Kissel v. Rosenbaum

• Decision Date: 21 October 1991
• Docket Number: No. 87A01-9104-CV-116,87A01-9104-CV-116
• Citation: 579 N.E.2d 1322
• Parties: Prod.Liab.Rep. (CCH) P 13,079 Waldemar KISSEL, Melva Kissel, Appellants-Defendants, v. Mark ROSENBAUM, Nona Rosenbaum, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 1322

579 N.E.2d 1322

Prod.Liab.Rep. (CCH) P 13,079

Waldemar KISSEL, Melva Kissel, Appellants-Defendants, v. Mark ROSENBAUM, Nona Rosenbaum, Appellees-Plaintiffs.

No. 87A01-9104-CV-116.

Court of Appeals of Indiana,

First District.

Oct. 21, 1991.

David L. Henry, Ramsey & Henry, Tell City, for appellants-defendants.

Mark & Nona Rosenbaum, pro se.

ROBERTSON, Judge.

Waldemar and Melva Kissel appeal from an adverse bench trial judgment on Mark and Nona Rosenbaum's complaint to quiet title and for damages for breach of implied warranty of fitness for habitation. On appeal, they bring the following issues:

I. Did the Court improperly enter a judgment against the Kissels as individuals when they were not parties as individuals to the transaction underlying this dispute, but were instead officers of the corporation that was a party to the transaction and which was not made a party to the litigation?

II. Did the Court improperly enter a judgment against Kissels which should have been barred by the applicable statute of limitations?

We reverse.

The evidence most favorable to the Rosenbaums shows that the Kissels built and sold homes as a business. They eventually built a house in 1976 in Warrick County, Indiana and lived in it as their residence. On March 6, 1978, the Kissels formed Kissel Homes, Inc., a company they used to continue to build and sell houses. The Kissels were the only directors of this corporation. Waldemar Kissel was the president, and Melva Kissel was the secretary.

The Kissels sold their residence to Kissel Homes, Inc., in April of 1979. The Rosenbaums later negotiated with the Kissels to purchase the property. The parties reached an agreement whereby the Rosenbaums would borrow five thousand dollars ($5,000.00) from the Kissels so they could buy the house immediately. The Rosenbaums therefore executed a promissory note, secured by a real estate mortgage on the property, in that amount on August 7, 1979. The Rosenbaums then purchased the house on August 8, 1979, and Mark Rosenbaum repaid the loan of five thousand dollars ($5,000.00) just before closing with proceeds from a loan from his employer. Waldemar Kissel told Mark Rosenbaum he would return the original promissory note marked "PAID" but never did so. The warranty deed to the Rosenbaums lists Kissel Homes, Inc., as the grantor. The Kissels signed the warranty deed in their capacities as officers of the corporation.

On August 9, 1979, the day after closing, and within about one month thereafter, Mark Rosenbaum discovered damage to and defects in the house which were inherent in the construction. The brick facing on the front, back, and sides of the house had moved away from the structural wall. A major crack appeared in the brick facing and moved from the front to the back of the house. A gap existed between the wall and the brick facing on the walls. Certain strategically placed double moldings in the window and door frames, shrubs around the base of the house, and fascia along the top of the brick work all hid the gaps. The condition of the brick facing was such that it would likely fall if not repaired. The condition of these walls was caused by the virtual lack of footing in the foundation of the house when the Kissels built it. The footing for the house should have been at least eight inches but some parts of the foundation had no footing at all.

In addition, the heating and air conditioning system installed in the house prevented suitable heating or cooling of the structure. The downstairs unit had to be immediately replaced and the duct work under the house in the crawl space had to be repaired and insulated.

Waldemar Kissel was aware of the damage to the property before August 8, 1979 but failed to notify the Rosenbaums of the damage. Mark Rosenbaum immediately attempted to contact Waldemar and Melva Kissel to report the damage and recover the paid promissory note but was unable to locate them in the State of Indiana. The Kissels were last residents of the State of Indiana in August of 1979. The Kissels owed much money to many persons when they left the State of Indiana. Eventually, many persons obtained judgments against them for debts and for inadequately built homes. Mark Rosenbaum wrote many letters to the Kissels in an attempt to contact them about the damage to his home and the costs of repair, and he believed some of them were delivered although most were returned. Waldemar Kissel even sent an unsigned check to the Rosenbaums for $17,000.00, with a note that said, "Ha, ha." Mark Rosenbaum had no other contact with the Kissels from the time of closing until they answered his complaint. However, he received correspondences from Melva Kissel's father after the Kissels had attempted to assign the paid promissory note to him.

