FILED
Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
Dec 15 2011, 9:43 am
CLERK
of the supreme court,
court of appeals and
tax court
ATTORNEYS FOR APPELLANT:
ATTORNEY FOR APPELLEE:
JOHN D. PAPAGEORGE
ERIN C. NAVE
Taft Stettinius & Hollister, LLP
Indianapolis, Indiana
JEREMY L. FETTY
Parr Richey Obremskey Frandsen
& Patterson LLP
Lebanon, Indiana
IN THE
COURT OF APPEALS OF INDIANA
GOOD HOST, LLC,
Appellant-Plaintiff,
vs.
ADVANCED INTERVENTIONAL
PAIN CENTER, LLC,
Appellee-Defendant.
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No. 49A05-1105-PL-217
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Theodore M. Sosin, Judge
Cause No. 49D02-1007-PL-31155
December 15, 2011
MEMORANDUM DECISION - NOT FOR PUBLICATION
NAJAM, Judge
STATEMENT OF THE CASE
Good Host, LLC (“Good Host”) appeals the dismissal of its amended complaint
for damages against Advanced Interventional Pain Center, LLC (“AIPC”) alleging breach
of a lease for commercial space. Good Host presents a single issue for our review,
namely, whether the trial court erred when it granted AIPC’s motion to dismiss for failure
to state a claim.
We affirm in part, reverse in part, and remand for further proceedings.
FACTS AND PROCEDURAL HISTORY
Deepak Joshi is a member of Good Host, which owns commercial real estate
located at 8345 Clearvista Place in Indianapolis (“the leased premises”).
Pattanam
Srinivasan is the owner of AIPC. Srinivasan and Joshi were also members of Castlepoint
Pain Associates, LLC (“Castlepoint”) beginning in 2006. On September 21, 2006, Good
Host and Castlepoint signed a lease agreement for a five-year term. The leased premises
were used by AIPC to operate its business,1 and Castlepoint’s role was the “marketing of
[AIPC]’s services” and “manag[ing] [the] administrative activities of [AIPC.]”
Appellant’s App. at 40.
On July 28, 2008, Srinivasan wrote Joshi a letter with the subject heading: “Re:
Dissolution of Castlepoint Pain Associates[.]” Id. That letter stated as follows:
In view to our recent disagreements, the following would the [sic]
summarize [the] future role of Castlepoint Pain Associates concerning its
operations with Advanced Interventional Pain Center.
1
The parties do not address whether there was any agreement between Castlepoint and AIPC
regarding the use of the leased premises or what the terms of any such agreement were.
2
Castlepoint Pain Associates was conceived with one major objective:
marketing of Advanced Interventional Pain Center’s Services and to a
lesser extent manage administrative activities of Advanced Interventional
Pain Center as pertaining to its Indianapolis office.
Please note that Advanced Interventional Pain Center (AIPC) did not need
your partnership money to operate. Your involvement as a partner in
Castlepoint Pain Associates was not only to provide marketing expertise
but also to manage administrative activities of Castlepoint Pain Associates
such as accounting etc. You were made a partner solely for this purpose,
your investment was taken so that you will have a financial interest in
trying to make the Indianapolis pain center a successful venture by
improving patient volume and at the same time lessening the administrative
burden of the Indianapolis pain center.
However in the last year and a half of operations of [t]he Indianapolis pain
center, your interest to make this venture successful appears to have
diminished if not completely vanished. Fall in patient volume since July of
2007 can be attributed to poor marketing efforts:
1.
No new doctor referrals.
2.
Failed radio advertisement, revenues wasted trying these out.
3.
Marketing employee failed to produce any new leads but was
paid more than $17k in salaries.
4.
Despite repeated request from me to contact major industry
employers to inform of our pain services, no efforts were
undertaken.
5.
Print ads in major newspapers were not done despite its
success with AIPC’s other offices.
6.
Overall poor efforts to inform about the pain services and
take the business to the end user.
