Yeager v. McManama

• Decision Date: 12 October 2007
• Docket Number: No. 49A02-0607-CV-614.,49A02-0607-CV-614.
• Citation: 874 N.E.2d 629
• Parties: Robert K. YEAGER, John M. Yeager and Marilyn J. Duran, and Yeager Realty, LLC, Appellants-Defendants, v. David A. McMANAMA, Cheryl S. McManama, Jack L. Cottey and Christina L. Cottey, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

874 N.E.2d 629

Robert K. YEAGER, John M. Yeager and Marilyn J. Duran, and Yeager Realty, LLC, Appellants-Defendants, v. David A. McMANAMA, Cheryl S. McManama, Jack L. Cottey and Christina L. Cottey, Appellees-Plaintiffs.

No. 49A02-0607-CV-614.

Court of Appeals of Indiana.

October 12, 2007.

James A. Goodin, Goodin Abernathy & Miller, LLP, James N. Scahill, Indianapolis, IN, Attorneys for Appellants.

David M. Brooks, Brooks Koch & Sorg, Indianapolis, IN, Attorney for Appellees.

OPINION

DARDEN, Judge.

STATEMENT OF THE CASE

Yeager Realty, LLC ("Developer"), and Robert K. Yeager, John M. Yeager, and Marilyn J. Duran individually (collectively, "the Yeagers"¹) appeal the judgment entered by the trial court after a bench trial in the action brought against them by David A. McManama, Cheryl S. McManama, Jack L. Cottey, and Christina L. Cottey (collectively, "the Plaintiffs"²).

We affirm.

ISSUES

1. Whether the trial court erred in denying the Yeagers' motion for summary judgment.

2. Whether the trial court erred in its order on summary judgment by holding that the Developer and the Yeagers owed duties to the Plaintiffs.

3. Whether the trial court erred in concluding, after trial, that the Developer and the Yeagers were liable to the Plaintiffs.

FACTS

The Yeagers were the sole members and owners of the Developer, which owned and was the developer of a Planned Unit Development project known as Murphy's Landing, located on the south side of Marion County. In June of 1994, the Developer — the Yeagers — executed and recorded the Declaration of Covenants and Restrictions of the Murphy's Landing Ownership ("the Declaration"), with specific language applying to Emerald Highlands and an attached conceptual site plan for a number of separately named residential areas in Murphy's Landing — including Emerald Highlands.

On March 1, 2000, the Plaintiffs filed their complaint, with attached copies of the Declaration and its conceptual site plan, including the Emerald Highlands at Murphy's Landing Architectural Standards ("the architectural standards"). The complaint alleged in Count I: Fraud or Constructive Fraud or Fraudulent Concealment, and Count II: Breach of Fiduciary Duty. Specifically, the Plaintiffs alleged that they had purchased lots and constructed very expensive homes in Emerald Highlands relying on the representations as to the high quality standards for homes in Emerald Highlands made by the Developer, the Yeagers, and by builder Steven Morse — the Developer-approved exclusive builder for homes there, as reflected in the Declaration. The Plaintiffs further alleged that pursuant to the Declaration, the Yeagers were the sole members of the Architectural Review Board, the duty of which was to "regulate the external design, appearance, use and location of improvements on the Real Estate in such manner as to preserve and enhance values and to maintain a harmonious relationship amongst structures, improvements and the natural vegetation and topography" of Emerald Highlands. (Complaint, quoting the Declaration at Section 14, subsection (b)). The Plaintiffs further alleged that by allowing construction of homes "not of comparable size and quality," the Developer and the Yeagers had breached their duties and responsibilities pursuant to the Declaration and their representations³ that Emerald Highlands would consist of large custom homes. (Complaint, p. 4). The Plaintiffs alleged that their resulting injury was a significant reduced value of their homes.

According to the CCS, on January 15, 2004, the Yeagers filed a motion for summary judgment and designation of evidence.⁴ The Yeagers argued that they were "entitled to judgment as a matter of law because: 1) the doctrines of fraud and constructive fraud do not apply; 2) there is no fiduciary duty between the parties; and 3) fraudulent concealment is not procedurally applicable to this case." (Yeagers' App. at 59). Specifically, the Yeagers argued that because "alleged statements" regarding home construction in Emerald Highlands were "statements implicat[ing] future behavior," and/or were "not statements of fact" but "mere opinions," the Plaintiffs had failed to show "a material misrepresentation of past or existing fact" and, therefore, could not "state a claim for fraud." Id. at 60, 61, 59, 61. The Yeagers further asserted that designated evidence revealed "insufficient contacts between" the Plaintiffs and "the Yeagers and [the Developer] upon which to ground a claim for constructive fraud or fiduciary duty." Id. at 62. Finally, the Yeagers argued that fraudulent concealment was "an equitable doctrine" that was inapplicable because there was no statute of limitations defense here. Id. at 64.

