Opinion
Court of Appeals Case No. 22A-PL-27
04-14-2022
Ronald and Barbara ROSSI, Appellants-Plaintiffs, v. Michelle M. BARTLETT and Richard Gauthier, Individually and as Co-Trustees of the Richard Gauthier 1986 Declaration of Trust, Appellees-Defendants.
Attorney for Appellants: Kevin E. Werner, Crown Point, Indiana Attorneys for Appellee: Michael E. O'Neill, Daniel F. Ford, O'Neill McFadden & Willett LLP, Schererville, Indiana
Attorney for Appellants: Kevin E. Werner, Crown Point, Indiana
Attorneys for Appellee: Michael E. O'Neill, Daniel F. Ford, O'Neill McFadden & Willett LLP, Schererville, Indiana
MEMORANDUM DECISION
Bradford, Chief Judge.
Case Summary
[1] During the summer of 2018, Ronald and Barbara Rossi (collectively, "the Rossis") purchased a home from Michelle Bartlett and Richard Gauthier, co-trustees of the Richard Gauthier 1986 Declaration of Trust (collectively, "the Estate parties"). In May of 2019, the Rossis suffered water damage in the basement of the Property. They subsequently filed suit, raising claims of constructive and actual fraud, promissory and equitable estoppel, and deception. In raising these claims, the Rossis alleged that they had relied on various representations by the Estate parties relating to the condition of the basement. The Estate parties filed a motion for summary judgment and, after holding a hearing and considering the parties’ submissions, the trial court granted the Estate parties’ motion. On appeal, the Rossis contend that the trial court erred in granting summary judgment in favor of the Estate parties because issues of material fact remain. We affirm.
Facts and Procedural History
[2] In June of 2018, the Rossis were interested in purchasing a home in Lake County. After Barbara's mother, Corinne Beavers, played a round of golf with Bartlett, she learned that the Estate parties were selling a home located at 1003 Rescobie Court ("the Property"). The Rossis met with Bartlett at the Property on numerous occasions before deciding to purchase the Property.
[3] On June 20, 2018, the parties entered into an agreement for the sale of the Property (the "Purchase Agreement"). The Purchase Agreement explicitly stated that Appellants reserved "the right to have the property inspected." Appellants’ App. Vol. II p. 90. It further states
CONSULT YOUR ADVISORS: Buyer and Seller acknowledge they have been advised that, prior to signing this document, they may seek the advice of an attorney for the legal or tax consequences of this document and the transaction to which it relates. In any real estate transaction, it is recommended that you consult with a professional , such as a civil engineer, environmental engineer, or other person, with experience in evaluating the condition of the Property.
Appellants’ App. Vol. II p. 93 (emphases added). In addition, the Purchase Agreement states that "Seller's Residential Real Estate Sales Disclosure Form is not applicable to this transaction." Appellants’ App. Vol. II p. 91.
[4] At some point prior to the completion of the sale, Ronald contacted John Sulek, a licensed home inspector since 1998, about the need to complete a home inspection prior to his and Barbara completing their purchase of the Property. Regarding his conversation with Ronald, Sulek later averred as follows:
6. I discussed the pending purchase of the now Rossi home with Ronald Rossi. After Mr. Rossi explained the situation to me, I told Mr. Rossi that I did not think having an inspection was necessary.
7. I understand that after the Rossi's [sic] purchased the home it was learned that there was an issue with iron ochre, which requires the homeowner [to] periodically drop chlorine tablets into the drainage tile and have the system professionally jetted annually.
8. The discovery of iron ochre is not something that a home inspection would uncover.
9. A home inspection does not involve the physical inspection of the drainage tile surrounding a home.
10. Home inspections are meant to uncover patent defects. Things that are readily recognizable. Home inspection do not involve the search for latent defects such as the presence of iron ochre in the drainage tile.
Appellants’ App. Vol. II pp. 121–22.
[5] The sale was completed on August 3, 2018. On November 8, 2018, the Rossis first communicated with a plumber from Action Plumbing when the plumber "came to jet the drain tile lines." Appellants’ App. Vol. II p. 84. On this date, the plumber allegedly informed Ronald that "there had been water/seepage in the basement" of the Property "prior to their purchasing the home." Appellants’ App. Vol. II p. 84. The plumber also allegedly informed Ronald that he had installed the Property's exterior drain tile clean out well and indicated that it had been added "because of the prior water damage/seepage that [had] occurred prior to [the Rossis] purchasing the home." Appellants’ App. Vol. II p. 85.
[6] The Rossis claim that on May 1, 2019, they experienced "severe seepage" and "pooling of water" in the basement. Appellants’ App. Vol. II p. 85. They further claim to have incurred $22,329.68 in costs associated with the necessary repairs. The Rossis notified the Estate parties about the issue.
