Landmark Health Care Associates L.P.-1989-A v. Bradbury

• Citation: 671 N.E.2d 113
• Decision Date: 02 October 1996
• Docket Number: No. 43S04-9505-CV-576,43S04-9505-CV-576
• Parties: LANDMARK HEALTH CARE ASSOCIATES L.P.-1989-A, an Indiana Limited Partnership, D/B/A Prairie View Health Care Center; The Landmark Corporation et al., Appellants (Defendants Below), v. Barbara L. BRADBURY, Laura L. Disher and Linda A. Ketrow, Trustees of James R. Bradbury, beneficiary and N. Charlene Bradbury, 614 Nancy Street, Warsaw, Indiana 46580, Appellees (Plaintiffs Below).
• Court: Supreme Court of Indiana

Page 113

671 N.E.2d 113

LANDMARK HEALTH CARE ASSOCIATES L.P.-1989-A, an Indiana

Limited Partnership, D/B/A Prairie View Health

Care Center; The Landmark Corporation et

al., Appellants (Defendants Below), v. Barbara L. BRADBURY, Laura L. Disher and Linda A. Ketrow,

Trustees of James R. Bradbury, beneficiary and N.

Charlene Bradbury, 614 Nancy Street,

Warsaw, Indiana 46580,

Appellees (Plaintiffs Below).

No. 43S04-9505-CV-576.

Supreme Court of Indiana.

Oct. 2, 1996.

Jeffrey C. McDermott, James W. Stevenot, Krieg DeVault Alexander & Capehart, Indianapolis, for Appellant.

Duane G. Huffer, Warsaw, for Appellee.

ON PETITION TO TRANSFER

SELBY, Justice.

Two questions are involved in this appeal: (1) whether summary judgment is appropriate in this case, and (2) whether the trial court abused its discretion by ordering the defendant to pay a judgment which included an interest rate in excess of the statutory rate. We affirm the trial court's grant of summary judgment, but we remand for modification due to the imposition of an excessive interest rate.

FACTS

In September 1988, Landmark Health Care Associates ("Landmark") executed an agreement with Prairie View Rest Home, Inc. ("Prairie View") to purchase the Prairie View Nursing Home. Landmark agreed to pay $3 million for the nursing home--$2.25 million at closing, and $250,000 plus accrued interest in January of 1990, 1991, and 1992.

The parties closed the deal on December 22, 1988, when Landmark executed and delivered a mortgage securing its promissory note to Prairie View. Prairie View subsequently filed for dissolution, and assigned its rights, title, and interest in the mortgage and note to "N. Charlene Bradbury and Linda S. Ketrow, Laura L. Disher and Barbara L. Bradbury, Trustees of James R. Bradbury" (collectively "Bradbury"). (R. at 338).

On September 25, 1991, a fire caused extensive damage to the nursing home. In an inspection which was conducted shortly after the fire, the Indiana State Fire Marshal determined that the nursing home's sprinklers and doors did not meet applicable fire codes. ¹

After Landmark failed to make the January 1992 payment, Bradbury commenced this action. Landmark answered, raising several affirmative defenses, including breach of the covenants, representations, and warranties in the sales agreement. Landmark also filed a counterclaim, alleging breach of warranty based on Prairie View's failure to disclose the nursing home's alleged latent defects and fire code violations.

Bradbury moved for summary judgment on its amended complaint and on Landmark's counterclaim. The trial court granted Bradbury's motion:

This matter having been submitted to the Court for hearing on motion for summary judgement filed herein by [Bradbury] and the response thereto of [Landmark], and the Court having considered said motion, response, pleadings and papers filed in this case, and affidavits in support thereof ... and being duly advised in the premises NOW FINDS that after the date of Agreement for the Purchase and Sale of Prairie View Nursing Home, September 7, 1988, and prior to date of promissory note and date of mortgage, [Landmark], under the agreement, had the rights to determine if Plaintiffs' assignor was fully licensed, to inspect the nursing home facility of Plaintiffs' assignor, to determine that Plaintiffs' assignor's representation and warranties of the agreement were true and correct, and if not, require Plaintiffs' assignor, prior to delivery of note and mortgage, to correct same; that reports of inspection of the sprinkler system of the nursing home facility, by an independent contractor used by both Plaintiffs' assignor and Landmark indicated that the sprinkler system was in proper condition and that public notice to the public that the sprinkler system may not operate properly under fire conditions was not made for several months after delivery of note and mortgage; that the Indiana Department of Fire and Building Services determined that the nursing home facility met the conditions of the Life Safety Code of the National Fire Protection Association on December 7, 1988, a date prior to delivery of the note and mortgage; and that there is no genuine issue as to any material fact and that Plaintiffs are entitled to judgment as a matter of law.

