Court Opinion

ID: 4171743
Source: CourtListenerOpinion
Date Created: 2017-05-25 16:10:03.58412+00
Date Added: 2024-06-11T14:25:09.001826
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be                                    FILED
regarded as precedent or cited before any                           May 25 2017, 8:01 am

court except for the purpose of establishing                             CLERK
the defense of res judicata, collateral                              Indiana Supreme Court
                                                                        Court of Appeals
                                                                          and Tax Court
estoppel, or the law of the case.

APPELLANT PRO SE                                         ATTORNEY FOR APPELLEE
Richard Kulbieda                                         Christopher L. Nusbaum
Arizona City, Arizona                                    Dale Huffman & Babcock
                                                         Bluffton, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Richard Kulbieda,                                        May 25, 2017
Appellant-Defendant/Counter-Plaintiff,                   Court of Appeals Case No.
                                                         75A05-1609-SC-2100
        v.                                               Appeal from the Starke Circuit
                                                         Court
Sara Alford and Cory Day,                                The Honorable Jeanene Calabrese,
Appellees-Plaintiffs/Counter-                            Magistrate
Defendants.                                              Trial Court Cause No.
                                                         75C01-1604-SC-152

Riley, Judge.

Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017          Page 1 of 15
                                  STATEMENT OF THE CASE
[1]   Appellant-Defendant/Counter-Plaintiff, Richard Kulbieda (Landlord), appeals

      the small claims court’s Judgment in favor of Appellees-Plaintiffs/Counter-

      Defendants, Sara Alford and Cory Day (collectively, the Tenants).

[2]   We affirm.

                                                      ISSUES
[3]   The Landlord raises three issues on appeal, one of which we find dispositive

      and which we restate as: Whether the small claims court erred in entering

      judgment for the Tenants.

[4]   The Tenants also raise one issue on cross-appeal, which we restate as: Whether

      the Tenants are entitled to an award of appellate attorney fees.

                       FACTS AND PROCEDURAL HISTORY 1
[5]   On March 1, 2015, the Landlord and the Tenants entered into a Lease

      Agreement, pursuant to which the Tenants agreed to rent the dwelling located

      1
        At the outset, we acknowledge the role that small claims courts have in “dispensing speedy justice between
      the parties according to the rules of substantive law.” Ind. Small Claims Rule 8(A). Small claims
      proceedings are informal and not subject to the usual “rules of practice, procedure, pleadings or evidence
      except provisions relating to privileged communications and offers of compromise.” S.C. R. 8(A). However,
      in this case, the Tenants—as the plaintiffs—did not testify or present any evidence beyond the Lease
      Agreement. Rather, their attorney narrated the Tenants’ version of events, and even were we to presume that
      attorneys are permitted to testify under the relaxed rules of small claims proceedings, the Tenants’ attorney
      was not sworn in as a witness. See S.C. R. 8(B) (“All testimony shall be given under oath or affirmation.”).
      Nevertheless, the Landlord never objected and has not raised this as an issue on appeal. Still, in order to set
      forth the facts, we rely on the Lease Agreement, the pleadings transmitted to our court (which consist of the
      Landlord’s Counterclaim and the Tenants’ Answer thereto as we have not been provided with a copy of the
      Tenant’s initial Notice of Claim), and the sparse testimony of the Landlord, in addition to inferences derived

      Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017               Page 2 of 15
      at 1020 N. 1025 E., Knox, Starke County, Indiana (the Property). The Lease

      Agreement commenced on March 11, 2015, and was set to end on March 11,

      2016. Upon expiration, the Lease Agreement would automatically convert to

      “a month-to-month agreement” unless either party notified the other “in writing

      at least [thirty] days prior to expiration that they do not wish this Agreement to

      continue on any basis.” (Appellant’s App. Vol. II, p. 6). In addition to a

      $900.00 security deposit, the Tenants agreed to pay monthly rent in the amount

      of $950.00.

[6]   In December of 2015, the Tenants notified the Landlord that they had

      purchased a home and would not be renewing the Lease Agreement when it

      expired the following March. The Tenants advised that they would soon begin

      the process of moving their belongings over to their new home. However, the

      Tenants indicated that they understood their obligation to pay rent through the

      end of the Lease term and stated that they would continue to check on the

      Property. In early January of 2016, the Tenants informed the Landlord that

      they had moved into their new home.

