Kaghann's Korner, Inc. v. Brown & Sons Fuel Co., Inc.
| Decision Date | 25 February 1999 |
| Docket Number | No. 17A03-9802-CV-79,17A03-9802-CV-79 |
| Citation | 706 N.E.2d 556 |
| Parties | KAGHANN'S KORNER, INC., Appellant, v. BROWN & SONS FUEL COMPANY, INC., Appellee. |
| Court | Indiana Appellate Court |
John R. Burns, III, Robert D. Moreland, Laura C. O'Donnell, Baker & Daniels, Fort Wayne, Indiana, Attorneys for Appellant.
Cathleen M. Shrader, Thomas A. Herr, Barrett & McNagny, Fort Wayne, Indiana, Attorneys for Appellee.
Defendant-Appellant Kaghann's Korner, Inc. appeals two trial court decisions: 1) "Court Decision Enforcing Contract for Sale of Real Estate" ("Contract Decision"), ordering Kaghann's Korner to specifically perform its obligations required by an enforceable agreement for the sale of Kaghann's Korner's real estate and business to Brown & Sons Fuel Company, Inc. ("Brown"); and 2) "Court Decision Awarding a Civil Money Judgment for Damages Based on Negligence" ("UST Decision"), finding that Brown negligently caused a fuel spill at Kaghann's Korner's underground storage tank ("UST"), but failing to find that Brown violated the Indiana Underground Storage Tank Act ("USTA"). Ind.Code § 13-23 et seq.
Plaintiff-Appellee Brown cross-appeals on the "Court Decision Establishing Partial Summary Judgment" in favor of Kaghann's Korner and against Brown, finding that Brown failed to strictly perform its implied contractual obligations to deliver diesel fuel to Kaghann's Korner in a safe, reasonable, and workmanlike manner, thereby committing a breach of contract.
We affirm in part and reverse in part.
Kaghann's Korner raises three issues for our review which we restate as follows:
1. Whether the trial court erred in finding that Brown was not an owner or operator of the UST as defined under the USTA at the time of the fuel overfill. 1
2. Whether the trial court erred in determining that Brown did not cause a release of fuel as defined under the USTA. 2
3. Whether the trial court correctly ordered Kaghann's Korner to specifically perform its obligations required by the January 18, 1995 Letter of Understanding ("Letter").
4. Whether the trial court lacked jurisdiction to enter its January 15, 1998 order subsequent to its original August 11, 1997 judgments.
Brown raises one issue on cross-appeal for our review which we restate as: whether the trial court erred in finding that as a matter of law Brown failed to strictly perform its contractual obligations, thereby committing a breach of contract.
On January 18, 1995, Kaghann's Korner and Brown entered into a contract for the sale of the Kaghann's Korner business and real estate. This contract included the Letter, a Promissory Note (Note), a Commercial Realty Lease (Lease), and a Fuel Supply Agreement (Agreement). The Letter stated a purchase price of $335,000 with a $50,000 cash down payment due from Brown at closing. The Note was for the remaining $285,000 and called for 120 consecutive monthly payments of principal and interest of $3,458 at eight percent per annum for ten years. The Lease was an agreement whereby Kaghann's Korner, as tenant, was to pay Brown, as landlord, the sum of $40,200 per annum, payable in equal monthly installments of $3,350. The Agreement was for Kaghann's Korner to purchase all fuel product requirements from Brown in order to guarantee Kaghann's Korner a pre-established margin for each fuel grade. Brown paid to Kaghann's Korner the $50,000 down payment at closing. Kaghann's Korner has continued to possess the real estate and operate the business but has failed to pay to Brown any of the $3,350 monthly lease payments agreed to in their Lease and has failed to obtain title insurance and deliver a warranty deed.
On March 30, 1995, Jay E. Brown, on behalf of Brown & Sons Fuel, delivered a truckload of diesel fuel to Kaghann's Korner. However, while in the process of filling a 4,000 gallon UST at Kaghann's Korner and while not paying attention, Jay E. Brown caused an overfill of the tank resulting in diesel fuel being spilled onto the concrete On March 25, 1996, the Dekalb County Circuit Court entered its "Decision Establishing Partial Summary Judgment" in favor of Kaghann's Korner and against Brown for spilling diesel fuel on the property, thereby constituting a breach of an implied contract term of the fuel supply contract that the fuel be delivered in a safe, reasonable, and workmanlike manner using reasonable care.
surface in the area and onto and into the ground in the area.
