Property Appeals

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.

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.

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.

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 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.

The Court of Appeals of Indiana upheld the trial court in a decision granting summary judgment in favor of a firefighter who allegedly made malicious comments during the course of fighting a fire.

Terry Hart, Assistant Fire Chief with the Martinsville Fire Department, was overheard by the son of the plaintiff saying “let it burn” while responding in an assisting capacity to a fire in Washington Township. In a complaint against Hart, as an individual and in his capacity with the fire department, and against the Martinsville Fire Department for negligence, the family who owns the burned property alleged that Hart and the fire department didn’t take proper care in ensuring that the property was protected from the fire. The trial court granted summary judgment in favor of the defendants, citing the common law and black letter rule of governmental immunity. 

In the opinion of Ellis v. City of Martinsville, No. 55A01-1003-CT-141, the court determined that the negligence actions against Hart and the city did not have issues of material fact and granted summary judgment for the municipalities. The court sided with the argument that the fire department cannot be held liable for the decisions made by those in charge of its operations and also that the individuals in charge of making those decisions cannot be held liable as long as the decision is made in the course of employment. Because Hart arrived at the scene in firefighting gear and was paid for his time at the fire, he was determined to be acting in his capacity as a firefighter and, thus, was granted immunity from liability to the homeowners.

The Court of Appeals reversed the trial court and held that student loan funds that are deposited into a personal bank account are exempt from being attached by a judgment creditor.

Nikki Brindle and Patrick J. Arata entered into an agreed judgment whereby Brindle would pay Arata for legal services provided. Arata initiated proceedings to seek funds from Brindle’s bank account at National City Bank, at which time contained $3,367.01. A week later, Brindle filed an exemption claim and requested a hearing. At the hearing, Brindle introduced a voucher from the Academy of Art University stating that she would receive a check in the amount of $3,268.00 which was the amount left over after her tuition was paid to the university. The trial court denied Brindle’s exemption claim and ordered all funds except $300.00 to be transferred. The court stated the funds lost their exempt status when they were deposited into her bank account. Brindle appealed.

In Nikki Brindle v. Patrick J. Arata, No. 02A05-1004-SC-239, the Court of Appeals held that under U.S.C. Title 20 section 1095a, regarding wage garnishments, the plain language of the statute was clear that student loan funds and property traceable to those funds were exempt from garnishment or attachment. Furthermore, because there were no provisions to terminate this status, a contrary decision would render section 1095a meaningless, which the Court doubted was Congress’ intent. It stated that almost every recipient of student funds deposits their funds into a personal bank account and that it “could not imagine that Congress wishes those who receive student loans to stuff their mattresses with their rent money to prevent judgment creditors from attaching it.” Additionally, it distinguished the garnishment of retirement funds after they were deposited from the garnishment of student loan funds. The federal statutes are only extended to protect from the collection of student loans. The Court stated that "not being able to give something away is quite different from having it protected from being taken away." Retirement fund statutes do not apply to student loans. Therefore, the trial court’s holding was erroneous because the student loan funds that Brindle deposited into her bank account were protected, and Arata was prohibited from attachment. Trial court’s holding is reversed.
 

     In insurance law, the insured has the initial burden to make accurate representations in the application.  If an insurance policy is issued, the insurer then has the burden to issue a policy with clear language and provide insurance according to the policy's terms.  Because the insurer is charged with writing an unambiguous policy, if a dispute between the insured and insurer turns on a term that is deemed ambiguous the policy is interpreted in favor of coverage. 

     In Allied Property & Casualty Ins. Co. v. Good, the Court of Appeals held that a policy is void ab initio and summary judgment should be entered in favor of the insurer when the insured makes a material misrepresentation on the application for insurance.  Specifically, the Court held:  "Because the uncontradicted evidence indicates Linda misrepresented the Goods' cancellation history on the application for homeowners insurance and Allied would not have issued the policy if it had known the truth about their history, the trial court erred by denying Allied's motion for summary judgment."

     Of note, Indiana appellate courts have stated that an ambiguity does not exist merely because the parties proffered differing interpretations of the policy language.  In this case, no ambiguity was found even though one of the three judges on the appellate panel interpreted the disputed language in the policy differently.  In dissent, Judge Bailey opined that the insured may not have provided misinformation in the application.  Judge Bailey further stated that, even if the insured provided misinformation, an insurer's use of a self-serving affidavit may not be sufficient to prove the materiality of the misrepresentation.

The Indiana Court of Appeals held that a master homeowners’ association was required to be established by the controlling ordinances for a planned unit development (“PUD”) and that a swimming pool was within the scope of the association’s responsibilities.