The Plaintiffs filed their response in opposition to the Yeagers' motion for summary judgment on March 8, 2004. Therewith, they submitted designated evidence and a memorandum arguing that their evidence established the following facts.

The Plaintiffs argued that the designated evidence established that pursuant to the Declaration, the Homeowner Association ("HOA") was granted complete control over the management and operation of Murphy's Landing. Management of the HOA was vested in its Board of Directors. The initial board — in place until December of 2001 — consisted solely of the Yeagers. The Yeagers were also the sole members of the Architectural Review Board during the relevant time period. The Developer had initially made Steven Morse the exclusive builder for Emerald Highlands and given him responsibility for lot sales and information. At the Developer's request, Morse had created the architectural standards for Emerald Highlands to make it the most exclusive section of the Murphy's Landing areas. The Developer and the Yeagers authorized Morse to answer all potential buyers' inquiries about Emerald Highlands.

The Plaintiffs also argued that the designated evidence established that Mrs. Cottey inquired of Morse about possibly building a very large, expensive home on a lot in Emerald Highlands. Morse informed her that Emerald Highland homes would be very exclusive and upscale, with an architectural review board to ensure that future homes built there would preserve and enhance the value of such a home. The Cotteys bought a lot from Morse for the purpose of building an approximately 6,000 square foot home on it, thereby becoming members of the HOA. The Cotteys then had the large home built.

The Plaintiffs further asserted that the designated evidence established that the McManamas also discussed with Morse the purchase of a lot in Emerald Highlands. They made a deposit with him towards the purchase of a lot. Subsequently, the Developer terminated its relationship with Morse, and Morse told the McManamas to contact Duran regarding the purchase of the lot.⁵ The McManamas made contact and discussed with Duran the size and quality of homes for Emerald Highlands, expressing their desire to build a very large brick home. On behalf of the Developer and the Yeagers, Duran assured the McManamas that future homes would be of size and value comparable to theirs. The McManamas proceeded to buy a lot in Emerald Highlands to build an approximately 5,000 square foot home on it.

Finally, the Plaintiffs argued that the designated evidence established that subsequent to the construction by the Plaintiffs of their homes, the Developer and the Yeagers approved the nearby construction in Emerald Highlands of homes less than half the size of the Plaintiffs' homes. The Developer was well aware of the duties of the Architectural Review Board, but the Yeagers simply reviewed proposed construction plans, and they never confirmed compliance with the minimum square footage⁶ specified in the Architectural Standards or that subsequent construction conformed to the plans submitted by the builders. When a home was built that failed to conform to the architectural standards, they took no enforcement action. Further, although the Developer and the Yeagers promoted Emerald Highlands as "upscale" and "exclusive," they defined these terms later to simply mean that the minimum square footage had been met. Moreover, although they admitted that the size and quality of homes within a mile of a home would affect the value of that home, they admitted to approving the nearby construction of homes less than half the size of the Plaintiffs' homes.

The Plaintiffs also filed a motion for partial summary judgment and designated the same evidence summarized above in support of their motion. In addition, the Plaintiffs submitted evidence from an expert quantifying the loss in value of their homes. Specifically, the expert's opinion was that the Cotteys' home was worth $185,000 less, and the McManama's home was worth $195,000 less, than if "surrounded by homes of comparable size and quality." Id. at 158. The Plaintiffs argued in support of their motion that during the pre-sale period, the Developer and the Yeagers — charged by the Declaration with sole control of the future development of Murphy's Landing — had a fiduciary duty to them, and that Morse was their agent in that regard. They further argued that during the post-sale period, the Developer and the Yeagers also owed them "contractual duties imposed" by the Declaration. (Plaintiffs' App. 161). The Plaintiffs' motion requested the trial court to hold that the Developer and the Yeagers owed duties to them and that they had breached those duties and were liable.

On June 3, 2004, the trial court heard arguments on all pending motions for summary judgment. Subsequently, the trial court denied the Yeagers' motion for summary judgment. As to the Plaintiffs' motion for summary judgment, it held that all of the defendants owed the Plaintiffs "a contractual and fiduciary duty"; that "[a]n agency relationship existed between the defendants and Steven Morse"; and that all defendants "had a duty to deal fairly, honestly and openly with plaintiffs." (Order of June 14,...