[7]   On January 14, 2016, the Landlord traveled from his home in Arizona to

      inspect and secure the Property. According to the Landlord, he spent two

      weeks at the Property—cleaning, demolishing the fire pit that the Tenants had

      therefrom. We recognize that the Tenants explicitly denied several of the material allegations contained in
      the Landlord’s Counterclaim, especially to the extent that factual allegations implied certain legal
      conclusions. However, based on the Tenants’ attorney’s arguments, we believe that our recitation of the facts
      sets forth the complete and undisputed background information necessary to resolve this appeal.

      Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017             Page 3 of 15
      built in the backyard, and attempting to re-let the premises. On January 28,

      2016, the Landlord signed a new lease with different tenants. Soon after the

      new renters moved in, the Tenants went to the Property to retrieve their mail

      and check on the house and were surprised to discover that there were new

      tenants in light of the fact that they had paid their rent for the month of

      February 2016 and were still operating under the terms of the Lease Agreement.

      Accordingly, the Tenants requested that the Landlord return half of the rent

      they paid for January, the full amount of rent paid for February, and their full

      security deposit. At some point, the Landlord refunded the $950.00 paid for

      February 2016 rent, but the Landlord refused to return the security deposit,

      claiming that he had “incurred a lot of unnecessary extra expense” by the

      Tenants improperly moving out of the Property without notice. (Appellees’

      App. Vol. II, p. 6).

[8]   On April 18, 2016, the Tenants filed a Notice of Claim, presumably seeking a

      refund of their $900.00 security deposit, in addition to attorney fees and court

      costs. On May 18, 2016, the Landlord filed a Counterclaim, alleging breach of

      contract. The Landlord sought a judgment of $3,191.59 for costs incurred in

      securing, cleaning, and re-renting the premises. These costs included the

      Landlord’s round-trip airfare, rental car, lost wages, cleaning charges, extra

      advertising, and landscaping work. On July 1, 2016, the Tenants filed an

      Answer and Affirmative Defenses to the Landlord’s Counterclaim, asserting, in

      part, that the Landlord had failed to state a claim upon which relief could be

      granted. On August 10, 2016, the small claims court conducted a bench trial, at

      Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 4 of 15
       the conclusion of which the small claims court issued a Judgment in favor of

       the Tenants. Specifically, the small claims court ordered the Landlord to return

       the Tenants’ security deposit of $900.00 and to pay attorney fees of $1,500.00,

       for a total recovery of $2,400.00 plus court costs.

[9]    The Landlord now appeals. Additional facts will be provided as necessary.

                               DISCUSSION AND DECISION
                                         I. Judgment for the Tenants

[10]   The Landlord challenges the small claims court’s Judgment, awarding the

       Tenants a refund of their security deposit and attorney fees and denying the

       Landlord’s counterclaim for damages. “Judgments in small claims actions are

       ‘subject to review as prescribed by relevant Indiana rules and statutes.’” Trinity

       Homes, LLC v. Fang, 848 N.E.2d 1065, 1067 (Ind. 2006) (quoting S.C. R. 11(A)).

       For facts determined in a bench trial, the clearly erroneous standard set forth in

       Indiana Trial Rule 52(A) applies, with due regard given to the opportunity of

       the small claims court to assess the credibility of witnesses. Id. “[T]his

       deferential standard does not apply to the substantive rules of law, which are

       reviewed de novo just as they are in appeals from a court of general

       jurisdiction.” Id. at 1068. Here, while the small claims court orally noted

       several findings, it did not issue written factual findings and conclusions

       thereon. Where no findings are made, “we presume the judgment is based on

       findings supported by the evidence and will affirm the judgment “if it can be

       sustained on any legal theory supported by the evidence.” Rueth v. Quinn, 659

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 5 of 15
N.E.2d 684, 687 (Ind. Ct. App. 1996), trans. denied. Our court does not reweigh

       evidence or assess witness credibility, and we consider only the evidence most

       favorable to the judgment together with all reasonable inferences derived

       therefrom. Id.

