Source: https://www.in.gov/judiciary/opinions/previous/archive/032601.wig.html
Timestamp: 2019-04-25 11:43:02+00:00

Document:
Appellant/cross-appellee and defendant below, the First Bank of Whiting n/k/a Centier Bank (the "Bank"), appeals the jury verdict and judgment entered thereon in favor of appellee/cross-appellant and plaintiff below, Thomas Schuyler ("Schuyler"). The jury awarded Schuyler both compensatory and punitive damages for his claims. The trial court subsequently vacated the punitive damage award and granted a new trial solely on that issue. Schuyler cross-appeals the trial court's decision to vacate the punitive damage award and to grant a new trial.
The Bank was the primary lender which financed the 1978 initial construction and the development of a building located at 9245 Calumet Avenue in Munster (the "Building"). The primary tenant of the Building was the Dynasty Racquetball Club. In 1979 or 1980, while the Building was being operated as a racquetball club, the Building experienced moisture which came into the lower level through the seams between the concrete walls. The moisture caused relatively minor damage such as slippery floors, condensation, and small pools of water. The moisture problem was resolved by removing the earthen berms around the Building so that a tarry fibrous material could be applied to the seams of the foundation. After the problem was solved, the berms were replaced.
drains and into the Building. Storm water also came in the Building through the north door, but management was able to stop that water after a very short period of time by using simple barriers. Because management was unable to stop the sewer backup, approximately 12 of the 15 racquetball courts were damaged and had to be replaced. After the flood, management discovered that during construction of the Building the architect had failed to install a check valve designed to prevent water backflow on the sewer line. A check valve was then installed and no other backups were experienced during the Building's operation as a racquetball club. In the years following the 1981 flood, racquetball club members recall viewing evidence of minor seepage and moisture in the Building, the origin of which was unknown. Aside from the minor seepage, the Building experienced no serious water problems after the 1981 flood.
Building, he observed the damp carpeting and warped racquetball floors. When Schuyler inquired as to the cause of this visible water damage, Southworth explained to him that the damage was caused by the broken hot water heater. Schuyler made no further inquiries of Southworth about any water problems in the history of the Building. Prior to his purchase of the Building, Schuyler was given blue prints of the entire Building, inspected the Building, and viewed all sump pumps and drains.
In 1988, Schuyler purchased the Building for $550,000.00 and proceeded to remodel the Building for use as office space. Subsequent to its purchase by Schuyler, the Building experienced a number of externally-generated water problems whereby water either flowed, seeped, or backed-up into the building. Schuyler suffered substantial expense in repairing the damages suffered to the Building and eventually lost the Building to foreclosure.
Correct Error filed by the Bank, the trial court vacated the punitive damage award and ordered a new trial on that issue. This appeal and cross-appeal ensued.
Both the Bank and Schuyler present several issues for our review; however, because the Bank presents reversible error on a dispositive issue, we need only address whether the Bank had a duty to disclose the "water history" of the Building to Schuyler.
The Bank moved for judgment on the evidence in its motion to correct error pursuant to Indiana Trial Rule 50(A)(4). The purpose of a motion for judgment on the evidence is to test the suffciency of the evidence. Nesvig v. Town of Porter, 668 N.E.2d 1276, 1282-83 (Ind. Ct. App. 1996). Where all or some of the issues in a case tried before a jury are not supported by sufficient evidence or a verdict thereon is clearly erroneous or contrary to the evidence because the evidence is insufficient to support it, the court shall withdraw such issues from the jury and enter judgment thereon or shall enter judgment thereon notwithstanding the verdict. Ind.Trial Rule 50(A). On appeal, we apply the same standard as the trial court. We consider the evidence in the light most favorable to the non-moving party and enter judgment on the evidence only if there is no substantial evidence or reasonable inference to be drawn therefrom to support an essential element of the claim. Town of Highland v. Zerkel, 659 N.E.2d 1113, 1120 (Ind. Ct. App. 1995), trans. denied.