On August 11, 1997, the Dekalb County Circuit Court entered two judgments. First, in the "Court Decision Enforcing Contract for Sale of Real Estate," the trial court ordered Kaghann's Korner to specifically perform its obligations required by the January 18, 1995 Letter, including the implied obligation to deliver to Brown a warranty deed and title insurance coverage. Further, the order bound Brown by the terms of the Note and both parties remained bound by the terms of the Lease. The second order was the "Court Decision Awarding a Civil Money Judgment for Damages Based on Negligence," whereby the trial court entered a judgment in favor of Kaghann's Korner and against Brown for $62,929.81 together with court costs and statutory judgment interest from and after August 11, 1997.
On January 15, 1998, the trial court entered a judgment pursuant to Indiana Trial Rule 70, ordering the money judgment funds from the August 11, 1997 judgment to be held in escrow for the sole purpose of cleaning up the environmental damage done by the fuel overfill at Kaghann's Korner.
Kaghann's Korner appeals the January 15, 1998 judgment as well as the two August 11, 1997 judgments while Brown appeals the March 25, 1996 judgment.
Kaghann's Korner argues that the trial court erred in finding that Brown did not own or operate the USTs and therefore was not liable under the USTA. Specifically, Kaghann's Korner contends that Brown is liable under the Act because it was both an owner and an operator of the USTs at the time of the fuel spill.
In order for a party to be held liable for costs under the USTA, it must be shown that the party either "owned or operated the underground storage tank at the time" when the fuel overfill occurred. Ind.Code § 13-23-13-8(b).
Kaghann's Korner argues that Brown owned the USTs at the time the fuel overfill occurred because the trial court found that Kaghann's Korner and Brown entered into an enforceable contract for the sale of Kaghann's Korner. According to the USTA, the definition of "owner" is a person who owns the underground storage tank, but specifically does not include a person who does not participate in the management of a UST, is otherwise not engaged in the production, refining, and marketing of regulated substances, and holds indicia of ownership primarily to protect the owner's security interest in the tank. Ind.Code § 13-11-2-150.
The supreme court, in Skendzel v. Marshall, held that a conditional land sale contract, once consummated, constitutes a present sale and purchase of the property, with the seller retaining the legal title of the property as security for the performance of the contract while equitable title vests in the purchaser. 261 Ind. 226, 301 N.E.2d 641, 646 (1973). Once the parties enter into a contract for the sale of real estate, all incidents of ownership accrue to the purchaser and the purchaser assumes the risk of loss. Id. Therefore, the retention of the title by the seller is the same as reserving a lien or mortgage. Realistically, seller-purchaser should be viewed as mortgagee-mortgagor. Id. In Skendzel, the Court reasoned that a conditional land sale contract, where the vendor reserves title, in effect creates a vendor's lien in the property to secure the unpaid balance owed under the contract. Id. at 647.
However, under the line of reasoning of Skendzel, the contract between Kaghann's Korner and Brown for the sale of Kaghann's Korner cannot be viewed as a mortgage. The contract between Brown and Kaghann's Korner was not a conditional land sale contract We conclude, therefore, that Brown was not the owner of Kaghann's Korner under the USTA because the contract was not akin to a mortgage. Where the title is retained by the seller as security for the payment of the debt, the security is very generally regarded as possessing all the essential features of a mortgage, and the seller stands in the shoes of a mortgagee to the buyer. Skendzel, 301 N.E.2d at 647. Where a sale of land is evidenced by a contract only, and the purchase price has not yet been paid, and the seller retains legal title, the parties occupy the positions of mortgagor and mortgagee. Id. Although Brown had satisfied its conditions of the contract, title had not been passed to Brown. Further, Kaghann's Korner was still in possession and operating the Kaghann's Korner business at the time of the fuel overfill. Thus, although the contract for the sale of Kaghann's Korner was enforceable, title and possession, and therefore ownership, had yet to pass to Brown. We affirm the trial court's ruling that Brown was not an owner under the USTA.
because the parties orally agreed that title insurance and a warranty deed would be executed and delivered to Brown within a few days of the consummation of the contract. Further, Brown fulfilled its part of the bargain by paying a $50,000 down payment and executed and delivered an unsecured promissory note for $285,000. Therefore, unlike the facts in Skendzel, Brown had no more conditions to perform under the contract and the Agreement was simply a contract for the sale of real estate. On the other hand, Kaghann's Korner was not retaining title as security for Brown to pay the remaining balance of the contract because there was no remaining balance. Instead, Kaghann's Korner had failed to honor its obligation to deliver title insurance and the deed within a reasonable time of the consummation...
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