Fischer v. Heymann

• Decision Date: 17 July 2014
• Docket Number: No. 49S02–1309–PL–620.,49S02–1309–PL–620.
• Citation: 12 N.E.3d 867
• Parties: Gayle FISCHER, Appellant/Cross–Appellee (Plaintiff), v. Michael and Noel HEYMANN, Appellees/Cross–Appellants (Defendants).
• Court: Indiana Supreme Court

12 N.E.3d 867

Gayle FISCHER, Appellant/Cross–Appellee (Plaintiff)

v.Michael and Noel HEYMANN, Appellees/Cross–Appellants (Defendants).

No. 49S02–1309–PL–620.

Supreme Court of Indiana.

July 17, 2014.

Rehearing Denied Oct. 9, 2014.

Gary M. Selig, Indianapolis, IN, Attorney for Appellant.

J. David Hollingsworth, Brent R. Borg, Steven M. Lutz, Fishers, IN, Attorneys for Appellees.

Opinion

RUSH

, Justice.

This is the second appeal in protracted litigation over the breach of a real-estate sales contract. The first appeal established that Buyers breached the contract when they unreasonably demanded that Seller fix a minor electrical problem as a condition of purchase. In this second appeal, we granted transfer to consider whether the trial court acted within its discretion in calculating Seller's damages. Both parties appealed the trial court's findings regarding Seller's efforts to mitigate her damages. Seller argues that her efforts were reasonable and justify a full award. Buyers argue Seller failed to mitigate her damages in two ways: 1) by failing to respond to their demand for electrical repairs and thus preserve the contract, and 2) by failing to accept a substitute offer to purchase the property after the agreement fell through. The trial court disagreed with Buyers' first argument but agreed with the second, and reduced Seller's damages accordingly. We hold the trial court was within its discretion to reach this conclusion, and therefore affirm the award of damages and attorney fees.

Facts and Procedural History

On February 4, 2006, Defendants Michael and Noel Heymann agreed to buy a condominium from Plaintiff Gayle Fischer for $315,000. Both parties signed a purchase agreement (“Agreement”), and the Heymanns paid $5,000 in earnest money. The Agreement authorized the Heymanns to terminate if Fischer refused to fix any “major defect” discovered upon inspection, but did not permit them to terminate if Fischer refused to perform “routine maintenance” or make “minor repair[s].” On February 10, 2006, the Heymanns demanded Fischer fix an electrical problem after an inspection report revealed electricity was not flowing to three power outlets. The Heymanns thought this was a “major defect” under the Agreement and conditioned their purchase on Fischer's timely response. Fischer failed to timely respond to their demand—even though she eventually fixed the problem for $117 on February 20—and the Heymanns tendered a mutual release. Fischer refused to sign the release and later sued for specific performance, or damages in the alternative, on May 9, 2006—two days before the original date of closing.

The trial court rejected Fischer's claim after the initial bench trial on the merits. The court found the Heymanns reasonably believed the electrical problem was severe, which justified their termination of the Agreement. But a divided panel of the Court of Appeals disagreed. The panel held that the Heymanns' demand itself breached the Agreement because the demand stemmed from an objectively unreasonable belief that the electrical problem was a “major defect.” Fischer v. Heymann, 943 N.E.2d 896, 902–03 (Ind.Ct.App.2011)

, trans. denied (“Fischer I ”). The Court of Appeals thus reversed and remanded for the trial court to determine damages.¹

Id. at 903.

On remand, Fischer sought $306,616.73 in total damages, attorney fees, and court costs. Broken down, her damages request accounted for (1) the difference between the Heymanns' purchase price of $315,000 and the 2011 sale price of $180,000; (2) $12,333.89 in closing costs; (3) $139,075.54 for the cost of maintaining the condo from 2006, when the Heymann deal fell through, until 2011 when she sold the property; (4) $11,222.50 in attorney fees; and (5) $8,984.80 in court costs. As the litigation continued on Fischer's second appeal, she argued those fees and costs have increased to $12,268.24 and $9,834.80, respectively.

The trial court entered its findings and conclusions after hearing extensive testimony. It concluded Fischer failed to mitigate her damages because she could have accepted an offer to sell the condo in 2007 for $240,000, instead of waiting to sell it in 2011 for only $180,000. Had she sold in 2007, she could have avoided all carrying costs and maintenance expenses she incurred between 2007 and 2011. As a result, the trial court concluded she was only entitled to $93,972.18—the difference between the original $315,000 selling price and the $240,000 offer, plus all carrying costs, expenses, and attorney fees that accrued from the moment of breach until Fischer rejected the $240,000 offer.

