Indiana Court decisions – Aug. 1-14, 2019

7th Circuit Court of Appeals

Aug. 13

Bankruptcy — Discharge/Debt Collection

Jacqueline M. Sterling v. Southlake Nautilus Health

18-2773

A woman arrested for failing to pay off a health club debt she thought had been discharged nearly 10 years earlier partially won a judgment against the law firm that pursued collection on the debt.

In 2001, Austgen, Kuiper & Associates, P.C. filed a claim in Lake County Superior Court on behalf of its client, Southlake Nautilus Health & Racquet Club, Inc., alleging that member Jacqueline Sterling owed Southlake $520 in unpaid membership fees. Default judgment was entered against Sterling the next year. In the following years, she repeatedly failed to appear for hearings set on Austgen’s further attempts to collect the judgment.

Austgen sought multiple orders to show cause demanding that Sterling explain why she was not complying with the state court’s orders, and in 2010 a bench warrant was issued for her arrest. Sterling first learned of the warrant in 2011 when a police officer stopped to assist her with a flat tire that resulted in her arrest and placement in jail.

“The problem here was that Sterling had filed for bankruptcy in the United States Bankruptcy Court for the Northern District of Indiana in 2009. Sterling listed Southlake as a creditor, and the bankruptcy court discharged her debt to Southlake in January 2010. The discharge order effectively enjoined Austgen from pursuing Sterling’s outstanding debt to Southlake. Austgen, therefore, should not have continued to prosecute the case in Lake County court, and by extension, Sterling should not have been arrested and jailed,” Circuit Judge Amy St. Eve wrote.

“A lack of communication caused this misunderstanding. Southlake was a listed creditor in Sterling’s bankruptcy proceedings and, as a result, it was sent notice of the discharge. Yet Southlake failed to notify Austgen of the discharge. Sterling, for her part, failed to notify either the Lake County court or Austgen that the debt at issue had been discharged, despite a local bankruptcy rule requiring her to do so,” the panel wrote.

Sterling filed a complaint in the bankruptcy court against Southlake, Austgen, and David Austgen alleging they had violated 11 U.S.C. § 524 by seeking to collect on a discharged debt. She unsuccessfully petitioned they be held in civil contempt for violating the court’s discharge order, as the bankruptcy court ruled in favor of Southlake and Austgen. The Northern District court affirmed, but the 7th Circuit Court partially reversed and remanded its judgment as to Southlake’s liability.

The 7th Circuit first found an error in legal reasoning when the bankruptcy court concluded Southlake had taken no action that violated the discharge order. It further found the district court erred in the same respect when it concluded Southlake could only be held liable if it intentionally withheld notice of the discharge order from Austgen.

“We conclude that Austgen’s actions, imputed to Southlake, were taken despite Southlake’s knowledge of the discharge order, meeting the requirements for civil contempt,” St. Eve wrote. “The bankruptcy court erred as a legal matter by concluding otherwise.

“Our conclusion here is not only consistent with our circuit precedent, it is sensible,” the panel continued. “Holding otherwise would create a loophole in the law through which creditors could avoid liability simply by remaining ignorant of their agents’ actions or by failing to notify their agents of debtors’ bankruptcy proceedings. We decline to incentivize such careless behavior.”

The 7th Circuit found no error with the finding that Austgen did not have requisite knowledge of the discharge, and therefore could not have willfully violated the discharge order and thus be held in contempt.

But in a final word of caution, the 7th Circuit noted the entire event could have been avoided had Sterling complied with Northern District of Indiana Local Bankruptcy Rule B-4002-1(a). That rule requires debtors to notify parties of relief granted in bankruptcy court.

“Like the bankruptcy court, we strongly advise debtors and their counsel to comply with this rule to avoid similar situations in the future. We leave to the bankruptcy court’s discretion whether to factor this into the damages calculation,” the panel concluded.

It thus affirmed in part, reversed in part and remanded Jacqueline M. Sterling v. Southlake Nautilus Health, 18-2773 to the bankruptcy court for further proceedings.

Indiana Supreme Court

Aug. 7

Criminal — Fixed Plea Modifications

Alberto Baiza Rodriguez v. State of Indiana

18S-CR-143

and State of Indiana v. Pebble Stafford

39S04-1712-CR-749

In upholding a decades-old rule recently codified through a legislative amendment, the Indiana Supreme Court has ruled in companion cases that trial courts can only modify a sentence entered as part of a fixed-plea agreement if the modified sentence would not have violated the plea agreement at the time the sentence was originally imposed.

The court handed down unanimous opinions on the sentence-modification question in Alberto Baiza Rodriguez v. State of Indiana, 18S-CR-143, and State of Indiana v. Pebble Stafford, 39S04-1712-CR-749.

