barbara-a-johnson-and-william-t-johnson-both-individually-and-as ( 2012 )

FILED
1Pursuant 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 Jul 30 2012, 9:18 am
the defense of res judicata, collateral
estoppel, or the law of the case. CLERK
of the supreme court,
court of appeals and
tax court
ATTORNEY FOR APPELLANTS: ATTORNEY FOR APPELLEES:
KATHERINE A. BROWN-HENRY SHAUN T. OLSEN
Cline Farrell Christie & Lee, P.C. Weiss & Schmidgall, P.C.
Indianapolis, Indiana Merrillville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
BARBARA A. JOHNSON and WILLIAM T. JOHNSON, )
both individually and as trustees of the BARBARA A. )
JOHNSON LIVING TRUST DATED 12-17-1996, )
)
Appellants-Defendants, )
)
vs. ) No. 45A04-1111-CT-610
)
JOSEPH WYSOCKI and M. CARMEN WYSOCKI, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable Gerald N. Svetanoff, Judge
Cause No. 45D04-0805-CT-00092
July 30, 2012
MEMORANDUM DECISION – NOT FOR PUBLICATION
BARTEAU, Senior Judge
STATEMENT OF THE CASE
Barbara and William Johnson, individually and as trustees of the Barbara A.
Johnson Living Trust (“the Trust”) (collectively “the Johnsons”), appeal the trial court’s
judgment against them and in favor of Joseph and M. Carmen Wysocki.
We affirm in part and reverse in part.
ISSUES
The Johnsons present two issues for our review, one of which is dispositive:
I. Whether the trial court erred by entering judgment in favor of the Wysockis
on their claim of fraudulent misrepresentation.
On cross-appeal, the Wysockis present one issue, which we restate as:
II. Whether the trial court abused its discretion by not awarding attorney’s fees
and costs to the Wysockis pursuant to the Crime Victims Relief Act.
FACTS AND PROCEDURAL HISTORY
In 1973, Barbara and William purchased the home that is the subject of this
lawsuit. At that time, the home was newly constructed, and Barbara and William were
the first owners. In the years following, improvements were done to the home. Some of
the improvements were done by William and some were done by contractors.
In 1996, as part of their estate planning, William and Barbara transferred the house
into the Trust. William and Barbara are co-trustees of the Trust, and Barbara is the settlor
of the Trust. In 2006, the house was listed for sale, and a residential real estate sales
disclosure form was filled out and signed by Barbara. In filling out the sales disclosure
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form, Barbara indicated that there were no moisture and/or water problems in the
basement, crawl space area, or any other area, that there were no structural problems with
the building, that the roof did not leak, that there were no foundation problems with the
improvements, and that there were no violations of zoning, building codes, or restrictive
covenants.
In July 2006, the Wysockis viewed the house and received a copy of the sales
disclosure form. Following negotiations, the Wysockis purchased the property, and prior
to closing they had the home independently inspected. In his report, the inspector noted
that there were no electrical, mechanical, or plumbing items not operating and no roof
leaks or major deficiencies. The inspector’s report further states that the home appeared
to be in satisfactory condition, and he noted some exceptions such as a cracked tile in one
of the bathrooms. The report also indicates that the inspector got on the roof to perform
his roof inspection, went into the garage attic, and entered the second floor attic as part of
his inspection.
After taking possession, the Wysockis encountered several problems with the
house. In particular, the Wysockis noticed electrical problems beneath the screened-in
porch, water puddling in the garage and pooling on the front porch and in the ceiling
above the front porch, a deflected front porch beam, and problems with the support posts
of the screened-in porch. In 2008, the Wysockis filed a lawsuit against William and
Barbara, individually and as trustees of the Trust, claiming fraud, breach of contract, and
conversion. The Johnsons filed a motion for summary judgment, which the trial court
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granted as to the Wysockis’ claims of breach of contract and conversion. Following a
bench trial on the claim of fraud, the trial court found William and Barbara liable both
individually and as trustees of the Trust with regard to the electrical service lines
underneath the screened-in porch, the roofing of the front porch, the front beam of the
front porch, and the support beams for the screened-in porch. It is from this judgment
that the Johnsons now appeal.
