Richard Kulbieda v. Sara Alford and Cory Day (mem. dec.) ( 2017 )


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  • MEMORANDUM DECISION
    Pursuant to Ind. Appellate Rule 65(D),
    this Memorandum Decision shall not be                                    FILED
    regarded as precedent or cited before any                           May 25 2017, 8:01 am
    court except for the purpose of establishing                             CLERK
    the defense of res judicata, collateral                              Indiana Supreme Court
    Court of Appeals
    and Tax Court
    estoppel, or the law of the case.
    APPELLANT PRO SE                                         ATTORNEY FOR APPELLEE
    Richard Kulbieda                                         Christopher L. Nusbaum
    Arizona City, Arizona                                    Dale Huffman & Babcock
    Bluffton, Indiana
    IN THE
    COURT OF APPEALS OF INDIANA
    Richard Kulbieda,                                        May 25, 2017
    Appellant-Defendant/Counter-Plaintiff,                   Court of Appeals Case No.
    75A05-1609-SC-2100
    v.                                               Appeal from the Starke Circuit
    Court
    Sara Alford and Cory Day,                                The Honorable Jeanene Calabrese,
    Appellees-Plaintiffs/Counter-                            Magistrate
    Defendants.                                              Trial Court Cause No.
    75C01-1604-SC-152
    Riley, Judge.
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017          Page 1 of 15
    STATEMENT OF THE CASE
    [1]   Appellant-Defendant/Counter-Plaintiff, Richard Kulbieda (Landlord), appeals
    the small claims court’s Judgment in favor of Appellees-Plaintiffs/Counter-
    Defendants, Sara Alford and Cory Day (collectively, the Tenants).
    [2]   We affirm.
    ISSUES
    [3]   The Landlord raises three issues on appeal, one of which we find dispositive
    and which we restate as: Whether the small claims court erred in entering
    judgment for the Tenants.
    [4]   The Tenants also raise one issue on cross-appeal, which we restate as: Whether
    the Tenants are entitled to an award of appellate attorney fees.
    FACTS AND PROCEDURAL HISTORY 1
    [5]   On March 1, 2015, the Landlord and the Tenants entered into a Lease
    Agreement, pursuant to which the Tenants agreed to rent the dwelling located
    1
    At the outset, we acknowledge the role that small claims courts have in “dispensing speedy justice between
    the parties according to the rules of substantive law.” Ind. Small Claims Rule 8(A). Small claims
    proceedings are informal and not subject to the usual “rules of practice, procedure, pleadings or evidence
    except provisions relating to privileged communications and offers of compromise.” S.C. R. 8(A). However,
    in this case, the Tenants—as the plaintiffs—did not testify or present any evidence beyond the Lease
    Agreement. Rather, their attorney narrated the Tenants’ version of events, and even were we to presume that
    attorneys are permitted to testify under the relaxed rules of small claims proceedings, the Tenants’ attorney
    was not sworn in as a witness. See S.C. R. 8(B) (“All testimony shall be given under oath or affirmation.”).
    Nevertheless, the Landlord never objected and has not raised this as an issue on appeal. Still, in order to set
    forth the facts, we rely on the Lease Agreement, the pleadings transmitted to our court (which consist of the
    Landlord’s Counterclaim and the Tenants’ Answer thereto as we have not been provided with a copy of the
    Tenant’s initial Notice of Claim), and the sparse testimony of the Landlord, in addition to inferences derived
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017               Page 2 of 15
    at 1020 N. 1025 E., Knox, Starke County, Indiana (the Property). The Lease
    Agreement commenced on March 11, 2015, and was set to end on March 11,
    2016. Upon expiration, the Lease Agreement would automatically convert to
    “a month-to-month agreement” unless either party notified the other “in writing
    at least [thirty] days prior to expiration that they do not wish this Agreement to
    continue on any basis.” (Appellant’s App. Vol. II, p. 6). In addition to a
    $900.00 security deposit, the Tenants agreed to pay monthly rent in the amount
    of $950.00.
    [6]   In December of 2015, the Tenants notified the Landlord that they had
    purchased a home and would not be renewing the Lease Agreement when it
    expired the following March. The Tenants advised that they would soon begin
    the process of moving their belongings over to their new home. However, the
    Tenants indicated that they understood their obligation to pay rent through the
    end of the Lease term and stated that they would continue to check on the
    Property. In early January of 2016, the Tenants informed the Landlord that
    they had moved into their new home.