In Rodriguez, Alberto Rodriguez pleaded guilty to felony and misdemeanor drunken driving charges and was sentenced to six years on work release. The agreement noted there was “no discretion to change” Rodriguez’s sentencing order as long as he remained on work release.

Likewise in Stafford, Pebble Stafford was sentenced under a fixed plea agreement to six years in the Department of Correction for a felony drug charge, plus consecutive sentences of 30 days in county jail and four years in community corrections for drug and battery charges.

Both Rodriguez and Stafford moved to modify their sentences. In Stafford’s case, the trial court allowed the modification and the Indiana Court of Appeals affirmed. In Rodriguez’s case, however, the trial court denied the modification, but a divided Court of Appeals reversed.

The dissent in the initial Rodriguez opinion was from former Justice and now-Senior Judge Robert Rucker, who wrote that amendments to Indiana’s sentence modification statute, specifically, Indiana Code § 35-38-1-17(l), did not “repeal long-standing statutory authority or to overrule long-standing judicial precedent… .” Likewise, after the Stafford and Rodriguez opinions came down, the Indiana General Assembly once again amended the sentence modification statute to codify the longstanding practice of courts deferring to sentences in fixed plea agreements unless the prosecutor consents to a modified sentence outside the terms of the agreement.

With that legislative amendment, the Indiana Supreme Court remanded both cases to the COA for reconsideration in light of the new statute.

In Rodriguez, the lower appellate court once again upheld the modification of the fixed sentence, finding the statutory amendments weren’t applicable. Rucker again dissented.

However, in Stafford, the Court of Appeals determined the amendment made clear that “the legislature never intended to create a right to modification of fixed sentences imposed under a plea agreement.” The cases then went before the Supreme Court for oral arguments in May. The justices used the Rodriguez decision to outline their legal analysis, finding that neither trial court had discretion to modify either defendants’ fixed sentences.

“As a matter of statutory interpretation, we find the decades-old rule of sentence modification remains undisturbed: courts may modify a sentence only if the new sentence would not have violated the terms of the valid plea agreement had the new sentence been originally imposed,” Justice Steven David wrote for the Supreme Court in Rodriguez.

David began the court’s analysis by noting the Legislature made amendments to the sentence modification statute in 2014, 2016 and 2018, throwing the legal community “into uncertain territory over whether defendants who entered into a fixed-term plea agreement could now petition for sentence modification despite the terms of their agreement.”

“Our own Court of Appeals in Rodriguez II and Stafford II charted no less than four possible paths forward to interpret the same statutory provisions,” the justice wrote.

In clarifying the confusion, the court relied on the rule of Pannarale v. State, 638 N.E.2d 1247 (Ind. 1994) — in fixed plea agreements, “a deal is a deal.”

“The logical application of this rule — that a defendant may not petition for modification of a fixed-plea sentence because the plea agreement authorized the court to only impose a specific sentence — has been reinforced by Pannarale and its progeny for several decades leading up to the present challenge,” David wrote. “… This rule is reinforced by codified law under Indiana Code section 35-35-3-3(e), which provides, ‘If the court accepts a plea agreement, it shall be bound by its terms.’ That provision has remained unchanged since this Court’s decision in Pannarale …”

But that rule came into question with the 2014 amendment, which, under I.C. 35-28-1-17(l), held that “(a) person may not waive the right to sentence modification under this section as part of a plea agreement.” However, due to the confusion created by the COA opinions, the 2018 General Assembly amended I.C. 35-38-1-17(e) to hold that “if the convicted person was sentenced under the terms of a plea agreement, the court may not, without the consent of the prosecuting attorney, reduce or suspend the sentence and impose a sentence not authorized by the plea agreement.”

Further, subsection (l) was amended in 2018 to hold that the statute does not prohibit “the finding of a waiver of the right to…have a court modify a sentence and impose a sentence not authorized by the plea agreement, as described under subsection (e)… .”

“We think a reasonable harmonization of these provisions is that the legislature sought only to ban the explicit waiver of the right to sentence modification within the text of the written plea agreement,” David wrote. “…This view also reinforces the well-established principle that plea agreements are contractual in nature.”

The court handed down a shorter, four-page opinion in Stafford, writing that the law stated in Rodriguez is equally applicable to Stafford’s case. Thus, in Rodriguez, the justices affirmed the denial of his motion for sentence modification, while they reversed the grant of Stafford’s sentence modification.

Stafford was remanded for further proceedings necessary to resolve the case.

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Aug. 8

Civil Tort — Wrongful Death, Negligence

Katrina Murray and Aquila F. Flynn, as Co-Personal Representatives of the Estate of Jaylan T.R. Murray, Deceased v. Indianapolis Public Schools and Arlington Community High School

19S-CT-282

The estate of a murdered teenage boy could not convince the Indiana Supreme Court that his school was negligent for his death. Instead, justices found the estate’s claims to be barred under contributory negligence law.

