Hall-Hottel Co., Inc. v. Oxford Square Co-op., Inc.
| Decision Date | 08 March 1983 |
| Docket Number | No. 1-382A61,HALL-HOTTEL,1-382A61 |
| Parties | CO., INC., Defendant-Appellant, v. OXFORD SQUARE COOPERATIVE, INC., Plaintiff-Appellee. |
| Court | Indiana Appellate Court |
Arthur H. Northrup, Indianapolis, for defendant-appellant.
Michael Kummerer, Columbus, for plaintiff-appellee.
Defendant-appellant Hall-Hottel Co., Inc. (Manager) appeals a judgment entered in the Bartholomew Circuit Court upon a jury trial in favor of Oxford Square Cooperative, Inc. (Cooperative) in a breach of contract action for damages arising out of Manager's withholding excessive and unauthorized management fees. At the close of all the evidence, the trial court granted Cooperative's motion for judgment on the evidence for actual damages in the amount of $6,767.04. The jury assessed punitive damages against Manager in the amount of $5,000.
We affirm.
The Cooperative entered into a Housing Management Agreement (management agreement) with Manager, a realty management company, to supervise sales, repair and maintenance of Cooperative's housing units in Columbus, Indiana. The Cooperative is a nonprofit cooperative housing corporation designed to provide housing on a mutual ownership basis to low and moderate income families. Mortgages are provided by the Federal Housing Administration (FHA) to members of the Cooperative at interest rates below the market rate. The Department of Housing and Urban Development (HUD) is a consenting party to the management agreement, and by its terms Manager was authorized to withhold 7 percent of Cooperative's gross monthly income as a management fee.
As a consenting party to the management agreement, HUD reserved the power to reject any management company hired by Cooperative which HUD found unsatisfactory. Likewise, HUD's written consent was necessary before a management contract between Cooperative and a management company could take effect.
On July 21, 1978, ten days before the original management term with Manager would expire, James Lyons, an employee of Manager, contacted Shirley Shipley, President of Cooperative's Board of Directors, and requested her signature on an Amendment to the management agreement, increasing Manager's fee to 9 percent. Lyons explained that Shipley's signature was needed immediately since Lyons was going on vacation. Shipley signed the amendment without the approval of Cooperative's Board of Directors, relying on Lyon's representation that the amendment would not be effective until HUD approved as a consenting party.
The amendment was prepared by Manager pursuant to an instruction by Manager's President, Richard Hall, that Lyons negotiate a fee increase with Cooperative. No other members of Cooperative's Board of Directors saw the amendment before it was signed by Shipley. Shipley did not realize that the management agreement between Cooperative and Manager did not allow for management fee increases greater than one quarter of one percent.
HUD never consented to the fee increase proposed in Manager's amendment. HUD's first record of the fee increase request came in a January, 1979 letter from Manager. In February, 1979, HUD expressly refused to consent to the management fee increase. Despite HUD's lack of consent and express refusal to the fee increase, Manager withheld a 9 percent fee from August, 1978, until December 31, 1979, when the management contract was terminated. The Cooperative sent a letter to Manager requesting Manager to refund the 2 percent excess fees charged Cooperative. Manager refused. HUD was not aware Manager had, without its consent, collected the 9 percent fee. HUD conducted a management review of Manager and found the management operation of the Cooperative to be unsatisfactory. HUD concurred with Cooperative in the termination of Manager's contract.
Manager presents the following five issues for review:
I. Did the trial court err in denying defendant's motion to dismiss this suit or direct a verdict for defendant on the ground that the Commissioner of Housing and Urban Development (HUD) had not given the required consent in writing to the bringing of this action?
II. Did the trial court err in granting summary judgment against affirmative defenses when the motion for summary judgment was supported only by an affidavit filed the day of hearing and stating parol evidence?
III. Did the trial court err in denying defendant's motion for a mistrial when documents which were never offered in evidence were submitted to the jury for examination, but instead gave an instruction which made it appear that such submission was the defendant's fault?
IV. Was any award of punitive damages sustained by the evidence when defendant acted with full disclosure, in reliance on a written agreement signed by plaintiff and with apparent approval by the Department of Housing and Urban Development, pursuant to established trade practices?
V. Did the trial court err in directing a verdict on the basis that there was no evidence of HUD consent or acquiescence and in an amount appropriate for specific performance, but not for breach of contract?
Issue I. Motion to dismiss
Manager argues that the trial court should have sustained its motion to dismiss Cooperative's complaint since by the terms of the Oxford Square Cooperative Plan the Cooperative is required to obtain written consent from HUD to file a lawsuit.
Motions to dismiss are not favored by the law. William S. Deckelbaum Company v. The Equitable Life Assurance Society of the United States, (1981) Ind.App., 419 N.E.2d 228. Trial courts should consider as true all allegations of complaint and should view a motion to dismiss in a light most favorable to the nonmoving party, resolving all inferences in his favor. Id.
