Arlington State Bank v. Colvin

• Decision Date: 23 October 1989
• Docket Number: No. 24A01-8901-CV-28,24A01-8901-CV-28
• Citation: 545 N.E.2d 572
• Parties: ARLINGTON STATE BANK, Appellant-Defendant, v. Glen R. COLVIN and Carolyn Sue Colvin, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 572

545 N.E.2d 572

ARLINGTON STATE BANK, Appellant-Defendant, v. Glen R. COLVIN and Carolyn Sue Colvin, Appellees-Plaintiffs.

No. 24A01-8901-CV-28.

Court of Appeals of Indiana First District.

Oct. 23, 1989.

Rehearing Denied Nov. 22, 1989.

Thomas A. Withrow, Jeffery J. Neal, Henderson, Daily, Withrow & DeVoe, Indianapolis, David P. Barrett, Brookville, for appellant-defendant.

J. Lee McNeely, Mark W. McNeely, Stephen E. Schrumpf, McNeely, Sanders, Stephenson & Thopy, Shelbyville, for appellees-plaintiffs.

RATLIFF, Chief Judge.

STATEMENT OF THE CASE

Arlington State Bank appeals from a judgment awarding Glen R. Colvin and Carolyn Sue Colvin $35,000 compensatory damages and $100,000 punitive damages because of the Arlington State Bank's Breach of an Agreed Judgment between the bank and the Colvins. We affirm, but reduce the amount of damages.

FACTS

On or about May 4, 1984, Arlington State Bank (Bank) initiated a lawsuit against Glen R. and Carolyn Sue Colvin (the Colvins) to foreclose upon the mortgage which the Bank held upon the property. On March 26, 1985, the Bank and the Colvins entered into an Agreed Judgment, whereby the Colvins quitclaimed to the Bank their interest in the property and the Bank agreed to lease it to the Colvins for a period of up to one year beginning March 1, 1985. The Bank also granted the Colvins In April 1985, the Bank entered into a listing agreement with a local realtor to sell the property. A real estate agent with the realtor was working with the Colvins to help them locate a larger home. She asked the Colvins whether they were interested in purchasing the property. The Colvins responded that the home was too small. The realtor, interpreting this remark to mean that the Colvins were not interested in purchasing the property, informed Ron Wilson (Wilson), the Bank's attorney, that the Colvins were not interested in purchasing the property.

a right of first refusal to purchase the property during the lease period.

Mr. and Mrs. Sorenson (the Sorensons) made a purchase offer to the Bank in November 1985. Wilson advised the Bank's Board of Directors that the realtor had informed him the Colvins were not interested in purchasing the property. The Bank then accepted the Sorenson's purchase offer on November 18, 1985, without offering the Colvins the right of first refusal. James A. Evans (Evans), the Bank's Chief Executive Officer, signed the purchase agreement, which referenced the leasehold interest owned by the Colvins. Wilson prepared a warranty deed which Evans executed, and the sale was made on November 22, 1985, subject to the Colvin's leasehold.

The real estate agent had informed the Colvins in November 1985, that an offer had been made to purchase the property. On December 2, 1985, the Colvins, through their attorney, Rick Levi (Levi), told the Bank they were interested in purchasing the property. Also on December 2, 1985, Wilson advised the Colvins that they had two days to match the cash offer of $33,900 which the Sorensons had made on the property. Levi told Wilson that the Colvins were offering to match the Sorensons' purchase offer pursuant to their right of first refusal, but needed more than two days to obtain financing. Wilson advised Levi that an offer had been made on the property which had to be accepted by the Bank within two days. Wilson did not tell Levi that the property had already been sold. Later that day, the realtor called Levi and told him that the property had been sold on November 22, 1985.

On December 3, 1985, the Colvins tendered to the Bank a written offer to purchase the property for $33,900.00. The Colvins' attorney had advised them to do this in order to protect their record for future litigation. The Colvins did not tender any cash. On December 3, 1985, the Colvins had $16,000.00 on deposit in the bank for use as a down payment. The Colvins submitted a residential loan application to the Rushville National Bank on the same day. Rushville National Bank told the Colvins that it would take between seven (7) and ten (10) days to get an appraisal of the property and to process a loan application. For various reasons the Rushville National Bank neither granted nor denied the Colvins' loan application.

