Laws Real Estate

Intentional intervening events will break the chain of negligence in a lawsuit for the proximate cause of an individual’s death. The Court of Appeals recently upheld that the willful and malicious criminal act of a third party breaks the causal chain between the alleged negligence and the resulting harm.

In Beth Ann Johnson, Mother of: Emily Johnson, Deceased Minor Child v. Lance Jacobs, Steven J. Cummins, Stacy Cummings, Lawrence County Board of Aviation Commissioners, Tony Newbold, Lawrence Co. Comm., No. 47A01-1102-CT-35, Eric Johnson and Beth Johnson were in the midst of a divorce. Eric Johnson had been taking flight lessons and decided to take their daughter Emily in a rented plane. Eric Johnson intentionally flew the airplane into his mother-in-law’s house, killing himself and Emily. Beth Johnson sued Lawrence County Board of Aviation Commissioners (Aviation Board) and the Lawrence County Commissioners seeking damages for Emily’s wrongful death. The Aviation Board filed a motion for summary judgment claiming that any negligence that might be attributed to the Aviation Board was superseded by Eric’s intervening act of murdering Emily. The trial court granted the summary judgment motion and this appeal ensued.

On appeal Beth Johnson made two arguments; (1) the actions of the Aviation Board were the proximate cause of Emily’s death, and (2) it was foreseeable that an unauthorized person could have taken the airplane and flown off in it. The Court addressed the first argument by concluding that “Eric’s intentional criminal actions triggered the intervening, superseding cause doctrine and broke the causal chain between the Aviation Board’s alleged negligence and Emily’s death”, thus, the Aviation Board was not the proximate cause of Emily’s death. The Court addressed the second argument by questioning whether the Aviation Board should have foreseen Eric’s actions that led to Emily’s death. The record shows that none of the employees thought Eric was acting unusual and the employees did not see anything out of the ordinary that day. The Court concluded that there was nothing on record that would show that the Aviation Board should have foreseen that Eric would use the plane in the way that he did. The trial court properly granted summary judgment.  

The Court of Appeals recently held that the fact that Indiana Supreme Court has set out different procedures in the Trial Rules for service of process when sending tax sale notices upon organizations has no authority because the delivery of tax sale notices is governed by statute.

In James K. White and Wells Fargo Bank v. Susan Orth, Allen County Treasurer, and Lisbeth A. Blosser, Allen County Auditor No.02C01-1012-MI-2025, the trial court granted the Allen County Treasurer and the Allen County Auditor (collectively, “Allen County”) an issuance of tax deeds on property with delinquent property taxes due and owing. Wells Fargo held the mortgage on the property that the issuance was served upon. Wells Fargo objected to the issuance of the tax deed and argued that Allen County did not properly serve two tax sale notices upon Wells Fargo.

The Court of Appeals cites Indiana Code section 6-1.1-25-4.5 and section 6-1.1-25-4.6 which require “tax sale notices be sent to any person with a substantial interest of public record at the address included in the public record.” Allen County complied with the statutory requirements of sending tax sale notices because they sent both of the tax sale notices by certified mail, return receipt requested, to the address listed in the mortgage document, and to another local address.  Nowhere in the statute does it require compliance with Trial Rules when sending tax sale notices, therefore, the trial court's issuance of the tax deed was affirmed.

 What constitutes just cause for terminating an employee? The Indiana Court of Appeals recently decided that precise question. The Court assessed the employer’s attendance policy in order to determine if the employee was in fact terminated for just cause.

In P.M.T., Inc. v. Review Board of the Indiana Dept. of Workforce Development and L.A., No. 93A02-1105-EX-389, L.A worked as an ambulance dispatcher at P.M.T. P.M.T. had a strict attendance policy where an employee could only miss seven days in a twelve-month period, barring some narrow exceptions. In March 2010, L.A. requested leave through the Family Medical Leave Act (“FMLA) to take care of her terminally ill husband, which accumulated to six absences. After August 19, 2010, L.A. had two emergency absences; one was due to a personal health problem and the other occurred when she was informed by her son that her husband was lying unconscious on the floor at home. After that accident L.A. spent an additional two more days with her husband at the hospital. All of these absences exceeded her seven allowed under P.M.T.'s attendance policy. P.M.T. terminated L.A. due to excessive absences. The Administrative Law Judge awarded L.A. unemployment insurance benefits based on the unreasonableness of P.M.T.’s attendance policy and the insufficiency of evidence to prove that L.A. knowingly violated the attendance policy. P.M.T. appealed the ruling to the Review Board. The Review Board affirmed the Administrative Law Judge’s ruling.