The City of Greenwood adopted a zoning ordinance for planned unit developments which provided “there shall be established a homeowners association to provide for the control and maintenance of all common areas.” A developer submitted the Master Plan for The Pines of Greenwood’s PUD, and it consisted of five communities with two types of homes and densities, the Pines of Greenwood (“POG”) and the Village Pines (“VP”). The Master Plan did not contain any definitions, but was approved by the Greenwood Common Council in an ordinance that amended the city’s zoning ordinance (“Master Plan Ordinance”). Later, covenants and restrictions were recorded establishing two separate homeowners’ associations for the POG and VP communities. However, a master homeowners’ association was never established for The Pines as a whole. 

A swimming pool was built in the POG community, but not in the VP community. The POG covenants stated that only POG property owners could use the pool. The VP community filed a complaint seeking to reform the POG covenant because it “mistakenly omitted a provision whereby the residents of VP would be permitted to use the community swimming pool” located in the POG area. The VP community argued that a master homeowners’ association should be established for maintenance and operation of the common areas. The trial court held that the creation of a master homeowners’ association to control the common areas was not expressly stated in the documents reflecting the development of The Pines. VP appealed.

The issue in The Village Pines at the Pines of Greenwood Homeowners' Assn. Inc. v. The Pines of Greenwood Homeowners' Assn. Inc., Case No. 41A01-0912-CV-568, was whether the Master Plan Ordinance required a master homeowners’ association, and if required, what areas this association would control. The Court read the PUD zoning ordinance and the Master Plan Ordinance together because they contained the same subject matter and, thus, should be read together to come to a “harmonious statutory scheme.” Both the PUD ordinance and Master Plan Ordinance discussed a master homeowners’ association. Thus, a master homeowners’ association was required for The Pines. Furthermore, when deciding if the master homeowners’ association responsibilities included the swimming pool, it looked at the terms “amenities” and “park area” contained in the ordinances. Although the terms were not defined, it used the plain, ordinary and usual meanings of the words. It held that the swimming pool was within the definition of the terms because a pool is an “amenity or park area available as a recreation area to all residents.” Therefore, it was within the master homeowners association’s responsibilities to properly control, maintain and operate it. The Court reversed the trial court’s holding and ordered the parties to engage in mediation.

The Indiana Court of Appeals held, as a matter of first impression, that the definition of a “courthouse” for a notice statute can be a temporary courthouse in which the courts convene while a permanent county courthouse is undergoing repairs.

In August 2009, the Grant County Courthouse was undergoing repairs. Due to the repairs, the court was relocated to a temporary site. Around this time, Claudette Gee’s home was ordered into foreclosure. The Grant County Sheriff’s Department posted notice of the foreclosure on a bulletin board located next to the door of the temporary courtroom. A week after Gee’s property was purchased, Gee moved to set aside the sheriff’s sale. She argued that the sheriff’s office failed to post notice of the sale “at the door of the courthouse” as required by Indiana statute. The trial court denied Gee’s motion and Gee appealed to the Indiana Court of Appeals.

In Claudette Gee v. Green Tree Servicing LLC, No. 27A02-1003-MF-304, the issue on appeal was whether the sheriff followed the correct procedure when the sheriff posted notice of the sale at the temporary county court offices and not at the permanent county courthouse. The Court held that the sheriff complied with Indiana’s notice statute because a “courthouse” is defined as a place where judges convene to adjudicate disputes and administer justice. The Court relied on Black’s Law Dictionary for this definition, as it was not defined in a statute. Because the temporary courtroom was the place where three of the four county courts convened during renovations, the Court determined that the plain meaning of the statute also applied to temporary courtrooms. Therefore, the sheriff followed the proper notice procedure and the foreclosure sale was valid. The court noted, however, that Gee did not argue that the sheriff was required to post notice at both sites, and thus, the Court did not consider this issue. Affirmed.

The Indiana Supreme Court split in a 3:2 decision on the issue of whether an “occurrence” under a commercial general liability (CGL) policy covered a subcontractor’s faulty workmanship under the insured’s contract.

Sheehan Construction Company was a general contractor on the Crystal Lake residential project, and was responsible for hiring subcontractors to build the houses. During the period when the houses were being built, Sheehan was insured by Continental Insurance Co. under a CGL policy that covered all damages the insured was legally obligated to pay because of “bodily injury” or “property damage” that were caused by an “occurrence” in the coverage territory. This policy excluded coverage for damages to the insured’s property and work that arose out of work performed on “your behalf by a subcontractor.” Sheehan was also insured by Somerville Construction, one of Sheehan’s subcontractors, under their CGL policy through Indiana Insurance Company.

