FSC's life insurance policies. Id. at 183. In relevant part, the FSC Guaranty contains the following provisions: 5. Waivers and Amendments. This Agreement may be amended or modified, and its terms or conditions may be waived, only by a written instrument executed by the parties hereto . . . . Entire Agreement. This Agreement constitutes the entire understanding of the parties relative to the subject matter hereof and supersedes all prior agreements and undertakings between or among any of the parties relating to the subject matter hereof. ***** 9. Term. This Agreement shall expire one (1) year from the date of this Agreement, but may be renewed for like terms upon written agreement of the parties.

6.

Id. at 184 (emphasis in original). B. FSC's Default and Liquidation In the past, FSC had provided structural steel to Duke Construction on multiple commercial projects throughout central Indiana, Ohio, and other parts of the Midwest. Indeed, although FSC had numerous other customers, Duke Construction "accounted for well in excess of 50% of the FSC business at all relevant times hereto." Id. at 106-07. However, in the fall of 2002, Duke Construction began withdrawing its business from FSC. In October of 2002, FSC defaulted on its line of credit with the Bank, which was guaranteed by G&P. On or about November 1, 2002, Duke Construction decided to no longer award "FSC any new fabrication and erection contracts because of [FSC's] uncertain

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financial position." Id. at 476. On November 6, 2002, in a memorandum from Berghoff to Sutton, Berghoff outlined a proposal that he believed "would result in an agreement with [the Bank] to extend [FSC's] credit facility." Id. at 702. In part, the memorandum provides: "Please understand that each day [FSC] [is] in suspension, [Duke Construction] gets less comfortable about our ability to service them. They have begun making plans to develop other suppliers locally and are planning to competitively bid a small job called Harlan Freezer." Id. On January 20, 2003, the Bank "commenced the liquidation of FSC because of its default on the line of credit." Id. at 1183. Thereafter, on January 27, 2003, Berghoff formally resigned as president of FSC. At the time, however, Berghoff also served as President of Lenex Steel. In 2003, Lenex Steel competitively bid on and received two projects from Duke Construction that FSC had previously submitted bids for, i.e., Lebanon 12 and Hamilton 6. In his affidavit, Berghoff testified that Duke Construction is now Lenex Steel's largest customer. III. Commencement of the Present Litigation A. The Bank's Complaint Against G&P On January 21, 2003, and pursuant to the Bank Guaranty, the Bank filed a complaint against G&P, requesting judgment in the amount of $3,000,000.00. In response, G&P filed a third party complaint against Appellees--i.e., Berghoff and Lenex Steel--Ferguson, and MEFI (collectively, "Third Party Defendants"), claiming that the "Third Party Defendants owed G&P duties because of G&P's status as a creditor of FSC." Id. at 150. On March 31, 2004, G&P entered into a Mutual Release and Settlement Agreement with the Bank, settling 6

all claims arising from the Bank Guaranty for $1,825,000.00. Pursuant to an Addendum to the Settlement Agreement, the Bank assigned to G&P "any and all of its rights, interests and entitlement in the proceeds or recovery" from any derivative claims, "to which [the Bank] as the secured creditor of [FSC] by virtue of the Credit Note, Credit Agreement and Line of Credit, may have or claim some right, title and interest therein." Id. at 489. That same day, G&P and Peters executed an Assignment Agreement, wherein G&P assigned to Peters all of its "rights, interests, privileges, benefits, remedies and claims under the [Bank Guaranty] . . . and the [FSC Guaranty,]" to the extent of a recovery of: a. b. actual damages in the amount of $1,825,000.00; thirty-eight percent (38%) of consequential damages (including, but not limited to attorney's fees, consultant fees and litigation costs incurred through March 31, 2004 . . . ("Consequential Damages") . . . .

Id. at 496. G&P did not, however, assign to Peters the other 62% of Consequential Damages. In pertinent part, the Assignment Agreement contains the following provisions: 4. [Peters] agrees to pay [G&P] the sum of $1,825,000.00. [G&P] and [Peters] agree that [G&P] is indebted to [Peters] in the amount of $2,850,000.00 represented by a certain Promissory Note . . . . [Peters] shall (in lieu of a cash payment) reduce the amount of [G&P's] indebtedness to him by $1,825,000.00 and shall endorse on the Promissory Note as partial payment thereof the amount of $1,825,000.00 upon the execution of this Agreement. As further consideration for the Assignment, [G&P] shall continue to maintain the management of and control over the Lawsuit relating to the [Bank Guaranty] and [FSC Guaranty.] [G&P] shall continue to keep [Peters] informed, on a regular basis, in regards to the status of the Lawsuit. As further consideration for the Assignment, the Assignor shall continue to pay all of the fees, costs and expenses (including but not limited to attorney fees, consultant fees and litigation costs) of the 7