Then-16-year-old Jaylan Murray was murdered, and his body found at an apartment complex across the street from Indianapolis’ Arlington Community High School, where he was a student. Jaylan died on the same day he left school grounds without signing out at the front desk and without Arlington’s knowledge. The school was aware that Jaylan was a frequent runaway and had an active Department of Child Services case file.

Jaylan’s co-personal representatives filed a wrongful death suit against Indianapolis Public Schools and Arlington, alleging the defendants were negligent for failing to properly supervise and monitor students during school hours.

The Marion Superior Court initially granted the defendants’ motion for summary judgment, but the Indiana Court of Appeals reinstated the case when it found genuine issues of material fact as to Arlington’s duty to supervise its students. In an appeal to the Supreme Court on grant of transfer, Arlington argued, among other things, that the COA was incorrect in finding the public school corporation was not entitled to immunity under the Indiana Tort Claims Act for Jaylan’s wrongful death.

Supreme Court justices affirmed the trial court in Katrina Murray, et al. v. Arlington Community High School, et al., 19S-CT-282.

“Here, Jaylan was sixteen. While his estate argues that the specific reason for Jaylan’s departure from school is unknown, no one contends there are any special circumstances that would render Jaylan incapable of exercising this standard of care. Thus, he is charged with exercising the reasonable care an adult would,” Justice Steven David wrote for the unanimous court.

Justices additionally noted there was no dispute that Jaylan was involved in criminal activity the night before his murder, that he left school property to engage in some criminal act, and that he was found with a large amount of money in an apartment complex known for criminal activity.

“In either case, it is clear that his leaving school to purchase either guns or drugs was not an exercise of reasonable care and caution for his safety. While a sixteen-year-old may not know all the perils that await him off of school grounds, he certainly knew there was danger in either of those two ventures. As such, Jaylan was contributorily negligent,” the high court wrote. “To be clear, while Jaylan may not be solely or even primarily responsible for what happened, his negligence was at least a slight cause of the unfortunate harm he suffered.”

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Aug. 9

Juvenile Termination — Best Interests Determination/Homeless Mother

In the Matter of M.I., N.I., N.I., N.I., N.I., S.I. (Minor Children); Denis Koehlinger v. K. H. (Mother); A.I. (Father) and L.M. (Father) v. Indiana Department of Child Services

19S-JT-281

A mother who fought to be reunited with her six minor children secured the Indiana Supreme Court’s favor after justices unanimously affirmed a finding that the termination of her parental rights due to her homelessness was not in the children’s best interests.

In 2015, K.H., who at the time was struggling with an alcohol addiction and homelessness, brought her six children to the Indiana Department of Child Services and stated she couldn’t care for them. The kids were all adjudicated children in need of services, and K.H. was given a parent-participation plan with 23 requirements. She was required to, in part, maintain suitable housing and employment, attend Alcoholics Anonymous meetings, take part in counseling, enroll in home-based services, submit to random drug screens, and participate in visitations.

As 2018 approached, K.H. had successfully followed through with most of her requirements, even walking more than two hours one-way to attend AA meetings because she didn’t own a car. However, she was still unable to secure housing. DCS thus petitioned to terminate K.H.’s parental rights, citing her failure to satisfactorily comply with her parent participation plan.

Supreme Court justices affirmed the trial court’s refusal to terminate the parent-child relationships, disagreeing with the children’s guardian ad litem’s assertion that K.H.’s inability to secure housing led to the singular conclusion that her parental rights should be terminated. The Allen Superior Court refused to terminate her rights, concluding that DCS failed to clearly and convincingly show that termination was in the children’s best interests.

The GAL — who had neither met nor spoken with the children — had been the only witness to opine that the termination was in the children’s best interests. The Indiana Court of Appeals reversed in a memorandum decision, and the Supreme Court granted transfer to K.H.’s appeal. In In the Matter of M.I., N.I., N.I., N.I., N.I., S.I. (Minor Children); Denis Koehlinger v. K. H. (Mother); A.I. (Father) and L.M. (Father) v. Indiana Department of Child Services, 19S-JT-281, the high court unanimously concluded the GAL failed to show the trial court’s decision was contrary to law. “When determining what is in children’s best interests, trial courts may consider a variety of factors. The trial court here did just that,” Chief Justice Loretta Rush wrote for the panel, which unanimously affirmed the trial court’s decision.

Justices noted that the children and their mother shared a “strong, loving bond,” that DCS would face challenges finding adoptive homes for the children, and that K.H. had made progress complying with her parent-participation plan by securing a full-time job, remaining sober and regularly engaging in counseling and AA meetings.