The Colvins initiated this lawsuit on December 6, 1985, against the Bank, also naming the Sorensons as co-defendants. The Sorensons filed a cross-claim against the Bank for the Bank's failure to transfer merchantable title to the property. The Bank settled its suit with the Sorensons in October 1986, for $40,169.29 and the Sorensons conveyed title to the Bank. The Colvins' suit against the Bank went to jury trial. At both the conclusion of the Colvins' case-in-chief and the conclusion of the presentation of all the evidence, the Bank moved for judgment on the evidence on the issues of compensatory and punitive damages. The Bank alleged that the Colvins had failed to introduce any evidence of actual damages suffered as a result of the Bank's failure to adhere to the terms of the agreed judgment, and that the Colvins had failed to introduce clear and convincing evidence that the Bank's conduct associated with its failure to adhere to the terms of the agreed judgment was so reprehensible as to justify an award of punitive damages. The trial court denied both motions. The jury found in favor of the Colvins, awarding them $35,000 in compensatory damages and $100,000 in punitive damages, and the court entered judgment. Further facts will be revealed as necessary to the discussion.

ISSUES

Arlington State Bank presents thirteen issues for appeal which we consolidate and renumber as follows:

1. Did the trial court err in denying the Bank's motions for judgment on the evidence made on the basis that the Colvins had failed to present substantial evidence to support a compensatory damage award of $35,000 and, if the court did not err, was the award clearly excessive?

2. Did the trial court err in denying the Bank's motions for judgment on the evidence made on the basis that the Colvins failed to establish by clear and convincing evidence that a punitive damage award of $100,000 was justified and, if the court did not err, was the award clearly excessive?

DISCUSSION AND DECISION

Issue One

The Bank asserts that the Colvins failed to present substantial evidence which would support the jury's award of $35,000 in compensatory damages. The Bank also asserts that the trial court's denial of the Bank's motions for judgment on the evidence, made at the close of the Colvin's case-in-chief and again at the close of all the evidence, was erroneous. Specifically, the Bank alleges that the Colvins failed to introduce any evidence of actual pecuniary damages, of physical injury accompanying mental anguish, or of intentional conduct by the Bank inspired by fraud or malice and causing mental anguish to the Colvins.

Both parties acknowledge the fact that the Bank breached the agreed judgment is not in dispute. Only the issues of whether damages should be paid and what amount of damages should be paid are in dispute. ¹

When we review the sufficiency of the evidence brought forth at trial, we will not reweigh it and we will not determine the credibility of witnesses. We will consider only the evidence most favorable to the appellee together with all reasonable and logical inferences to be drawn from the evidence. If there is substantial evidence of probative value to support the trial court's judgment, we will affirm it. Smith v. State (1988), Ind., 531 N.E.2d 1162, 1163. A jury's verdict will be set aside only if there is a total lack of evidence or where it is contrary to uncontradicted evidence. Trinity Lutheran Church v. Miller (1983), Ind.App., 451 N.E.2d 1099, 1102, trans. denied.

In order to determine the proper measure of damages to which the trial evidence must be compared, we must note the nature of the right which was breached. The right of first refusal was merely a dormant set of rights that did not entitle the Colvins to take any action until the Bank received a bona fide offer to purchase. See Urban Hotel v. Main and Washington Joint Venture (1986), Ind.App., 494 N.E.2d 334, trans. denied and Stoneburner v. Fletcher (1980), Ind.App., 408 N.E.2d 545. If the Bank had notified the Colvins that it had received a purchase offer from the Sorensons, the right of first refusal would have been changed into an option. See Urban Hotel, 494 N.E.2d at 337. "By an option, the owner subjects himself to the liability of having to convey the property if the option is exercised within the time and in the manner stipulated." (Emphasis omitted). Romain v. A. Howard Wholesale Co. (1987), Ind.App., 506 N.E.2d 1124, 1127, trans. denied.

No measure of damages for a breach of a right of first refusal was stated in Urban Hotel. However, in Stoneburner we dealt with the issue of damages for breach of a pre-emptive right, which is another label for a right of first refusal. See Urban Hotel, 494 N.E.2d at 336, n. 1. The general measure of damages for a vendor's failure or refusal to convey land is usually based on the difference between the contract price and the market value of the land at the time of the breach, plus the return of any payment made with interest. Such a measure is referred to as loss of the bargain. Stoneburner, 408 N.E.2d at 551. The price voluntarily paid by a purchaser is admissible as evidence of the property's fair market value. Indiana Tri-City Plaza Bowl v. Estate of Glueck (1981), Ind.App., 422 N.E.2d 670, 679, trans. denied. The fair market value at the time of the breach is the particular fair market value to be compared to the contract price. 25 I.L.E. Sales of Realty Sec. 158 (1960).

At trial the Colvins presented evidence that the fair market value of the property was $33,900 by showing that the Sorensons paid that purchase price in November 1985. That figure also represented the contract price since it was the amount which the Colvins...