Grissom v. Moran

• Decision Date: 12 December 1972
• Docket Number: No. 771A123,771A123
• Citation: 154 Ind.App. 419,290 N.E.2d 119
• Parties: William M. GRISSOM and May Grissom, Appellants (Plaintiffs and Counter-Defendants below), v. Theodore F. MORAN and Nedra J. Moran, Appellees (Defendants and Counter-Claimants below).
• Court: Indiana Appellate Court

Page 119

290 N.E.2d 119

154 Ind.App. 419

William M. GRISSOM and May Grissom, Appellants (Plaintiffs and Counter-Defendants below), v. Theodore F. MORAN and Nedra J. Moran, Appellees (Defendants

and Counter-Claimants below).

No. 771A123.

Court of Appeals of Indiana, Second District.

Dec. 12, 1972.

Wolf & Robak, Greenfield, for appellants

Joseph F. Quill and John G. McNutt, Indianapolis, for appellees.

BUCHANAN, Presiding Judge.

CASE SUMMARY--Plaintiffs-appellants, William and Amy Grissom (Grissoms) appeal from a judgment in the amount of Six Thousand Nine Hundred Thirty-one Dollars ($6,931.00) entered against them in a court trial on their Complaint for Breach of Contract and in favor of defendants-appellees, Theodore and Nedra Moran (Morans) on their Counterclaim for fraudulent misrepresentation, the controversy arising out of the sale of a motel and real estate. We affirm.

FACTS--The facts and evidence most favorable to Morans and the judgment below are:

In February of 1968, the Morans became interested in purchasing the Woods Motel (the Motel) in Greenfield, Indiana, which at that time had been owned by the Grissoms since 1962. Prior to reaching an agreement for the sale of the Motel, the Morans discussed with the Grissoms the physical condition of the Motel and its volume of business. During these conversations, the Grissoms represented to the Morans as potential buyers that the facilities 'were all in fine working condition.' The Morans then specifically inquired about the sewage and electrical systems of the Motel, to which the Grissoms responded that 'they were all right.' There was also an indication by the Grissoms that they had experienced no problems with the sump pump or water backing up into the rooms.

While the Morans presonally toured the Motel and visited the various rooms, they did not seek a detailed inspection of the Motel by experts, such as an architect, electrician, or plumber. Instead, they chose to rely upon the statements made by the Grissoms that the facilities of the Motel were in good condition and that there had never been any trouble.

The truth of the Grissoms' representations, at least as to the electrical system, was placed in doubt when the Motel's regular On February 29, 1968, the Morans entered into a Land Contract (the Contract) with the Grissoms whereby the Grissoms agreed to sell the Motel with furnishings and equipment for a total purchase price of $115,000.00. Of this amount $2,500.00 was paid immediately as a down payment and the balance payable in installments of $1,500.00 on the first day of each calendar month plus payment by Morans of an additional $5,000.00 each year on the anniversary date of the Contract and all property tax installments, insurance premiums, and any assessments for public improvements.

electrician testified that prior to the sale of the Motel he had discussed the inadequacy of the electrical system with the Grissoms and that they all knew that something had to be done towards rewiring the Motel and improving its electrical system. Nothing transpired from these conversations, however, for soon thereafter the Morans purchased the Motel.

The Morans took possession of the Motel on March 1, 1968, and soon thereafter were basieged with various mechanical problems. The kitchen sink in the restaurant and the toilets in the Motel rooms began to back up. Sewage flooding required extensive cleansing of many of the units, which were not then available for rental purposes during the cleaning period thereby causing loss of business. Ultimately, the Morans had to replace the pump for the sewage system because, as the plumber testified, the old pump was simply not adequate for the Motel's operations.

In addition to the faulty plumbing, the air conditiong system failed to function properly. After analyzing the problem, the Motel's electrician discovered several burned-out electrical switches in addition to the generally defective electrical system. The electrician informed the Morans that the electrical system was simply not adequate to handle the electrical needs of the Motel. He therefore recommended that the Motel be rewired, and the Morans agreed. During their seven months of possession, the Morans were forced to spend $944.24 for repairs to the sewage system, a new sewage pump, the electrical system, cleaning of the flooded rooms, and various other items.

In July of 1968 the Morans informed the Grissoms by letter of the repairs and problems they had incurred since they obtained possession of the Motel on March 1, 1968. No response was tendered by the Grissoms. Nevertheless, the Morans continued their monthly payments of $1,500.00 until August 1, 1968, at which time the payments stopped. From March 1, 1968 until August 1, 1968, the Morans had paid the Grissoms a total of $10,000.00 under the Contract, representing a $2,500.00 down payment and five monthly installments of $1,500.00 each.