Schuyler brought his claim for compensatory and punitive damages against the Bank alleging that the Bank committed actual fraud when it failed to make a full disclosure of material facts regarding the "water history" of the Building. To sustain an action for fraud, the plaintiff must prove that the defendant made a material misrepresentation of a past or existing fact, which was false, was made with knowledge or in reckless ignorance of the falsity, was relied upon by the complaining party, and proximately caused the complaining party's injury. Strodtman v. Integrity Builders, Inc., 668 N.E.2d 279, 283 (Ind. Ct. App. 1996). Moreover, the failure to disclose all material facts by one on whom the law imposes a duty to disclose constitutes actionable fraud. Fleetwood Corp. v. Mirich, 404 N.E.2d 38, 42 (Ind. Ct. App. 1980).
party from making a thorough inspection. For, if in addition to his silence, there is any behavior of the seller which points affirmatively to a suppression of the truth or to a withdrawal or distraction of the parties' attention to the facts, the concealment becomes fraudulent.
Id. Indeed, a seller cannot be permitted to partially disclose the facts as he knows them to be, so as to deliberately create a false impression in the mind of the buyer by failing to fully reveal the true state of affairs. Thompson v. Best, 478 N.E.2d 79, 84 (Ind. Ct. App. 1985).
misrepresentation to impose a duty on the bank and its representative to disclose the whole truth. Id. at 432.
Similarly, in Thompson v. Best, 478 N.E.2d 79 (Ind. Ct. App. 1985), prior to the purchase of a home, the buyer and seller entered into a discussion regarding the presence of a sump pump in the basement of the house and the drainage tiles around the house. The buyer specifically asked the seller if he had had a water problem with the house and the seller responded that he had not. Following his purchase of the home, the buyer discovered a second sump pump which had been previously covered up by the seller's belongings. After another inquiry to the seller regarding any water problems and the need for a second pump, the seller again denied that the house had any drainage problems. To the contrary, the evidence showed that seller experienced severe drainage difficulty in the home's basement while residing in the home. As a result of the drainage problems, the buyer experienced flooding of major proportions in the basement. Based upon this evidence, we concluded that "once [the seller] took it upon himself to explain the house's drainage situation, vis a vis describing the tasks of the sump pump and the tiles, he was required to disclose the entire situation, not just those portions that would not spoil a sale of the house." Id. at 84.
broken water heater. There is no evidence to suggest that Southworth's explanation of the cause of the visible damage was inaccurate, and Schuyler asked nothing further.
Unlike in Perry, the Bank made no misrepresentation regarding the cause of the visible damage to the lower level of the Building. Southworth answered fully and honestly the question posed to him. There is no evidence that the Bank, or Southworth as its representative, engaged in deceptive conduct in an attempt to conceal any material facts regarding the Building's water history.
Moreover, unlike the "partial" disclosure in Thompson, Southworth did not undertake to explain the sewer/septic system of the Building, the drainage capabilities of the Building, or the Building's experience seven years earlier during the 1981 flood. Southworth merely explained the damage caused by the broken water heater, the only damage which Schuyler had inquired about. Schuyler, an experienced commercial real-estate developer, made no inquires regarding whether the Building had experienced any externally-generated water problems such as seepage or sewer backup or, in fact, whether the Building had any problems whatsoever other than the visible damage he viewed upon touring the Building. We disagree with Schuyler that the evidence supports that the Bank somehow misled him into believing that the broken water heater was the "only" problem involving water that the Building had ever experienced. Such an inference from Southworth's representation is unreasonable and unsupported by case law.
467 N.E.2d at 431. There was insufficient evidence to support the jury's verdict on the issue of fraud, and judgment on the evidence is appropriate. Accordingly, Schuyler is not entitled to compensatory damages for his fraud claim.See footnote 2 Moreover, because compensatory damages are a prerequisite to an award of punitive damages, Sullivan v. American Cas. Co. of Reading, PA., 605 N.E.2d 134, 140 (Ind. 1992), Schuyler is similarly not entitled to punitive damages on this issue. Thus, the need for a new trial on punitive damages has been obviated. The judgment is vacated and the cause is remanded with instructions to enter judgment for the Bank.
HOFFMAN, J. and STATON, J. concur.
Footnote: 1 We note that the Indiana Code § 24-4.6-2-7 imposes specific disclosure requirements on the seller of residential real estate; however, that statute does not apply to commercial real estate.
Footnote: 2 Since we determine that judgment on the evidence is appropriate, we need not consider the parties' arguments concerning various items of compensatory damages.

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