Ellis v. Keystone Constr. Corp.

82 N.E.3d 920

Jason ELLIS, Appellant-Defendant/Counterclaimant,

v.KEYSTONE CONSTRUCTION CORPORATION, Appellee-Plaintiff/Counterclaim Defendant.

Court of Appeals Case No. 32A01-1607-PL-1477.

Court of Appeals of Indiana.

September 5, 2017

Attorneys for Appellant: Thomas A. Brodnik, Patrick M. Cline, Doninger Tuohy & Bailey LLP, Indianapolis, Indiana, Scott Treadway, EST Law, LLC, Indianapolis, Indiana.

Attorneys for Appellee: T. Joseph Wendt, Edward M. Smid, Barnes & Thornburg LLP, Indianapolis, Indiana.

Mathias, Judge.

[1] Jason Ellis ("Ellis") challenges the order of the Hendricks Superior Court granting summary judgment in favor of Keystone Construction Corporation ("Keystone"). On appeal, Ellis presents four issues, one of which we find dispositive, which we restate as whether the trial court erred in determining that the doctrine of judicial estoppel precluded Ellis's claims against Keystone.

[2] We affirm.

Facts and Procedural History¹

[3] Keystone is a construction company formed by Ersal Ozdemir ("Ersal") in 2002, with Ersal as the sole shareholder. Ellis was experienced in the commercial construction industry, and in late 2002 and early 2003, Ersal recruited Ellis to come to work for Keystone. Ellis claims that Ersal offered to make him a "partner" in Keystone with a 20% ownership interest. Ellis agreed and began to work for Keystone as the director of construction.

[4] Thereafter, although Ellis's partnership or ownership status was never formalized in writing, Ersal introduced Ellis to others as his "partner," and told others that he had a "partner" in Keystone. Ellis was also referred to on Keystone's website as a partner and in internal corporate records as a "partner" and "director." Ersal also discussed Keystone's obligation to pay dividends to Ellis, and Ellis received some dividends from Keystone in addition to his salary.

[5] After Ellis joined Keystone, Ersal's younger brother, Huseyin Ozdemir ("Huseyin"), also joined Keystone as a third member or shareholder. Huseyin's background was in finance and accounting, and he became the financial officer of the company. Huseyin told others working for Keystone that he, Ersal, and Ellis were "partners" or "owners" of Keystone. Appellant's App. Vol. 4, p. 25.

[6] As the company grew, it became involved in several large commercial construction projects. Ellis and Huseyin also pressured Ersal to reduce their ownership status to writing in a formal shareholder or partnership agreement. In 2006, Ersal sent Ellis and Huseyin an email stating that he had met with attorneys who were preparing a partnership agreement, a buy/sell agreement, and stock certificates. Apparently, however, these agreements were never signed by the parties.

[7] In 2010, Huseyin sent Ersal an email demanding that Ersal purchase his shares of Keystone for $2,500,000, which Huseyin believed represented his share of the value of Keystone at the time, which he determined was in excess of $7,500,000. Huseyin also complained of Ersal's failure to formalize the ownership of the company. Ersal responded by claiming that he had always owned 100% of the company. He also stated that if Huseyin believed the company was worth that much, he should buy it from Ersal for that price.

[8] At the same time as the dispute over ownership of Keystone was developing, Ellis and his then wife, Brooke Ellis ("Brooke") were in the process of dissolving their marriage. Brooke filed for dissolution in February 2010. Eventually, Ellis and Brooke entered into a settlement agreement resolving all issues in the dissolution, which the dissolution court accepted and incorporated into the dissolution decree. This settlement agreement purported to disclose "all the property and interest, both real and personal, now held by [Ellis and Brooke]." Appellee's App., Vol. 3, p. 164. The agreement also provided that Ellis and Brooke "have amicably and equitably divided all personal property acquired during the course of the marriage," and that both parties "represent and warrant to each other that there has been a full disclosure of assets and that the property referred to in this Agreement represents all the property of any sort whatsoever which either of them have an interest in or right to, whether legal or equitable." Id . at 168, 171. The settlement agreement also contained a provision stating that, "[i]t is understood and agreed that this is an agreement to settle all property rights [.]" Id at 171. The settlement agreement further contained an integration clause stating, that "[e]ach party hereto acknowledges ... that this Agreement constitutes all of the terms of the contract between said parties." Id . On March 18, 2011, the dissolution court approved the Ellises' proposed Settlement Agreement. Notably, however, the settlement agreement contained no mention of any ownership interest or shares of Keystone.

