Kruse Inc v. Hogan et al
Filing
107
OPINION AND ORDER DENYING 97 MOTION for Summary Judgment by Defendants Rodney Hogan, Playtime Playground Equipment, Counter Claimant Rodney Hogan. Signed by Judge Jon E DeGuilio on 1/22/15. (cer)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
KRUSE, INC.,
Plaintiff,
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v.
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RODNEY HOGAN and PLAYTIME
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PLAYGROUND EQUIPMENT,
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Defendants.
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__________________________________ )
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RODNEY HOGAN,
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Counterclaimant,
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v.
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KRUSE, INC.,
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Counter-Defendant.
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__________________________________ )
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RODNEY HOGAN,
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Third Party Plaintiff,
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v.
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BUNKER LAKES DEALERSHIP, INC., )
and DEAN KRUSE
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Defendants.
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Case No. 1:10-CV-014 JD
OPINION AND ORDER
This case arises from several disputes regarding vehicles previously auctioned or sold by
entities related to Dean Kruse.1 Kruse, Inc., sued Rodney Hogan and Playtime Playground
Equipment, Inc., in Indiana state court, alleging that the defendants had failed to pay for certain
automobiles purchased at auction. [DE 1.] After the case was removed to this Court, Mr. Hogan
filed a counterclaim against Kruse, Inc., arguing that Kruse, Inc., had breached an agreement by
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To avoid confusion, the Court refers to the individual Dean Kruse as “Mr. Kruse” and the corporate entity Kruse,
Inc., as “Kruse, Inc.” It refers to the entities collectively as the “Kruse entities.”
selling Mr. Hogan’s vehicles below reserve prices. [DE 14.] Mr. Hogan also filed a third-party
complaint against Mr. Kruse and Bunker Lakes Dealership, Inc., relating to the sale of a
recreational vehicle which Mr. Hogan claims he paid for but never received. [Id.] The progress
of this case was delayed by a purported settlement by the parties, which depended upon the sale
of the RV at issue in the third-party complaint. The case was stayed to effectuate a sale of the
RV, but that sale was never accomplished. The stay was lifted and, after the attorneys for the
Kruse entities withdrew and no new attorney appeared in the time allotted by the Court, default
was entered against Kruse, Inc. [DE 88.]
Now before the Court is a motion for summary judgment filed by Mr. Hogan. [DE 97,
98.] The motion addresses only one portion of the claim against Mr. Kruse and Bunker Lakes
Dealership regarding the purported sale of the RV, namely that the retention of the RV by the
Kruse entities constitutes criminal conversion. The Kruse entities have not responded to the
motion and the time to do so has passed. As a result, the Court may consider the facts contained
in the motion “undisputed for the purposes of the motion” and may “grant summary judgment if
the motion and supporting materials—including the facts considered undisputed—show that the
movant is entitled to it.” Fed. R. Civ. P. 56(e).
For the reasons stated below, even in light of the failure to respond to the motion, the
Court finds that Mr. Hogan has not shown he is entitled to summary judgment. Accordingly, the
motion for summary judgment is DENIED.
I. Background
As an initial matter, the Court notes that Mr. Hogan appears to have a misunderstanding
regarding the status of the claims stated in his third-party complaint. Specifically, in his
memorandum in support of his motion for summary judgment, Mr. Hogan incorrectly states
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“Hogan has obtained a default judgment against Kruse on this conversion claim.” [DE 98 at 3.]
No entry of default or default judgment has been entered against any defendant on the claims in
the third-party complaint; no default judgment has been entered against any defendant, period. In
light of this misunderstanding, and for the benefit of the parties, the Court outlines the current
status of the claims pending in this litigation.
As noted above, the case contains three operative pleadings: an initial complaint (brought
by Kruse, Inc., against Mr. Hogan and Playtime Playground Equipment) [DE 1], a counterclaim
(brought by Mr. Hogan against Kruse, Inc.) [DE 14], and a third-party complaint (brought by Mr.
Hogan against Mr. Kruse and Bunker Lakes Dealership) [DE 14]. An entry of default, not a
default judgment, has been entered against only one party in this case—Kruse, Inc.—based on
that corporate entity’s failure to appear through counsel. [DE 86, 87.] The Court would also have
been justified in entering default against Bunker Lakes Dealership, based on that corporate
entity’s failure to appear by counsel, but did not do so at that time. Mr. Kruse, in his personal
capacity, was warned that further failure to participate in the litigation could warrant the entry of
default [see DE 86 at 1–2], but new counsel has since appeared and does appear to be engaging
in the litigation as required. So, no default has been entered against Mr. Kruse on any claim.
Additionally, so that the parties are clear, the entry of default against Kruse, Inc., operates
only as a default on the claims contained in Mr. Hogan’s counterclaim. Rule 55 allows entry of
default against “a party against whom a judgment for affirmative relief is sought.” Fed. R. Civ.
