Columbia Club, Inc. v. American Fletcher Realty Corp., 49A02-9901-CV-61.

• Decision Date: 03 December 1999
• Docket Number: No. 49A02-9901-CV-61.,49A02-9901-CV-61.
• Citation: 720 N.E.2d 411
• Parties: COLUMBIA CLUB, INC., Appellant-Plaintiff, v. AMERICAN FLETCHER REALTY CORPORATION, an Indiana Corporation, Formerly known as Circle Realty Corporation; AF Center Limited Partnership, an Ohio Limited Partnership; and Monument Tower Associates Limited Partnership, a Delaware Limited Partnership, Appellees-Defendants.
• Court: Indiana Appellate Court

720 N.E.2d 411

COLUMBIA CLUB, INC., Appellant-Plaintiff, v. AMERICAN FLETCHER REALTY CORPORATION, an Indiana Corporation, Formerly known as Circle Realty Corporation; AF Center Limited Partnership, an Ohio Limited Partnership; and Monument Tower Associates Limited Partnership, a Delaware Limited Partnership, Appellees-Defendants.

No. 49A02-9901-CV-61.

Court of Appeals of Indiana.

December 3, 1999.

Rodney V. Taylor, Michael A. Beason, Christopher and Taylor, Indianapolis, Indiana, Attorneys for Appellant.

David O. Tittle, Nana Quay-Smith, James P. Strenski, Bingham Summers Welsh & Spilman, Indianapolis, Indiana, Attorneys for Appellee.

OPINION

ROBB, Judge.

The Columbia Club appeals the trial court's grant of summary judgment in favor of the AF Center Limited Partnership ("AF Center") and Monument Tower Associates ("Monument Tower") in a breach of contract action.¹ We affirm.

Issues

Columbia Club raises the following consolidated and restated issues for our review:

1. Whether the trial court erred in granting the Partnership's motion for summary judgment holding that the indemnification provision contained in the Agreement was a covenant which runs with the land, and thus, binds subsequent grantees and releases the Partnership from liability under the indemnification provision; and

2. Whether a novation is required for the indemnification provision contained in the Agreement to run with the land.

Facts and Procedural History²

On July 27, 1987, the Columbia Club entered into a contract with AF Center and American Fletcher Realty Corporation ("American Fletcher"). This contract, entitled "Agreement Relating to Construction Requirements and Easements" (the "Agreement"), was subsequently recorded in the county recorder's office. At the time of the Agreement, American Fletcher was the fee simple owner of property leased to AF Center upon which AF Center proposed to construct an office building and parking garage, later known as the Bank One Tower. The Columbia Club is the fee simple owner of property adjacent to the property where the Bank One Tower was constructed.

The Agreement contained construction requirements and created cross-easements between AF Center, American Fletcher, and the Columbia Club. The parties granted cross-easements in order to facilitate the construction of the Bank One Tower and the accompanying parking garage and to allow the Columbia Club to continue operating as a social club. The Agreement also contained an indemnity provision.

Thereafter, AF Center assigned the option to lease the property owned by American Fletcher to Monument Tower. During 1987-88, American Fletcher and Monument Tower constructed the Bank One Tower. On November 28, 1990, an addendum to the Agreement was executed between Columbia Club, American Fletcher, and Monument Tower which did not alter the indemnity provision in the Agreement. The indemnity provision remained in full force and effect.

On December 2, 1991, American Fletcher and Monument Tower assigned all of their interests in the Bank One Tower building and property to an unrelated third party. American Fletcher and Monument Tower have not held any fee or leasehold interest in the Bank One Tower building and property since December 2, 1991.

Around December 31, 1995, it was discovered that the Columbia Club had suffered structural damage from construction of the Bank One Tower which resulted in raw sewage flowing into the building. On December 30, 1997, the Columbia Club filed suit against American Fletcher, AF Center, and Monument Tower for indemnification from the damages suffered from the construction of the Bank One Tower building. Consequently, AF Center and Monument Tower moved for summary judgment, which was later granted by the trial court. This appeal ensued.