[7] On September 1, 2020, the Rossis filed suit against the Estate parties, raising claims of constructive and actual fraud, promissory and equitable estoppel, and deception. In support of their claim that the Estate parties were "surely" aware of prior water issues in the Property's basement, the Rossis asserted that the plumber from Action Plumber, who they allege claimed to have completed work on the property in the past, indicated that "the reason the clean out well was installed and the drain tile is jetted annually was a direct result of prior water in the basement." Appellants’ App. Vol. II p. 20.
[8] On June 16, 2021, the Estate parties filed a motion for summary judgment. The Rossis filed a response to the Estate parties’ motion on October 1, 2021. The Estate parties filed a reply on October 8, 2021. The trial court held a hearing on the Estate parties’ motion on November 23, 2021. On December 3, 2021, the trial court entered an order granting the Estate parties’ motion for summary judgment.
Discussion and Decision
[9] At the outset, the Rossis acknowledge that the statute on which they based their deception claim has been repealed and, as a result, their claim for deception "is no longer viable and it is withdrawn." Appellants’ Reply Br. p. 11. As to their remaining claims of fraud and for equitable relief, the Rossis contend that the trial court erred in granting the Estate parties’ motion for summary judgment.
Our review of the Rossis’ remaining claims is hampered by the fact that, in the argument section of their appellate brief, the Rossis have failed to provide citations to the record for the evidence upon which they rely. We remind counsel for the Rossis that Indiana Appellate Rule 46(A)(8)(a) requires that an appellant's contentions on appeal "must be supported by citations to the authorities, statutes, and the Appendix or parts of the Record on Appeal relied on."
[10] When reviewing a grant or denial of a motion for summary judgment our well-settled standard of review is the same as it is for the trial court: whether there is a genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. The party moving for summary judgment has the burden of making a prima facie showing that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Once these two requirements are met by the moving party, the burden then shifts to the non-moving party to show the existence of a genuine issue by setting forth specifically designated facts. Any doubt as to any facts or inferences to be drawn therefrom must be resolved in favor of the non-moving party. Summary judgment should be granted only if the evidence sanctioned by Indiana Trial Rule 56(C) shows there is no genuine issue of material fact and that the moving party deserves judgment as a matter of law.
Goodwin v. Yeakle's Sports Bar & Grill, Inc. , 62 N.E.3d 384, 386 (Ind. 2016) (internal citations omitted). "We review questions of law de novo and owe no deference to the trial court's legal conclusions." Floyd Cnty. v. City of New Albany , 1 N.E.3d 207, 213 (Ind. Ct. App. 2014). The party appealing the grant or denial of summary judgment has the burden of persuading this court on appeal that the trial court's ruling was improper. Id.
I. Elements of the Rossis’ Claims
A. Actual and Constructive Fraud
[11] Actual fraud
consists of five elements: 1) the fraud feasor must have made at least one representation of past or existing fact; 2) which was false; 3) which the fraud feasor knew to be false or made with reckless disregard as to its truth or falsity; 4) upon which the plaintiff reasonably relied ; 5) and which harmed the plaintiff.
Scott v. Bodor, Inc. , 571 N.E.2d 313, 319 (Ind. Ct. App. 1991) (emphasis added). Stated differently, "[t]o maintain an action for actual fraud, there must be a material misrepresentation of past or existing fact which is made with knowledge of or reckless disregard for the falsity of the statement, and resulting reliance upon the misrepresentation to the detriment of the relying party." Drudge v. Brandt , 698 N.E.2d 1245, 1250 (Ind. Ct. App. 1998). The elements of constructive fraud are:
(1) a duty owing by the party to be charged to the complaining party due to their relationship;
(2) violation of that duty by the making of deceptive material misrepresentations of past or existing facts or remaining silent when a duty to speak exists;
(3) reliance thereon by the complaining party;
(4) injury to the complaining party as a proximate result thereof; and
(5) the gaining of an advantage by the party to be charged at the expense of the complaining party.
Siegel v. Williams , 818 N.E.2d 510, 516 (Ind. Ct. App. 2004) (emphasis added).
B. Promissory and Equitable Estoppel
[12] "Estoppel is a judicial doctrine sounding in equity." Brown v. Branch , 758 N.E.2d 48, 51 (Ind. 2001). "Although variously defined, it is a concept by which one's own acts or conduct prevents the claiming of a right to the detriment of another party who was entitled to and did rely on the conduct." Id. at 51–52. The doctrine of promissory estoppel provides:
"A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise. The remedy for breach may be limited as justice requires."