Last January (2008) during our meeting with our staff, it was also indicated
to you how patients are flowing from our other offices to the Indianapolis
office as a result of AIPC’s marketing efforts at its other offices taking the
business to the end user. Not only did you ignore and ridicule this fact as
being nonexistent but rather stated that your marketing efforts are providing
patients to AIPC’s other offices, a serious misconception not supported by
facts. This attitude has indeed resulted in failure of taking the business to
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the end user with no improvement in patient volume for the Indianapolis
pain center.
Furthermore your undertaking of the administrative responsibilities of
Castlepoint Pain Associates were poorly carried out:
1.
Poor recordkeeping of expense accounts. You were last
minute running for details and invoices for expenses done
more than a year ago.
2.
As a result you were not able to produce the K-1 forms by
January 31. You pushed this until April making personal
taxes inconvenient.
Despite your shortcomings, the Indianapolis pain center carried on per our
verbal agreement. My pain services provided for all expenses including
paying rent for office space in which you have an ownership interest
without me. Revenues were allocated per our verbal agreement. All
accounting from AIPC was done to the last penny correctly reflecting the
revenues and expenses, accurately. You have frequently complained that
accounting is not transparent despite the fact you have been provided
proper accounting reports every month that accurately reflect the.
Indianapolis pain center revenues. I can emphatically assert your doubts
that AIPC is secretly hiding revenues are quite unfounded, you may verify
these accounts using an independent accountant if needed, however AIPC
shall not bear the expenses for independent accountants acting on your
behalf.
Perhaps your disinterest and unwillingness to support the Indianapolis pain
venture was best reflected during the last three months when our billing
services were becoming independent of the Agency services thereby saving
us [a] billing commission fee. During this temporary phase revenues as
expected had dropped. Not only were you unwilling to offer additional
working capital during this phase but rather wanted AIPC to undertake all
the financial needs including wanting to keep up marketing expenses for
your failed methods. Moreover you noted that your partnership had some
value more than what you had invested and wanted AIPC to buy you out by
offering you more than what you had invested. At a time when patient
volume had seriously fallen through poor marketing efforts, with
Indianapolis revenues barely making for its expenses, you appear seriously
mistaken to think you had built some kind of positive equity for and into
the Indianapolis pain center. It is your own fantasy and self[-]induced
illusion to think that the Indianapolis pain center has been helped by your
marketing efforts when poor patient volume and revenues indicate
otherwise.
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I do not see any part of our verbal agreement that has not been carried out
to date by AIPC. This is evidenced by the fact that you did not attempt to
get a written agreement until December 2007, nearly eleven months after
the start of the Indianapolis pain center.
Yet it was your own wish to obtain an agreement formulated to your benefit
from attorneys acting on your behalf that you wanted me to sign. I have
many times expressed my wish that AIPC or I personally cannot bear the
expenses of attorneys acting on your behalf to formulate this agreement. I
objected to several clauses found in the initial agreement, those that appear
to benefit only you and wanted to include other clauses that have been
cleverly left out once again to your benefit. Just because I wanted you to
change the agreement you brought forward to be signed by me in no way
implies either I or AIPC was willing to bear expenses of getting your
attorneys to formulate the agreement. Your attorneys were acting on your
behalf and they did not get in touch with me or take input from me directly.
Taking into consideration of all the above events I as a member of
Castlepoint Pain Associates and owner and Director of AIPC declare the
following:
1.
AIPC no longer desires the involvement of Castlepoint Pain
Associates in any aspect of its operations.
2.
Castlepoint Pain Associates is no longer needed for
marketing, administrative or promotional activities of AIPC.
3.
As a member wishing to disengage from Castlepoint Pain
Associates, this letter confirms the formal dissolution of our
partnership and dissolution of Castlepoint Pain Associates in
accordance with the Indiana Uniform Partnership Act.
4.
Castlepoint Pain Associates as an entity shall not carry out
any business activity except for self accounting and tax filing.
It shall have no new relationship to other businesses, persons
or entities. Neither you, nor me [sic] is permitted to represent
this entity to other businesses except for fulfilling financial
obligations that existed before today.
5.
Attorney fees for formulating the agreement between AIPC
and Castlepoint Pain Associates is your expense.
In
accordance with the [U]niform [P]artnership [A]ct it is your
own willful and reckless act which was attempted to your
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benefit. Therefore I will not bear the expenses incurred to
you for formulating or trying to formulate this agreement.