In April 2000, Vincent B. Alig and his wife Mary Jean Alig purchased a home in Crystal Lake. A few years later, the Aligs experienced leaking windows, water damage, and other issues in their home and notified their homeowner insurance carrier, who later found that the problems resulted from faulty workmanship of Sheehan’s subcontractors. In November 2004, the Aligs filed suit against Sheehan alleging violation of Indiana Code sections 32-27-3-1 to 14 (concerning cause of action for construction defects). Later, more homeowners in the Crystal Lake subdivision joined and created a class-action suit. The class and Continental Insurance settled.   Continental filed for declaratory judgment claiming that Sheehan’s claims were not covered under the policy. Sheehan and the class filed a third-party complaint against Indiana Insurance and MJ Insurance, Sheehan’s insurance broker. The trial court granted summary judgment in favor of Continental, MJ, and Indiana Insurance. The Court of Appeals affirmed.

In Sheehan Construction Co., Inc., et al. v. Continental Casualty Co., et al., No. 49S02-1001-CV-32, Justices Robert Rucker, Brent Dickson, and Theodore Boehm held that CGL policies can cover an insured’s liability for a subcontractor’s faulty workmanship. The issue the Court grappled with was whether faulty workmanship is an “accident” within a standard CGL policy’s definition of an “occurrence.” The majority determined that faulty workmanship is an accident if the damage is the result of an unexpected or unforeseeable event. The Court defined an “accident” as an unexpected happening without intention or design. Implicit in this definition is a lack of intent. If the faulty workmanship was the product of unintentional conduct, then the resulting damage would be unforeseeable and would be an accident within the CGL policy’s definition of an “occurrence.” This analysis is fact specific and should be determined on a case-by-case basis. In this case, the trial court did not conclude on the issue of whether the faulty workmanship was intentional or unintentional and the trial court’s judgment was reversed and remanded for further proceedings.

Dissent:

Chief Justice Shepard: This opinion leads Indiana to the wrong result because CGL policies are not designed or priced to cover any demand an insured may face. Oral argument suggested that an insurance product that covers an insured’s faulty work may not even exist. Therefore, CGL policies should not cover faulty subcontractor work as an accident within standard coverage of a CGL policy’s definition of an “occurrence.”  

Justice Sullivan: An “occurrence” under a CGL policy is an accidental damage caused by an insured or an insured’s subcontractors, to property owned by third-parties, but not the costs of repairing work performed. Instead, a party who wishes to insure against damages from faulty workmanship should obtain protection from a performance bond.

            Lost Creek is a not-for-profit organization that has been operating a shooting range since 1934 in a rural area of Vigo County, Indiana. Shooting activities at Lost Creek’s shooting range increased after September 11, 2001, because members of Vigo County’s law enforcement began using their range. On July 17, 2007, the homeowners who lived near Lost Creek filed a complaint for injunctive relief seeking to abate the nuisance of the shooting range. 

            In Phyllis Woodsmall, et al. v. Lost Creek Township Conservation Club, Inc., Case No. 84A01-1001-PL-33, the trial court refused to enjoin Lost Creek because the homeowners failed to establish their burden of proof. Accordingly, the homeowners appealed, from a negative judgment, and the case was reviewed by the Indiana Court of Appeals under the clearly erroneous standard. To prevail under this standard, the homeowners had to establish that the conclusion reached by the trial court was contrary to the law.

            In Indiana, the statute defines an actionable nuisance as: “Whatever is (1) injurious to health; (2) indecent; (3) offensive to the senses; or (4) an obstruction to the free use of property; so as essentially to interfere with the comfortable enjoyment of life or property [.]” IC § 32-30-6-6. The homeowners’ statutory nuisance complaint concerned the legal use of land that affected a finite number of people. Thus, they alleged a private, per accidens nuisance against Lost Creek.

           Our First Amendment right to express ourselves is one of our most cherished freedoms.  It is a right that is sometimes abused, but the law provides free expression ample breathing space to avoid stifling that right.

            The Indiana Supreme Court and the Indiana Court of Appeals recently addressed freedom of expression in two cases where it was claimed that speakers abused their free speech rights by making defamatory misstatements that harmed another person.

            In Dugan v. Mittal Steel USA Inc., No. 45S05-1002-CV-121 (June 17, 2010), the Indiana Supreme Court concluded that certain defamatory statements made about an employee during an employer’s investigation of the disappearance of company equipment were protected by a qualified privilege and therefore not a basis for the employee’s defamation claim.  Indiana law recognizes a “privilege” or legal protection in certain circumstances where it is particularly important as a matter of public policy to encourage speech.  When such a privilege applies, speakers are liable for defamation only if they knew their statement was false or had substantial doubt about the truth of the statement.