Fischer brought this interlocutory appeal, arguing she reasonably mitigated her damages and the trial court erred in calculating damages. The Heymanns cross-appealed, arguing Fischer could have avoided all damages except the $117 repair bill if she had responded to their demand to fix the electrical problem, thus preserving the Agreement. A divided panel of the Court of Appeals agreed with the Heymanns and awarded only $117 in damages. Fischer v. Heymann, 994 N.E.2d 1151, 1160–62 (Ind.Ct.App.2013)

(“Fischer II ”). Judge Bradford dissented. He concluded that requiring Fischer to respond to the Heymanns to mitigate damages undermined a non-breaching party's right to immediately terminate the contract upon breach. Id. at 1164 (Bradford, J., dissenting). We granted transfer, which vacated the Court of Appeals' decision. Ind. Appellate Rule 58(A). Further facts will be provided as needed.

Standard of Review

On appeal, both parties focus on whether Fischer reasonably mitigated her damages. Fischer argues she reasonably declined the $240,000 purchase offer in 2007, and the Heymanns argue she unreasonably failed to save the Agreement by yielding to their repair demand. A party's reasonableness in mitigating damages is a question for the trier of fact, e.g., Frieburg Farm Equip., Inc. v. Van Dale, Inc., 978 F.2d 395, 403 (7th Cir.1992)

; AES Tech. Sys., Inc. v. Coherent Radiation, 583 F.2d 933, 942(7th Cir.1978), much like the exercise of reasonable care in negligence cases, e.g.,

Schloot v. Guinevere Real Estate Corp., 697 N.E.2d 1273, 1276 (Ind.Ct.App.1998). Similarly, “the computation of damages is a matter within the sound discretion of the trial court.” Berkel & Co. Contractors. Inc. v.

Palm & Assocs., Inc., 814 N.E.2d 649, 658 (Ind.Ct.App.2004). And because the trial court entered findings of fact and conclusions of law on those issues, we review only for clear error—that is, “whether the evidence supports the findings and whether the findings support the judgment.” Id. (citing Yanoff v. Muncy, 688 N.E.2d 1259, 1262 (Ind.1997) ). Under the clear error standard, we will reverse the trial court's findings on any of these issues “only when the record contains no facts to support them either directly or by inference.” Id.

Discussion and Decision

Neither party disputes that Fischer had a duty to exercise reasonable diligence to mitigate her damages once the Heymanns breached the Agreement. See Lindenborg v. M & L Builders & Brokers, Inc., 158 Ind.App. 311, 324, 302 N.E.2d 816, 824 (1973)

. In view of Fischer I, this duty began on February 10, 2006, when the Heymanns demanded that Fischer fix a minor electrical problem as a condition of their purchase. See Fischer I, 943 N.E.2d at 902–03

. After the deal fell through in 2006, Fischer attempted to mitigate her damages by selling the condo. But in the ensuing months, the housing market entered one of its worst downturns in recent memory. She received many offers, ranging as high as $240,000 to as low as $150,000. Eventually, in November 2011, over five years after the Heymanns breached the Agreement, Fischer sold the condo to a third party for $180,000. Here, both parties take issue with the trial court's damage award. The Heymanns argue, and the Court of Appeals held, that Fischer could have mitigated nearly all of her damages had she responded to the Heymanns' demand to fix the electrical problem. Fischer, conversely, argues she is entitled to the full $306,616.73 sum she requested before the trial court, plus fees and costs incurred after the damages hearing, because her refusal to sell the condo for $240,000 in 2007 was reasonable. But because neither party has shown clear error, we affirm the trial court's findings and conclusions.

I. Fischer's Duty to Mitigate Damages.

Fischer had a right to damages for the “loss actually suffered as a result of the breach” once the Heymanns breached the Agreement, but not “to be placed in a better position than [she] would have been if the contract had not been broken.” Roche Diagnostics Operations, Inc. v. Marsh Supermarkets, LLC, 987 N.E.2d 72, 89 (Ind.Ct.App.2013)

(citations omitted), trans. denied. She also had a duty to mitigate her damages. Hawa v. Moore, 947 N.E.2d 421, 427 (Ind.Ct.App.2011). “[T]he duty to mitigate damages is a common law duty independent of the contract terms” that requires “a non-breaching party [to] make a reasonable effort to act in such a manner as to decrease the damages caused by the breach.” Geller v. Kinney, 980 N.E.2d 390, 399 (Ind.Ct.App.2012) ; Salem Cmty. Sch. Corp. v. Richman, 406 N.E.2d 269, 275 (Ind.Ct.App.1980). Still, “the burden of proving that the non-breaching party has failed to use reasonable diligence to mitigate damages” lies with the party in breach—here, the Heymanns. Hawa, 947 N.E.2d at 427 ; see also

Willis v. Westerfield, 839 N.E.2d 1179, 1187 (Ind.2006). And since assessing Fischer's diligence is a question of fact, we defer to the trial court's discretion and reverse only if there are no facts to support its conclusion either directly or by inference. Berkel & Co. Contractors, Inc., 814 N.E.2d at 658 (citing Yanoff, 688 N.E.2d at 1262 ).

A. The Record Does Not Compel a Finding That Fischer Unreasonably Rejected the Heymanns' Demand.

The Heymanns argue the trial court should have found that Fischer's only reasonable option to mitigate her damages was to...