Vic's Antiques & Uniques, Inc. v. J. Elra Holdingz, LLC

• Decision Date: 18 February 2020
• Docket Number: Court of Appeals Case No. 19A-SC-1348
• Citation: 143 N.E.3d 300
• Parties: VIC'S ANTIQUES AND UNIQUES, INC., Appellant-Defendant, v. J. ELRA HOLDINGZ, LLC, Appellee-Plaintiff.
• Court: Indiana Appellate Court

143 N.E.3d 300

VIC'S ANTIQUES AND UNIQUES, INC., Appellant-Defendant,

v.J. ELRA HOLDINGZ, LLC, Appellee-Plaintiff.

Court of Appeals Case No. 19A-SC-1348

Court of Appeals of Indiana.

Filed February 18, 2020

Attorney for Appellant: Jason M. Massaro, The Massaro Legal Group, LLC, Indianapolis, Indiana

Attorneys for Appellee: Jeffrey L. Beck, Beck Rocker & Habig, P.C., Columbus, Indiana, Matthew T. Albaugh, Faegre Baker Daniels LLP, Indianapolis, Indiana

Najam, Judge.

Statement of the Case

[1] Vic's Antiques and Uniques, Inc. ("Vic's") appeals from an order of possession entered in a small claims eviction proceeding, which required that Vic's vacate real estate owned by J. Elra Holdingz, LLC ("J. Elra"). Vic's raises one dispositive issue for our review, namely, whether the court erred when it held that an agreement between Vic's and J. Elra is a lease subject to an eviction proceeding rather than a land sale contract. We hold that, in its operation and effect, the agreement between Vic's and J. Elra is a land sale contract and that the claim asserted is not a possessory action between a landlord and a tenant. We also hold that the value of the property sought to be recovered exceeds the jurisdictional limit of a small claims court. Thus, the small claims court lacked jurisdiction over the agreement, and we vacate the order and remand with instructions to dismiss the claim.¹

Facts and Procedural History

[2] On March 22, 2018, J. Elra and Vic's entered into a "Lease Agreement" ("the agreement") for a building and 3.56 acres of property ("the real estate"). Appellant's App. Vol. II at 9. Under the agreement, Vic's agreed to pay J. Elra $1,265.30 per month for a term of twenty years. The agreement included a provision which granted Vic's an option to purchase the real estate plus an additional six acres (collectively, the "option property") for a purchase price of $1.00 upon the successful completion of the agreement.

[3] In the alternative, Vic's could purchase the option property before the end of the twenty-year term if J. Elra were to refinance the property, which was subject to a mortgage, or to sell any portion of the property, or if J. Elra's mortgage were released. If Vic's exercised the option prior to the end of the term, the remaining monthly payments would be accelerated and the purchase price would equal the total of the remaining monthly payments, plus $1.00. And the agreement provided that, if Vic's exercised its option to purchase the option property, J. Elra would provide title insurance in the amount of $200,000 and a warranty deed. See id. at 11.

[4] On January 21, 2019, J. Elra sent Vic's a letter in which J. Elra asserted that Vic's had breached various provisions of the agreement. And on February 15, J. Elra filed a small claim for an eviction based on unpaid rent, unpaid taxes, failure to maintain the leased premises, and failure to provide proof of insurance, as well as a claim for $6,000 in damages.

[5] Thereafter, on May 24 and 29, the small claims court held a hearing on J. Elra's claim for possession of the real estate. At the beginning of the hearing, J. Elra withdrew its claims that Vic's had failed to make rent payments and to pay the real estate taxes. However, J. Elra proceeded with its claims that Vic's had "unlawfully retained possession" of the real estate in that Vic's had failed to provide proof of insurance and had failed to maintain the premises. Id. at 8. In addition, J. Elra sought to evict Vic's based on alleged breaches that had occurred since the filing of the claim, namely, that Vic's had placed a lock on J. Elra's gate to an adjacent property occupied by J. Elra and that Vic's had failed to comply with local zoning ordinances.

[6] At the hearing, Aaron Ferguson, the president of J. Elra, testified. On cross-examination, Vic's attempted to question Ferguson about the formation of the agreement. Specifically, Vic's asked Ferguson if the agreement "actually arises out of a prior litigation between J. Elra and Vic's[.]" Tr. Vol. II at 22. At that point, J. Elra objected to Vic's question on the ground that it was "related to the prior litigation," which litigation had been dismissed with prejudice. Id. at 22-23. The small claims court sustained J. Elra's objection.