P.M.T. argued on appeal that L.A.’s termination was for just cause because the attendance policy was reasonable and L.A. knowingly violated the attendance policy. Ind. Code § 22-4-15-1 requires “just cause for the termination if the employee is to be ineligible for unemployment insurance benefits.” The Review Board concluded that P.M.T.’s attendance policy was unreasonable because there were “no exceptions for verified emergencies or situations beyond the employee’s control.” The Court agreed and supplemented that personal and family health issues are considered valid reasons for missing work. As for the “just cause” issue, the Court stated that L.A.’s absences were a result of circumstances beyond her control and therefore there was not just cause for her termination. The Court affirmed the Review Board’s decision.

by Steven M. Badger 

A deal is a deal, right?  That is not always true when the deal is a fee agreement between a lawyer and a client.  With interest in alternative fee arrangements growing among lawyers and clients, Indiana law firms should keep in mind that their fee agreements remain subject to scrutiny of the Indiana Supreme Court. 

A recent disciplinary decision of the Indiana Supreme Court teaches Indiana lawyers two lessons about non-hourly fee arrangements:  First, a deal is most definitely NOT a deal when a lawyer would obtain an unconscionable windfall.  Second, a lawyer may be required to renegotiate a fee agreement that would otherwise produce an unconscionable benefit for the lawyer.

In In re Everett E. Powell, II, No. 49S00-0910-DI-426, the Indiana Supreme Court suspended a lawyer for charging an unreasonable contingent fee. The client, T.G., engaged Powell to seek the removal of a trustee of a trust established for T.G.'s benefit.  The trust was put in place by T.G.'s first lawyer, Ross, to hold the proceeds of a personal injury settlement for T.G.  The trust was created to keep T.G. (and her domineering partner) from quickly wasting the settlement proceeds, about $42,000.  Ross was the trustee (because he could not find another qualified person to do it) and had refused T.G.'s earlier, repeated demands for the money in the trust. 

When Powell contacted Ross, he readily agreed to resign as trustee and handover those duties to Powell.  Soon after he became successor trustee, Powell withdrew the trust funds, paid two-thirds of the funds to T.G., and kept his one-third contingent fee.  As a result, Powell received a contingent fee of over $14,000 for 15 hours of work.

In his disciplinary case, Powell argued his contingent fee was reasonable considering the client was a "difficult" one, there was a heightened threat of a future malpractice suit, and there was uncertainty at the time the fee agreement was made both about the amount of funds left in the trust and whether Ross would resist giving up control of the trust.  The Court rejected that argument.  The Court observed that Powell learned very quickly the amount left in the trust and Ross' willingness to step aside as trustee.  The Court stated:

We do not suggest that a contingent fee must be reduced every time a case turns out to be easier or more lucrative than contemplated by the parties at the outset.  But collection of a fee under the original agreement is unreasonable when it gives the attorney an unconscionable windfall under the totality of the circumstances.  On the evidence before us in this case, we conclude that Respondent violated the Indiana Professional Conduct Rule 1.5(a) by collecting a fee that was clearly excessive and unreasonable under the totality of the circumstances.

The vulnerability of the client in Powell was certainly an important aspect of the case that would distinguish it from one involving a sophisticated client.  Yet, Powell is an important reminder for Indiana attorneys to think twice before keeping a contingent fee that is grossly disproportionate to the amount of work performed.

Does an Indiana County Sheriff owe a common law duty to warn the public of known hazardous conditions on a county road?  The Indiana Supreme Court recently decided that as long as the County Sheriff's Department does not own, maintain, or control the county road, the Sheriff does not have a common law duty to warn motorists of dangerous conditions.

In Putnam County Sheriff v. Pamela Price, No. 60S01-1012-CV-665, Pamela Price was driving on a county road when she encountered ice across the roadway. Price lost control of her car and suffered injuries in the resulting accident. Earlier that morning, a deputy sheriff had been called to the same location because of an earlier accident caused by the same icy conditions. The deputy contacted the Putnam County Highway Department, advised the Highway Department of the conditions on the road, but left the area without taking any further action. Price argued the deputy was negligent “in failing to take any steps to alleviate the icy and hazardous condition or warn the traveling public of the known hazard.”