            In Dugan, an employee claimed she was defamed by a supervisor who told the company’s chief of security that the employee had defrauded the company and stolen its equipment.  The Supreme Court had no difficulty finding that the statements were defamatory per se, because they accused the employee of criminal conduct.  However, the Court recognized that the supervisor had a duty to cooperate with his company’s investigation of theft and report what he knew or heard to his employer.  It is sound public policy to encourage such communications and therefore Indiana law applies a privilege to protect and encourage those communications.

The employee argued that the supervisor’s statements should not be protected because they were based only on second-hand information he had received from others, rather than his direct, personal observation.  The Indiana Supreme Court expressly rejected that argument. The Court explained:

“It is unreasonable and contrary to sound policy for the common interest qualified privilege for intra-company communications about theft of company property to apply only for statements made on personal knowledge and to exclude the reporting of information received from others.”

It is not hard to imagine how an intra-company investigation of theft would be hampered if employees were not encouraged to report everything they knew or heard that could assist the investigation.   Application of the qualified privilege does not depend on the source of the speaker’s information, but rather whether the speaker “lacked any grounds for belief as to the truth of the statements.”

The Indiana Court of Appeals opinion in In re Paternity of K.D., No. 49A02-0907-JV-693 (June 29, 2010) addressed a different problem – under what circumstances may a Court order a person to refrain from speaking about a particular subject.  Government bans on speech are referred to as “prior restraints” because they seek to stop or silence people before they have expressed themselves.  Prior restraints are rarely appropriate under the First Amendment because they are in effect government censorship of expression.

In K.D., the court faced a harrowing situation involving allegations by a mother that her daughter had been sexually abused by her father.  The case involved a paternity action brought before the juvenile court.  Two different judges on two different occasions found the mother’s allegations of abuse against the father to be unsubstantiated.  After the second time the court rejected the mother’s allegations of abuse, she took her story to the press.  The mother repeated her allegations in a series of newspapers and harshly criticized the father's lawyer and the judges who handled the case.

In response to the articles, the father asked the court to find the mother in contempt for allegedly violating Indiana juvenile law by discussing the proceedings with the press.  The Indiana juvenile court declined to hold the mother in contempt, but the court did expressly bar the mother from talking any further with the news media or anyone else about the case.  The mother appealed from that order.

The Indiana Court of Appeals reversed the order as an overbroad and invalid prior restraint.  In doing so, the Court of Appeals applied the well-established First Amendment rule that:  “Any system of prior restraints of expression comes to the court bearing a heavy presumption against its constitutional validity.”  That rule was established in the famous “Pentagon Papers” case in which the United States Supreme Court struck down a court order prohibiting the New York Times from reporting information received from an informant about a top secret Defense Department study about the Viet Nam War.  New York Times Co. v. United States, 403 U.S. 713 (1971).

By George T. Patton, Jr. and Kellie M. Barr

      In May, the Indiana Supreme Court issued six civil opinions and granted transfer in two civil appeals. The Indiana Court of Appeals issued twenty-three published civil opinions, seven of which are briefly summarized in this column. The full text of each decision is available via Casemaker at www.inbar.org.    
 

INDIANA SUPREME COURT

Dispute between Internet marketing firm and company for website design is not for "goods and services" pursuant to Indiana's Article 2 of the Uniform Commercial Code and, under the facts of this case, the company could not sustain conversion claim for website's removal

      The Indiana Supreme Court tackled numerous issues of first impression to resolve a dispute between a company and an Internet marketing firm that created and hosted the company's website.  Conwell v. Gray Loon Outdoor Mktg. Group, Inc., 906 N.E.2d 805 (Ind. 2009). Although the parties fulfilled their obligations under their written agreement, the company later refused to pay for hosting fees and additional changes it requested to the website. The marketing firm sued the company for payment, and the company counterclaimed that the marketing firm committed conversion by taking down the original website for which the company had already paid.

      The Supreme Court first addressed whether Article 2 of Indiana's Uniform Commercial Code ("U.C.C.") or common law principles of contract law governed the parties' transaction. By applying the "predominant thrust" test to determine whether the transaction involved the transfer of goods or the performance of service, the Court held that "[a] website created under arrangements calling for the designer to fashion, program, and host its operations on the designer's server is neither tangible nor moveable in the conventional sense." Id. at 812. Because agreement of the parties "contemplated a custom design for a single customer and an ongoing hosting relationship[,]" the U.C.C. did not apply. Id.