P. 55(a) (emphasis added). Kruse, Inc., meets that definition with respect to Mr. Hogan’s
counterclaim, but not with respect to its own claim contained in the initial complaint.
Accordingly, the Court considers Kruse, Inc.’s, claim against Mr. Hogan and Playtime
Playground Equipment to remain pending.
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With that background, the Court turns to the pending motion, which addresses only the
non-defaulted claim of criminal conversion against Mr. Kruse and Bunker Lakes Dealership,
relating to the RV at issue in the third-party complaint.
II. Facts
In light of the failure of the Kruse entities to respond to the motion for summary
judgment, the Court treats the following facts as undisputed for the purposes of this motion. In
2009, Mr. Hogan purchased a 1998 40-foot Prevost Liberty Mirage recreational vehicle from
either Mr. Kruse or Bunker Lakes (the motion is unclear). Mr. Hogan paid $250,000, which was
remitted by cashier’s check payable to Mr. Kruse. [DE 98-3.]
Mr. Kruse has refused to provide the RV to Mr. Hogan. Mr. Kruse testified at deposition
that the RV is currently being stored in a facility under Mr. Kruse’s control in DeKalb County,
Indiana. [DE 98-1 at 1.] At one point, a sheriff came to pick up the RV, but declined to do so
once Mr. Kruse showed that he had “a lien and a UCC filed with the Secretary of State on it for
the amount of money he owed.” [Id. at 2.] Mr. Kruse testified that he instructed his “people to
keep the bus” in light of other money allegedly owed by Mr. Hogan to Mr. Kruse. [Id.]
III. Standard of Review
On summary judgment, the burden is on the moving party to demonstrate that there “is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). That means that the Court must construe all facts in the light most
favorable to the nonmoving party, making every legitimate inference and resolving every doubt
in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Kerri v. Bd. of Trs. of
Purdue Univ., 458 F.3d 620, 628 (7th Cir. 2006). Summary judgment is not a tool to decide
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legitimately contested issues, and it may not be granted unless no reasonable jury could decide in
favor of the nonmoving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The party seeking summary judgment “bears the initial responsibility of informing the
district court of the basis for its motion, and identifying” the evidence which “demonstrate[s] the
absence of [a] genuine issue of material fact.” Id. at 323. Once the moving party meets this
burden, the nonmoving party may not rest on allegations or denials in its own pleading, but must
set out specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(c)(1); Beard v. Whitley
County REMC, 840 F.2d 405, 410 (7th Cir. 1988). The disputed facts must be material, which
means that they “might affect the outcome of the suit under the governing law.” Brown v. City of
Lafayette, No. 4:08-CV-69, 2010 WL 1570805, at *2 (N.D. Ind. Apr. 16, 2010).
As a federal court sitting in diversity, the Court will rely on state substantive law and
attempt to predict how the Indiana Supreme Court would decide the issue presented here. See
Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999) (“Where the state
supreme court has not ruled on an issue, decisions of the state appellate courts control, unless
there are persuasive indications that the state supreme court would decide the issue differently.”).
IV. Discussion
The sole claim at issue in the pending motion is Mr. Hogan’s claim of criminal
conversion. The pending motion does not address the legal standards applicable to a finding of
criminal conversion, perhaps because of the mistaken belief that default has already been
entered. So, the Court begins by stating the applicable standards here.
Under Indiana law, a person commits criminal conversion when he or she “knowingly or
intentionally exerts unauthorized control over property of another person.” Ind. Code § 35-43-43. Under the Indiana Crime Victims Act, a person who has suffered a pecuniary loss as a result
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of a criminal conversion may bring a civil action to recover the loss. JET Credit Union v.
Loudermilk, 879 N.E.2d 594, 597 (Ind. Ct. App. 2008). Unlike a criminal prosecution, a plaintiff
bringing a civil claim need only prove by a preponderance of the evidence that the defendant
committed the criminal act. Id. The plaintiff must, however, prove all of the elements of the
criminal act. Larson v. Karagan, 979 N.E.2d 655, 661 (Ind. Ct. App. 2012).
Under Indiana law, “[a] person engages in conduct ‘intentionally’ if, when he engages in
the conduct, it is his conscious objective to do so.” Ind. Code § 35-41-2-2(a). “A person engages
in conduct ‘knowingly’ if, when he engages in the conduct, he is aware of a high probability that
he is doing so.” Id. at (b). The statute further states that to “‘[e]xert control over property’ means
to obtain, take, carry, drive, lead away, conceal, abandon, sell, convey, encumber, or possess
property, or to secure, transfer, or extend a right to property.” Ind. Code § 35-43-4-1(a). “A
person’s control over property of another person is “unauthorized” if, among other things, it is
exerted “without the other person’s consent.” Ind. Code § 35-43-4-1(b)(1).