The Supreme Court concluded that, absent ownership, maintenance, or control of the county road, the Sheriff had no duty to warn the public of the hazardous conditions. The duty to warn rested with the county supervisor who was specifically given the job to supervise, maintain, and repair the highways within the county. The Court wrote:  “Absent a duty, there can be no breach of duty and thus no negligence or liability based upon the breach.”

Justice David concurred with the Court's decision but was “hesitant for the subsequent application of this holding that the sheriff can escape any liability on the basis of non-maintenance and control of the county roadway.” Justice David believed that in certain circumstances a sheriff owes a duty of ordinary and reasonable care by remaining on the scene until assistance arrives.

Indiana unemployment insurance contributions are determined based on the past record of unemployment claims against the Indiana employer.  When an Indiana corporation reorganizes to form a new subsidiary, the question may arise whether the subsidiary is a new employer eligible for a lower introductory contribution rate or assumes the same employment experience account rate as its parent and predecessor.  In a recent ruling the Court itself described as "narrow" or limited to the specific facts of the case, the Indiana Supreme Court decided that a company’s newly-formed subsidiaries did not constitute distinct and segregable portions of the business and therefore must pay the same employment experience account rate as their parent company.  

In Franklin Electric Company, Inc. v. Unemployment Insurance Appeals of the Indiana Dept. of Workforce Development, No. 93S02-1102-EX-89, Franklin Electric Co., Inc. formed two new wholly-owned subsidiary corporations, Franklin Electric Manufacturing, Inc. and Franklin Electric Sales, Inc., as part of an expansion and reorganization of its business. Franklin Electric transferred real estate, equipment, and other assets associated with manufacturing to Franklin Electric Manufacturing in exchange for one hundred percent ownership in the new corporation. Franklin Electric transferred all of its sales-related personal property, sales contracts, and other related items to Franklin Electric Sales in exchange for one hundred percent ownership. Subsequently, Franklin Electric started a new employment experience account with a low introductory contribution rate for each subsidiary. A few years later, Franklin Electric, without Franklin Electric Manufacturing as a party, sold a portion of the manufacturing operation to Bluffton Motor Works LLC. The Indiana Department of Workforce Development investigated Franklin Electric and determined Franklin Electric did not transfer to the new subsidiaries a distinct and segregable portion of its organization, trade, or business. Franklin Electric argued its two new subsidiaries were eligible for a 2.7% experience rate as new employers under Indiana Code § 22-4-10-6(c). 

In order for the two subsidiaries to qualify as employers separate from the parent company for purposes of Indiana unemployment insurance, they must prove that they acquired a “distinct and segregable” portion of Franklin Electric’s business. Thus, the Court focused on whether Franklin Electric Sales and Franklin Electric Manufacturing acquired a portion of the business that was separate from Franklin Electric.  The Court considered the following key facts:  Franklin Electric wrote a single check to its payroll provider to fund the wages of employees of all three companies. Also, Franklin Electric provided workers compensation, health insurance, and retirement benefits for all three entities. Finally, Franklin Electric (not Franklin Electric Manufacturing) sold assets to Bluffton Motors that it had previously transferred to Franklin Electric Manufacturing. The Indiana Supreme Court considered all these facts together and decided the two subsidiaries are not distinct and segregable from Franklin Electric and therefore are not employers entitled to a new lower unemployment insurance rate.

By Steven M. Badger

The "human cannonball," Hugo Zacchini, left an indelible impression on the law in his seminal case against Scripps-Howard 34 years ago.  Zacchini v. Scripps-Howard Broadcasting Co., 433 U.S. 562 (1977).  Zacchini's case affirmed his right to control viewing of his unique 15-second performance in which he was shot from a cannon. The U.S. Supreme Court ruled that the First Amendment did not grant the media the right to broadcast Zacchini's entire performance without his permission. 

 Zacchini's enduring legacy shot down a recent First Amendment challenge by Gannett to the Wisconsin Interscholastic Athletic Association's exclusive licensing of live internet streaming of high school sporting events.  In rejecting Gannett's claims, the Seventh Circuit relied heavily on the Zacchini case in ruling that "nothing in the First Amendment confers on the media an affirmative right to broadcast entire performances." Wisconsin Interscholastic Athletic Association v. Gannett Co., No. 10-2627 (Aug. 24, 2011). The Court distinguished broadcast of an entire performance from coverage of the event, and made it clear that media coverage of high school events could not be granted or restricted on a selective basis.

 The only recourse left to Gannett is to seek certiorari in the United States Supreme Court, which must be filed within 90 days of the Seventh Circuit's decision.