“To be sure, Mother has not consistently complied with, nor has she completed, all twenty-three requirements in her parent-participation plan — including the requirement that she secure suitable housing for herself and her children. But as the trial court aptly observed, full compliance with the plan ‘is difficult to accomplish, especially for someone without personal transportation,’” the panel wrote.

“After all, on multiple occasions, Mother went to counseling and visitations by foot; and DCS case managers conceded that the plan requirements were cumbersome, often requiring Mother to be in three or four different places in a given week, while also keeping a job, attending visitations, and looking for housing. But despite any challenges Mother has faced, the evidence shows that she has complied or made progress with most of the plan’s requirements,” it continued.

“In sum, the trial court recognized Mother’s struggles with finding suitable housing, but it properly looked to other factors — supported by the evidence — in concluding that DCS failed to meet its burden to show that terminating Mother’s parental rights would be in her children’s best interests,” Rush concluded. “Given the evidence above that supports the trial court’s decision, that decision is not contrary to law.”

Indiana Court of Appeals

Aug. 5

Adoption — Failure to Appear/Implied Consent

In the Matter of the Adoption of C.A.H., Minor Child, A.C.S. v. R.S.E. and R.K.E.

19A-AD-00240

A divided Indiana Court of Appeals affirmed a Morgan County adoption decree over a father’s objections, finding his consent was irrevocably implied due to his failure to appear at a final hearing.

The grandparents of C.A.H. filed to adopt the minor child after serving as guardians for most of C.A.H.’s life. While the child’s mother consented to the adoption, the father did not, but the grandparents argued his consent was not necessary pursuant to Indiana Code section 31-19-9-8.

Proceedings in the case were prolonged over a 20-month period, in which father A.C.S. was late to a hearing, failed to appear for a deposition due to his incarceration, and failed to appear during the final hearing after numerous continuances.

The Morgan Superior Court denied his motion for a continuance on the final hearing, finding no cause as to his failure to appear, then issued the adoption decree. A.C.S. responded with an Indiana Trial Rule 60(B) motion for relief from judgment, arguing that although he overslept on the morning of the final hearing, he still appeared at the courthouse during the scheduled hearing time on the date of the hearing.

That motion was denied, and A.C.S. contended on appeal that the trial court erred by finding his consent to the adoption of C.A.H. was irrevocably implied because he failed to appear. A.C.S. argued that he did not fail to prosecute his motion to contest without undue delay because he participated in the adoption proceedings on an “ongoing and consistent” basis.

A divided Indiana Court of Appeals affirmed the trial court, finding guidance from K.S. v. D.S., 64 N.E.3d 1209 (Ind. Ct. App. 2016). The majority concluded the circumstances in In the Matter of the Adoption of C.A.H., Minor Child, A.C.S. v. R.S.E. and R.K.E., 19A-AD-240, were “very similar” to those presented in K.S., first noting that A.C.S. also filed a motion to contest the adoption and proceeded to repeatedly neglect participation in the adoption proceedings.

“Here, Father failed to appear at the final hearing without any explanation or contact with his counsel when he was aware of the time and date,” Judge James Kirsch wrote for the majority joined by Judge Robert Altice. “At the time that he failed to appear, Father’s counsel did not know his whereabouts or a way of contacting him, although the trial court had previously informed Father that he must stay in contact with his counsel and provide her with any information necessary.”

On the finding that A.C.S. did not elaborate as to what actual time he appeared at the courthouse, the appellate panel concluded his assertion was not supported by any evidence. The majority therefore found the trial court did not err in finding A.C.S.’s consent was irrevocably implied due to his failure to appear and prosecute the motion without unreasonable delay.

However, Chief Judge Nancy Vaidik dissented from the majority in a separate opinion, arguing the evidence was insufficient to come to such a conclusion.

The dissenting chief judge first pointed out that while A.C.S. showed up late to a hearing and missed his scheduled deposition, his absences were not cited by the trial court to justify its ruling. She further noted the father had been in contact with his attorney the day before his final hearing and said he would be at the courthouse between 8:30 and 8:45 a.m.

“The majority relies almost exclusively on K.S., but that case is nothing at all like this case,” Vaidik wrote. “There, the mother filed a motion to contest the adoption but then disappeared. In other words, she took no steps to prosecute her claim. Here, in contrast, Father prosecuted his claim for well over a year before missing the final hearing.

“Although Father failed to appear at the final hearing, his actions during the sixteen months leading up to the final hearing — most importantly, his active participation in the related paternity proceedings — are not the actions of a parent who is failing to prosecute the motion to contest without undue delay, “ Vaidik wrote. “In affirming the trial court, the majority sets a dangerous precedent. Under the majority’s holding, the bar for finding implied consent in adoption cases is set too low.”

Instead, Vaidik said she would remand the case to give A.C.S. an opportunity to contest the allegations that he failed to communicate with and support his child.•