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Under Ind. R. Trial. P. 8(C), statute of frauds is an affirmative defense which must be both pleaded and proven by the party relying thereon. Under the statute of frauds, oral contracts are enforceable only if they could be performed within one year from the making of the contract. Ind. Code § 32-21-1-1(b)(5). This statute only bars enforcement of an oral contract if it is impossible for the contract to be performed within one year.
Plaintiff-appellee Kent Blacklidge and defendant-appellant Mark Blacklidge were father and son, and were both real estate appraisers. In the year 2000, they orally agreed to start a business together. They did not create any formal documentation of either the appraisal entity or their business relationship with each other. They did, however, have an oral contract under which they were equals in the appraisal entity and each person was entitled to seventy percent of the appraisal fees for appraisals that person performed, with the other thirty percent being used to pay overhead expenses. In December of 2004, the business became a limited liability company. Although they filed Articles of Organization with the Indiana Secretary of State, that document was not in the record. That even after creation of the LLC, the parties continued to operate under the oral agreement that each individual was still entitled to seventy percent of the fees from appraisals that individual completed, after overhead expenses were paid. Nancy Nicholson of an accounting firm did the accounting for the appraisal entity beginning in 2010. She kept track of what plaintiff was owed based on the parties' oral agreement for the distribution of appraisal profits. She terminated her business relationship at the end of 2013. After she left, plaintiff began receiving smaller and smaller payments for the appraisals he did. He terminated his business relationship with defendant on 2015. A year after, he filed a complaint against defendant for damages arising out of the latter’s breach of the parties' oral appraisal fees agreements. Defendant then filed his answer, a counterclaim for bad faith litigation, and affirmative defenses, including the defenses that plaintiff’s complaint was subject, in part or in whole, to the Statute of Limitations and the Statute of Frauds. He then filed a motion for summary judgment which was subsequently denied. The trial court held a bench trial and entered judgment in favor of plaintiff.
Did the trial court err in ruling in favor of plaintiff in past due appraisal fees?
The court affirmed the judgment. The court held that a judgment for plaintiff was proper on claims against defendant seeking past-due appraisal fees because the defendant waived the statute of frauds defense by failing to argue it below and, regardless, there was no evidence that the parties' appraisal fee agreement could not possibly have been performed within one year. The court also added that only articles of organization were required to form the parties' LLC under Ind. Code §§ 23-18-2-4 and 23-18-2-7, but the evidence supported the trial court's finding that the defendant was personally liable because his refusal to pay plaintiff the money he knew the LLC owed was willful misconduct or reckless pursuant to Ind. Code § 23-18-4-2(a). Thus, the court ruled that the trial court did not err in applying the six-year statute of limitations to the parties' oral agreements where the defendant failed to carry his burden to show it was an employment dispute under Ind. Code § 34-11-2-1.