[11]   This case centers on the application of the landlord-tenant statutes governing

       security deposits. Indiana Code section 32-31-3-12(a) provides that upon the

       termination of a rental agreement, a landlord must return the tenant’s security

       deposit, less any amount applied to “(1) the payment of accrued rent; (2) the

       amount of damages that the landlord has suffered or will reasonably suffer by

       reason of the tenant’s noncompliance with law or the rental agreement; and (3)

       unpaid utility or sewer charges that the tenant is obligated to pay under the

       rental agreement.” These deductions must be

               itemized by the landlord with the amount due in a written notice
               that is delivered to the tenant not more than forty-five (45) days
               after termination of the rental agreement and delivery of
               possession. The landlord is not liable under this chapter until the
               tenant supplies the landlord in writing with a mailing address to
               which to deliver the notice and amount prescribed by this
               subsection. Unless otherwise agreed, a tenant is not entitled to
               apply a security deposit to rent.

       Ind. Code § 32-31-3-12(a). The landlord’s failure to comply with these

       requirements entitles the tenant to “recover all of the security deposit due the

       tenant and reasonable attorney’s fees.” I.C. § 32-31-3-12(b). In addition, both

       the landlord and the tenant, if so entitled, may seek “other damages.” I.C. § 32-

       31-3-12(c).

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 6 of 15
[12]   Indiana Code section 32-31-3-13 more specifically sets forth the purposes for

       which a security deposit may be used:

                 (1) To reimburse the landlord for actual damages to the rental
                     unit or any ancillary facility that are not the result of
                     ordinary wear and tear.

                 (2) To pay the landlord for:

                      (A) all rent in arrearage under the rental agreement; and

                      (B) rent due for premature termination of the rental
                          agreement by the tenant.

                 (3) To pay for the last payment period of a residential rental
                     agreement if a written agreement between the landlord and
                     the tenant stipulates that the security deposit will serve as
                     the last payment of rent due.

                 (4) To reimburse the landlord for utility or sewer charges paid
                     by the landlord that are:

                      (A) the obligation of the tenant under the rental agreement;
                          and

                      (B) unpaid by the tenant.

[13]   Indiana Code section 32-31-3-14 further details the landlord’s requirements for

       sending the tenant an itemized list of deductions:

               Not more than forty-five (45) days after the termination of
               occupancy, a landlord shall mail to a tenant an itemized list of

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 7 of 15
               damages claimed for which the security deposit may be used
               under section 13 of this chapter. The list must set forth:

               (1) the estimated cost of repair for each damaged item; and

               (2) the amounts and lease on which the landlord intends to assess
                   the tenant.

               The landlord shall include with the list a check or money order
               for the difference between the damages claimed and the amount
               of the security deposit held by the landlord.

       If the landlord fails to provide this notice of damages, the landlord essentially

       agrees “that no damages are due, and the landlord must remit to the tenant

       immediately the full security deposit.” I.C. § 32-31-3-15. Moreover, in

       addition to the full security deposit, the landlord’s failure to comply with the

       notice requirement renders the landlord liable to the tenant for “reasonable

       attorney’s fees and court costs.” I.C. § 32-31-3-16.

[14]   The small claims court found, based on the Tenants’ attorney’s argument, that

       the Landlord failed to provide the Tenants with written notice of damages as

       statutorily required. On appeal, the Landlord now asserts that he did send an

       itemized list of damages to the Tenants via email on February 6, 2016, and,

       furthermore, that his obligation to send notice of the itemized damages was

       never triggered because the Tenants failed to provide, in writing, a mailing

       address for sending the notice pursuant to Indiana Code section 32-31-3-12(a).

       Although he mentioned the notice in his counterclaim, the Landlord did not

       dispute the Tenants’ contention that they never received an itemized notice,
       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 8 of 15
       despite the Landlord’s opportunity to do so during the bench trial; nor did the

       Landlord attempt to admit a copy of such notice into evidence. The Landlord

       similarly failed to argue that the Tenants never provided their new address for

       mailing the notice. Thus, he cannot proceed with these arguments on appeal. 2

       See Weida v. City of West Lafayette, 896 N.E.2d 1218, 1227 (Ind. Ct. App. 2008)

       (noting that, as a general rule, a party may not present an argument or issue to

       an appellate court unless the party raised that argument or issue to the lower

       court).