Maintaining medical records for a patient is within the scope of the Medical Malpractice Act. The Medical Malpractice Act generally requires that actions for medical negligence against health care providers must first be submitted to, and an opinion given by, a medical review panel before commencing an action in court.

In Howard Regional Health System, et al. v. Jacob Gordon, et al. , et al. No. 34S02-1009-CV-476, the plaintiff sought damages and moved for partial summary judgment for spoliation against a hospital for lost medical records. The trail court granted partial summary judgment by concluding that the defendant had a duty to maintain the records and their failure to maintain these records breached that duty under Indiana code section 16-3-7-1. The hospital appealed, arguing that maintaining medical records is within the purview of Medical Malpractice Act and thus a medical review panel must give is opinion before an action against the hospital may commence.

The Indiana Supreme Court reasoned that ongoing maintenance of test and treatment records bears strongly on subsequent treatment and diagnosis of patients. It is a part of what patients expect from health care providers. Thus, maintaining medical records falls inside within the scope of the Act and is considered a part of the practice of medicine. The Supreme Court also rejected the plaintiff's argument that it was asserting a third-party spoliation cliam, instead finding that the plaintiff's claim was essentially a first-party spoliation claim that is disallowed under Indiana law.

In an opinion dissenting in part and concurring in part, Judge Dickson was dissatisfied with the court’s view that the maintenance of medical records claim should be governed by the Indiana Medical Malpractice Act. Rather, the maintenance of records does not involve any exercise of professional medical judgment and thus should not be subject to the act.

What if after a jury verdict was established one of the parties tries to impeach that verdict with testimony or an affidavit of the jurors who returned it? The Court of Appeals recently addressed this issue and stated that it has long been established in Indiana law that the jury’s verdict cannot be impeached by testimony or from an affidavit of a juror who returned it.

In Martha Sienkowski v. Frederick E. Verschuure No. 46A03-1101-CT-5, after the jury verdict was announced, the plaintiff tried to impeach that verdict with testimony of one juror and an affidavit from another juror in an attempt to receive a new trial. The defendant filed a motion to vacate the judgment and the request for a new trial. The trial court issued its Order, granting the defendant’s motions to strike the letter and affidavit and denying plaintiff’s motion for a new trial. The plaintiff appealed.

 The Court of Appeals reiterated that the jury verdict may not be impeached by the testimony or an affidavit of the juror who returned it. The policy behind this rule comes from Stinson v. State, 313 N.E.2d 699 (Ind. 1974). In Stinson, the Supreme Court showed concern by saying; “If this [c]ourt were to permit individual jurors to make affidavits or give testimony disclosing the manner of deliberation in the jury room and their version of the reasons for rendering a particular verdict, there would be no reasonable end to litigation. Jurors would be harassed by both sides of litigation and find themselves in a contest of affidavits and counter-affidavits and arguments and re-arguments as to why and how a certain verdict was reached. Such an unsettled state of affairs would be a disservice to the parties litigant and an unconscionable burden upon citizens who serve on juries.” The court did recognize exceptions under the Indiana Evidence Rule 606(b) where a juror may testify with respect to certain aspects of the trial. The three exceptions where testimony would be allowed concern: (1) drug or alcohol use by any juror, (2) the question of whether extraneous prejudicial information was improperly brought to the jury’s attention, or (3) whether any outside influence was improperly brought to bear upon any juror. None of those exceptions were present in this case.

Where a cause of action has both legal and equitable claims, the court will look at the essential features of the suit to decide if a jury trial is appropriate. If the claim as a whole is equitable and the legal causes of action are not “distinct and severable,” then there is no right to a jury trial because the equitable claim will integrate the legal causes of action.

In Mary Beth Lucas and Perry Lucas v. U.S. Bank, N.A., as Trustee for the C-Bass Mortgage Loan Asset-Backed Certificates, Series 2006-MH-1, No. 28S01-1102-CV-78, the loan servicer Litton charged the Lucases late fees, but the Lucases argued they timely paid all their fees. Lucases filed for bankruptcy and the following month requested that Litton discontinue their escrow account. Litton continued to charge the Lucases late fees and sent the Lucases notice that it planned on accelerating their account. The current mortgage holder, U.S. Bank National Association, filed a complaint against the Lucases seeking to foreclose on the mortgaged property for failure to make payments. The Lucases filed affirmative defenses, counterclaims, and a third party complaint, along with a demand for a jury trial on issues deemed triable. U.S. Bank filed a motion to strike the Lucases’ request for a jury trial. The trial court granted U.S. Bank’s motion asserting that seeking foreclosure is essentially an equitable claim. The Court of Appeals reversed the trial court’s order relying on the test used in Songer v. Civitas Bank, 771 N.E.2d 61 (Ind. 2002).