Mark Rosenbaum decided not to pursue his breach of warranty claim, as the Kissels had many judgments against them and had left the State of Indiana. However, he eventually discovered the promissory note the Kissels had attempted to assign was a cloud on his title. In an attempt to remove this lien, he served the Kissels with notice by publication of his claim to quiet title. He was surprised to receive an answer; but when he obtained personal jurisdiction over the Kissels, he decided to amend his complaint and pursue his breach of warranty claim.

The trial court entered judgment in favor of the Rosenbaums for implied breach of warranty as follows:

Well, from the evidence that I've heard, taken the plaintiff's Complaint, he's complaining about the workmanship of the builders of the house and according to your opening statement it was the Kissels that were the builders of the house, Waldemar Kissel and his wife, Melva Kissel, were builders of the house. And according to the evidence that I've heard today there were some latent defects that could not have been discovered from an ordinary and reasonable [sic], and the statute of limitations starts running after that. I have evidence that the brick work has to be done in the amount of $8,725. Mr. Rosenbaum testified that he spent $3,500 on air conditioning and heating system that was a latent effect [sic] and he spent $2,700 on duct work. So I will grant the plaintiff a judgment against Waldemar Kissel and Melva Kissel in the amount of $14,925....

* * * * * *

And that leaves a question as to whether [the note] has been paid or not. I have evidence that it has been paid by Mr. Rosenbaum, that he paid it accord and satisfaction. And so that wipes that note out. He has a judgment of $14,925 plus costs.

The trial court ordered and adjudged that the promissory note was null and void and did not constitute a lien or cloud upon the Rosenbaums' title and interest in the real estate, as it had been paid in full.

I.

The trial court did not improperly enter a judgment against the Kissels as individuals for an act attributable to their corporation.

The Kissels first claim that the trial court improperly entered judgment against them as individuals for an act they performed as officers of their corporation. We remind them that our function is not to reweigh evidence or reassess the credibility of the witnesses. We will not set aside the fact-finding of the trial court unless it is clearly erroneous. The trial court will not be reversed on the evidence unless there is a total lack of supporting evidence or the evidence is undisputed and leads solely to a contrary conclusion. Brancheau v. Weddle (1990), Ind.App., 555 N.E.2d 1315.

In order to appropriately address this issue, we must discuss the Rosenbaums' theory of recovery. The Rosenbaums sued the Kissels for breach of implied warranty of fitness for habitation. Our supreme court first recognized this theory in Theis v. Heuer (1971), 149 Ind.App. 52, 270 N.E.2d 764, transfer granted and opinion adopted, (1972), 264 Ind. 1 280 N.E.2d 300. That case abolished the rule of caveat emptor as applied to the immediate purchase of a new dwelling house from a builder-vendor. Wagner Construction Co., Inc. v. Noonan (1980), Ind.App., 403 N.E.2d 1144. The implied warranty of fitness for habitation does not require that the dwelling be rendered totally uninhabitable before there is a breach of the warranty; rather, breach of the warranty is established by proof of a defect of a nature which substantially impairs the use and enjoyment of the residence as a place of human habitation. Id.

Caveat emptor developed when the buyer and the seller were in an equal bargaining position and could readily be expected to protect themselves in the deed. Buyers of mass produced development homes are not on an equal footing with the building vendors and are therefore less able to protect themselves in the deed. See Theis, 264 Ind. at 9, 280 N.E.2d at 304 (quoting Schipper v. Levitt & Sons, Inc. (1964), 44 N.J. 70, 207 A.2d 314). The rule performed a disservice not only to the ordinary prudent purchaser but to the industry itself by lending encouragement to the unscrupulous, fly-by-night operator and purveyor of shoddy work. Theis, 264 Ind. at 8, 280 N.E.2d at 304 (quoting Humber v. Morton (1968), Tex., 426 S.W.2d 554). The ordinary home buyer is not in a position, with inadequate knowledge and opportunity, to make a meaningful inspection of the component parts of a residential structure and thereby discover its hidden defects. The purchase of a home is not a common transaction for the average home buyer, who should therefore be able to rely upon the expertise and skill of the builder that the the house is reasonably fit for its intended use. Wagner, 403 N.E.2d at 1147 (quoting Moxley v. Laramie Builders, Inc. (1979), Wyo., 600 P.2d 733). See also, Vetor v. Shockley (1980), Ind.App., 414 N.E.2d 575.

The supreme court then extended the protection of the implied warranty of fitness for habitation to a second or subsequent purchaser for latent or hidden defects which become manifest after the purchase and which are not...