    [7]   On January 14, 2016, the Landlord traveled from his home in Arizona to
    inspect and secure the Property. According to the Landlord, he spent two
    weeks at the Property—cleaning, demolishing the fire pit that the Tenants had
    therefrom. We recognize that the Tenants explicitly denied several of the material allegations contained in
    the Landlord’s Counterclaim, especially to the extent that factual allegations implied certain legal
    conclusions. However, based on the Tenants’ attorney’s arguments, we believe that our recitation of the facts
    sets forth the complete and undisputed background information necessary to resolve this appeal.
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017             Page 3 of 15
    built in the backyard, and attempting to re-let the premises. On January 28,
    2016, the Landlord signed a new lease with different tenants. Soon after the
    new renters moved in, the Tenants went to the Property to retrieve their mail
    and check on the house and were surprised to discover that there were new
    tenants in light of the fact that they had paid their rent for the month of
    February 2016 and were still operating under the terms of the Lease Agreement.
    Accordingly, the Tenants requested that the Landlord return half of the rent
    they paid for January, the full amount of rent paid for February, and their full
    security deposit. At some point, the Landlord refunded the $950.00 paid for
    February 2016 rent, but the Landlord refused to return the security deposit,
    claiming that he had “incurred a lot of unnecessary extra expense” by the
    Tenants improperly moving out of the Property without notice. (Appellees’
    App. Vol. II, p. 6).
    [8]   On April 18, 2016, the Tenants filed a Notice of Claim, presumably seeking a
    refund of their $900.00 security deposit, in addition to attorney fees and court
    costs. On May 18, 2016, the Landlord filed a Counterclaim, alleging breach of
    contract. The Landlord sought a judgment of $3,191.59 for costs incurred in
    securing, cleaning, and re-renting the premises. These costs included the
    Landlord’s round-trip airfare, rental car, lost wages, cleaning charges, extra
    advertising, and landscaping work. On July 1, 2016, the Tenants filed an
    Answer and Affirmative Defenses to the Landlord’s Counterclaim, asserting, in
    part, that the Landlord had failed to state a claim upon which relief could be
    granted. On August 10, 2016, the small claims court conducted a bench trial, at
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 4 of 15
    the conclusion of which the small claims court issued a Judgment in favor of
    the Tenants. Specifically, the small claims court ordered the Landlord to return
    the Tenants’ security deposit of $900.00 and to pay attorney fees of $1,500.00,
    for a total recovery of $2,400.00 plus court costs.
    [9]    The Landlord now appeals. Additional facts will be provided as necessary.
    DISCUSSION AND DECISION
    I. Judgment for the Tenants
    [10]   The Landlord challenges the small claims court’s Judgment, awarding the
    Tenants a refund of their security deposit and attorney fees and denying the
    Landlord’s counterclaim for damages. “Judgments in small claims actions are
    ‘subject to review as prescribed by relevant Indiana rules and statutes.’” Trinity
    Homes, LLC v. Fang, 
    848 N.E.2d 1065
    , 1067 (Ind. 2006) (quoting S.C. R. 11(A)).
    For facts determined in a bench trial, the clearly erroneous standard set forth in
    Indiana Trial Rule 52(A) applies, with due regard given to the opportunity of
    the small claims court to assess the credibility of witnesses. 
    Id. “[T]his deferential
    standard does not apply to the substantive rules of law, which are
    reviewed de novo just as they are in appeals from a court of general
    jurisdiction.” 
    Id. at 1068.
    Here, while the small claims court orally noted
    several findings, it did not issue written factual findings and conclusions
    thereon. Where no findings are made, “we presume the judgment is based on
    findings supported by the evidence and will affirm the judgment “if it can be
    sustained on any legal theory supported by the evidence.” Rueth v. Quinn, 659
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 5 of 
    15 N.E.2d 684
    , 687 (Ind. Ct. App. 1996), trans. denied. Our court does not reweigh
    evidence or assess witness credibility, and we consider only the evidence most
    favorable to the judgment together with all reasonable inferences derived
    therefrom. 
    Id. [11] This
    case centers on the application of the landlord-tenant statutes governing
    security deposits. Indiana Code section 32-31-3-12(a) provides that upon the
    termination of a rental agreement, a landlord must return the tenant’s security
    deposit, less any amount applied to “(1) the payment of accrued rent; (2) the
    amount of damages that the landlord has suffered or will reasonably suffer by
    reason of the tenant’s noncompliance with law or the rental agreement; and (3)
    unpaid utility or sewer charges that the tenant is obligated to pay under the
    rental agreement.” These deductions must be
    itemized by the landlord with the amount due in a written notice
    that is delivered to the tenant not more than forty-five (45) days
    after termination of the rental agreement and delivery of
    possession. The landlord is not liable under this chapter until the
    tenant supplies the landlord in writing with a mailing address to
    which to deliver the notice and amount prescribed by this
    subsection. Unless otherwise agreed, a tenant is not entitled to
    apply a security deposit to rent.