The Supreme Court reiterated the policy from Trial Rule 38(A): “when both equitable and legal causes of action or defenses are joined in a single case, the equitable causes of action or defenses are to be tried by the court while the legal causes of action or defenses are to be tried by a jury.” The Court looked at the facts of the case to ascertain the “essential features of the suit.” The Court implemented a multi-pronged inquiry used in Songer to determine whether a suit is essentially equitable: “The court must examine several factors of each joined claim—its substance and character, the rights and interests involved, and the relief requested. After that examination, the trial court must decide whether core questions presented in any of the joined legal claims significantly overlap with the subject matter that invokes the equitable jurisdiction of the court. If so, equity subsumes those particular legal claims to obtain more final and effectual relief for the parties despite the presence of peripheral questions of a legal nature.” Despite the presence of some legal claims and requests of legal remedies by the Lucases, the Court found that the main legal issues overlap with the foreclosure issues to a substantial degree. Since the essential features of the suit are equitable, the Supreme Court affirmed the trial court’s denial of the Lucases’ request for a jury trial.

In a dissenting opinion, Justice Dickson focused on the fact that the analysis in Songer should not be modified. The modification to include the additional test of “significantly overlap” could often exclude a defendant’s right to a jury trial on distinct and severable legal claims. Legal claims that are distinct and severable from the equitable foreclosure action should be available for trial to a jury and should not be subsumed as an equitable cause of action.

When does a federal tax lien attach to real property? The Court of Appeals stated that it is considered attached to the property at the time of assessment, not at the time the tax lien was recorded.

In Charles David Kelly v. National Attorneys Title Assurance Fund, No. 69A04-1104-CT-215, the Kelly Oil Company issued title to real property by way of warranty deed to Kelly on February 19, 2004, and later recorded that deed on February 24, 2004. The IRS made assessments of the Kelly Oil Company for unpaid taxes on November 11, 2002. The federal tax liens were recorded on September 17, 2004. Kelly subsequently conveyed that same real property to the Grays by way of warranty deed. The deed did not disclose the federal tax lien. Attached to the deed was an affidavit stating among other things that there were no liens, orders, and encumbrances on the property. Gray’s insurance company, National Title Assurance Fund, did not find the recorded federal tax lien during the title search. Thereafter, the United States initiated an action to foreclose on the property. The Grays paid the United States $11,667 in exchange for a release of the lien on their property. National Insurance, as a subrogree of the Grays, filed suit against Kelly for breach of warranty of title. The trial court granted National Insurance's motion for summary judgment.

Kelly’s only argument on appeal was that the notices of the federal tax lien were not timely recorded with respect to the conveyance of the property by Kelly Oil Company to himself. The basis of this argument was that the federal tax lien did not attach to the property until it was recorded on September of 2004. The United States Codes sections 6321 and 6322 state that if a person neglects or refuses to pay any tax, the amount shall be a lien against the property, and the lien imposed attaches at the time of assessment. The Court of Appeals explained that the moment the tax assessment was made on November 11, 2002, the federal tax lien attached and the property became encumbered. Thus, Kelly breached his warranty by conveying title that is not free and clear from all encumbrances. The Court of Appeals affirmed.

Are will contest actions exempt from Trial Rule 7, regarding filing of an answer?  The Indiana Supreme Court just recently decided this question, stating that will contest actions are subject to the Indiana Trial Rules and failure to file an answer may result in a default judgment.

In Rod L. Avery and Marshall K. Avery v. Trina R. Avery, No. 49A05-1004-PL-320, Rod and Marshall Avery filed a petition in the probate estate to remove their sister (Trina) as the personal representative and to probate their mother's will dated November 14, 2008, which named Rod as the personal representative. On February 1, 2010, Trina Avery filed a separate action to contest the 2008 will, emphasizing that it was the product of undue influence, fraud, and duress, and that her mother had executed a subsequent will on January 14, 2009, which superseded and revoked the 2008 will. Notice of the separate action was given to Rod and Marshal Avery, but neither of them filed an answer. Trina Avery moved for a default judgment, and Rod and Marshall Avery filed a motion to dismiss the default judgment maintaining that a will contest does not require an answer. The trial court denied their motion to dismiss and entered a default judgment against them.

