John G. Schutz, Terry Schutz, Kimberly Casiano, Mark Fentress, Michael Jablonski, and Bryan Klein,1 Appellants-Defendants, v. Leroy Scott and Lorraine Scott, Appellees-Plaintiffs. (2025)

MEMORANDUM DECISION

Statement of the Case

[1] John and Terry Schutz (collectively, the Schutzes) bring this interlocutory appeal from the trial court's order denying their motion for summary judgment in an action brought against them by Leroy and Lorraine Scott (collectively, the Scotts). Concluding that the trial court correctly determined that there are genuine issues of material fact precluding the entry of summary judgment, we affirm.

Facts and Procedural History

[2] From around 1992 to late 2007, Leroy worked at Thomas Dodge, in Highland. The Schutzes owned Center Garage, Inc. (Center Garage) which was located in Cedar Lake. In late 2007 to early 2008, Leroy and a group of investors, including Kimberly Casiano, Mark Fentress, Michael Jablonski, and Bryan Klein, formed Center Investments, Inc. (Center Investments) and Center Consulting Corporation (Center Consulting) for the purpose of acquiring ownership of Center Garage. Leroy invested $400,000.00 in exchange for a forty-percent ownership interest in Center Investments. Leroy also has a forty-percent ownership interest in Center Consulting.

[3] Leroy was an active participant in the negotiations with the Schutzes for the purchase of Center Garage. During those negotiations, John and Leroy discussed executing employment agreements with Center Garage. John does not remember the conversations about the terms of the employment agreements. However, Leroy states that John's employment agreement was meant to be a template of sorts for his contract. As he understood them, the terms of Leroy's employment agreement included a ten-year employment period with a salary of $4,000.00 per week and the use of two company vehicles. An additional term of the employment agreement, which the parties call the “poison pill,” was to provide for the lump sum payment of the buyout for the remaining period of the contract should Leroy's employment be terminated early.

[4] Around the beginning of 2008, Leroy left his position at Thomas Dodge and was hired by John to work at Center Garage in the position he had sought. John established Leroy's salary at $4,000.00 per week and gave Leroy the use of two company vehicles.

[5] Those negotiations culminated in the execution of a stock purchase agreement (SPA) on January 24, 2008. Appellants’ App. Vol. III, pp. 54-101 (SPA). Also pursuant to negotiations, Leroy wrote a check to Center Garage for $625,000.00. The Schutzes signed individually as the sellers, with Leroy Scott and Mark Fentress signing on behalf of Center Investments in their capacities as President, and Vice President and Secretary, respectively. Id. at 87. The section immediately following those signatures provided that, “The undersigned join this Agreement and agree to be individually liable for all contractual obligations of Center Investments, Inc. to John G. Schutz and Terry P. Schutz pursuant to this Stock Purchase Agreement.” Id. Fentress, Casiano, and the Scotts signed individually. Id.

[6] Under the terms of the SPA, the Schutzes agreed to sell forty-nine shares of common stock in Center Garage, constituting forty-nine percent of the shares of capital stock. In exchange, Center Investments agreed to pay $700,000.00. Id. at 61. Center Investments paid $100,000.00 of that amount in cash, and executed a promissory note, personally guaranteed by Fentress, Casiano, and the Scotts for the remaining $600,000.00. Id. The remaining balance of the promissory note was to be paid in monthly installments, beginning one month after the SPA closing date, with seven percent per annum interest, for one hundred and twenty months. Id. And Center Consulting loaned the Schutzes $400,000.00 under a promissory note, which was meant to be a deferred payment for the remaining fifty-one percent of the outstanding stock of Center Garage.

[7] The SPA also provided in pertinent part that “[t]he obligations of the Seller and the Purchaser under this Agreement are subject to the satisfaction, on the Closing Date, of each of the following conditions, any of which may be waived by the parties to this Agreement: ․ The Purchaser and the Sellers on behalf of the Company will execute employment agreements for John Schutz, Mark Fentress, and LeRoy Scott.” Id. at 62-63 (¶ 1.4 Conditions Precedent to Obligations of Seller and Purchaser; ¶1.4.6).

[8] On February 13, 2008, John's employment agreement was executed pursuant to SPA ¶1.4.6. While John does not remember any verbal agreements about Leroy's employment agreement, Leroy stated that he closed on the SPA on April 9 without an executed employment agreement because he was assured by John that one would be executed later. And Section 9.1 of the SPA included the following provision:

Execution of Further Documents: From and after the Closing, upon the reasonable request of the Purchaser, the Seller shall execute, acknowledge and deliver all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be required to convey and transfer to and vest in the Purchaser and protect its right, title and interest in the Shares and as may be appropriate otherwise to carry out the transactions contemplated by this Agreement.