      The Court examined the marketing firm's claim for payment under common law principles and determined that although the website modifications were not contemplated by the parties' original agreement, the company requested the changes without inquiring into the amount the changes would cost. The marketing firm's invoice was the only evidence submitted to the trial court regarding the reasonableness of the charges, and there was evidence that a representative of the company accepted the price after receiving the invoice. Because there was no evidence that the marketing firm "participated in an unconscionable effort to 'strong arm' [the company] into paying an unreasonable fee," the Court affirmed the trial court's decision to enforce the parties' agreement, even though the marketing firm had not provided a cost estimate. Id. at 813.

      Turning to the company's counterclaim that the marketing firm committed conversion by taking down the website for which the company paid, the Court analyzed how copyright law affected the legal status of the website. For the company's counterclaim to succeed, the website either had to be a "work made for hire" where the company was the original owner or the marketing firm had to have transferred ownership of the website to the company. The Court determined that the website was not a work made for hire because the marketing firm was an independent contractor, not the company's employee. The Court also concluded that language in the marketing firm's proposal that the company inherently owned the product was insufficient to transfer ownership of the website from the marketing firm to the company. The marketing firm did, however, have a nonexclusive license because the "parties intended to transfer a copyright, but failed to do so in writing." Id. at 816. Because a nonexclusive license is not an ownership interest under copyright law, however, the marketing firm did not commit conversion by removing the website, and the company's counterclaim failed.

      Concurring in result, Justice Boehm wrote separately to explain that, in his view, a website is "property" for the purposes of tortious or criminal conversion. Id. at 817. Although the company was a licensee that could not sustain a conversion claim, Justice Boehm emphasized that licensees are not without remedy. In this case, the marketing firm arguably "created the problem that the licensed code no longer existed" and "had no right to seize both phases [of the website design] as collateral for its unpaid work on the second phase." Id. 818-19. Although the company's damages were "a matter of speculation on this record," Justice Boehm noted that the company could have asserted breach of license as either an affirmative defense or set-off. Because it did not, he concurred with the majority's result.

Evidence of discounted payments healthcare providers accept from insurance carriers on behalf of injured plaintiffs can be introduced into evidence to determine the reasonable value of the services to the extent it can be done without referencing insurance

      The Indiana Supreme Court confronted "the question of how to determine the reasonable value of medical services when an injured plaintiff's medical treatment is paid from a collateral source at a discounted rate." Stanley v. Walker, 906 N.E.2d 852, 855 (Ind. 2009). In an opinion authored by Justice Sullivan, the Court held that evidence of a healthcare provider's acceptance of a reduced amount of compensation for services provided to a plaintiff may be introduced to help a jury determine the reasonable value of the services "[t]o the extent the discounted amounts may be introduced without referencing insurance." Id. at 853. The Court analyzed Indiana Rule of Evidence 413 and the "complexities of health care pricing structures[, which] make it difficult to determine whether the amount paid, the amount billed, or an amount in between represents the reasonable value of medical services." Id. at 857. Ultimately, the Court held that Indiana's collateral source statute does not bar evidence of discounted payments accepted by healthcare providers to determine the reasonable value of services. "Given the current state of the health care pricing system where . . . authorities suggest that a medical provider's billed charges do not equate to cost, the jury may well need the amount of the payments, amounts billed by medical providers, and other relevant and admissible evidence to be able to determine the amount of reasonable medical expenses." Id. at 858. 

      Justice Dickson authored a dissenting opinion, joined by Justice Rucker, arguing that the majority's rule "contravenes the express requirements of the collateral source statute." Id. at 860 (citing Ind. Code § 34-44-1-2). The dissent also disagreed that the collateral source statute abrogated the common law collateral source rule because "the statute's precise language appears to create a limited exception to the common law rule, which is otherwise left intact." Id. at 862. "Under today's new rule, the existence and extent of any improvement to the accuracy of verdicts seems overwhelmed by the significant probability of incompleteness, confusion, and resulting unfairness, all further compounded by detrimental effects on the fairness and efficient administration of justice." Id. at 865.

      Justice Boehm, joined by Chief Justice Shepard, wrote separately to respond to points made by the dissent and emphasized that "we hold today only that the discounted price actually paid for medical services is admissible evidence as to the reasonable value of those services. We do not hold that it is conclusive." Id. at 859.