Discussion

I. Summary Judgment Standard of Review

The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which may be determined as a matter of law. Bastin v. First Indiana Bank, 694 N.E.2d 740, 743 (Ind.Ct.App.1998),trans. denied. When reviewing a grant or denial of summary judgment, this court applies the same standard as does a trial court. USA Life One Ins. Co. v. Nuckolls, 682 N.E.2d 534, 537 (Ind.1997). Summary judgment should be granted only if the designated evidentiary material shows that there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. Ind. Trial Rule 56(C); Hoskins v. Sharp, 629 N.E.2d 1271, 1276 (Ind.Ct. App.1994). On review, we may not search the entire record to support the judgment, but may only consider that evidence which had been specifically designated to the trial court. North Snow Bay, Inc. v. Hamilton, 657 N.E.2d 420, 422 (Ind.Ct.App. 1995). The party appealing the denial of summary judgment has the burden of persuading this court on appeal that the trial court's ruling was erroneous. See Warner Trucking, Inc. v. Carolina Cas. Ins. Co., 686 N.E.2d 102, 104 (Ind.1997)

. We resolve any doubt about a fact or any inference to be drawn from it in favor of the nonmoving party. Claxton v. Hutton, 615 N.E.2d 471, 473 (Ind.Ct.App.1993). Although the trial court made findings of fact and conclusions of law, it does not change the nature of our review of summary judgment. The entry of specific facts and conclusions in a summary judgment order aids our review by providing us with a statement of reasons for the trial court's decision, but it has no other effect. P.M.S., Inc. v. Jakubowski, 585 N.E.2d 1380, 1381 (Ind.Ct.App.1992). Summary judgment should not be used as an abbreviated trial. Brunner v. Trustees of Purdue Univ., 702 N.E.2d 759, 760 (Ind.Ct.App.1998),

trans. denied.

II. Real Covenant

The Columbia Club contends that the trial court erred in granting the Partnership's motion for summary judgment. Specifically, the Columbia Club argues that the indemnification provision contained in the Agreement is not a covenant which ran with the land, and thus, the Partnership is liable under the Agreement for damages to the Columbia Club as a result of the construction process of the Bank One Tower and the accompanying parking garage. We disagree.

A. Indemnification Provision is an Affirmative Covenant

A person typically cannot be held liable for breach of contract unless it is shown that he was a party to the contract. See Evansville & S.I. Traction Co. v. Evansville Belt Ry. Co., 44 Ind.App. 155, 162, 87 N.E. 21, 22-24 (1909). Contractual obligations are personal in nature and privity of contract is essential for the establishment of such liability. Boswell v. Lyon, 401 N.E.2d 735, 743 (Ind.Ct.App.1980). However, Indiana recognizes an exception to the privity of contract requirement: it is called privity of estate. See generally Conduitt v. Ross, 102 Ind. 166, 26 N.E. 198 (1885). In Indiana, the obligations of a contract are imposed upon persons who stand in privity of estate with the original covenantor as successive grantees. Evansville, 87 N.E. at 21; Wells v. Benton, 108 Ind. 585, 8 N.E. 444, 447 (1886). Thus, the law of contracts and property may both be implicated in a breach of contract action, especially when a contract concerns promises in instruments relating to real estate, which are known as covenants.

Our first inquiry is to determine whether the indemnification provision contained in the Agreement is a covenant or merely a contractual provision binding only those in privity of contract. Generally, a covenant is an agreement duly made to do, or not to do, a particular act. Vierk v. Ritenour, 131 Ind.App. 547, 172 N.E.2d 679, 683 (1961). In modern usage, the term "covenant" generally describes promises relating to real property that are created in conveyances or other instruments. Covenants may be express or implied as a matter of law. Id. Moreover, covenants are a species of express contract. Id. We believe that the indemnification provision contained in the Agreement is a covenant because it essentially is a promise created in a contract, the Agreement, which granted cross easements between the original parties. The nature of the burden determines whether the covenant is negative, affirmative, or restrictive. Negative covenants call for the covenantor to refrain from doing some act. If the required performance limits the uses that can be made by the owner or occupier of land, the covenant is usually called a restrictive covenant. We have held that restrictive covenants are, in essence, a form of express contract between a grantor and a grantee in which the latter agrees to refrain from using his property in a particular manner. Burnett v. Heckelman, 456 N.E.2d 1094, 1097 (Ind.Ct.App.1983). In contrast, affirmative covenants call for the covenantor to do some act, such as paying money, supplying goods or services, or performing some other act, either on or off the land owned by the covenantor. We have defined affirmative covenants as a form of express contract between a grantor and a grantee which imposes an affirmative burden on the latter. See generally Moseley v. Bishop, 470 N.E.2d 773, 777 (Ind.Ct. App.1984)

(defendant contracted to permanently maintain the drain tile on land for the benefit of plaintiff's property). In the present case, the indemnity provision contained in the Agreement may be characterized as an affirmative covenant because under the terms of the original Agreement, American Fletcher and AF Center expressly contracted to reimburse Columbia Club for any damages it incurred as a result of the construction of the Bank One Tower and the accompanying parking garage. R. 21.

Land use covenants create rights and duties between the original promising parties. The grantee's rights are called the "benefit" of the covenant, while the grantor's duties are called the "burden." Covenants are either personal, enforceable only by the original parties to an agreement, or they "run with the land." When covenants run with the...