Appellants’ App. Vol. III, p. 79. The “poison pill” provision in John's employment agreement protected his interests in the event of early termination. Appellants’ App. Vol. IV, pp. 45-52 (Schutz Employment Agreement; “poison pill” p. 47). According to Leroy, he was assured his employment agreement would have contained the same provision.

[9] In late November or early December 2008, Leroy approached John about finalizing his employment agreement by having it reduced to writing per the terms of the SPA. John informed Leroy that he would not give him a written employment contract. And on December 20, 2008, John terminated Leroy's employment with Center Garage. Appellants’ App. Vol. IV, p. 53 (Termination Letter). The termination letter alleged Leroy engaged in: (1) breach of fiduciary duty; (2) self-dealing; (3) diversion of corporate opportunities; (4) gross and negligent mishandling of business responsibilities; (5) unilaterally increasing his and another employee's salaries; and (6) job abandonment/failure to commit sufficient resources to his position. Id.

[10] The Scotts filed their twelve-count complaint against Center Investments, Fentress, Cassiano, Jablonski, Klein, Center Consulting, Center Garage, and the Schutzes on March 27, 2009. Appellants’ App. Vol. II, pp. 36-57 (Complaint). Center Garage and the Schutzes answered the Scotts’ complaint and filed the affirmative defenses of failure to mitigate, estoppel and unclean hands, failure to state a claim, proximate cause, no duty, lack of consideration, laches, waiver, failure to perform conditions precedent, failure to comply with contract and breach of same, and reserved the right to assert others. Id. at 58-89 (Answer, Affirmative Defenses, Counter Claims Cross Claims). On November 28, 2012, Center Garage filed for Chapter 7 bankruptcy protection.

[11] The Secretary of State administratively dissolved Center Investments on February 5, 2020. Appellants’ App. Vol. III, p. 155. On May 20, 2022, the Schutzes filed a motion for judgment on the pleadings, challenging, in part, Leroy's standing to pursue his claim under the SPA. But on June 29, 2022, the board of directors of Center Investments issued a resolution, ratifying Leroy's actions in bringing an action against the Schutzes in his individual capacity rather than in the corporation's name. Appellants’ App. Vol. IV, p. 83. The resolution also ratified the prior assignment of the corporation's rights and abilities to Leroy to pursue the suit against the Schutzes for breach of the SPA. Id. In addition, the resolution assigned to Leroy the right to pursue any claim against the Schutzes and to authorize him to take any and all necessary actions. Id. The resolution was signed by Leroy as Center Investment's Chairman of the Board. The shareholders of Center Investments also issued a resolution to the same effect and was signed by Leroy as the majority shareholder. Id. at 84. On July 1, 2022, Leroy responded to the Schutzes’ motion for judgment on the pleadings and attached the resolutions.

[12] The Schutzes filed a motion for summary judgment on September 9, 2022. Appellants’ App. Vol. II, p. 90. The court held a hearing on the motion on September 3, 2024 at which time the Scotts agreed to dismiss all counts but Count IV and V. Count IV alleged a breach of the SPA in that there was an obligation to employ Leroy for ten years and nine years remained unpaid, and Count V, alleged a breach of fiduciary duty by the Schutzes for the breach of their duty of good faith and fair dealing and acting to their personal advantage as opposed to the interests of the corporation.²

[13] The court's November 19, 2024 order denied the Schutzes’ motion for summary judgment. The court found that because Leroy wrote a check for $625,000.00 to Center Garage, and the Schutzes claim they do not know what happened to the money, there is a genuine issue of material fact about whether the Schutzes acted to their personal advantage as alleged in Count V. As for the breach of contract claim in Count IV, the court found a genuine issue of material fact as to whether Leroy detrimentally relied upon John's promises while fulfilling his portion of the SPA. The Schutzes had also challenged Leroy's standing to bring the claims because he sued in his individual capacity. The court found a question of fact existed as to whether the June 29, 2022 Resolution of the Shareholders of Center Investments allowed Leroy to pursue the claims under the SPA as a third-party beneficiary.

[14] On November 27, 2024, the Scotts moved to dismiss Count V of their complaint, the count dealing with breach of fiduciary duty, and the court granted the motion that same day. The only count pertinent to this appeal concerns the Scotts’ claims against the Schutzes under Count IV for breach of contract and indemnification for attorney's fees under Count XII.