Although claim against mother's estate was timely, daughter failed to rebut presumption that services rendered to her incapacitated mother were gratuitous because no evidence that daughter had an express or implied contract with mother's guardian

      The Indiana Supreme Court unanimously reversed the trial court's denial of an estate's motion for summary judgment on a daughter's claim against her mother's estate for reimbursement for various expenses and personal services that the daughter rendered to her mother while the mother was subject to a guardianship. Estate of Prickett v. Womersley, 905 N.E.2d 1008 (Ind. 2009). First, the Court addressed the Estate's argument that the daughter's reimbursement claim was time-barred because she had not filed her claim in the guardianship proceeding. Interpreting the Guardianship Code, the Court held that Indiana Code § 29-3-10-1(d) does not require a claim to be filed against the guardianship estate and "in the absence of legislative direction mandating a guardian's approval, we are apprehensive of the administrative and other practical consequences of ordering a guardian's review of all claims filed in a probate estate that accrue during a decedent's guardianship." Id. at 1012. Therefore, the daughter's claim for reimbursement was not time-barred because she was not required to pursue it in the guardianship proceeding and she properly filed it against her mother's estate.

      The Court reaffirmed the rebuttable presumption that services rendered by a family member are gratuitous. Although the daughter designated evidence that her mother signed a statement in front of two witnesses that she wanted her estate to compensate her daughter for her services, the Court held that the mother could not enter into a contract at the time she executed the statement and, consequently, "when the provider is a family member the implied contract must exist between that person and the incapacitated person's guardian." Id. at 1013. Because the daughter failed to produce evidence that she had an express or implied contract with her mother's guardian, she failed to rebut the presumption that her services were gratuitous as a matter of law.

An insurance company's policy was consistent with Indiana's uninsured motorist statute and insureds were not entitled to uninsured motorist benefits for the death of their unmarried adult son because they did not suffer bodily injury

      The Indiana Supreme Court unanimously held that named insureds who brought an action against their automobile insurer to recover uninsured motorist benefits for the death of their unmarried adult son were not persons "legally entitled to recover damages" for their son's death. Bush v. State Farm Mut. Auto. Ins. Co., 905 N.E.2d 1003, 1008 (Ind. 2009). For purposes of its uninsured motorist coverage, the parents' insurance policy defined "insured" to include the named insureds and their relatives, which were defined as related persons primarily residing with the named insureds. Because their adult son no longer lived with his parents, he was not an insured under his parents' policy.

      The insured parents argued that they were entitled to uninsured motorist benefits because their policy was inconsistent with Indiana's uninsured motorist statute-Indiana Code § 27-7-5-2-and, thus, unenforceable. The Court disagreed and emphasized that "the statute itself makes clear that it contemplates uninsured motorist coverage only for the 'insured's' bodily injury." Id. at 1005. The insurance company's policy was "consistent with the uninsured motorist statute by requiring that the insured sustain bodily injury to trigger uninsured motorist coverage." Id. Reaffirming a previous holding, the Court held that the definition of bodily injury includes emotional distress "only if it arises from a bodily touching." Id. (citing State Farm Mut. Auto. Ins. Co. v. Jakupko, 881 N.E.2d 654 (Ind. 2008)). "Indiana's uninsured motorist statute requires coverage only for bodily injuries sustained by an insured." Bush, 905 N.E.2d at 1007-08. Because the parents did not suffer bodily injury, they did not have uninsured motorist coverage for their adult son's death.

For purposes of the Family and Medical Leave Act, the 1250-hour requirement applies to an employee's overall service, not service in any particular position, and a trial court's exercise of equitable jurisdiction to award an employee front pay had to be discounted to reflect present day value

      The Indiana Supreme Court addressed issues of first impression surrounding a full-time teacher, part-time football coach's claims against his school corporation employer under the Family and Medical Leave Act ("FMLA"). Gary Cmty. School Corp. v. Powell, 906 N.E.2d 823 (Ind. 2009). Although the school reinstated the employee to his full-time teaching position after his medical leave, it did not reinstate him to his head coaching position. Additionally, the school rejected him as head football coach in subsequent years, which the teacher argued was retaliatory conduct for comments he made to a local newspaper regarding the school's failure to restore him to his coaching position following his medical leave.

      The Court held as an issue of first impression that "an employee filling multiple positions with the same employer is eligible for FMLA leave as to all positions if that employee has completed 1,250 total hours of service to that employer in the twelve months preceding the request for leave." Id. at 828. As the Court noted, "the test for [FMLA] eligibility is phrased in terms of 'hours of service' to an 'employer,' not service in any particular position." Id. Therefore, because the 1,250-hour requirement applies to an employee's overall service, the school corporation was required to reinstate the employee to both the full-time teaching position and the part-time coaching position. Additionally, the Court concluded that the employee presented sufficient evidence to support the jury's conclusion that the school corporation retaliated against him for voicing his complaints to a local newspaper, which were not permissible grounds for retaliation under FMLA.