Future business with AIPC and you shall continue in the following manner
consistent with our verbal agreement and e-mail exchanges:
Facts:
1.
Initial investment of $22K by you and me for the Indianapolis
Pain Center.
2.
Each of us ha[s] received [a] $4K distribution in January of
2008.
3.
This leaves $18k for each of us as investment in the business
pending recoupment.
Business shall be continued by AIPC at the Indianapolis office until
January 31, 2012[,] when the office lease expires.
1.
Net revenues shall be distributed for expenses and profit
sharing after deduction by 25% towards professional fees.
2.
Profits remaining after all expenses shall be shared 50%
between you (Deepak Joshi) and AIPC up to 3 years from
start of business until February 31, 2010 or until you and
AIPC have each made $18K (or 22K total i.e., all investment
recouped) whichever is later.
Thereafter profits after
expenses shall be shared 30% by you (Deepak Joshi) and
70% by AIPC consistent with our preliminary agreement.
3.
Monthly reports will be given to you indicating revenues,
expenses and profits if any. A profit distribution check if
determined shall be made to you in your name periodically in
accordance with the above formula in 2 at the discretion of
AIPC. You have the right to inspect accounts through an
independent accountant at your own expense and at AIPC’s
convenience. AIPC shall not bear that expense.
4.
You (Deepak Joshi) shall have no role in any activities
relating to marketing or administration of AIPC except as
landlord of the leased space of the Indianapolis office
ensuring proper work space and associated conveniences.
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5.
AIPC shall close its Indianapolis office located at 8345
Clearvista Place, IN 46256 on expiry of the office lease. All
movable property shall be sold, auctioned or otherwise
disposed and the monetary proceedings shall be equally 50%
given to you (Deepak Joshi) and AIPC. Such movable
property shall also be divided through other arrangements
agreeable by you and AIPC.
6.
Revenues from ARs pending shall be distributed up to 1 year
following the closure of AIPC operations using the formula in
2 above. In the event that you (Deepak Joshi) ha[ve] been
unable to recoup your initial investment, AIPC shall pay the
balance to you so that all investment has been recouped.
7.
AIPC assures the above except in circumstances beyond
control such as a serious illness, disability, death of the
physician(s) of AIPC or during a malpractice event to name a
few.
The following options are also acceptable:
8.
You (Deepak Joshi) can get your remaining investment 18K
paid to you immediately by AIPC, marking the date of such
payment.
9.
All ARs pending up to that date will be marked and followed
up to one year. Any profits obtained using the formula in 2
shall be applied to the 18K paid out to you. Any profits
obtained using the formula in 2 exceeding this 18K from the
pending ARs before the 1 year period shall be given to you up
to the 1 year period.
10.
All movable property shall belong to AIPC once you accept
your 18K payment.
11.
AIPC shall continue operations until lease expiration. You
shall have no further claims with AIPC or any of its property.
Along the same lines:
12.
AIPC shall discontinue operation immediately if you pay
$18K to AIPC which is the remaining investment.
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13.
You undertake to take the Indianapolis office space lease and
payments of the C-arm and pain table and free AIPC and its
physician(s) of all financial obligations relating to the
Indianapolis pain center.
14.
AIPC shall relinquish all claims of movable property present
in its Indianapolis office.
15.
ARs receivable shall be marked and followed up to one year.
100% profits after deducting professional fee shall be given to
you until they reach 18K paid to AIPC, thereafter you shall
receive 50% of profits until one year.
I think the above is a fair and equitable arrangement. If you undertake to
recoup your investment, the above mentioned 18K presumes that amount at
this point in time. If you get some profit distribution then this amount will
reduce to reflect the correct unrecouped investment.
You may forward this letter to your legal team.
Id. at 40-43 (emphases added).
Joshi did not respond to Srinivasan’s letter, and AIPC continued its operations at
the leased premises, with AIPC paying the rent to Good Host. But on September 14,
2008, Srinivasan wrote a letter to Joshi stating, “This letter will serve as your one month
notice.” Id. at 46. In the letter, Srinivasan outlined alleged “fire safety” and “health
safety” violations by Joshi, “who represents or is the landlord solely by partnership to
whom rents were being paid and had also provided janitorial services for a fee.” Id.