    Ind. Code § 32-31-3-12(a). The landlord’s failure to comply with these
    requirements entitles the tenant to “recover all of the security deposit due the
    tenant and reasonable attorney’s fees.” I.C. § 32-31-3-12(b). In addition, both
    the landlord and the tenant, if so entitled, may seek “other damages.” I.C. § 32-
    31-3-12(c).
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 6 of 15
    [12]   Indiana Code section 32-31-3-13 more specifically sets forth the purposes for
    which a security deposit may be used:
    (1) To reimburse the landlord for actual damages to the rental
    unit or any ancillary facility that are not the result of
    ordinary wear and tear.
    (2) To pay the landlord for:
    (A) all rent in arrearage under the rental agreement; and
    (B) rent due for premature termination of the rental
    agreement by the tenant.
    (3) To pay for the last payment period of a residential rental
    agreement if a written agreement between the landlord and
    the tenant stipulates that the security deposit will serve as
    the last payment of rent due.
    (4) To reimburse the landlord for utility or sewer charges paid
    by the landlord that are:
    (A) the obligation of the tenant under the rental agreement;
    and
    (B) unpaid by the tenant.
    [13]   Indiana Code section 32-31-3-14 further details the landlord’s requirements for
    sending the tenant an itemized list of deductions:
    Not more than forty-five (45) days after the termination of
    occupancy, a landlord shall mail to a tenant an itemized list of
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 7 of 15
    damages claimed for which the security deposit may be used
    under section 13 of this chapter. The list must set forth:
    (1) the estimated cost of repair for each damaged item; and
    (2) the amounts and lease on which the landlord intends to assess
    the tenant.
    The landlord shall include with the list a check or money order
    for the difference between the damages claimed and the amount
    of the security deposit held by the landlord.
    If the landlord fails to provide this notice of damages, the landlord essentially
    agrees “that no damages are due, and the landlord must remit to the tenant
    immediately the full security deposit.” I.C. § 32-31-3-15. Moreover, in
    addition to the full security deposit, the landlord’s failure to comply with the
    notice requirement renders the landlord liable to the tenant for “reasonable
    attorney’s fees and court costs.” I.C. § 32-31-3-16.
    [14]   The small claims court found, based on the Tenants’ attorney’s argument, that
    the Landlord failed to provide the Tenants with written notice of damages as
    statutorily required. On appeal, the Landlord now asserts that he did send an
    itemized list of damages to the Tenants via email on February 6, 2016, and,
    furthermore, that his obligation to send notice of the itemized damages was
    never triggered because the Tenants failed to provide, in writing, a mailing
    address for sending the notice pursuant to Indiana Code section 32-31-3-12(a).
    Although he mentioned the notice in his counterclaim, the Landlord did not
    dispute the Tenants’ contention that they never received an itemized notice,
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 8 of 15
    despite the Landlord’s opportunity to do so during the bench trial; nor did the
    Landlord attempt to admit a copy of such notice into evidence. The Landlord
    similarly failed to argue that the Tenants never provided their new address for
    mailing the notice. Thus, he cannot proceed with these arguments on appeal. 2
    See Weida v. City of West Lafayette, 
    896 N.E.2d 1218
    , 1227 (Ind. Ct. App. 2008)
    (noting that, as a general rule, a party may not present an argument or issue to
    an appellate court unless the party raised that argument or issue to the lower
    court).
    [15]   Moreover, the security deposit statute plainly states that security deposits may
    only be applied for “actual damages” that “are not the result of ordinary wear
    and tear”; accrued rent; the last installment of rent (if so agreed by parties); and
    certain utility charges. I.C. § 32-31-3-13. See Sholes v. Sholes, 
    760 N.E.2d 156
    ,
    159 (Ind. 2001) (“Courts are obliged to respect the plain language of a
    statute.”). In addition, the small claims court pointed out that the Lease
    Agreement specifically limits the use of the security deposit “to cover any
    possible damage to the [P]roperty.” (Appellant’s App. Vol. II, p. 6). See Ryan v.