      The school corporation presented numerous arguments challenging the trial court's award of damages. As an issue of first impression, the Court concluded that although the trial court did not abuse its discretion by exercising equity jurisdiction and awarding front pay, "front pay should be discounted to present value. Without discounting, [the employee] would receive a windfall in the form of the use of the money years before it would have been earned." Id. at 834. The Court remanded the action to the trial court to discount the front pay award to present day value, but otherwise affirmed the trial court in all respects.

Employees' damages award for backpay after employer's violation of Indiana Civil Rights Act should not have been reduced by amount of unemployment benefits received

      Two employees filed a complaint with the Michigan City Human Rights Commission ("Commission"), alleging that their employer violated the Indiana Civil Rights Act when it discriminated against them on the basis of race and terminated them for timecard fraud. Filter Specialists, Inc. v. Brooks, 906 N.E.2d 835 (Ind. 2009). The Commission concluded that race was the motivating factor behind the firings and awarded the employees damages for backpay and fringe benefits. The Indiana Supreme Court concluded that the employees proved their claim even though they did not introduce evidence of the ordinance establishing the Commission because the ordinance "has no bearing on whether [the employer] discharged [the employees] on the basis of race in violation of the Indiana Civil Rights Act." Id. at 845. Additionally, the employees presented substantial evidence to support the Commission's conclusion that they had suffered unlawful discrimination, even though there was "no smoking gun" regarding the employer's mental processes. Id. at 848.

      Regarding damages, the Court agreed with a majority of federal circuit courts that "unemployment benefits should not be deducted from backpay awards in discrimination cases." Id. at 849. Consequently, the trial court erred by ordering the case remanded to the Commission because "the damages awarded to [the employees] should not have been affected by their receipt of unemployment compensation." Id. at 850.

INDIANA COURT OF APPEALS

> Father had independent cause of action against Indiana Patient's Compensation Fund for negligent infliction of emotional distress after he witnessed the death of his son, which was caused by the negligent conduct of healthcare providers. Ind. Patient's Comp. Fund v. Patrick, 906 N.E.2d 194 (Ind. Ct. App. 2009).

> Oral findings and conclusions that are "thoroughly detailed in the record" satisfy the purpose of special findings under Indiana Trial Rule 52(A). Nunn Law Office v. Rosenthal, 905 N.E.2d 513 (Ind. Ct. App. 2009). Additionally, an attorney employed under a contingency fee contract who is discharged prior to occurrence of the contingency is limited to quantum meruit recovery. 

> Trial court should have granted party's request for a hearing on motion to change venue pursuant to Indiana Trial Rule 75(A) because of conflicting evidence and the lack of evidence regarding the location of plaintiff's principle office. Painters Dist. Council 91 v. Calvert Enter. Electronic Servs., Inc., 906 N.E.2d 254 (Ind. Ct. App. 2009).

> The Indiana Motor Vehicle Protection Act, commonly known as the Lemon Law, "obligates a consumer to demonstrate that the vehicle was subject to repair at least four times and that the same defective condition remained unresolved after the fourth attempt." Metro Health Profs., Inc. v. Chrysler, LLC, 905 N.E.2d 1026, 1033 (Ind. Ct. App. 2009). Once a consumer has met the four-repair requirement and files a claim shortly after the fourth attempt, as a matter of law, the automobile manufacturer is obligated to either refund the amount the buyer paid or provide a replacement vehicle of comparable value.

> Employee's claim against political subdivision employer is governed by the three-year statute of limitations contained in the Federal Employers' Liability Act instead of the two-year statute of limitations governing Indiana personal injury claims. Januchowski v. N. Ind. Commuter Trans. Dist., 905 N.E.2d 1041 (Ind. Ct. App. 2009).

> Bureau of Motor Vehicles' policy of revoking driving privileges after class members whose recorded personal information did not match information on file with the Social Security Administration violated federal due process because the BMV failed to articulate ascertainable standards for current identification holders. Leone v. Ind. Bureau of Motor Vehicles, 906 N.E.2d 172 (Ind. Ct. App. 2009). The policy did, however, have the rational basis of preventing identity theft, and the trial court properly denied the class members' request for a preliminary injunction because the class failed to show an injunction would be in the public interest. 

> Jim Mansfield was initially declared the winner of the Muncie mayoral election but his opponent, Sharon McShurley, was declared the winner after a recount. Mansfield v. McShurley, --- N.E.2d ---, No. 18A02-0804-CV-375 (Ind. Ct. App. 2009). The trial court dismissed Mansfield's statutory challenge to the election as well as his amended complaint asserting a quo warranto action. On appeal, the Court of Appeals held that a statutory contest action "may not be brought outside the statutorily prescribed time frames even if, as in the case before [the Court of Appeals], the election result changes by virtue of a recount." Additionally, the trial court did not err by dismissing the quo warranto complaint because the recount commission did not act unlawfully by declining to count certain absentee ballots.