[15]   Moreover, the security deposit statute plainly states that security deposits may

       only be applied for “actual damages” that “are not the result of ordinary wear

       and tear”; accrued rent; the last installment of rent (if so agreed by parties); and

       certain utility charges. I.C. § 32-31-3-13. See Sholes v. Sholes, 760 N.E.2d 156,

       159 (Ind. 2001) (“Courts are obliged to respect the plain language of a

       statute.”). In addition, the small claims court pointed out that the Lease

       Agreement specifically limits the use of the security deposit “to cover any

       possible damage to the [P]roperty.” (Appellant’s App. Vol. II, p. 6). See Ryan v.

       Lawyers Title Ins. Corp., 959 N.E.2d 870, 875 (Ind. Ct. App. 2011) (“The

       unambiguous language of a contract is conclusive upon the parties to the

       2
          Moreover, the Landlord has included several “exhibits” in his appellate appendix, including emails that
       were exchanged with the Tenants regarding the move-out and dispute over the security deposit, including the
       purported itemized list of damages. None of these documents were presented to the small claims court, let
       alone admitted, during the bench trial. Therefore, we do not consider these documents on appeal. Saler v.
       Irick, 800 N.E.2d 960, 970 n.7 (Ind. Ct. App. 2003) (“[N]ew evidence may not be submitted to the court for
       the first time upon appeal.”).

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017            Page 9 of 15
       contract and upon the courts.”). Accordingly, pursuant to both statute and the

       terms of the Lease Agreement, the Landlord had no right to withhold the

       Tenants’ security deposit to pay for travel accommodations (airfare and rental

       car), the wages he lost by virtue of spending two weeks in Indiana, and

       advertising expenses.

[16]   The Landlord also argued during the bench trial that he expended money to

       clean the house and remedy some landscaping issues caused by the Tenants,

       which are chargeable damages against the security deposit. In response, the

       small claims court asked, “[W]here are the bills . . . [t]o support that[?]” The

       Landlord answered,

               I don’t[] have ‘em. It’s just my labor that was there. ‘Cause I
               was here for two (2) weeks. I was cleaning and everything and—
               uh—I had to hire the lady down the road there to clean out the
               range, refrigerator and do the windows. And she even
               admitted—[the Tenants] even admitted that [they] didn’t clean,
               you know, so. You know, I feel we’re being fair about this. I’m
               not trying to gouge or take advantage of [them].

       (Tr. pp. 12-13). When the small claims court again asked about his cleaning

       expenses, the Landlord stated,

               Well, I paid for—let’s see, well I think I paid a hundred and fifty
               (150) out of my own pocket, plus my labor of—of having to—I
               helped over there—clean everything. And we had to shampoo
               the carpet; that was a hundred and fifty (150). And—um—you
               know, and then I was here—and but again, I was basing my
               expenses of having to come here to—to—to—to you know, to
               take care of the home.

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 10 of 15
       (Tr. p. 13).

[17]   While the Landlord presented no specific evidence of his purported landscaping

       costs, he did testify that he spent at least $150.00 to clean the range, refrigerator,

       windows, and carpet. It is unclear from the record whether the small claims

       court found a lack of credibility with respect to the Landlord’s cleaning

       damages based on his failure to present documented evidence of these costs at

       the bench trial. Nonetheless, Indiana Code section 32-31-3-13(1) provides that

       a security deposit may be used for actual damages to the rental unit that are not

       the result of ordinary wear and tear, and the Lease Agreement specifically

       provides that a cleaning fee may be deducted as damages from the security

       deposit if the Tenants failed to thoroughly clean the premises by cleaning

       “appliances, windows, window blinds, bathrooms, ceiling fans, shampooing of

       carpet, etc.” (Appellant’s App. Vol. II, p. 6). See Miller v. Geels, 643 N.E.2d
922, 928 (Ind. Ct. App. 1994) (“[A] rental unit which tenants are required to

       clean under a lease agreement but which the tenants have failed to clean has

       been damaged. . . . The landlord may pursue a claim for cleaning expenses

       under the lease.”), trans. denied. Here, the Lease Agreement provides that the

       cleaning expenses should have been deducted from the security deposit (as

       opposed to pursuing “other damages” pursuant to Indiana Code section 32-31-

       3-12(c)). Therefore, such “damages” must have been included in the itemized

       notice required by Indiana Code sections 32-31-3-12 and 14. As already

       discussed, the Landlord has waived his argument that he submitted the

       statutorily required notice of damages, and he did not dispute the Tenants’

