Eden United, Inc. v. Short

• Decision Date: 27 June 1991
• Docket Number: No. 49A02-8910-CV-504,49A02-8910-CV-504
• Citation: 573 N.E.2d 920
• Parties: EDEN UNITED, INC., (Defendant, Cross-Defendant, Counter-Claimant and Cross-Claimant Below), and Bankatlantic Financial Corporation f/k/a I.R.E. Financial Corporation (Defendant and Cross-Defendant Below), and Eden Services, Inc., I.R.E. Properties, Inc., I.R.E. Investments Inc., and Investment Management Group, Inc., Appellants (Defendants Below), v. Frank M. SHORT, (Plaintiff and Counter-Defendant Below), and Chatlee Realty Corp., (Defendant, Cross-Defendant, Counter-Claimant and Cross-Claimant Below), Appellees. 1 .
• Court: Indiana Appellate Court

Page 920

573 N.E.2d 920

EDEN UNITED, INC., (Defendant, Cross-Defendant Counter-Claimant and Cross-Claimant Below), and Bankatlantic Financial Corporation f/k/a I.R.E. Financial Corporation (Defendant and Cross-Defendant Below), and Eden Services, Inc., I.R.E. Properties, Inc., I.R.E Investments Inc., and Investment Management Group Inc., Appellants (Defendants Below), v. Frank M. SHORT, (Plaintiff and Counter-Defendant Below), and Chatlee Realty Corp., (Defendant, Cross-Defendant Counter-Claimant and Cross-Claimant Below), Appellees.

No. 49A02-8910-CV-504 ¹.

Court of Appeals of Indiana, First District.

June 27, 1991.

Rehearing Denied Aug. 7, 1991.

Joe C. Emerson, James M. Matthews, Baker & Daniels, Indianapolis, for appellants.

Stephen R. Buschmann, B. Claire South, Buschmann, Carr & Shanks, P.C., G.R. Parish, Jr., Indianapolis, for appellees.

ROBERTSON, Judge.

Eden United Inc., Bankatlantic Financial Corp., successor of I.R.E. Financial Corp., and Eden Services, Inc., I.R.E. Properties, Inc., I.R.E. Investments, Inc., and Investment Management Group, Inc. appeal the judgments entered against them in favor of appellee, Frank M. Short, and counterclaimant, Chatlee Realty Corp., in an action brought by Short for breach of contract and tortious interference with a contractual relation and on Chatlee's counterclaim for breach of contract. Short cross-appeals the trial court's award of nominal damages on his tort claim against the defendants.

We affirm the judgments as to all the defendants but IMG and reverse the trial court's ruling on compensatory damages.

The record reflects that in early 1980, Bart Schuman, a real estate syndicator in Los Angeles, received a sales brochure from Scott Kranz, an individual representing himself to be Vice-President of the I.R.E. Group, offering Eastwind Village, an apartment complex in Indianapolis, Indiana, for sale. Schuman contacted appellee Short, a business associate with whom Schuman had consummated some fifteen real estate purchases, to act in effect as a banker for a proposed syndication of the property to a limited partnership to be created by Schuman. At Schuman's urging, Short contacted Kranz and after viewing the property concluded that Eastwind would be suitable for purchase and resale through syndication.

In May, 1981, having reached agreement with Kranz on the purchase price and structure of the deal, Short and Schuman met with Kranz and other representatives of the I.R.E. Group. Short learned for the first time that he would be buying the property from Eden, not the I.R.E. Group, that Kranz did not have the authority to commit Eden but an Alan Levan, President of Eden did, and that Eden did not yet own the property but was concurrently negotiating for its purchase from appellee Chatlee Realty Co. Kranz informed Short that they could agree to the same amount of dollars overall but needed a higher purchase price. This meant that $240,000 of agreed upon interest would be converted to principal. As an accommodation, Short agreed to this change, but insisted that all other payments due under the note be treated as interest. Eden agreed but the word "interest," which appeared at one point in a draft, was omitted from the final document.

A provision relating to the proration of real estate taxes was also negotiated and added but subsequently omitted. Short caught this change and demanded that the parties' agreement on proration of taxes be put back in the document.

The parties discussed the terms of the Eden-Chatlee mortgage because it had been decided that Short's mortgage would "wrap" existing mortgages on the property. Since the terms of the other mortgages on the property were acceptable to Short and Eden insisted that the Eden-Chatlee mortgage had not yet been created, Short agreed that the Short-Eden mortgage would be no more stringent than the "underlying mortgages." In fact, the lengthy Eden-Chatlee documents had been negotiated in March, 1981, with terms varying considerably from those of the other mortgages presented to Short.