DISCUSSION AND DECISION
I. FRAUDULENT MISREPRESENTATION
Here, the trial court entered findings of fact and conclusions of law. When the
trial court enters findings of fact and conclusions of law, we apply a two-tiered standard
of review: first, we determine whether the evidence supports the findings and, second,
whether the findings support the judgment. S.C. Nestel, Inc. v. Future Constr., Inc., 836
N.E.2d 445, 449 (Ind. Ct. App. 2005). The trial court’s findings and conclusions will be
set aside only if they are clearly erroneous. Id. “Findings of fact are clearly erroneous
when the record lacks any evidence or reasonable inferences from the evidence to support
them.” St. John Town Bd. v. Lambert, 725 N.E.2d 507, 518 (Ind. Ct. App. 2000). A
judgment is clearly erroneous when it is not supported by the findings of fact. Id. Put
another way, a judgment is clearly erroneous when a review of the record leaves us
firmly convinced that a mistake has been made. S.C. Nestel, Inc., 836 N.E.2d at 449. In
determining whether the findings or judgment are clearly erroneous, we consider only the
evidence favorable to the judgment and all reasonable inferences flowing therefrom. St.
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John Town Bd., 725 N.E.2d at 518. Moreover, we will not reweigh the evidence or
assess witness credibility. S.C. Nestel, Inc., 836 N.E.2d at 449.
In its order, the court found the following pertinent facts:
11. This Court has considered all of the evidence presented to it by the
parties and has weighed that evidence as well as the credibility of the
witnesses testifying in this case. This Court has also considered the Indiana
statutory law and common law applicable to this claim. The Court finds
that the issues for which complaint has been made here existed for some
time and should have been obvious to the Johnsons prior to the time that
they sold the Property. After having thoroughly weighed all of the
evidence in this case, this Court concludes that the Wysockis have
established by a preponderance of the evidence that the Defendants are
liable to them for the following defects in the Property:
(a) The repair of the electrical service lines below the
screened-in-deck;
(b) Repairs to the roofing of the front porch;
(c) Repair to the front beam; and
(d) Repair to the rear screened-in-room support beams.
Appellants’ App. pp. 15-16. The court then concluded that, with regard to these items,
the Wysockis have incurred damages in the amount of $13,805.95 and entered judgment
against the Johnsons in that amount.
The Johnsons contend that the trial court erred by entering judgment in favor of
the Wysockis because they failed to establish all of the elements necessary for their claim
of fraudulent misrepresentation, particularly the Johnsons’ knowledge that their
statements were false. In addition, the Johnsons argue that Indiana Code section 32-21-5-
11 (2002) precludes their liability for errors, inaccuracies, or omissions that were not
within Barbara’s actual knowledge at the time she signed the sales disclosure form.
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To prevail in a cause of action for fraudulent misrepresentation, the Wysockis
must prove that 1) the Johnsons made false statements of past or existing material facts;
2) the Johnsons made such statements knowing them to be false or recklessly without
knowledge as to their truth or falsity; 3) the Johnsons made the statements to induce the
Wysockis to act upon them; 4) the Wysockis justifiably relied and acted upon the
statements; and 5) the Wysockis suffered injury. See Vanderwier v. Baker, 937 N.E.2d
396, 398 (Ind. Ct. App. 2010).
Our courts have long followed the rule that a purchaser has no right to rely upon
the representations of the seller as to the quality of the property, where he or she has a
reasonable opportunity of examining the property and judging its qualities for himself or
herself. See Cagney v. Cuson, 77 Ind. 494, 497 (1881); Dickerson v. Strand, 904 N.E.2d
711, 715 (Ind. Ct. App. 2009). Nevertheless, in some cases where the buyer makes
inquiries about a condition on, the qualities of, or the characteristics of the property, the
seller has a duty to disclose material facts about the property. Wise v. Hays, 943 N.E.2d
835, 840 (Ind. Ct. App. 2011). Once the seller undertakes to disclose facts within his or
her knowledge, the seller must disclose the whole truth. Id.In 1993 our legislature created a statutory obligation, now codified as Indiana
Code chapter 32-21-5, for sellers of certain residential real estate to complete disclosure
forms informing prospective buyers of certain types of defects in the property. The
disclosure form must be completed and signed and then submitted to a prospective buyer
before an offer is accepted. See Ind. Code § 32-21-5-10(a) (2002). This chapter also
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provides that a seller is not liable for any error, inaccuracy, or omission on the sales
disclosure form if the error, inaccuracy, or omission was not within the seller’s actual
knowledge. See Ind. Code § 32-21-5-11(1).