    Lawyers Title Ins. Corp., 
    959 N.E.2d 870
    , 875 (Ind. Ct. App. 2011) (“The
    unambiguous language of a contract is conclusive upon the parties to the
    2
    Moreover, the Landlord has included several “exhibits” in his appellate appendix, including emails that
    were exchanged with the Tenants regarding the move-out and dispute over the security deposit, including the
    purported itemized list of damages. None of these documents were presented to the small claims court, let
    alone admitted, during the bench trial. Therefore, we do not consider these documents on appeal. Saler v.
    Irick, 
    800 N.E.2d 960
    , 970 n.7 (Ind. Ct. App. 2003) (“[N]ew evidence may not be submitted to the court for
    the first time upon appeal.”).
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017            Page 9 of 15
    contract and upon the courts.”). Accordingly, pursuant to both statute and the
    terms of the Lease Agreement, the Landlord had no right to withhold the
    Tenants’ security deposit to pay for travel accommodations (airfare and rental
    car), the wages he lost by virtue of spending two weeks in Indiana, and
    advertising expenses.
    [16]   The Landlord also argued during the bench trial that he expended money to
    clean the house and remedy some landscaping issues caused by the Tenants,
    which are chargeable damages against the security deposit. In response, the
    small claims court asked, “[W]here are the bills . . . [t]o support that[?]” The
    Landlord answered,
    I don’t[] have ‘em. It’s just my labor that was there. ‘Cause I
    was here for two (2) weeks. I was cleaning and everything and—
    uh—I had to hire the lady down the road there to clean out the
    range, refrigerator and do the windows. And she even
    admitted—[the Tenants] even admitted that [they] didn’t clean,
    you know, so. You know, I feel we’re being fair about this. I’m
    not trying to gouge or take advantage of [them].
    (Tr. pp. 12-13). When the small claims court again asked about his cleaning
    expenses, the Landlord stated,
    Well, I paid for—let’s see, well I think I paid a hundred and fifty
    (150) out of my own pocket, plus my labor of—of having to—I
    helped over there—clean everything. And we had to shampoo
    the carpet; that was a hundred and fifty (150). And—um—you
    know, and then I was here—and but again, I was basing my
    expenses of having to come here to—to—to—to you know, to
    take care of the home.
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 10 of 15
    (Tr. p. 13).
    [17]   While the Landlord presented no specific evidence of his purported landscaping
    costs, he did testify that he spent at least $150.00 to clean the range, refrigerator,
    windows, and carpet. It is unclear from the record whether the small claims
    court found a lack of credibility with respect to the Landlord’s cleaning
    damages based on his failure to present documented evidence of these costs at
    the bench trial. Nonetheless, Indiana Code section 32-31-3-13(1) provides that
    a security deposit may be used for actual damages to the rental unit that are not
    the result of ordinary wear and tear, and the Lease Agreement specifically
    provides that a cleaning fee may be deducted as damages from the security
    deposit if the Tenants failed to thoroughly clean the premises by cleaning
    “appliances, windows, window blinds, bathrooms, ceiling fans, shampooing of
    carpet, etc.” (Appellant’s App. Vol. II, p. 6). See Miller v. Geels, 
    643 N.E.2d 922
    , 928 (Ind. Ct. App. 1994) (“[A] rental unit which tenants are required to
    clean under a lease agreement but which the tenants have failed to clean has
    been damaged. . . . The landlord may pursue a claim for cleaning expenses
    under the lease.”), trans. denied. Here, the Lease Agreement provides that the
    cleaning expenses should have been deducted from the security deposit (as
    opposed to pursuing “other damages” pursuant to Indiana Code section 32-31-
    3-12(c)). Therefore, such “damages” must have been included in the itemized
    notice required by Indiana Code sections 32-31-3-12 and 14. As already
    discussed, the Landlord has waived his argument that he submitted the
    statutorily required notice of damages, and he did not dispute the Tenants’
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 11 of 15
    attorney’s claim that no such notice was sent. Accordingly, the small claims
    court properly ordered the Landlord to remit the Tenants’ $900.00 security
    deposit, and because of the Landlord’s failure to comply with the security
    deposit statute, the Tenants were also entitled to an award of attorney fees. See
    I.C. § 32-31-3-12(b). 3
    II. Appellate Attorney Fees
    [18]   On cross-appeal, the Tenants claim that they are entitled to an award of
    appellate attorney fees because the Landlord “needlessly filed this claim and
    made accusations against [their attorney].” (Appellees’ Br. p. 10). Pursuant to
    Indiana Appellate Rule 66(E), our court “may assess damages if an appeal,
    petition, or motion, or response, is frivolous or in bad faith.” Such damages
    may include attorney fees. However, “[o]ur discretion to award attorney fees
    under Indiana Appellate Rule 66(E) is limited . . . . to instances when an appeal
    is permeated with meritlessness, bad faith, frivolity, harassment, vexatiousness,
    or purpose of delay.” Thacker v. Wentzel, 
    797 N.E.2d 342
    , 346 (Ind. Ct. App.