Prior to 1970, before the Indiana Rules of Trial Procedure became effective, an answer in a will contest was not required. Post 1970, the Trial Rules became more comprehensive and now govern the practices and procedures in all areas of law in the State of Indiana.  The applicability of the Trial Rules to the statutory will contest proceeding is governed by Robinson v. Estate of Hardin, 587 N.E.2d 683, 685 (Ind. 1992), which explains that the Trial Rules “supersede statutory provisions addressing matters purely civil and procedural in nature, unless otherwise stated." The Trial Rules require a timely filing of an answer and do not exempt will contests. Rod and Marshall Avery failed to file an answer, so they are in default and the trial court’s judgment is affirmed.

Where an attorney no longer represents a client but is still owed legal fees for prior services performed, the attorney may assert a retention lien over the files of the client’s case and is not required to turn over key documents upon the request of the client’s new counsel. If a trial court determines that the documents must be produced, it must simultaneously provide security for the payment of the former attorney’s fees.

This holding extends from Grimes v. Cockrom, No. 45A03-1008-CT-491, a Court of Appeals case in which a client’s new counsel issued a subpoena duces tecum to her client's former attorney in order to compel him to produce medical records paramount to a medical malpractice claim, a matter on which the attorney had previously worked.   The former attorney moved to quash the subpoena and argued that, similar to the right recognized by a mechanic’s lien, the common law of Indiana recognizes an attorney’s right to retain the documents of a former client until that client’s fees are paid. The trial court denied the attorney’s motion to quash, ordered him to produce the records, and an interlocutory appeal followed.

The Court of Appeals agreed with the former attorney that Indiana recognizes an attorney’s right to a retention lien that operates similar to the lien granted to a mechanic with unpaid service fees. If a client wishes to obtain key documents from a former attorney, a trial court has the authority to compel production of the documents, but must also provide a security to assure that the attorney’s fees will be paid in exchange for the documents’ production. The Court, in citing to Bennett v. NSR, Inc., 553 N.E.2d 881, 882 (Ind. Ct. App. 1990), acknowledged that “[l]awyers are merely afforded the same advantage enjoyed by workmen who labor on behalf of others. It is considered equitable that lawyers be allowed to retain documents and other personal property of their clients until paid.” In Grimes, because the client disputed the amount of fees owed to the former attorney, the Court remanded the case and ordered that a hearing be conducted to determine the proper amount of fees owed and that a security be provided to the attorney in that amount in exchange for the production of the medical records.

In an action brought against a governmental entity, a complaining party must have suffered something more than a general concern or disagreement with a policy, the Court of Appeals held today. The holding extends to suits brought under Indiana statutes which expressly state who may bring a claim arising under the law.

In Klosinski v. Cordry Sweetwater Conservatory District, No. 07A01-1008-PL-429, the plaintiff complained that a county conservatory district was acting outside of its statutory duties and had failed to construct sanitary sewer facilities and keep the community lakes’ coves free of sediment. The plaintiffs lived within the district and the trial court found that they had standing to sue because “[t]he Klosinskis own property in the District; they and their property are subject to and affected by the District’s rules and regulations; and they pay assessments or fees for the services provided by the District.” After denying most of the plaintiff’s requests for injunctions, the trial court issued a general injunction against the conservatory, prohibiting it from establishing or enforcing any rule that does not further its statutory purpose, an issue the defendant conceded. Both parties appealed.

On appeal, the district challenged the plaintiffs’ standing to sue on the grounds that they had not been aggrieved by any actions of the district and the plaintiffs appealed the denial of several requested injunctions. In deciding the issue of standing, the Court of Appeals looked to the language of the statute which described the parties who may sue. The statute states that “[a]n interested person adversely affected by an action committed or omitted by the board in violation of this chapter may petition the court having jurisdiction over the district to enjoin or mandate the board.” After noting that no case had yet interpreted the phrase “[a]n interested person adversely affected,” the Court followed Huffman v. Office of Envtl. Adjudication, 811 N.E.2d 806 (Ind. 2004), which interpreted similar language in a different statute. The court in Huffman interpreted the phrase “aggrieved or adversely affected” and found that "to be ‘aggreived or adversely affected,’ a person must have suffered or be likely to suffer in the immediate future harm to a legal interest, be it a pecuniary, property, or personal interest.” After noting that the Klosinskis had identified “no specific controversy with the District,” the Court concluded that “[o]ur supreme court recognized in Huffman that general standing principles are inapplicable where a statute identifies who may pursue an administrative proceeding,” and that “[t]o be ‘adversely affected,’ the Klosinskis must have more than a generalized concern. They must identify a specific harm to a pecuniary, property, or personal interest. Simply arguing they are taxpayers is insufficient.” The Court reversed the trial court’s determination that the plaintiffs had standing to sue and affirmed its denial of injunctions.