The parties to the cooperative plan were the Cooperative and the Commissioner of HUD. Manager was not a contracting party to this agreement. The provisions of the cooperative plan bind only the parties to it. As Cooperative asserts in its brief, Manager, at best, is an incidental beneficiary to the cooperative plan, and as such does not acquire the right to raise this issue against either of the contracting parties. See RESTATEMENT (SECOND) OF CONTRACTS Sec. 315 (1981). Assuming, arguendo, that Manager may present this error, it is waived for Manager's failure to properly raise it in a responsive pleading. United Farm Bureau Mutual Insurance Company v. Wolfe, (1978) 178 Ind.App. 441, 382 N.E.2d 1018. The affirmative defense of failure to perform a condition precedent must be specifically asserted in a responsive pleading. Ind. Rules of Procedure, Trial Rules 9(C) and 8(C); Wolfe, supra; and See Thompson v. City of Aurora, (1975) 263 Ind. 187, 325 N.E.2d 839. Manager first raised this defense at trial, and thus it was waived because it was not properly raised in a responsive pleading. The trial court did not err.
Issue II. Summary judgment
Manager asserts that it was error for the trial judge to grant Cooperative's summary judgment motion against Manager's affirmative defenses 1 since the motion was unsupported by a valid affidavit.
On review of a motion for summary judgment, the Court of Appeals must consider as true all facts properly asserted by the nonmovant. Wallace v. Indiana Insurance Company, (1981) Ind.App., 428 N.E.2d 1361. When reviewing a summary judgment, we will reverse if the record discloses either an unresolved issue of material fact or an incorrect application of law. Wienke v. Lynch, (1980) Ind.App., 407 N.E.2d 280.
The management agreement entered into on July 21, 1976, was signed by Manager, Cooperative, and HUD. Written consent from HUD was required to validate any supplemental agreement such as Manager's amendment seeking a 9 percent fee. The management agreement provided for the payment of a management fee as follows:
"27. Agent's Compensation.
a. Each such monthly fee will be in an amount equal to seven percent (7%) of gross collections received during the preceding month of carrying charges, housing charge income, rent supplemental receipts, and late charges, and any other miscellaneous income.
b. The percentage fee stipulated in Section 27a may be increased by one-fourth ( 1/4) of one percent (1%) on the anniversary date of this Agreement if HUD approved the Owner's written request, based upon its determination that the Agent's performance has been of superior quality. Such requests are not automatically approved, and may not be implemented without written authorization from the HUD Area/Insuring Office having jurisdiction over the project mortgage." (Emphasis added.)
Manager's affirmative defenses depend entirely upon the validity of the amendment which had never been approved by HUD as expressly required under the management agreement. In fact, the management agreement specifically prohibited a supplemental agreement such as the amendment without the written consent of HUD. The relevant portions of the management agreement provided:
"28. Terms of Agreement. This Agreement shall be in effect for a period of two years beginning on the first day of August, 1976, and ending on the 31st day of July, 1978; thereafter, the term shall continue in full force and effect until either party shall serve written notice of cancellation to the other party in the manner hereinafter provided, in which event this agreement shall terminate sixty (60) days after the service of such notice; subject, however, to the following conditions:
a. This Agreement will not be binding upon the Principal Parties until endorsed by the Consenting Parties.
34. Interpretative Provisions.
b. This Agreement constitutes the entire agreement between the Owner and the Agent with respect to the management and operation of the Project, and no change will be valid, unless made by supplemental written agreement, executed and approved by the Consenting Parties as well as the Principal Parties....
To continue reading
Request your trial
-
Miller Brewing Co. v. Best Beers of Bloomington, Inc.
...Bright (1986), Ind.App., 494 N.E.2d 970; Liberty Mut. Ins. Co. v. Parkinson (1985), Ind.App., 487 N.E.2d 162; Hall-Hottel Co. v. Oxford Square Coop. (1983), Ind.App., 446 N.E.2d 25; Campbell v. Railroadmen's Fed. Sav. and Loan Ass'n (1982), Ind.App., 443 N.E.2d 81; Shelby Fed. Sav. and Loan......
-
Brant Const. Co., Inc. v. Lumen Const. Co.
...damages is discretionary and is awarded to punish wrongdoing and to deter others from similar conduct. Hall-Hottel Co. v. Oxford Square Co-op, Inc. (1983), Ind.App., 446 N.E.2d 25, 31. The evidence here showed that Brant, through deception of Lumen, attempted to circumvent the MBE requireme......
-
Crook v. Shearson Loeb Rhoades, Inc.
...actionable fraud can arise from a breach of duty by the dominant party in a fiduciary relationship. Hall-Hottel Co. v. Oxford Square Co-op, Inc., 446 N.E.2d 25, 31 (Ind.App.1983). "Failure to disclose all material facts by one on whom the law imposes a duty to disclose constitutes actionabl......
-
Comfax Corp. v. North American Van Lines, Inc.
...confidential relationship can arise, there must be dominant and subordinate parties involved); cf. Hall-Hottel Co. v. Oxford Square Co-Op, Inc. (1983), Ind.App., 446 N.E.2d 25, 31, trans. denied (fiduciary relationship existed between cooperative housing corporation and management company, ......