    2003). We are mindful to “use extreme restraint when exercising this power
    because of the potential chilling effect upon the exercise of the right to appeal.”
    3
    The Landlord also claims that, even though the costs of his airfare and rental car could not be deducted
    from the security deposit, he still should have received a judgment for such expenses based on the fact that
    they were “incurred due to [the Tenants] not giving a proper move out notice.” (Appellant’s Br. p. 20). The
    Landlord neither cites any authority or contractual provision nor otherwise presents a cogent argument to
    support his claim and therefore has waived the issue. Ind. Appellate Rule 46(A)(8)(a). The Landlord has
    also waived his claim that the Tenants’ attorney somehow tampered with the contents of his Counterclaim as
    there is no basis for such an accusation in the record and because the Landlord has not developed a cogent
    argument. App. R. 46(A)(8)(a).
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    Id. Thus, “[a]
    strong showing is required to justify an award of appellate
    damages, and the sanction is not imposed to punish mere lack of merit, but
    something more egregious.” Helmuth v. Distance Learning Systems Ind., Inc., 
    837 N.E.2d 1085
    , 1094 (Ind. Ct. App. 2005).
    [19]   Claims for appellate attorney fees are categorized as either “substantive” or
    “procedural” bad faith claims. 
    Thacker, 797 N.E.2d at 346
    . For substantive bad
    faith claims, the party seeking fees must demonstrate “that the appellant’s
    contentions and arguments are utterly devoid of all plausibility.” 
    Id. On the
    other hand, procedural bad faith “occurs when a party flagrantly disregards the
    form and content requirements of the rules of appellate procedure, omits and
    misstates relevant facts appearing in the record, and files briefs written in a
    manner calculated to require the maximum expenditure of time both by the
    opposing party and the reviewing court. Even if the appellant’s conduct falls
    short of that which is ‘deliberate or by design,’ procedural bad faith can still be
    found.” 
    Id. at 346-47
    (internal citation omitted).
    [20]   In seeking attorney fees, the Tenants assert that
    [f]ollowing [the Landlord’s] failure to present any evidence at the
    [bench trial] it cannot be said that any reasonable attorney would
    consider his appeal of this case worthy of litigation. To the
    contrary, the appropriate conclusion, coupled with his nearly
    defamatory claims against [the Tenants’ attorney], is that [the
    Landlord’s] [a]ppeal is meritless, in bad faith, aimed only [at]
    causing harassment with the purpose to delay his judg[]ment.
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    (Appellees’ Br. pp. 10-11). Thus, it appears that the Tenants have set forth a
    substantive bad faith claim.
    [21]   It is well established that pro se litigants, such as the Landlord, are held to the
    same standards as licensed attorneys. 
    Thacker, 797 N.E.2d at 345
    . As such, pro
    se litigants may be liable for appellate attorney fees when they disregard the
    rules in bad faith. In re Estate of Carnes, 
    866 N.E.2d 260
    , 267 (Ind. Ct. App.
    2007). Here, the Landlord’s pro se status is no excuse for improperly attempting
    to introduce new evidence on appeal or raising unfounded accusations against
    the Tenants’ attorney. Nevertheless, mindful of our duty to utilize extreme
    restraint, we decline to exercise our discretion to award appellate attorney fees.
    Both parties did a poor job of presenting evidence during the bench trial, which
    has made our review more difficult. Despite the lack of evidence in the record
    that this court may properly consider, it is clear that the Landlord did not file
    his appeal in bad faith based on his belief that he had complied with the notice
    requirements of the security deposit statute. In fact, had the Landlord
    attempted and succeeded in admitting the document that he now claims to be
    the itemized notice of damages, he may have partially prevailed in this matter.
    Therefore, while we affirm the small claims court’s Judgment, we do not order
    the award of appellate attorney fees.
    CONCLUSION
    [22]   Based on the foregoing, we conclude that the small claims court properly
    ordered the Landlord to pay the Tenants the sum of their security deposit and
    Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 14 of 15
    attorney fees. We further conclude that the Tenants are not entitled to an
    award of appellate attorney fees.
    [23]   Affirmed.
    [24]   Najam, J. and Bradford, J. concur
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