Stephenson v. Frazier

• Decision Date: 29 January 1980
• Docket Number: No. 2-677A252,2-677A252
• Citation: 399 N.E.2d 794,28 UCC Rep.Serv. 12
• Parties: 28 UCC Rep.Serv. 12 Clovis STEPHENSON and Mabel Stephenson, Appellants-Plaintiffs, v. Bill FRAZIER d/b/a Bill Frazier Mobile Homes and Vindale Corporation, Appellees-Defendants.
• Court: Indiana Appellate Court

Page 794

399 N.E.2d 794

28 UCC Rep.Serv. 12

Clovis STEPHENSON and Mabel Stephenson, Appellants-Plaintiffs, v. Bill FRAZIER d/b/a Bill Frazier Mobile Homes and Vindale Corporation, Appellees-Defendants.

No. 2-677A252.

Court of Appeals of Indiana, Fourth District.

Jan. 29, 1980.

Raymond A. Brassart, Lennington, Lennington & Brassart, Muncie, for appellants-plaintiffs.

William David Neal, Dunnuck, Rankin, Wyrick & Neal, Muncie, for appellees-defendants.

CHIPMAN, Judge.

In July of 1974 plaintiff-appellants Clovis and Mabel Stephenson purchased a modular home from defendant-appellee Bill Frazier. The total purchase price of $22,500 included the installation of a septic system and construction of a foundation on the Stephensons' rural property. Numerous disputes regarding the home and the foundation arose and the Stephensons eventually sued for rescission of the sales contract. At the close of appellants' case the court granted appellee's motion for involuntary dismissal pursuant to Indiana Trial Rule 41(B). Appellants appeal, arguing the court's ruling was contrary to law as they were entitled to rescind the contract as a result of appellee's fraud and/or material breach. Appellee argues, inter alia, that appellants did not establish a prima facie case for rescission and further appellants prevented full performance by appellee.

Our scope of review for deciding the issues presented in this appeal is well established. Considering the evidence most favorable to appellants we determine whether there was substantial evidence of probative value which would have sustained the material elements of appellants' complaint. Stath v. Williams, (1977) Ind.App., 367 N.E.2d 1120; Building Systems, Inc. v. Rochester Metal Products, Inc., (1976) Ind.App., 340 N.E.2d 791. Applying this standard, we must reverse the decision of the trial court.

I. APPLICABILITY OF U.C.C.

Appellants argue the court erred in not applying the Uniform Commercial Code, Article 2, Sales, in reaching its decision in this case. Appellants are partially correct. Ind.Code 26-1-2-105 defines goods as "all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale . . . ." Under this definition the sale of the modular home was covered by the Uniform Commercial Code. Jones v. Abriani, (1976) Ind.App., 350 N.E.2d 635. The part of the contract relating to the construction of the foundation and installation of the septic system, however, does not fall within the definition of "goods." These contractual provisions were for the performance of services and thus the issues pertaining to them must be determined by common law contract principles.

II. PREVENTION OF PERFORMANCE

Appellee Frazier argues appellants are precluded from rescinding the contract because they prevented his full and complete performance. While the modular home was being installed on their land appellants complained to appellee about various defects in the home and its foundation. The defects with the home itself included loose paneling, a water mark in the bathroom that had not been repaired as promised, broken storm window frames, a wrinkled roof, missing aluminum siding, crooked window frames, missing axles and wheels and no bathroom mirror. Appellants also argued vigorously that the foundation had been built improperly. On September 9, 1974, appellants and appellee met at the building site to discuss their problems, primarily appellants' complaints concerning the foundation. Frazier stated he approved of the foundation "100%" and if appellants did not like it they could take him to court. At that point, Clovis Stephenson ordered Frazier from his land and told him the property was "off limits" to him and his men. The next day, appellee sent appellants a letter stating he was "ready, willing and able" to install the septic system, attach the footers, replace loose paneling, repair the bathroom ceiling and return the tires and axles. Frazier's letter also said he was ready to fully perform his obligations and complete the work to appellants' satisfaction. The letter made no reference to appellants' complaints about the foundation. Appellants responded with a letter saying it would be impossible for Frazier to complete the work due to the totally unsatisfactory nature of the work already done. The letter concluded by tendering the mobile home back to Frazier and asking for a return of the purchase price.

Under these facts we hold appellants are prohibited from rescinding on the basis of the defects in the modular home, but did not wrongfully prevent Frazier's performance with regard to the foundation.

As noted previously the sale of the modular home was covered by the Uniform Commercial Code. Ind.Code 26-1-2-508 grants a seller the right to cure any nonconformance upon notifying the buyer of his intention to do so. Frazier's letter of September 10 was clearly notice of intent to cure defects in the modular home. Appellants' refusal to allow him to exercise his right to cure therefore prohibits their rescission of the contract based upon defects in the home. Wilson v. Scampoli, (1967) D.C.App., 228 A.2d 848; Reece v. Yeager Ford Sales, Inc., (1971) 155 W.Va. 453, 184 S.E.2d 722.

The issue of prevention of performance in this case, however, takes on an entirely different light when viewed in the context of the foundation defects. As under the U.C.C., the common law of contracts excuses the performance of one party where the other party wrongfully prevents that performance. Brodt v. Duthie, (1933) 97 Ind.App. 692, 186 N.E. 893; Roder v. Niles, (1916) 61 Ind.App. 4, 111 N.E. 340. See Jacobs v. Jones, (1967) 161 Colo. 505, 423 P.2d 321; Ehard v. Pistakee Builders, Inc., (1969) 111 Ill.App.2d 227, 250 N.E.2d 1; Kiff Contractors, Inc. v. Beeman, (1968) 10 Mich.App. 207, 159 N.W.2d 144.

In our opinion Frazier's letter of September 10 cannot reasonably be considered as an offer to complete and/or correct his promised performance on the foundation. Although the letter contains language which states Frazier wanted to perform all his obligation to appellants' satisfaction, the letter does not mention the foundation defects. The omission is significant in view of Frazier's statement of the previous day that he completely approved of the foundation and appellants could take him to court. From this evidence we think it obvious Frazier did not intend to cure any of the defects in the foundation; he considered his obligations completely performed. Thus, the evidence most favorable to appellants demonstrates they did not wrongfully prevent Frazier's performance on the foundation.

In light of the above, our inquiry is now directed to determining whether appellants' unilateral rescission of the contract may be justified solely with regard to the foundation. Appellants allege two common law bases for rescission fraud and material breach.

III. FRAUD

We do not think appellants' evidence satisfied their burden of showing a prima facie case of fraud as a basis for rescission. A key element of fraud is intent, i. e., the making of false representations with knowledge or reckless ignorance of the falsity. Blaising v. Mills, (1978) Ind.App., 374 N.E.2d 1166; Grissom v....