In an opinion dissenting in part and concurring in part, Judge Baker expressed dissatisfaction with the Court’s determination that the plaintiffs were not an aggrieved party, as described in the statute, because as a resident of the district in question, they are directly affected by the actions of the conservatory and should be able to bring a claim against such an entity.

In many real estate transactions, the seller will agree to provide title insurance to the buyer in an attempt to assure the buyer that their title to the property is free and clear of encumbrances. The seller may contact a title insurance company who will then solicit insurance companies to cover the property after investigating its title history.

Such was the case in Meridian Title Corp. v. Gainer Group, LLC, No. 46A03-1006-PL-312, where the trust of a deceased’s estate engaged Meridian Title to procure title insurance on property it intended to sell Gainer Group, a real estate re-seller. After Meridian obtained the insurance from a third-party insurer, the trust presented the information that it had sold more land to Gainer Group than it had intended. At a mediation meeting held by Meridian Title, Meridian’s CEO told Gainer he believed that Gainer had no claim against the trust because of a provision in the contract excluding protection where the buyer does not obtain a survey, which Gainer had failed to do. The trust filed suit against Gainer to recover the portion of property that it had not intended to sell. After initially retaining its own lawyer, Gainer filed an insurance claim with the insurer procured by Meridian and the insurer agreed to provide Gainer’s defense. Gainer then filed this separate suit against Meridian, alleging that Meridian had failed to properly handle its situation and sought to recover the legal expenses it incurred before the insurer took over the defense. Meridian filed a Motion for Summary Judgment, arguing that it owed no further duty to Gainer than the general duty to exercise reasonable care, skill and good faith diligence in obtaining a policy for title insurance.  The trial court denied the motion and this interlocutory appeal followed.

In its opinion, the Indiana Court of Appeals found that an insurance agent’s (Meridian) duty “does not extend beyond merely procuring insurance for the insured unless the insured can establish the existence of an intimate, long-term relationship with the agent, or some other special circumstance.”   Due to the standard nature of the transaction performed by Meridian, the court found there to be no intimate, long-standing relationship between Meridian and Gainer Group. The court did, however, find that there was a special circumstance present that would trigger an extended duty to advise on the part of Meridian. Because of the property dispute between the seller and the buyer of the property involved, and because of Meridian’s effort to resolve the dispute by holding a mediation conference, there was enough evidence to trigger an extended duty on the part of Meridian to advise Gainer Group regarding the title for which it obtained insurance. But because Meridian offered advice to Gainer by referencing the contract provision and stating its opinion that Gainer did not have a successful claim, the Court held that Meridian met its extended duty to Gainer and reversed the trial court’s denial of summary judgment.

On appeal from a bench trial judgment in favor of a purchaser who backed out of a condominium purchase because their inspection revealed that no power was being delivered to several outlets in the condo, the Court of Appeals reversed the trial court’s judgment and determined that the problem complained of did not constitute a major defect.

In Fischer v. Heymann, No. 49A04-1004-PL-231, the seller of a condo unit entered into a purchase agreement with a buyer that allowed for the buyer to conduct an inspection of the property before closing the deal and included that the buyer could terminate the agreement if it found what could be termed a “Major Defect” that the seller was unable or unwilling to remedy. After hiring an inspector and conducting the inspection, it was found that several outlets around the residence were not receiving power. The inspection report classified this problem as a “major concern” which was the highest level of alert on the report. The buyers presented the report to the seller who, through an agent, said that she would not be able to remedy to problem by the stated closing date and requested a two-week extension. The buyers did not grant the two-week extension and instead gave the seller several extra days to fix the problem. The day before the extension was to expire, the buyers entered into a new agreement with another seller and instructed their agent not to deliver their termination letter to the first seller until the extension period had ended. The seller eventually fixed the power issue in what turned out to be a minor repair but after receiving the termination letter, and sued the buyer for specific performance or, in the alternative, damages including attorney's fees and costs.