Recent cases show a split on this Court regarding the effect of Indiana Code
chapter 32-21-5. In Dickerson, the majority affirmed summary judgment for the sellers
on the buyers’ fraud claim citing Cagney, despite evidence the sellers made
misrepresentations on the sales disclosure form. Judge Vaidik dissented and noted that
for transactions covered by Indiana Code chapter 32-21-5, the sales disclosure form
statutes abrogate the common law rule of Cagney and place the burden on the seller to
refrain from knowingly making misrepresentations about the condition of the property.
More recently, several panels of this Court have agreed with the Dickerson dissent. See
Hizer v. Holt, 937 N.E.2d 1, 7-8 (Ind. Ct. App. 2010) (disagreeing with Court’s
conclusion in Dickerson and holding that seller may be held liable for fraudulent
misrepresentations made on sales disclosure form if buyer can prove seller’s actual
knowledge of defect at time form is completed); Vanderwier, 937 N.E.2d at 401(rejecting holding of Dickerson and adopting Hizer opinion in its entirety); and Wise, 943
N.E.2d at 841-42 (agreeing with Dickerson dissent, Hizer, and Vanderwier and holding
that for transactions covered by Indiana Code chapter 32-21-5, seller may be liable for
any misrepresentation on sales disclosure form if seller had actual knowledge of
misrepresentation at time form was completed). Likewise, we agree that for transactions
covered by Indiana Code chapter 32-21-5, a seller may be liable for any
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misrepresentation on the sales disclosure form if the seller had actual knowledge of that
misrepresentation at the time the form was completed.
Accordingly, we now consider whether the Wysockis presented sufficient
evidence to prove that the Johnsons had actual knowledge of the defects in the property at
the time they completed the sales disclosure form. With regard to the electric lines below
the screened-in porch, the evidence shows that the bottom of the porch was covered with
cedar siding and skirting so that the area underneath the porch was not easily accessible.
Joseph testified that he went underneath the porch and found wires lying in the dirt.
However, William testified that he last saw the electrical junction box underneath the
porch in 1976 or 1977 and that it was attached to the joists just as the contractor had
installed it. Barbara testified that she had never gone underneath the screened-in porch.
The evidence concerning William and Barbara’s knowledge of the front porch
roof leak consists of their testimony that they never had water in the garage or on the
front porch and that neither of them had any knowledge of leaking, moisture problems, or
water problems with the front porch roof or garage ceiling. In addition, Barbara testified
that upon completion, the front porch passed inspection by a city inspector. She also
testified that she had no knowledge that the front porch was not built in accordance with
the building codes or town ordinances. William testified that he noticed a gap in one
corner of the garage where the ceiling drywall met the wall so he attempted to put screws
in the drywall. He stated that the screws went through the drywall so he left it. He
further testified that there were no signs of water damage or of a roof leak at the time he
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placed the screws. Likewise, both William and Barbara testified that they had no
knowledge of a deflected beam on the front porch roof.
With regard to the foundation supports for the screened-in porch, Joseph testified
that there was no concrete under the posts and that the posts went only seven inches into
the ground. However, William testified that in 1974 he built the deck that eventually
became the floor of the screened-in porch. He testified that he put the foundation posts
into the ground forty inches deep and poured concrete into the hole. He stated that a few
years later he added steel posts, not because the porch needed extra support but because
he “kind of go[es] overboard” on things. Tr. p. 67. In addition, Barbara testified: “He
overdoes everything. If one is good enough, two is better. He literally does wear
suspenders and a belt at the same time. So for his own piece [sic] of mind, he added
those auxiliary jacks to the main supports, in addition to the main supports.” Id. at 504.