It was not the intent of the Indiana legislature to criminalize bona fide contract disputes
as criminal conversion. NationsCredit Commercial Corp. v. Grauel Enters., 703 N.E.2d 1072,
1079 (Ind. Ct. App. 1998). Therefore, in order to succeed on a claim of conversion, the plaintiff
must show criminal intent. JET Credit Union, 879 N.E.2d at 597 (“It is this mens rea
requirement that differentiates criminal conversion from a more innocent breach of contract or
failure to pay a debt, which situations the criminal conversion statute was not intended to
cover.”). To establish that intent, the plaintiff “must show the defendant was aware of a high
probability his control over the plaintiff’s property was unauthorized.” Id. The Indiana Supreme
Court has stated that it is a “rare situation in which criminal intent may be found in a civil action
through summary judgment.” White v. Ind. Realty Assocs. II, 555 N.E.2d 454, 458 (Ind. 1990).
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However, the failure to respond to the summary judgment motion can provide such a situation.
Id.
Based on those legal standards, the Court must then determine whether or not the
uncontested allegations entitle Mr. Hogan to summary judgment on the criminal conversion
claim. Mr. Hogan’s motion is unclear as to whether he is seeking summary judgment against Mr.
Kruse individually, Bunker Lakes Dealership, or both. Rather, the motion refers to each of the
defendants as “Kruse,” without distinction between the individual defendants. [DE 98 at 2.]
However, because the motion contains no factual allegations regarding any actions taken by
Bunker Lakes Dealership, summary judgment as to that defendant, to the extent it is requested, is
DENIED.
With respect to Mr. Kruse, there is no question that he exercised control over the RV.
Additionally, the uncontested facts are that Mr. Hogan had paid for the RV and sent one of his
employees to obtain the RV from Mr. Hogan. This is sufficient factual basis to determine that
Mr. Kruse exercised the control without Mr. Hogan’s consent and, thus, his exercise of control
was unauthorized. Mr. Kruse further admitted at deposition that he took these actions
intentionally.
That leaves the question of criminal intent. As noted above, a defendant must have been
“aware of a high probability his control over the plaintiff’s property was unauthorized” in order
to justify a finding of criminal conversion. That “high probability” has been found lacking in
cases where the defendant has a good faith belief in his entitlement to the property at issue. See
JET Credit Union, 879 N.E.2d at 598 (finding reliance on DFI interpretation of statute sufficient
to negate any criminal intent). On the other hand, exercising control over property without any
legal basis can subject a party to a finding of criminal conversion. Romanowski v. Giordano
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Mgmt. Group, LLC, 896 N.E.2d 558, 563 (Ind. Ct. App. 2008) (finding actions in removing
tenants’ personal property without legal basis justified finding of criminal conversion); Palmer
Dodge, Inc. v. Long, 791 N.E.2d 788, 791–92 (Ind. Ct. App. 2003) (finding failure to adhere to
contractual term requiring return of trade-in vehicle justified finding of criminal conversion). In
other words, where a defendant has a “belief that he had a contractual right” to the property, it
can serve as evidence to negate any criminal intent. Manzon v. Stant Corp., 138 F. Supp. 2d
1110, 1116–17 (S.D. Ind. 2001) (holding retention of company car, in compliance with
employment contract, did not constitute criminal conversion); Palmer Dodge, 791 N.E.2d at 791
(reasonableness of belief of entitlement to property is a question of fact).
Here, the evidence offered by Mr. Hogan in support of the summary judgment motion
demonstrates that Mr. Kruse believed he was entitled to retain the RV due to money owed to him
by Mr. Hogan due to other commercial transactions. [DE 98-1 at 2 (“Q: And as I understand
your testimony, you did not release possession of the bus because of the amount of $670,000 that
was owed to you? A: Yes, I told our people to keep the bus and the cars, but somehow the cars
got out of there over a period of several weeks, and I didn’t realize it, but the bus was immobile,
so it wasn’t running. It was there, so I told them to lock it up.”).] No facts are currently before
the Court regarding whether Mr. Kruse’s belief regarding his entitlement to retain the RV was
either reasonable or justified—legally or factually—under the circumstances. For instance, the
Court has no information about whether or not Mr. Hogan legitimately owed money to Mr.
Kruse, either from related or unrelated business transactions. Additionally, Mr. Hogan has
offered no legal argument against the notion that Mr. Kruse is entitled to the lien he sought and
obtained on the RV.
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In light of the paucity of the record, and making every legitimate inference in favor of
Mr. Kruse—as the Court must, even in light of his failure to respond to the summary judgment
motion—the Court finds that it may be possible for a reasonable jury to decide that Mr. Kruse
lacked the requisite criminal intent. If so, such a jury could decide the criminal conversion claim
in favor of Mr. Kruse. Accordingly, summary judgment against Mr. Kruse is DENIED.
V. Conclusion
For the reasons stated above, Mr. Hogan’s motion for summary judgment is DENIED.
[DE 97.]
SO ORDERED.
ENTERED: January 22, 2015
/s/ JON E. DEGUILIO
Judge
United States District Court
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