In its opinion, the Court of Appeals cited to the language in the contract, stating that termination could be sought for a “major defect” and determined that the buyers must have “reasonably believed” that the defect was major. The court held that the defect in the condo was not of the major variety and also held that the buyers were not able to claim that they held a reasonable belief because the inspection report, despite listing the power issue as a “major concern,” also stated that it might be easily fixed. Because the buyer did not hold a reasonable belief that there was a major defect, as defined within the contract agreement, the trial court’s decision was reversed and remanded to determine the seller's fees and costs.

In a dissenting opinion, however, Judge Brown focused on the fact that the seller did not remedy the issue until after the agreed upon closing date (and subsequent extension) had passed. Because the remedy did not take place within the time frame listed in the agreement, and because the contract also contained a “time is of the essence” clause, the dissent believed that the agreement should have been struck down and the trial court's decision should have been upheld.

In a decision handed down earlier this month, the Supreme Court refused to give a ruling on an issue that was described as being “within the special expertise of the Tax Court.” The decision comes from a rehearing of an earlier case holding that capital contributions are not automatically exempt from Indiana’s use tax.

In Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, No. 49S10-1010-TA-519, the Department of Revenue imposed a use tax of almost $2 million on Belterra due to its acquisition of a riverboat from its parent company. Belterra argued that the acquisition counts as a capital contribution, which the Department has ruled in the past as not subject to the tax. The court used what is called the “step transaction” doctrine to find that the acquisition constituted a retail transaction and was subject to the tax penalty. Belterra sought rehearing of that decision, arguing that, even if they were subject to the penalty, they shouldn’t have to pay because Indiana law says that a penalty for failure to pay taxes is waivable if the failure to pay is the result of a reasonably held belief that payment isn’t necessary.

The court said that that “the Indiana Tax Court was established to develop and apply specialized expertise in the prompt, fair, and uniform resolution of state tax cases” and that it “extends cautious deference” to decisions that should fall within such expertise. The court remanded the case to the Tax court to resolve the issues of whether or not Belterra exhausted all of its administrative remedies, whether they are subject to the tax, and if the penalty should be paid.

In Beneficial Indiana, Inc. v. Joy Properties, LLC, No. 02A05-1005-PL-260, the Indiana Court of Appeals held a mortgagee’s interest in defaulted property to be superior to that of a quitclaim deed beneficiary.

In 2003, Beneficial Indiana was granted a security interest by an executed mortgage relating to real estate owned by Ronald and Cheryl Osten. In 2008, after the Ostens failed to pay property taxes, Allen County held an auction sale to recoup the tax dollars owed. The Ostens failed to exercise their rights to reclaim the property before the expiration of a one-year redemption period, leaving a surplus of $42,462.20. After Beneficial Indiana filed a motion asking for the surplus funds to be held pending court action, citing the Osten’s defaulted mortgage, the Ostens executed a quitclaim deed to Joy Properties granting them their interest to the property.

In an action between the two parties, the court explained that Beneficial Indiana’s security interest in the property was extinguished by the tax sale, but then followed the proceeds and attached to the surplus money. The deed executed by the Ostens only granted Joy Properties an interest in the real estate subject to Beneficial Indiana’s mortgage lien, meaning the surplus should have been given to Beneficial Indiana to satisfy the defaulted mortgage.

The Court of Appeals held last week that a real estate agent representing a buyer in a transaction only owes the selling party a duty of honesty and a duty of not knowingly giving out false information, pursuant to Indiana statutory law.

In Likens v. Prickett’s Properties, Inc., a buyer’s agent in a real estate transaction contacted a seller independently to encourage acceptance of the buyer’s offer. The agent represented to the seller that, although closing would have to wait several months until the buyer was able to secure enough cash for the purchase, the buyer presented a good offer and would make rental payments to the seller on the property until closing. The agent also told the seller that the buyer deposited $10,000 in escrow, which was to be held in the form of a bank letter of guarantee of funds. After closing did not occur by the date specified and the bank letter was determined to be fraudulent, the seller sued the agency, the buyer, and the agent for negligence and fraud.

The trial court granted summary judgment in favor of the real estate agent on both counts, citing Indiana Code § 25-34.1-10-11, which states that a licensee (a real estate agent) representing a buyer “owes no duties or obligations to the seller or landlord except that a licensee shall treat all prospective sellers or landlords honestly and not knowingly give them false information.” The statute also states that the agent bears no responsibility to ensure the financial stability of the buyer. The Court of Appeals, in affirming the granting of summary judgment, explained that because there was no statutory duty owed to the seller, there could be no negligence claim. The seller failed to appeal the summary judgment as it related to the fraud claim, so no further investigation of the agent’s knowledge needed to be conducted.