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Lawsuit relating to the Guaranty, the Agreement and the Claims. Id. at 497. B. G&P's Second Amended Third Party Complaint On May 28, 2004, Appellants filed a second amended third party complaint, i.e., the present complaint, alleging that the Third Party Defendants are liable to G&P for the $1,825,000.00 settlement payment to the Bank (the "Complaint"). In the Complaint, Appellants asserted the following causes of action against the Third Party Defendants: (1) breach of fiduciary duties owed to FSC and corporate waste, i.e., Counts III and IV; (2) tortious interference with FSC's contracts and prospective business relations with Duke Construction, i.e., Count V; (3) breach of consulting agreement by Ferguson and MEFI, i.e., Count VI; and (4) civil conspiracy, i.e., Count VII. Peters brought his claims "as Assignee under the [Assignment Agreement,] individually and in his capacity as a shareholder of FSC, and derivatively on behalf of FSC." Id. at 119. G&P alleged that it has standing to bring the breach of fiduciary and corporate waste, tortious interference, breach of contract and civil conspiracy causes of action, "based upon its status as a contractual third party beneficiary and as an assignee of the Bank's rights as a secured creditor of FSC pursuant to the Settlement Agreement and Addendum." Id. at 119. G&P averred, for example: As a secured creditor and guarantor of FSC, as a direct contractual party in privity with FSC pursuant to the [FSC Guaranty], and by virtue of the Settlement Agreement and Addendum, G&P has both direct rights and rights as an intended third party beneficiary of the fiduciary duties which Berghoff and Ferguson owed to FSC, and of the corporate opportunities available to FSC.

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Id. at 126. On November 3, 2004, the Third Party Defendants filed a motion for summary judgment on all claims asserted by G&P and on three of the causes of actions alleged by Peters, i.e., Counts IV, V, and VI. Specifically, the Third Party Defendants argued that G&P lacks standing to maintain the Complaint because it was a mere guarantor-creditor of FSC and, further, because G&P was not owed any fiduciary duties. On February 23, 2005, Appellants filed a response in opposition to the Third Party Defendants' summary judgment motion. On April 29, 2005, the trial court conducted a hearing on the motion for summary judgment. Subsequently, and at the trial court's request, the parties filed their proposed findings of fact and conclusions thereon. On June 10, 2005, the trial court entered partial summary judgment in favor of Appellees, as well as findings of facts and conclusions of law. 3 The trial court then found that there was no just reason for delay and directed "entry of final, partial judgment against G&P and Peters on the claims designated by the Court." 4 Id. at 54. On July 11, 2005, Appellees filed a motion to correct errors, which the trial court denied. This appeal ensued. 5

The trial court did not grant summary judgment to Appellees on Peters's derivative claims against Ferguson and Berghoff for breach of fiduciary duties owed to FSC and for civil conspiracy against FSC.
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Indiana Trial Rule 56(C) provides, in relevant part: A summary judgment upon less than all the issues involved in a claim or with respect to less than all the claims or parties shall be interlocutory unless the court in writing expressly determines that there is not just reason for delay and in writing expressly directs entry of judgment as to less than all the issues, claims or parties.

During the pendency of this appeal, Appellants settled their claims against Ferguson and MEFI. On January 11, 2006, we granted Appellants' Motion to Dismiss the claims pertaining to Ferguson and MEFI.

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Discussion and Decision I. Standard of Review On review of a trial court's decision to grant or deny summary judgment, we apply the same standard as the trial court: we must decide whether there is a genuine issue of material fact that precludes summary judgment and whether the moving party is entitled to judgment as a matter of law. Carie v. PSI Energy, Inc., 715 N.E.2d 853, 855 (Ind. 1999). Once the moving party has sustained its initial burden of proving the absence of a genuine issue of material fact and the appropriateness of judgment as a matter of law, the party opposing summary judgment must respond by designating specific facts establishing a genuine issue for trial. Stephenson v. Ledbetter, 596 N.E.2d 1369, 1371 (Ind. 1992). We may consider only those portions of the pleadings, depositions, and any other matters specifically designated to the trial court by the parties for purposes of the motion for summary judgment. Ind. Trial Rule 56(C), (H). Any doubt as to the existence of an issue of material fact, or an inference to be drawn from the facts, must be resolved in favor of the nonmoving party. Cowe v. Forum Group, Inc., 575 N.E.2d 630, 633 (Ind. 1991). Although the nonmovant has the burden of demonstrating that the grant of summary judgment was erroneous, we carefully assess the trial court's decision to ensure that the nonmovant was not improperly denied his or her day in court. Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind. 1997). Specific findings and conclusions by the trial court are not required, and although they offer valuable insight into the rationale for the judgment and facilitate our review, we are not limited to reviewing the trial court's reasons for granting or denying summary judgment. Bernstein v. Glavin, 725 N.E.2d 455, 458 (Ind. 10