Discussion and Decision

[15] The Scotts argue the trial court properly denied summary judgment to the Schutzes but contend the court erred by failing to grant summary judgment in their favor on the Schutzes’ motion. Appellees’ Br. pp. 51-57. The Schutzes appeal from the court's order on summary judgment, contending the trial court erred by denying their motion. Summary judgment is appropriate only “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 a judgment as a matter of law.” Ind. Trial Rule 56(C). But summary judgment is not a means for resolution of factual disputes and ‘ “should not be used as an abbreviated trial, even where the proof is difficult or where the court may believe that the nonmoving party will not succeed at trial.” ’ Pierson ex rel. Pierson v. Serv. Am. Corp., 9 N.E.3d 712, 715 (Ind. Ct. App. 2014) (quoting Hudson v. Davis, 797 N.E.2d 277, 287 (Ind. Ct. App. 2003), trans. denied), trans. denied. We review de novo whether the trial court properly denied summary judgment. Arrendale v. Am. Imaging & MRI, LLC, 183 N.E.3d 1064, 1068 (Ind. 2022).

[16] When we review a denial of summary judgment, our standard of review is the same as that of the trial court. Bader v. Johnson, 732 N.E.2d 1212, 1216 (Ind. 2000). We consider only those facts that the parties designated to the trial court. Abbott v. Bates, 670 N.E.2d 916, 921 (Ind. Ct. App. 1996). The Court must accept as true those facts alleged by the nonmoving party, construe the evidence in favor of the nonmovant, and resolve all doubts against the moving party. Shambaugh & Son, Inc. v. Carlisle, 763 N.E.2d 459, 461 (Ind. 2002).

[17] A trial court's order on summary judgment is cloaked with a presumption of validity. Indianapolis Downs, LLC v. Herr, 834 N.E.2d 699, 703 (Ind. Ct. App. 2005), trans. denied. And “[t]he party appealing from a summary judgment decision has the burden of persuading this court that the grant or denial of summary judgment was erroneous.” Doe v. Adams, 53 N.E.3d 483, 495 (Ind. Ct. App. 2016), trans. denied. We may affirm the denial of summary judgment upon any basis argued by the parties and supported by the record. City of Indianapolis v. West, 81 N.E.3d 1069, 1072 (Ind. Ct. App. 2017).

[18] The Schutzes alleged that the Scotts, more specifically, Leroy, lacked standing to bring the claims against them based on the SPA. They contend that because he was not a party to the SPA, he lacked standing to bring claims under it. Leroy argued that the 2022 resolutions, which assigned Center Investments’ claims to him and ratified his decision to file the complaint, rendered him a third-party beneficiary to the SPA, because Center Investments was a party to the SPA.

[19] The trial court found that there is a genuine issue of fact as to whether Leroy could pursue his claims as a third-party beneficiary to the SPA. “Generally, only those who are parties to a contract or those in privity with a party have the right to enforce the contract.” Daimler Chrysler Corp. v. Franklin, 814 N.E.2d 281, 285 (Ind. Ct. App. 2004). But, “[a] third party beneficiary may directly enforce a contract.” Eckman v. Green, 869 N.E.2d 493, 496 (Ind. Ct. App. 2007), trans. denied.

To enforce a contract as a third-party beneficiary, the third-party beneficiary must show the following:

(1) A clear intent by the actual parties to the contract to benefit the third party;

(2) A duty imposed on one of the contracting parties in favor of the third party; and

(3) Performance of the contract terms is necessary to render the third party a direct benefit intended by the parties to the contract.

Id. (quoting Luhnow v. Horn, 760 N.E.2d 621, 628 (Ind. Ct. App. 2001)). “ ‘[T]he intent to benefit the third party is the controlling factor and may be shown by specifically naming the third party or by other evidence.’ ” Id.

[20] On appeal, the Schutzes argue that Center Investments lacked the capacity to assign its rights or to ratify Leroy's actions years after its administrative dissolution. Reply Br. p. 13. And the Schutzes maintain that the survival statute ³ for administratively dissolved corporations extends only to winding up of affairs and lasts for just two years. Reply Br. p. 17. They observe that Center Investments was administratively dissolved on February 5, 2020, and its resolutions were issued on June 29, 2022, more than two years after the dissolution.

[21] However, all of these arguments aside, there remains a genuine issue of material fact as to whether Leroy, as a third party beneficiary, who is named in ¶1.4.6 the SPA, which was executed by the Schutzes and Center Investments, could enforce the employment agreement provision. “Standing refers to the question of whether a party has an actual demonstrable injury for purposes of a lawsuit.” Hammes v. Brumley, 659 N.E.2d 1021, 1029 (Ind. 1995). The trial court correctly concluded that the Schutzes have not met their burden of establishing as a matter of law that Leroy lacked standing because the facts are not uncontroverted and there is a genuine issue of material fact.