Srinivasan also stated in the letter:
As a partner of the dissolved Castlepoint Pain Associates you share any
existing debts and obligations until its dissolution on 7/28/08. With ceasing
of operations of the Castleton pain center, your debt in the business far
exceeds any income received as of date.
Debt Description of Castlepoint Pain Associates:
***
8
Rent payments
Id.
44 [months]
[$]136,000
And on October 14, 2008, Srinivasan wrote to Joshi “d/b/a Castlepoint Pain
Associates” to notify him that AIPC “has stopped operating at the [leased] premises[.]”
Id. at 49. That letter also stated, “Since you are the landlord, lessor, lessee and tenant of
the [leased premises] you can proceed with your plans for the above premises without my
involvement.” Id.
On July 15, 2010, Good Host filed a complaint against AIPC alleging breach of
contract under the lease agreement. And Good Host filed an amended complaint on
November 1.
Attached to the amended complaint were five exhibits:
the lease
agreement; a letter of understanding regarding the lease executed by Srinivasan for
Castlepoint; Srinivasan’s July 28, 2008 letter to Joshi; Srinivasan’s September 14, 2008
letter to Joshi; and Srinivasan’s October 14, 2008 letter to Joshi.
In the amended
complaint, Good Host alleged that Srinivasan’s July 2008 letter to Joshi constituted an
assignment of the lease from Castlepoint to AIPC and that AIPC is, therefore, liable for
the amount still due under the lease agreement. In the alternative, Good Host alleged that
AIPC assumed the lease by operation of an equitable assignment.
AIPC moved to dismiss the amended complaint for failure to state a claim under
Trial Rule 12(B)(6). In particular, AIPC argued that Castlepoint did not assign its interest
in the lease to AIPC, neither as a matter of law nor in equity. Following a hearing, the
trial court granted AIPC’s motion to dismiss Good Host’s amended complaint. This
appeal ensued.
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DISCUSSION AND DECISION
Good Host contends that the trial court erred when it concluded that it had failed
to state a claim upon which relief can be granted. The standard of review on appeal of a
trial court’s grant of a motion to dismiss for the failure to state a claim is de novo and
requires no deference to the trial court’s decision. Lei Shi v. Cecilia Yi, 921 N.E.2d 31,
36 (Ind. Ct. App. 2010). The grant or denial of a motion to dismiss turns only on the
legal sufficiency of the claim and does not require determinations of fact. Id. Further, as
we stated in Irish v. Woods, 864 N.E.2d 1117, 1120 (Ind. Ct. App. 2007):
When reviewing a motion to dismiss for failure to state a claim upon which
relief can be granted, this court accepts as true the facts alleged in the
complaint. In re Train Collision (Dillon v. Chicago Southshore & South
Bend R.R. Co.), 670 N.E.2d 902, 905 (Ind. Ct. App. 1996), trans. denied,
cert. denied, 522 U.S. 914 (1997). But a court need not accept as true
allegations that are contradicted by other allegations or exhibits attached to
or incorporated in the pleading. Rainey v. Nat’l Check Bureau, Inc., 849
N.E.2d 776, 778 (Ind. Ct. App. 2006). Further, “[i]t is a well-settled rule
that when a written instrument contradicts allegations in the complaint to
which it is attached, the exhibit trumps the allegations.” N. Ind. Gun &
Outdoor Shows v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998).[]
Indeed, “a plaintiff may plead himself out of court by attaching documents
to the complaint that indicate that he or she is not entitled to judgment.”
Id. at 455 (quoting In re Wade, 969 F.2d 241, 249 (7th Cir. 1992)). Nor
need a court accept as true conclusory, non-factual assertions or legal
conclusions. Richards & O’Neil v. Conk, 774 N.E.2d 540, 547 (Ind. Ct.
App. 2002).
(Emphasis added). “ ‘A motion to dismiss under Rule 12(B)(6) tests the legal sufficiency
of a complaint: that is, whether the allegations in the complaint establish any set of
circumstances under which a plaintiff would be entitled to relief.’ ” Lei Shi, 921 N.E.2d
at 36 (quoting Trail v. Boys & Girls Clubs of Nw. Ind., 845 N.E.2d 130, 134 (Ind. 2006)).
