Barrington Management Co., Inc. v. Paul E. Draper Family Ltd. Partnership

• Decision Date: 30 April 1998
• Docket Number: No. 79A02-9705-CV-321,79A02-9705-CV-321
• Citation: 695 N.E.2d 135
• Parties: BARRINGTON MANAGEMENT CO., INC., Richard P. Roethke, and Richard P. Roethke, d/b/a Barrington Investment Company, Inc., Appellants-Defendants, v. PAUL E. DRAPER FAMILY LTD. PARTNERSHIP and Paul E. Draper, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 135

695 N.E.2d 135

BARRINGTON MANAGEMENT CO., INC., Richard P. Roethke, and Richard P. Roethke, d/b/a Barrington Investment Company, Inc., Appellants-Defendants, v. PAUL E. DRAPER FAMILY LTD. PARTNERSHIP and Paul E. Draper Appellees-Plaintiffs.

No. 79A02-9705-CV-321.

Court of Appeals of Indiana.

April 30, 1998.

Robert J. Schukit, Stacy L. Hill, Dann Pecar Newman & Kleiman, Indianapolis, for Appellants-Defendants.

Roger W. Bennett, Christine A. DeSanctis, Bennett, Boehning & Clary, Lafayette, for Appellees-Plaintiffs.

OPINION

BAILEY, Judge.

Case Summary

Appellants-Defendants Barrington Management Co., Inc., Richard P. Roethke, and Richard P. Roethke, d/b/a Barrington Investment Company, Inc., ("Buyer"), appeals the trial court's granting of the petition of Appellees-Plaintiffs Paul E. Draper Family LTD. Partnership, and Paul E. Draper, ("Seller"), to rescind a real estate Purchase Agreement. Buyer asserts the trial court erred in denying its counter-claim requesting specific performance of the Purchase Agreement.

In granting rescission, the trial court ruled that Seller could retain Buyer's $1,000.00 earnest money deposit. The trial court also awarded Seller $10,767.00 in attorney fees under the Purchase Agreement.

We reverse and remand with instructions that Seller return the $1,000.00 earnest money deposit to Buyer. We also reverse the award of attorney fees. In all other respects, we affirm.

Issues

Buyer raises three issues, which we restate and consolidate into the following two issues:

I. Whether the trial court erred in granting Seller's petition to rescind the Purchase Agreement.

II. Whether the Seller, having initiated the present litigation to obtain the remedy of rescission, may retain Buyer's earnest money deposit and recover attorney fees under the contract.

Facts

The stipulated facts reveal that, on December 8, 1993, the parties entered into a written Purchase Agreement under which Seller agreed to sell a certain parcel of commercial real estate to Buyer. Buyer made a $1,000.00 earnest money deposit. The Purchase Agreement provided that "[t]ime is of the essence of this Contract." An Addendum to the Contract, which included additional terms of the Purchase Agreement, also noted that "[t]ime is important." The closing of the sale was to take place within thirty (30) days after all conditions had been satisfied or waived. The addendum also provided as follows:

4. It is a condition ("Condition # 1") of this offer that all utilities, including but not limited to sanitary sewer, either from the city of West Lafayette or from American Suburban Utilities, Inc. (including line and sewage plant capacity), city water, electric, gas, storm drainage, are available to the Phase I property line and are in an adequate supply and capacity to serve the development of the entire 68 acres.... Purchaser shall have one hundred eighty (180) days from date of this Purchase Agreement to satisfy or waive this condition.

....

15. In the event any of the above listed conditions or other condition of this Purchase Agreement are not timely satisfied, Purchaser shall have the right to either waive said conditions and close or to notify Seller of the objections and terminate this Agreement. In the event Purchaser elects to terminate this Agreement, Purchaser shall be entitled to a full and immediate return of the earnest money tendered herewith, and in the event such cancellation notice is paid to the Seller, the Purchase Agreement shall terminate and be considered null and void.

(R. 19, 22-23) (emphasis added). The addendum reiterated that if Condition # 1 was not "timely satisfied or waived by Purchaser, Purchaser may so notify Seller that it terminates this Agreement on account thereof and receive back its earnest money deposit." The Purchase Agreement provided further that:

If Buyer breaches this Agreement and is in default, Seller may treat this Agreement as being terminated and receive the Earnest Money as liquidated damages. If Seller breaches this Agreement and is in default, then the Earnest Money shall be returned to Buyer. In addition, if Seller is in default, the Buyer may seek specific performance or any other remedy provided by law or equity against the Seller.

(R. 14). The Purchase Agreement also provided:

Any signatory to this contract who is the prevailing party in any legal or equitable proceeding against any other signatory brought under or with relation to the Contract or transaction shall be additionally entitled to recover court costs and reasonable attorney's fees from the non-prevailing party.