[22] The court also found that there was a genuine issue of material fact as to whether Leroy relied to his detriment upon John's promises to execute Leroy's employment agreement when he closed on the SPA. The Schutzes argue that the execution of Leroy's employment agreement was a provision that could be waived. And their reasoning follows that because Leroy closed on the SPA without one, he waived that requirement. They also point to John's statements that he does not recall any discussions about the terms of Leroy's employment agreement or any promises or assurances to execute the same after the closing date. Leroy, on the other hand, points to the terms of his employment during negotiations, which largely mirrored those included in John's employment agreement, and his recollection of what the oral terms of his contract would be ($4,000 per week, use of two company vehicles). And he testified that he closed on the SPA based on John's assurances that a written employment agreement would be executed.

[23] The Schutzes argue that Leroy is presenting his promissory estoppel arguments for the first time on summary judgment. They contend that “plaintiffs cannot raise new claims in response to summary judgment motions.” Appellant's Br. p. 18 (citing 5200 Keystone Ltd. Realty, LLC v. Filmcraft Labs, Inc., 30 N.E.3d 5, 12 (Ind. Ct. App. 2015); Briggs v. Finley, 631 N.E.2d 959, 964 (Ind. Ct. App. 1994)). “The elements of promissory estoppel are ‘(1) a promise by the promissor; (2) made with the expectation that the promissee will rely thereon; (3) which induces reasonable reliance by the promissee; (4) of a definite and substantial nature; and (5) injustice can be avoided only be enforcement of the promise.’ ” Morgan v. Dickelman Ins. Agency, Inc. 202 N.E.3d 454, 461 Ind. Ct. App. 2022 (quoting Turner v. Nationstar Mortg., LLC, 45 N.E.3d 1257, 1265 (Ind Ct. App. 2015)), trans. denied. “ ‘Where the evidence is conflicting, the issue of whether a particular person has exercised reasonable prudence and whether the reliance was justified is for a jury's determination.’ ” Id. (quoting Wright v. Pennamped, 657 N.E.2d 1223, 1231 (Ind. Ct. App. 1995), clarified on reh'g, 664 N.E.2d 394 (1996)).

[24] Indiana's “ ‘[n]otice pleading merely requires pleading the operative facts so as to place the defendant on notice as to the evidence to be presented at trial.’ ” Hall v. Shaw, 147 N.E.3d 394, 400 (Ind. Ct. App. 2020) (quoting Shields v. Taylor, 976 N.E.2d 1237, 1245 (Ind. Ct. App. 2012)), trans. denied. The complaint clearly states facts alleging that the SPA required a written employment contract for John and Leroy, that one was executed for John but not for Leroy, that John established Leroy's salary at the rate matching the employment agreement requirement of the SPA, that one was never executed, that Leroy had the use of two company vehicles, and that John terminated Leroy's employment. We conclude that the Schutzes were sufficiently put on notice as to the evidence to be presented at trial.

[25] John stated that he did not recall promising or assuring Leroy anything. Nor did he recall any of the terms of Leroy's employment agreement. However, Leroy recalled that his salary would be $4,000.00 per week, he would have the use of two company vehicles, and that his employment contract would also contain the “poison pill” provision that was included in John's employment agreement. Prior to closing on the SPA, John hired Leroy at a rate of $4,000.00 per week, and he had the use of two company vehicles. And he recalled John promising and assuring him that his employment agreement would be executed after the closing. Leroy stated that he did not waive the employment agreement requirement but relied on John's promises. When Leroy followed up with John about his employment agreement, he was told one was not forthcoming, and John terminated Leroy's employment.

[26] We agree with the trial court that a genuine issue of material fact exists as to whether Leroy exercised reasonable prudence when relying upon John's promises and/or assurances to his detriment when carrying out his responsibilities under the SPA, and whether that reliance was justified.

[27] In sum, we conclude that the trial court properly denied summary judgment in favor of the Schutzes. We do not address the court's conclusion that there is a genuine issue of material fact as to the breach of fiduciary duty claim in Count V, because that count has been dismissed. Further, because genuine issues of material fact exist, we find no error in the court's decision not to grant summary judgment in favor of the Scotts.

Conclusion

[28] We conclude that the trial court's judgment should be affirmed. There are genuine issues of material fact which preclude the entry of summary judgment in the Schutzes’ favor.

[29] Affirmed.

FOOTNOTES

2.   Presumably, they did not dismiss Cout XII and its indemnification argument for the award of attorney fees.

3.   The survival statute is found at Indiana Code section 23-1-45-7 (1990).

Crone, Senior Judge.

Bradford, J., and Weissmann, J., concur.