Thus, while we do not test the sufficiency of the facts alleged with regards to their
10
adequacy to provide recovery, we do test their sufficiency with regards to whether or not
they have stated some factual scenario in which a legally actionable injury has occurred.
Id.
Good Host maintains that Castlepoint assigned its entire interest in the lease to
AIPC when Srinivasan, as a member of the LLC, wrote the July 28 letter to Joshi, which
Good Host attached as an exhibit to the amended complaint. Thus, Good Host contends
that AIPC breached the lease agreement when it abandoned the leased premises and
stopped paying rent before the lease expired on January 31, 2012. AIPC argued to the
trial court that no assignment occurred and, therefore, that Good Host failed to state a
claim for breach of contract in its complaint.
An assignment is the transfer by a lessee of one’s entire leasehold interest. Board
of Comm’rs of Delaware County v. Lions Delaware County Fair, Inc., 580 N.E.2d 280,
284 (Ind. Ct. App. 1991), trans. denied. The construction of an assignment is the same as
that of any contract. See Downing v. Dial, 426 N.E.2d 416, 419 (Ind. Ct. App. 1981).
The basic requirements of a contract are offer, acceptance, consideration, and a meeting
of the minds of the contracting parties. Sands v. Helen HCI, LLC, 945 N.E.2d 176, 180
(Ind. Ct. App. 2011), trans. denied. The question of whether a certain or undisputed set
of facts establishes a contract is one of law for the trial court. Buschman v. ADS Corp.,
782 N.E.2d 423, 428 (Ind. Ct. App. 2003). Contract formation requires mutual assent or
a meeting of the minds on all essential contract terms.
See id.; see also Pinnacle
Computer Servs., Inc. v. Ameritech Publ’g, Inc., 642 N.E.2d 1011, 1013 (Ind. Ct. App.
1994). In order to be enforceable, a contract must be reasonably definite and certain in its
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material terms so that the intention of the parties may be ascertained.
Wenning v.
Calhoun, 827 N.E.2d 627, 629 (Ind. Ct. App. 2005), trans. denied.
Good Host maintains that Srinivasan’s July 28, 2008, letter “constituted an
assignment because Castlepoint reserved no right of re-entry for itself and thus assigned
its entire leasehold interest [to AIPC].” Brief of Appellant at 5. In support of that
contention, Good Host argues:
The facts pleaded in the amended complaint clearly establish the existence
of the assignment, offer, and acceptance. AIPC and Castlepoint sent Good
Host the Letter offering the assignment. Good Host had a reasonable
opportunity to reject it pursuant to a consent clause contained in the Lease,
and Good Host did not do so. The Letter made clear Castlepoint was
assigning the Lease to AIPC, and that AIPC was offering to pay rent
through the expiration of the Lease with the expectation AIPC would be
permitted to continue for the entire course of the Lease. AIPC then
occupied the premises and paid rent for three months—conduct which
conformed to the offer and clearly manifested AIPC’s intention to assume
the lease. Good Host’s actions of accepting AIPC’s rent payments and
permitting AIPC to occupy the property manifested its intention to accept
the assignment. Notably, no confusion could exist regarding offer and
acceptance because Good Host’s actions conformed only to the offer and
none of the alternative proposals in the Letter, both of which required either
a payment to Good Host or AIPC.
Id. at 8 (citations omitted). AIPC contends that the July 28 letter was not an assignment
of Castlepoint’s interest in the lease, but merely explained Srinivasan’s reasons for the
dissolution of Castlepoint and proposed options for Joshi to choose to complete the
winding down of the business.
Indiana Code Section 23-18-9-3 provides in relevant part that a dissolved limited
liability company may only carry on business that is appropriate to wind up and liquidate
its business and affairs, including discharging or making provision for discharging
liabilities. Here, in the July 28 letter, Srinivasan gave Joshi the option to “take the
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Indianapolis office space lease” himself or to permit AIPC to continue to operate its
business at the leased premises “until lease expiration.” See Appellant’s App. at 43.