TRANSFER ORDERS

> Babes Showclub v. Lair, 901 N.E.2d 44 (Ind. Ct. App. 2009) (whether a police officer's claims for injuries he suffered responding to a complaint on the club's premises were barred by the Fireman's Rule), transfer granted on May 7, 2009.

> Ind. Family & Soc. Servs. Admin. v. Meyer, 900 N.E.2d 74 (Ind. Ct. App. 2009) (whether the trial court had discretion to respond to procedural error by granting a belated extension of time), transfer granted on May 14, 2009.

      George T. Patton, Jr., is a partner at Bose McKinney & Evans LLP, Indianapolis/Washington, D.C. and co-chair of its Appellate Group. He was the first chair of the ISBA Appellate Practice Section, served as an Adjunct Assistant Professor of Appellate Advocacy and Procedure at the Indiana University School of Law-Bloomington for five years, and has written four articles on recent developments in Indiana appellate procedure for the Indiana Law Review. George's book on the 2001 Indiana Appellate Rules is 24 Indiana Practice-Appellate Procedure (3d Ed. West Publishing Co. 2001 & 2006 Supp.). 

      Kellie M. Barr is an associate at Bose McKinney & Evans LLP, Indianapolis, and works on business, commercial, and appellate litigation. Upon graduating from the Indiana University School of Law-Bloomington, Kellie served as a law clerk to Chief Judge John G. Baker at the Indiana Court of Appeals. Kellie is the co-author of an article on recent developments in Indiana appellate procedure to be published in the Indiana Law Review later this year.

by Steven M. Badger 

In Indiana zoning law, the doctrine of "vested rights" protects developers who have made large investments in a construction project from having those investments thwarted by changes in zoning requirements while the development project is underway.  City of New Haven v. Flying J. Inc., No. 02A03-0902-CV-74, Ind. Ct. App. (August 31, 2009), recently addressed the question of what steps a developer must take in reliance on a set of existing zoning standards before that developer enjoys the protection of such "vested rights."

Flying J involved a tortuous litigation path including two appeals (and even a diversionary foray by the developer into federal court).  Flying J proposed to build a travel plaza (including a gas station, convenience store, 24-hour restaurant and other amenities) on a 17-acre site.  The initial BZA decision rejected the development, but that decision was overturned in the first appeal because the Indiana Court of Appeals concluded the travel plaza involved permitted uses under the New Haven zoning ordinance.  After that decision, however, New Haven amended its zoning ordinance to impose new restrictions on the size (by acerage) of service stations.  The size and scale of Flying J's planned travel plaza exceeded the limitations of the amended ordinance.  The issue addressed by the Indiana Court of Appeals in the second appeal was whether Flying J had a "vested right" to proceed with its development plans under the earlier version of New Haven's ordinance.

The Indiana Court of Appeals affirmed the trial court's decision finding that Flying J's vested right in its planned development precluded application of the amended ordinance.  The Court rejected the BZA's argument that Flying J had no vested right because it had not yet begun construction on the travel plaza.  Quoting an earlier decision in Pinnacle Media LLC v. Metropolitan Dev. Comm'n, 868 N.E.2d 894, 900 (Ind. Ct. App. 2007), the Court stated that "there is no bright-line rule that construction must have commenced in order to show a vested right."  The Court elaborated:

We read the Pinnacle cases to mean that, while construction definitely does establish a vested right, mere preliminary work, including filing of a building permit, does not.  In situations falling between these two extremes, courts must engage in a fact-sensitive analysis to determine whether vested rights have accrued prior to application for a building permit or construction.

The Court of Appeals concluded that the $4 million-plus spent by Flying J gave rise to a vested right (or at least the trial court did not err in so concluding).  By far the largest portion of the $4 million was the purchase price of the property -- a point pressed vigorously by the BZA.  (The BZA no doubt pointed out that if the cost of acquiring a property alone created vested rights under the zoning regulations in existence at the time the property was acquired, then zoning changes would be enforceable only against those property owners who happen to acquire their properties after the zoning ordinance is changed.  Such a rule would make it virtually impossible to update zoning regulations.)  Without directly addressing that argument, the Court of Appeals held that Flying J's other expenses, "including tens of thousands of dollars on engineering and surveying, constitute more than mere 'preliminary' work or expenses," and were sufficient to give Flying J a vested right under the original ordinance.