In early October of 1968, the Morans, on two occasions, requested the Grissoms to reduce the monthly payments of $1,500.00 due to the various repairs and problems incurred by the Morans. When the Grissoms refused, the Morans explained that without a reduction they would have to rescind the Contract and return possession to the Grissoms. The desired reduction was not granted, so possession of the Motel was surrendered to the Grissoms on October 15, 1968.

The Morans testified that prior to leaving the Motel they thoroughly cleaned it, alleging that it was left in better condition than when they obtained possession.

The Grissoms brought an action for breach of contract, seeking recovery of the monthly installments for the period of August 1 to October 15, damages for waste, and the unpaid November property tax installment. The Morans filed a Counterclaim, seeking a rescission of the Contract and 'damages' in the amount of $11,000.00, alleging that the Grissoms fraudulently misrepresented the condition of the Motel prior to execution of the Contract.

The trial court entered judgment against the Grissoms and in favor of the Morans

on their Counterclaim, awarding them $6,931.00. The Grissoms now appeal.

ISSUES

ISSUE ONE. Does the evidence support the trial court's finding that prior to the sale the Grissoms fraudulently misrepresented the condition of the Motel, thereby entitling the Morans to rescind the Contract?

ISSUE TWO. Was the award of $6,931.00 so excessive as to constitute damages rather than a return to the status quo as required by a theory of rescission based on fraud in the inducement?

As to ISSUE ONE, the Grissoms submit that the evidence was insufficient to prove the essential elements of fraud and that absent such proof the Morans were not entitled to recovery on their Counterclaim for fraudulent misrepresentation. They also argue that damages are due them because the Morans breached the Contract by retaining possession of the Motel, by refusing to make the monthly installment payments of $1,500.00 for the period of August 1 to October 15 of 1968, by failing to pay the November property tax installment, and by committing waste on the premises during their possession.

The Morans, on the other hand, contend that the evidence favorable to them and the judgment below, together with the reasonable inferences to be drawn therefrom, justified the trial court's finding that the Grissoms fraudulently misrepresented the condition of the Motel entitling them to rescission of the Contract.

As to ISSUE TWO, the Grissoms assert that when a party elects to rescind a contract he is not entitled to damages; rather, he is only entitled to be put into the position that he was prior to the time that the contract was entered into. For this reason, they argue that the award of $6,931.00 amounted to damages and not a return to the status quo.

The Morans reply that the $6,931.00 judgment entered in their favor did not amount to damages for the reason that it was more than $4,000.00 less than the total required to return them to the status quo.

Errors assigned by Grissoms on appeal are that: 'The decision of the Court was not supported by sufficient evidence' and that 'the decision of the Court was contrary to law.'

DECISION

ISSUE ONE--It is our opinion that the evidence was sufficient to sustain the trial court's finding that the Morans did not breach the Contract because the Grissoms had fraudulently misrepresented the condition of the Motel to the Morans and were therefore entitled to rescission.

Grissoms' assigned errors that the trial court's judgment was not supported by sufficient evidence and was contrary to law causes us to reiterate the oft-iterated rule that when the sufficiency of the evidence is questioned on appeal, the reviewing court will not weigh the evidence but will consider only that evidence most favorable to the appellee together with the reasonable inferences to be drawn therefrom. Muehlman v. Keilman (Ind.1971), 272 N.E.2d 591; Green v. Board of Commissioners of Scott County (1969) 251 Ind. 535, 242 N.E.2d 844; Smart & Perry Ford Sales, Inc. v. Weaver (Ind.App.1971) 274 N.E.2d 718. Also ingrained in our appellate practice is the principle that when trial is to the court the ultimate facts as found by the trial court must be accepted by this court if there is sufficient evidence to support such facts. We may not reverse the judgment unless it is 'clearly erroneous.'

Rule TR. 52(A), IC 1971, 34--5--1, Rule 52(a); First National Bank of Mishawaka v. Kamm (Ind.App.1972) 283 N.E.2d 563.

To determine whether Grissoms have climbed the mountain that every appellant must claim who assigns such errors, we first briefly review familiar fraud law.

When fraud is relied on as a basis for recovery, the alleging party must prove all of the essential elements of fraud by a preponderance of the evidence. Automobile Underwriters, Inc. v. Smith (1960) 131 Ind.App. 454, 166 N.E.2d 341, 167 N.E.2d 882; Farm Bureau Mutual Ins. Co. of Indiana v. Seal ...