Three months passed without any response from Joshi before AIPC closed its office at
the leased premises. Good Host argues that because AIPC occupied the premises and
paid rent for three months, that conduct “conformed to the offer and clearly manifested
AIPC’s intention to assume the lease.” But the letter does not state that AIPC offered,
intended, or had agreed to assume the lease.
We hold that there was no assignment of the lease as a matter of law. Srinivasan’s
letter was, at best, equivocal on this issue, and nothing in the July 28 letter states that
AIPC would assume the lease. Rather, AIPC, which had operated its business at the
leased premises from the inception of the lease, merely continued its operations. And
nothing in the letter indicates an intention to release Castlepoint from its liability under
the terms of the lease. Instead, Srinivasan’s September 14 letter, which was also included
as an exhibit to Good Host’s amended complaint, states, “As a partner of the dissolved
Castlepoint Pain Associates you share any existing debts and obligations[,]” including
rent payments for the remainder of the lease. Id. at 46. That statement, without more,
defeats the allegation in Good Host’s complaint that AIPC had assumed the lease. See
Irish, 864 N.E.2d at 1120.
In sum, there was no offer, acceptance, or meeting of the minds on the alleged
assignment, and the terms of the July 28 letter were insufficiently definite to bind AIPC
under the lease. In light of the options Srinivasan gave to Joshi, without any response
from Joshi or further negotiations, there was no assignment of the lease. Joshi reads one
13
sentence in the letter in isolation. We must construe the meaning of the letter in its
entirety. Srinivasan gave Joshi options and continued operating AIPC’s business pending
a response, and the letter is consistent with the dissolution of Castlepoint, the parties’
LLC, which remained liable under the lease. The trial court did not err when it found that
Good Host failed to state a claim for breach of contract under the theory of an assignment
of the lease.
However, Good Host has also asserted that AIPC is liable under the theory of
equitable assignment. In Collins v. McKinney, 871 N.E.2d 363, 372-73 (Ind. Ct. App.
2007), this court held that even where there is “ ‘no formal assignment’ ” of a contract, an
assignment may be found in equity. (Quoting The Indianapolis Mfg. & Carpenters Union
v. The Cleveland, C., C. & I. Ry Co., 45 Ind. 281, 288 (1873)). In Collins, where we
reversed the trial court’s grant of a directed verdict, we held:
Here, Collins presented sufficient evidence to support a jury finding that the
arrangement between Tomkinson and Glenbrook constituted an equitable
assignment as discussed in Indianapolis Manufacturing. First, the evidence
as to whether there was ever actually a management agreement between
Tomkinson and Glenbrook is in conflict. At one point, Doug McKibben,
the owner of Glenbrook, testified, “We had a Management Agreement.”
Tr. p. 123. However, he then testified that the “only” agreement between
Tomkinson and Glenbrook was the Asset Purchase Agreement. Id. at 12324. Furthermore, there is evidence that Glenbrook assumed Tomkinson’s
lease obligations for Parcel 1 in August 2004, took possession of Parcel 1,
and began paying rent directly to McKinney for the parcel. Finally, there is
evidence that Glenbrook began selling a different brand of cars than
McKinney after taking possession of Parcel 1, suggesting that Glenbrook
was in primary control. The jury could have reasonably found that the
arrangement between Tomkinson and Glenbrook constituted an assignment
of the Sublease.
871 N.E.2d at 373. Thus, there are three elements to establish an equitable assignment:
the existence of an agreement (here, the lease); an assumption of the obligation under the
14
agreement (here, AIPC made rent payments); and control (here, AIPC was in possession
of the leased premises).
Because the grant or denial of a motion to dismiss turns only on the legal
sufficiency of the claim and does not require determinations of fact, Good Host has stated
a claim for relief under the doctrine of equitable assignment. We, of course, express no
opinion on the merits of Good Host’s equitable assignment claim, but it is sufficient to
state a claim for relief under 12(b)(6). The trial court erred when it dismissed Good
Host’s claim on that theory.
Affirmed in part, reversed in part, and remanded for further proceedings.
RILEY, J., and MAY, J., concur.
15