Jarboe v. Landmark Cmty. Newspapers of Ind., Inc. , 644 N.E.2d 118, 121 (Ind. 1994) (quoting Restatement (Second) of Contracts § 90(1) (1981) ). Thus, the elements of promissory estoppel are: "(1) a promise by the promissor; (2) made with the expectation that the promisee will rely thereon; (3) which induces reasonable reliance by the promisee ; (4) of a definite and substantial nature; and (5) injustice can be avoided only by enforcement of the promise." Brown , 758 N.E.2d at 52 (emphasis added).
II. The Trial Court's Findings
[13] In granting the Estate parties’ motion for summary judgment, the trial court found that "[t]he crux of the case before the court hinges on reliance, as reliance is a necessary element of each of [the Rossis’] counts against [the Estate parties]." Appellants’ App. Vol. II p. 15.
The element of reliance is established only where the complaining party demonstrates he had a right to rely upon the defendant's representations. Ordinarily, one contracting party has no right to rely upon the statements of the other as to the character or contents of a written instrument. The law is designed to protect the weak and credulous from the wiles and stratagems of the artful and cunning. However, where persons stand mentally on equal footing and in no fiduciary relation, the law will not protect one who fails to exercise common sense and judgment.
Biberstine v. N.Y. Blower Co. , 625 N.E.2d 1308, 1316 (Ind. Ct. App. 1993) (cleaned up).
[14] "With respect to the sale of property, the rule of law in this state has long been that ‘the purchaser has no right to rely upon the representations of the vendor as to the quality of the property, where he has a reasonable opportunity of examining the property and judging for himself as to its qualities.’ " Johnson v. Wysocki , 990 N.E.2d 456, 461 (Ind. 2013) (quoting Cagney v. Cuson , 77 Ind. 494, 497 (1881) ); see also McCutchan v. Blanck , 846 N.E.2d 256, 265 (Ind. Ct. App. 2006) ; Kashman v. Haas , 766 N.E.2d 417, 422 (Ind. Ct. App. 2002) ; Pennycuff v. Fetter , 409 N.E.2d 1179, 1180 (Ind. Ct. App. 1980). "This is true even ‘[a]s to fraudulent representations operating as an inducement to the sale or exchange of property.’ " Johnson , 990 N.E.2d at 461 (quoting Cagney , 77 Ind. at 497 ). Further, while the Indiana Residential Real Estate Sales Disclosure Act ("the Sales Disclosure Act") requires that disclosure of certain information under some circumstances, see Ind. Code § 32-21-5-7(1), the Supreme Court has held that the common law principles set forth in Cagney are "undisturbed for transactions falling outside the scope of the [Sales] Disclosure Statutes." Johnson , 990 N.E.2d at 466 (emphasis added).
While we acknowledge that the Indiana Supreme Court has held that the "rule loses its force, however, when the defect is not one that would be revealed by the reasonable inspection," Johnson , 990 N.E.2d at 461, and that Sulek averred that a home inspection would not involve the search for the presence of iron ochre in the drainage tile, Appellants’ App. Vol. II p. 122, the Rossis have not argued that the long-standing rule should not apply for this reason. Without opining about the merits of such an argument, we note that we will not develop this argument for the Rossis on appeal.
[15] In this case, the parties agree that the Sales Disclosure Act does not apply to the transaction at issue. In addition, the Purchase Agreement explicitly recommended that the Rossis "consult with a professional, such as a civil engineer, environmental engineer, or other person, with experience in evaluating the condition of the Property" and stated that the "Seller's Residential Real Estate Sales Disclosure Form is not applicable to this transaction." Appellant's App. Vol. II pp. 93, 91. Given the Indiana Supreme Court's decision in Johnson coupled with the parties’ agreement that the Sales Disclosure Act did not apply to the transaction and the language in the Purchase Agreement stating that the Sales Disclosure Form was not applicable to the transaction, we conclude that, as it relates to the transaction at issue, the common law principles discussed in Cagney are undisturbed and apply. We agree with the trial court that each of the Rossis’ surviving claims required a showing of reliance. Applying the common law principles discussed in Cagney to the facts before us on appeal, we further agree with the trial court that, as a matter of law, the Rossis did not have the right to rely on any disclosures made by Estate parties.
While we agree with the Rossis that it is generally true that "if a seller undertakes to disclose facts within his knowledge, he must disclose the whole truth without concealing material facts and without doing anything to prevent the other party from making a thorough inspection[,]" Ind. Bank & Tr. Co. of Martinsville, Ind. v. Perry , 467 N.E.2d 428, 431 (Ind. Ct. App. 1984), this does not change the fact that the Rossis did not have the right to rely on any statements/disclosures made by the Estate parties, irrespective of the truth or falsity of said statements/disclosures.
[16] The judgment of the trial court is affirmed.
Crone, J., and Tavitas, J., concur.