(R. 14). Finally, the Purchase Agreement contained the following integration clause:

This Contract constitutes the sole and only agreement of the parties hereto and supersedes any prior understandings or written or oral agreements between the parties respecting the transaction and cannot be changed except by their written consent.

(R. 15).

Buyer experienced delays in satisfying "Condition # 1" of the Purchase Agreement; that is, in obtaining the land use and drainage approvals necessary to develop the property. Accordingly, the parties entered into a written agreement which extended the period in which Buyer could satisfy or waive this condition until December 31, 1995. However, Buyer remained unable to obtain the necessary approvals and requested an additional extension from Seller. (R. 87). Seller refused to grant another extension.

On January 25, 1996, Buyer demanded that Seller close the transaction and forwarded the closing documents. Seller refused to close, and this litigation ensued.

Procedural History

Seller initiated the present litigation requesting that the parties' real estate Purchase Agreement be rescinded to enable the Seller to sell the real estate to another purchaser. Buyer counterclaimed, requesting specific performance of the Purchase Agreement.

Recognizing that the dispute was largely one of law ¹, the parties agreed to submit the case to the trial court for disposition by "summary proceedings." The parties submitted a stipulated statement of facts to the trial court. The trial court considered the stipulated facts, entertained oral arguments, and reviewed legal memoranda submitted by the parties. The trial court entered judgment in favor of Seller granting rescission of the Purchase Agreement, and ruled that Seller could retain the Buyer's $1,000.00 earnest money deposit. In conjunction with its judgment, the trial court entered the following pertinent findings:

9. [Buyer] did not secure the necessary land use approval for the development of the ground and the preliminary drainage plan had not been approved as of December 31, 1995, as required by the Purchase Agreement.

....

11. [Seller] retained ownership of a 12 acre parcel located directly North of and adjacent to the 68 acres which was the subject matter of the Purchase Agreement of the parties.

....

16. Considering the agreement of the parties in its entirety, the intent of the parties was that the consideration for the Phase I property purchase included not only money, but also the planning and approval of certain improvements which [Seller was] entitled to use free of charge, and which provided benefit to and maintained the value of the property lying with Phases II and III, and enhanced the value of the 12 acres of [land] retained by [Seller].

After this judgment was entered, another hearing was held regarding Seller's request to be awarded reasonable attorney fees as provided under the Purchase Agreement. The trial court awarded Seller $10,767.00 in attorney fees. This appeal followed.

Discussion and Decision

Standard of Review

On appeal of a bench decision, the appellate court will not set aside the judgment unless it is clearly erroneous. Ind. Trial Rule 52(A). When the trial court enters findings on its own motion (as in the present case), specific findings control only as to issues they cover while a general judgment standard applies to any issue upon which the court has not found. Matter of Estate of Burmeister, 621 N.E.2d 647, 649 (Ind.Ct.App.1993). The reviewing court will affirm if the judgment can be sustained on any legal theory supported by the evidence most favorable to the judgment, together with all reasonable inferences to be drawn therefrom. Klebes v. Forest Lake Corp., 607 N.E.2d 978, 982 (Ind.Ct.App.1993), trans. denied. Where trial court findings on one legal theory are adequate, findings on another legal theory amount to mere surplusage and cannot constitute the basis for reversal even if erroneous. Williams v. Rogier, 611 N.E.2d 189, 196 (Ind.Ct.App.1993), trans. denied; Donavan v. Ivy Knoll Apartments Partnership, 537 N.E.2d 47, 52 (Ind.Ct.App.1989).

Contract Interpretation Generally

We begin our analysis by noting that our supreme court has expressed its commitment to advancing the public policy in favor of enforcing contracts. See Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind.1995). Indiana courts recognize that it is in the best interest of the public not to unnecessarily restrict persons' freedom to contract. Id. Thus, as a general rule, the law allows persons of full age and competent understanding the utmost liberty in contracting; and their contracts, when entered into freely and voluntarily, will be enforced by the courts. Pigman v. Ameritech Publishing Inc., 641 N.E.2d 1026, 1029 (Ind.Ct.App.1994). Indiana has long adhered to the rule that contracting parties may enter into any agreement they desire so long as it is not illegal or contrary to public policy. Id. at 1030.

Construction of the terms of a written contract is a pure question of law for the court; thus, our standard of review is de novo. George S. May International Co. v. King, 629 N.E.2d 257, 260 (Ind.Ct.App.1994), trans. denied. If a contract is ambiguous or uncertain and its meaning is to be determined by extrinsic evidence, its construction is a matter for the fact finder. Bicknell Minerals,...