COA partially reverses for financial adviser in Marion development dispute

The Indiana Court of Appeals has partially reversed in favor of a financial adviser in a dispute with the city of Marion after years were wasted on a construction project that was projected to cost millions of dollars.

After a YMCA building in downtown Marion was vacated, plans were proposed by an out-of-state developer to redevelop the space for hotel, restaurant, retail and commercial use. In 2009, the city retained London Witte Group LLC to provide financial advice regarding the financing of the construction project, which was estimated to cost $5.5 million.

The city was willing to provide bond financing in the amount of $2.5 million, meaning that the developer, Michael An, needed to come up with $3 million from other sources.

The project had remained unfinished for more than four years when An died in 2015. The city later filed a complaint against his estate and entered into a tolling agreement with LWG, which tolled the statute of limitations through Sept. 30, 2017.

The city eventually filed a complaint against LWG for negligence, breach of fiduciary duty and constructive fraud/unjust enrichment, alleging the company “not only failed to tell the City that An lacked the money to complete the project, it prevented the (First Farmers) Bank from learning it — a fact which would have stopped, or at least substantially changed, the bond issue.”

LWG moved for summary judgment, which the Grant Superior Court granted with respect to the claims for negligence and breach of fiduciary duty, finding those claims time-barred. But the trial court denied the motion with respect to the constructive fraud/unjust enrichment claim after finding that issue was based on the six-year statute of limitations contained in I.C. § 34-11-2-4(a) and did not begin to run until LWG’s work on refinancing the bonds was completed.

The Indiana Court of Appeals affirmed in part, noting that “(b)ecause 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 before February 13, 2015, to be entitled to summary judgment.”

The appellate court then found that the undisputed evidence in the record showed 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,” Judge John Baker wrote for the appellate court.

Additionally, the panel found that none of the exceptions to the discovery rule, including the doctrines of continuous representation, fraudulent concealment and adverse domination, tolled the limitations period in the case. The appellate court thus concluded the trial court did not err in granting summary judgment in favor of LWG on the city’s claims that had two-year statutes of limitations.

However, the appellate court reversed the denial of LWG’s summary judgment motion on the constructive fraud claim, agreeing with LWG that the two-year statute of limitations should govern that claim.

Finding the claim to be time-barred, the appellate court remanded with instructions to enter summary judgment in LWG’s favor on the city’s claim for constructive fraud and unjust enrichment.

The case is City of Marion v. London Witte Group, LLC, Chad Seybold, Estate of Michael Y. An, Global Investment Consulting, Inc., and World Enterprise Group, Inc., 19A-MI-1762.