[7] Vic's then made an offer of proof in which it asserted that the court needed the "context and background" of the prior litigation in order to "understand" that the agreement is not a lease subject to an eviction proceeding but, instead, a land sale contract styled as a lease. Id. at 24. In particular, Vic's stated that J. Elra and Vic's had mediated a prior dispute and that "[t]hat's where the lease came from." Id. Vic's further offered to prove that, at mediation, the parties "had to work around the fact that there was a lender involved" and as a result they "came to" a document that was a land sale contract "framed" as a lease with an option to purchase. Id. Following Vic's offer of proof, the court "agree[d]" with J. Elra that the document was a lease and continued with the eviction proceeding. Id. at 25. After the hearing, the small claims court entered an order that Vic's vacate the real estate and scheduled a hearing on J. Elra's claim for damages. This interlocutory appeal ensued.²

Discussion and Decision

[8] Vic's appeals the small claims court order that Vic's vacate the real estate. As this Court has recently stated:

Pursuant to Trial Rule 52(A), the findings or judgments rendered by a small claims court are upheld unless they are clearly erroneous. Because small claims courts were designed to dispense justice efficiently by applying substantive law in an informal setting, this deferential standard of review is particularly appropriate. We consider the evidence most favorable to the judgment and all reasonable inferences to be drawn from that evidence. However, we still review issues of substantive law de novo .

N. Ind. Pub. Serv. Co. v. Josh's Lawn & Snow, LLC , 130 N.E.3d 1191, 1193 (Ind. Ct. App. 2019) (citations omitted).

[9] This appeal presents an issue of substantive law, namely, whether the small claims court erred when it interpreted the agreement as a lease rather than a land sale contract. Further, in light of our holding on that issue, we must also address whether the small claims court had subject matter jurisdiction over the agreement.

Issue One: Interpretation of the Agreement

[10] Vic's contends that the small claims court erred when it evicted Vic's. Specifically, Vic's contends that the small claims court incorrectly deemed the agreement to be a lease subject to an eviction proceeding rather than a land sale contract. To resolve this issue on appeal, we must interpret the agreement. It is well settled that the

[c]onstruction of the terms of a written contact generally is a pure question of law. The goal of contract interpretation is to determine the intent of the parties when they made the agreement. This court must examine the plain language of the contract, read it in context and, whenever possible, construe it so as to render every word, phrase, and term meaningful, unambiguous, and harmonious with the whole. If contract language is unambiguous, this court may not look to extrinsic evidence to expand, vary, or explain the instrument but must determine the parties' intent from the four corners of the instrument.

Layne v. Layne , 77 N.E.3d 1254, 1265 (Ind. Ct. App. 2017) (citations omitted).

[11] Here, Vic's contends that the agreement is unambiguously a land sale contract rather than a lease because it "provides for an amortized payment schedule," requires that Vic's pay real estate taxes on both the real estate and the additional six acres, and "provides for the payment of money to Vic's in the event of a taking" by the State. Appellant's Br. at 17. And Vic's maintains that those provisions are "entirely consistent with a land contract[.]" Id. at 23.

[12] But J. Elra asserts in its brief on appeal that the agreement is unambiguously a lease because it "is entitled ‘LEASE AGREEMENT’ in all capital letters, at the top center of the first page," it identifies the parties as "Lessor" and "Lessee," the "term of the lease" is twenty years, and it calls for monthly "rent payments." Appellee's Br. at 11. We note, however, that at oral argument, a different counsel for J. Elra readily acknowledged our Supreme Court's holding in Rainbow Realty Group, Inc. v. Carter that "the transaction's purported form and assigned label do not control its legal status." 131 N.E.3d 168, 173 (Ind. 2019). In addition, the instrument itself includes a standard provision that the headings used by the parties "are for convenience only and do not define, limit, or construe the contents" of the agreement. Appellant's App. Vol. II at 20. We do not hesitate to conclude that the agreement is not a lease simply because it is labeled a "lease"; because it includes terms such as "lessor," "lessee," and "rent"; or because it includes a paragraph heading entitled "demised premises."

[13] At oral argument, J. Elra correctly stated that, once executed, a land sale contract is a present sale and purchase. See Skendzel v. Marshall , 261 Ind. 226, 301 N.E.2d 641, 646 (1973). And J. Elra also correctly noted that, in a land sale contract, all incidents of ownership are transferred to the purchaser. See id. Based on those premises, J. Elra argued that the agreement is unambiguously a lease because various provisions in the agreement indicate that J. Elra did not transfer all incidents of ownership to Vic's and, thus, that the agreement created a landlord-tenant relationship between the parties.³ Further, J. Elra maintained that there are "many similarities" between provisions in the agreement in this case and provisions in the agreement in Rainbow Realty Group that was found to be a residential lease. Oral Argument at 35:27-35:33.

[14] Indeed, J. Elra contended, in effect, that certain clauses in the agreement are found only in leases. Spe...