Ct. App. 2000), trans. denied. Rather, a grant of summary judgment may be affirmed upon any theory supported by the designated materials. 6 Id. II. Analysis On appeal, Appellants argue that the trial court erroneously granted summary judgment to Appellees because genuine issues of material fact exist regarding whether: (1) Berghoff owed a fiduciary duty to G&P because it was a creditor of FSC; (2) G&P, via its

In their brief, Appellants challenge several of the trial court's findings and conclusions pursuant to Trial Rule 52. However, in the summary judgment context, we are not governed by Rule 52 and are, thus, not constrained by the trial court's findings of fact and conclusions thereon. That said, under Trial Rule 56(C), the trial court must designate the issues and claims upon which summary judgment is granted only when summary judgment is granted upon less than all the issues. See also Wolfe v. Stork RMS-Protecon Inc., 683 N.E.2d 264, 267 (Ind. Ct. App. 1997). Otherwise, the rule imposes no requirement upon the trial court to specifically state the legal basis for granting summary judgment. Id. Here, the trial court entered numerous findings of fact and conclusions thereon. The trial court then designated the issues and claims upon which summary judgment was granted, including: (a) G&P's derivative claims, for itself, and as assignee of the Bank, . . . for: (i) breaches of fiduciary duty owed to FSC; (ii) tortious interference with FSC's relationship with Duke; . . . and (iv) civil conspiracy against FSC; (b) G&P's claims, for itself, and as assignee of the Bank, based upon its status as a creditor and as a guarantor of FSC, . . . for: (i) breaches of fiduciary duty owed to FSC; (ii) tortious interference with FSC's relationship with Duke; . . . and (iv) civil conspiracy against FSC; (c) G&P's direct claims, for itself, and as assignee of the Bank, based on contractual privity, . . . for: (i) breaches of fiduciary duty owed to FSC; (ii) tortious interference with FSC's relationship with Duke; . . . and (iv) civil conspiracy against FSC; (d) G&P's claims, for itself, and as assignee of the Bank, based on its alleged status as an intended third party beneficiary of FSC for: (i) breaches of fiduciary duty owed to FSC; (ii) tortious interference with FSC's relationship with Duke; . . . and (iv) civil conspiracy against FSC; and (e) Peters' shareholder derivative claims against Third Party Defendants for: (i) tortious interference with FSC's relationship with Duke; . . . and (iii) civil conspiracy by Lenex . . . against FSC. Appellants' App. at 53-54. Appellants challenge Finding 14 and Conclusions 2,3, 10, 13, 21-26, 37, and 45. Because we are not bound by these findings and conclusions, we do not address the propriety of each. Rather, we examine the propriety of the summary judgment as a whole and will affirm if it is sustainable upon any theory or basis in the law. However, with respect to Finding 14, which provides: "G&P's Agreement to Provide Guaranty with FSC [i.e., the FSC Guaranty] expired on April 13, 2002. The Agreement to Provide Guaranty was not renewed," we note that the FSC Agreement, by its terms, expired on April 13, 2002, unless the G&P and FSC renewed the guaranty, in writing. If such a writing exists, and, further, if, for privity purposes, the renewed agreement was material to the summary judgment proceeding, Appellants bore the burden to designate such agreement to the trial court to rebut the evidence that the FSC Guaranty expired on April 13, 2002.

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status as FSC's corporate guarantor, has standing to pursue a personal cause of action against Berghoff for breach of fiduciary duty; and (3) with regard to Peters's derivative claim for tortious interference of contract, Berghoff intended to tortiously interfere with FSC and Duke Construction's business contracts. We separately address each claim of error. A. Fiduciary Duty Appellants first contend that "Berghoff owed fiduciary duties to G&P" as a result of its status as creditor of FSC. Appellants' Br. at 22. The designated evidence reveals that Berghoff served as an officer, i.e., the President, of FSC from March 20, 2002 through January 27, 2003. As an officer, Berghoff certainly owed a fiduciary duty to FSC. See, e.g., Hartung v. Architects Hartung/Odle/Burke, Inc., 157 Ind. App. 546, 301 N.E.2d 240, 243 (Ind. Ct. App. 1973) (noting that both officers and directors have long been held to be fiduciaries in Indiana). Such duty required Berghoff to "deal fairly, honestly, and openly with his corporation and fellow stockholders" and, further, to avoid being "distracted from the performance of his official duties by personal interests." G & N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 240 (Ind. 2001). In the present action, however, FSC is not the party alleging that Berghoff breached his fiduciary duties as an officer of the corporation, nor can G&P--either as a corporate creditor or under the Addendum to the Settlement Agreement--maintain a derivative action on behalf of FSC because G&P and the Bank were never shareholders of FSC and do not fairly and adequately represent the interests of FSC's shareholders in enforcing the right of

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the corporation. See Ind. Code

Download Geiger & Peters, Inc. and Carl L. Peters v. Michael R. Berghoff and Lenex St

Indiana Law