Barbara also testified that in 1975 contractors for the screened-in porch indicated that the
porch floor was fine. In response to a question whether anyone had looked at the porch
floor and indicated it was structurally sound since William had added the auxiliary jacks,
she responded, “We had no problems, so we had no reason to have anybody in.” Id. at
524. William and Barbara both testified that they experienced no problems with the
porch moving and that they had no knowledge of any structural problems with the porch
floor or that the floor of the porch violated any building codes or town ordinances.
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Although it appears that there were items in the house that needed attention, the
evidence does not support the trial court’s judgment that the Wysockis established by a
preponderance of the evidence that the Johnsons made fraudulent misrepresentations.
Moreover, in its judgment, the trial court did not find that the Johnsons had actual
knowledge of the claimed defects; rather, the trial court merely found that there were
issues that “should have been obvious to the Johnsons prior to the time that they sold the
Property.” Appellants’ App. p. 15. In order to impose liability upon the Johnsons, the
Wysockis must show that the error, inaccuracy, or omission was within the actual
knowledge of the Johnsons. See Ind. Code § 32-21-5-11(1). Evidence showing that
defects “should have been obvious” is not sufficient. See Hizer, 937 N.E.2d at 7-8(holding that a seller may be held liable for fraudulent misrepresentations made on the
sales disclosure form if the buyer can prove the seller’s actual knowledge of the defect at
the time the form is completed).
Therefore, based upon the evidence before us, we conclude that the Wysockis
failed to show that the Johnsons had actual knowledge of the defects claimed by the
Wysockis at the time Barbara completed the sales disclosure form. The trial court thus
erred by entering judgment for the Wysockis on their claim of fraudulent
misrepresentation.
II. ATTORNEY’S FEES
On cross-appeal, the Wysockis assert that the trial court erred by not awarding
them attorney’s fees and costs of this action. Specifically, the Wysockis claim that the
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trial court’s findings support the conclusion that the Johnsons committed the crime of
deception, as set forth in Indiana Code section 35-43-5-3(a)(2) (1996)1, thereby entitling
them to attorney’s fees and costs pursuant to Indiana Code section 34-24-3-1 (1998)2, the
Crime Victims Relief Act.
Here, the trial court entered judgment for the Wysockis yet denied their claim for
attorney’s fees and costs pursuant to the Crime Victims Relief Act. Pursuant to our
discussion on the fraudulent misrepresentation claim, we reverse the trial court’s
judgment in favor of the Wysockis and enter judgment in favor of the Johnsons on that
claim. Therefore, we conclude there is no basis for an award of attorney’s fees and costs
to the Wysockis, and we affirm the trial court’s denial of such. See Steve Silveus Ins.,
Inc. v. Goshert, 873 N.E.2d 165, 183 (Ind. Ct. App. 2007) (recognizing that when party
prevails under the Crime Victims Relief Act and proves attorney’s fees have been
1
Indiana Code section 35-43-5-3 provides, in pertinent part:
(a) A person who:
...
(2) knowingly or intentionally makes a false or misleading written statement with intent
to obtain property, employment, or an educational opportunity
...
Commits deception, a Class A misdemeanor.
2
Indiana Code section 34-24-3-1 provides, in pertinent part:
If a person has an unpaid claim on a liability that is covered by IC 24-4.6-5 or suffers a
pecuniary loss as a result of a violation of IC 35-43, IC 35-42-3-3, IC 35-42-3-4, or IC
35-45-9, the person may bring a civil action against the person who caused the loss for
the following:
...
(2) The costs of the action.
(3) A reasonable attorney’s fee.
...
(7) All other reasonable costs of collection.
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incurred, award of attorney’s fees is mandatory, but holding that appellant not entitled to
attorney’s fees because judgment was not in its favor).
CONCLUSION
Based upon the foregoing discussion and authorities, we conclude the evidence
was insufficient to show, and the trial court did not find, that the Johnsons had actual
knowledge of the defects at the time the sales disclosure form was completed. Therefore,
we reverse the trial court’s judgment in favor of the Wysockis on their claim of
fraudulent misrepresentation and direct the court to enter judgment in favor of the
Johnsons. In addition, we affirm the trial court’s denial of the Wysockis’ request for
attorney’s fees and costs pursuant to the Crime Victims Relief Act.
Affirmed in part and reversed in part.
NAJAM, J., and BROWN, J., concur.
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