[9] In November 2011, Huseyin resigned from Keystone. He also transferred $2,500,000 from Keystone to an organization he owned² to compensate him for what he believed was his share of the value of Keystone. Ellis questioned Ersal about Huseyin's departure from Keystone, asking in an email if Huseyin was "still partners with us?" and if there would be a "distribution to shareholders soon for 2011." Appellant's App. Vol. 6, p. 124. Ersal responded with an email stating:

Christi is trying to put the [Keystone] financials together by next week. I am not sure if there will be any profit sharing distribution at this time. I will let you know after I review the financials.

Sain [i.e., Huseyin] is not involved in Keystone.

Id . at 123.

[10] Ellis continued to pressure Ersal for documentation formalizing his ownership interest in Keystone. In March 2012, Ersal and Ellis had a meeting at which they discussed Ellis's ownership interest in Keystone. Ellis recorded this conversation, and stated that he had met with his attorneys who had sent him documentation for what he referred to as "the partnership thing." Appellant's App. Vol. 6, p. 79. But instead of showing Ellis with a 20% interest, the documents Ersal presented to Ellis showed Ellis with only a 5% interest in Keystone. Ellis rejected this, stating that he was supposed to be a "partner" from "day one" and stated that he and Ersal had discussed a "10 to 20 percent" ownership interest. Id . at 92-93. Ersal denied that this had been the case.

[11] Ellis and Ersal were unable to come to an agreement regarding the ownership of Keystone, and Ellis resigned from the company in May 2012. On June 1, 2012, Ellis sent a letter to Keystone seeking access to certain financial and corporate records of Keystone, asserting rights he would have as a shareholder. Keystone responded by filing a complaint on June 15, 2012, seeking a declaratory judgment that Ellis was not a shareholder or partner in Keystone. Ellis responded on July 26, 2012, with an answer to the complaint, affirmative defenses, and seven counterclaims alleging breach of fiduciary duty; fraud and constructive fraud; breach of contract, promissory estoppel, conversion; and unjust enrichment; and also requesting compulsory production of corporate records; an accounting; a declaratory judgment and imposition of a constructive trust.

[12] After various filings by both parties, Keystone filed a motion for judgment on the pleadings on January 31, 2013, with regard to Ellis's counterclaims of breach of fiduciary duty, conversion, and fraud and constructive fraud. After Ellis filed a response, the trial court granted Keystone's motion on March 25, 2013. Keystone then filed a motion for summary judgment on May 12, 2014. Ellis responded to this motion after successfully seeking an extension of time, and the trial court denied Keystone's motion on August 12, 2014.

[13] Undeterred, on November 17, 2015, Keystone filed another motion for summary judgment as to the issue of damages. And before the trial court could issue a ruling on this motion, on December 14, 2015, Keystone filed a motion to renew its previously-denied motion for summary judgment on the grounds of newly discovered evidence. In this motion, Keystone sought summary judgment on the grounds of judicial estoppel, noting that Ellis's settlement agreement with his ex-wife Brooke contained no mention of any stock or ownership interest in Keystone and claiming that Ellis was therefore estopped from asserting an ownership interest in the present case. Ellis responded to both motions for summary judgment, and Keystone filed replies.

[14] On May 27, 2016, the trial court held a hearing on Keystone's motion for summary judgment based on judicial estoppel. The trial court issued an order on June 6, 2015, granting Keystone's motion for summary judgment. Keystone then moved for entry of final judgment, which the trial court granted on July 12, 2016, by entering an order of final judgment in favor of Keystone. Ellis now appeals.

Summary Judgment Standard

[15] Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Ind. Trial Rule 56(C) ; Knighten v. E. Chi. Hous. Auth. , 45 N.E.3d 788, 791 (Ind. 2015). The movant's burden is to show that its designated evidence, with all conflicts, doubts, and reasonable inferences resolved in the non-moving party's favor, affirmatively negates the non-moving party's claim. Hughley v. State , 15 N.E.3d 1000, 1003 (Ind. 2014). The burden then shifts to the non-moving party to show an issue of fact affecting the outcome of the case that requires resolution by the fact-finder. Id. We review the trial court's ruling de novo as a question of law, taking care that the nonmovant is not improperly denied her day in court. Id. We may affirm denial of summary judgment on any theory or basis found in the designated evidence. Chang v. Purdue Univ. , 985 N.E.2d 35, 45 (Ind. Ct. App. 2013), trans. denied .

Judicial Estoppel

[16] Ellis contends that the trial court erred when it determined that his...