The Court FURTHER FINDS that Plaintiffs are entitled to have and recover of and from the Defendants ... for the principal amount due thereon in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00), together with interest accrued on said note to date in the amount of Sixty-eight Thousand Eight Hundred Fifty-five and 80/100 Dollars ($68,855.80), together with attorney fees in the amount of Four Thousand Six Hundred Fifty-three Dollars ($4,653.00) and together with lien title search expense in the amount of Fifty-five dollars ($55.00), for a total judgment in the amount of Three Hundred Twenty-three Thousand Five Hundred Sixty-three and 80/100 Dollars ($323,563.80), together with interest thereon at the rate of Ten percent (10%) per annum from and after this date until paid and without relief from valuation and appraisement laws.

(R. at 408-11).

Landmark appealed, arguing that the trial court's order is erroneous as a matter of law for three reasons: (1) Landmark's right to determine the truth of the Plaintiffs' warranties imposed no affirmative duty on Landmark to verify that such warranties were true, (2) the trial court's order erroneously holds that the Plaintiffs did not breach their warranties because they lacked knowledge of the defects and the fire code violations when the warranties were made, and (3) the trial court's order fails to consider and harmonize all provisions of the purchase agreement. Bradbury did not address these arguments. Instead, Bradbury argued for affirmance on another basis, that Prairie View did not breach any of the warranties. ² The Court of Appeals addressed this contention and determined that the "designated materials reveal conflicting facts about the condition of the sprinkler system at the time of closing." Slip Op. at 13. Hence, the Court of Appeals determined that summary judgment is inappropriate in this case. Bradbury then sought transfer, arguing that the Court of Appeals disregarded the binding effect of a determination of fact by the Indiana State Fire Marshal.

This case presents a novel question for us: whether a buyer may sue for breach of contract warranty based upon evidence coming to light three years after closing, or whether a seller can reasonably rely on the actions of the Fire Marshal, an Officer of the State. Under the unique circumstances of this case, we affirm the trial court's grant of summary judgement to Bradbury. Defendants also raise the issue of whether the trial court erred by ordering the defendants to pay interest in excess of the statutory limit. We find that the trial court did so err, and we remand for modification consistent with this opinion.

I. Standard of Review

In an appeal from a grant of summary judgment, the reviewing court faces the same issues as the trial court, Hooks SuperX, Inc. v. McLaughlin, 642 N.E.2d 514 (Ind.1994), as summary judgment is appropriate only if the pleadings and evidence show "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." T.R. 56(c). Thus, even though a summary judgment is presumed to be valid and the appealing party bears the burden of persuasion, the appellate court follows the same process as the trial court. Drake v. Mitchell, 649 N.E.2d 1027 (Ind.1995). The reviewing court must provide careful scrutiny of the trial court's determination to assure that the non-prevailing party is not improperly denied his day in court. Indiana Dept. of State Revenue v. Caylor-Nickel Clinic, P.C., 587 N.E.2d 1311 (Ind.1992). A reviewing court will affirm a grant of summary judgment on any legal basis which is supported by the designated evidentiary matter found in the record. Indiana State Bd. of Public Welfare v. Tioga Pines Living Center, Inc., 622 N.E.2d 935 (Ind.1993), cert. denied, 510 U.S. 1195, 114 S.Ct. 1302, 127 L.Ed.2d 654 (1994).

II. Date of Importance

Our first task is to determine the date to which the agreement speaks with respect to the warranties. Bradbury directs us to Dittman v. Nagel, 43 Wis.2d 155, 168 N.W.2d 190 (1969), in which the warranty in a real estate purchase agreement stated the following:

The seller warrants the well on the herein described premises to be of sufficient depth and produces an adequate supply of water for human consumption.

Id.,168 N.W.2d at 191. In determining the date to which the warranty spoke, the Wisconsin Supreme Court applied common law principles of warranty and relied on 46 AM.JUR., Sales, § 375, which states in pertinent part as follows:

The ordinary warranty as to condition or quality relates to the time of sale, and if broken at all is broken when the sale is made.

Id. at 194. That court determined that if the warranty had been breached, it would have been breached on the date of closing and not thereafter. In that case, the buyers were unable to demonstrate that a breach had occurred at the time of sale. See also, Nachazel v. Miraco Mfg., 432 N.W.2d 158 (Iowa 1988).

Here, the purchase agreement includes the following pertinent provisions:

Section 6 ... [T]he Project and the use thereof comply with all applicable public and private restrictions, regulations, ordinances and laws.... [T]he project now conforms to all applicable building codes, zoning ordinances, environmental laws, rules and regulations and other restrictions governing the use of the Project....

7.2 The use and operation of the Project now is, and at the Closing will be, in full compliance with applicable building codes, zoning, land use and environmental laws, and other local, state or federal laws and regulations unless otherwise waived; and there are no licensing deficiencies,...