Short left the contracting session confident that he and Eden had reached agreement on the deal. After an inspection of the property, the parties amended the agreement to require Eden to obtain from Chatlee certain warranties concerning the property, among them, that Chatlee would maintain the property in the condition found by Short during the inspection and that Chatlee would close with Short under the terms of the Short-Eden agreement should Eden default and not close on the property.

During the months which followed, the transaction dragged. Eden delayed ordering the title work and postponed the closing. Fearing that the deal was slipping away, Schuman urged another meeting. On August 17, 1981, Short's group met again with Eden. At this meeting, Eden proposed a mortgage containing a due on sale clause, notice provisions, and grace periods which were more stringent than the mortgages reviewed by Short in May. Indeed, they were unworkable for Short who necessarily would have to meet the requirements of each mortgage "wrapped" by his mortgage to Eden and could not do so under the terms proposed. Eden agreed to make the changes requested by Short, including the addition of a collection agent to facilitate payment of the mortgages, and would prepare the closing documentation.

Short and his attorneys arrived in Miami on August 31, 1981, for the September 1 closing. Late that evening, Eden finally delivered the closing documents and Short's team stayed up until 3:00 a.m. reviewing them. The documents were presented exactly as they had been prior to the August 17 meeting. The amount of the note was correct but two interest payments of $150,000 had been converted to principal. The note was not prepayable, making Short's entire transaction with Schuman impossible. The note reflected the timing of the $240,000 in principal differently than Short had instructed. The mortgage contained no grace period on monthly payments and no requirement of notice if payment was late. Short assumed these matters would be resolved with additional drafting at the closing table. He proceeded to the closing financially ready to close the deal.

Short spent 5 1/2 hours on September 1, 1981, with Eden trying to close. Eden refused to assign the warranties of condition obtained from Chatlee or negotiate any of the other issues until the closing statement, which called for an additional $133,000 in taxes, had been signed and accepted. The closing ended abruptly with Levan and his people walking out.

When Eden failed to meet the terms of its escrow arrangement with Chatlee and defaulted on that deal, Chatlee began working with Short to close on Eastwind. Chatlee reached agreement with Short on the financial terms and the changes were made to the Short-Chatlee mortgage which had been requested by Short in July. However, even though Chatlee and Short tried to close under the terms of the Short-Eden agreement, Eden blocked the escrowed Eden-Chatlee closing documents without justification, demanded compensation if Chatlee sold directly to Short, offered to allow Chatlee to sell to any purchaser except Short without interference and proposed alternative purchasers for brokerage fees far less than the sums demanded from a Short-Chatlee closing. Ultimately, both Chatlee and Short were forced to walk away from the deal.

In this appeal, the parties challenge the tort judgment in favor of Short in several respects. Eden and the other defendants, collectively referred to as the Eden defendants, argue: (1) that Eden was found to have tortiously interfered with its own contract, contrary to Indiana law; (2) that Short lacked standing to sue for tortious interference with contract; (3) that the evidence is insufficient on certain elements of the tort; and (4) that the evidence does not support an award of punitive damages. Short contests the award of nominal damages. He argues that the trial court applied an erroneous standard, requiring greater certainty of lost profits than Indiana law requires.

Eden also appeals the breach of contract judgments. Eden argues that neither the evidence nor findings are sufficient to permit the conclusion that Eden breached or repudiated the Short-Eden contract. Eden urges with respect to the judgment in favor of Chatlee that it was obligated under the contracts to pay liquidated damages of $85,000 only one time, regardless of whether it breached both agreements.

The Eden defendants independently attack the determinations, that they were engaged in a joint venture with Eden and that as affiliated corporations they were in essence a single corporate instrumentality, by which they were found liable for the judgments against Eden.

The trial court made findings of fact and conclusions of law pursuant to Ind.Trial Rule 52(A). In our capacity as a reviewing court, we will not disturb those findings unless they are clearly erroneous. In making that determination, we do not reweigh evidence or reassess witness credibility. We consider only the evidence and reasonable inferences drawn therefrom that support the trial court's judgment. That judgment will not be altered unless, after a review of the entire record, we have a firm and definite conviction that a mistake has been made. Johnson v. Hickman (1987), Ind.App., 507 N.E.2d 1014, 1017, trans. denied. If there is evidence of probative value which will support the judgment, the decision of the trial court will be affirmed. Indiana & Michigan Electric Co. v. Terre Haute Industries, Inc. (1987), Ind.App., 507 N.E.2d 588, 597.

I. Tortious Interference with Contract Claim

Eden claims the trial court found that Eden tortiously interfered with Short's right, as a third-party beneficiary of the Eden-Chatlee contract, to close directly with Chatlee. Accordingly, Eden argues first, that it cannot tortiously interfere with its own contract and second, that a third-party beneficiary has no...