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 11 of 15
       attorney’s claim that no such notice was sent. Accordingly, the small claims

       court properly ordered the Landlord to remit the Tenants’ $900.00 security

       deposit, and because of the Landlord’s failure to comply with the security

       deposit statute, the Tenants were also entitled to an award of attorney fees. See

       I.C. § 32-31-3-12(b). 3

                                            II. Appellate Attorney Fees

[18]   On cross-appeal, the Tenants claim that they are entitled to an award of

       appellate attorney fees because the Landlord “needlessly filed this claim and

       made accusations against [their attorney].” (Appellees’ Br. p. 10). Pursuant to

       Indiana Appellate Rule 66(E), our court “may assess damages if an appeal,

       petition, or motion, or response, is frivolous or in bad faith.” Such damages

       may include attorney fees. However, “[o]ur discretion to award attorney fees

       under Indiana Appellate Rule 66(E) is limited . . . . to instances when an appeal

       is permeated with meritlessness, bad faith, frivolity, harassment, vexatiousness,

       or purpose of delay.” Thacker v. Wentzel, 797 N.E.2d 342, 346 (Ind. Ct. App.

       2003). We are mindful to “use extreme restraint when exercising this power

       because of the potential chilling effect upon the exercise of the right to appeal.”

       3
         The Landlord also claims that, even though the costs of his airfare and rental car could not be deducted
       from the security deposit, he still should have received a judgment for such expenses based on the fact that
       they were “incurred due to [the Tenants] not giving a proper move out notice.” (Appellant’s Br. p. 20). The
       Landlord neither cites any authority or contractual provision nor otherwise presents a cogent argument to
       support his claim and therefore has waived the issue. Ind. Appellate Rule 46(A)(8)(a). The Landlord has
       also waived his claim that the Tenants’ attorney somehow tampered with the contents of his Counterclaim as
       there is no basis for such an accusation in the record and because the Landlord has not developed a cogent
       argument. App. R. 46(A)(8)(a).

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017            Page 12 of 15
       Id. Thus, “[a] strong showing is required to justify an award of appellate

       damages, and the sanction is not imposed to punish mere lack of merit, but

       something more egregious.” Helmuth v. Distance Learning Systems Ind., Inc., 837
N.E.2d 1085, 1094 (Ind. Ct. App. 2005).

[19]   Claims for appellate attorney fees are categorized as either “substantive” or

       “procedural” bad faith claims. Thacker, 797 N.E.2d at 346. For substantive bad

       faith claims, the party seeking fees must demonstrate “that the appellant’s

       contentions and arguments are utterly devoid of all plausibility.” Id. On the

       other hand, procedural bad faith “occurs when a party flagrantly disregards the

       form and content requirements of the rules of appellate procedure, omits and

       misstates relevant facts appearing in the record, and files briefs written in a

       manner calculated to require the maximum expenditure of time both by the

       opposing party and the reviewing court. Even if the appellant’s conduct falls

       short of that which is ‘deliberate or by design,’ procedural bad faith can still be

       found.” Id. at 346-47 (internal citation omitted).

[20]   In seeking attorney fees, the Tenants assert that

               [f]ollowing [the Landlord’s] failure to present any evidence at the
               [bench trial] it cannot be said that any reasonable attorney would
               consider his appeal of this case worthy of litigation. To the
               contrary, the appropriate conclusion, coupled with his nearly
               defamatory claims against [the Tenants’ attorney], is that [the
               Landlord’s] [a]ppeal is meritless, in bad faith, aimed only [at]
               causing harassment with the purpose to delay his judg[]ment.

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 13 of 15
       (Appellees’ Br. pp. 10-11). Thus, it appears that the Tenants have set forth a

       substantive bad faith claim.

[21]   It is well established that pro se litigants, such as the Landlord, are held to the

       same standards as licensed attorneys. Thacker, 797 N.E.2d at 345. As such, pro

       se litigants may be liable for appellate attorney fees when they disregard the

       rules in bad faith. In re Estate of Carnes, 866 N.E.2d 260, 267 (Ind. Ct. App.

       2007). Here, the Landlord’s pro se status is no excuse for improperly attempting

       to introduce new evidence on appeal or raising unfounded accusations against

       the Tenants’ attorney. Nevertheless, mindful of our duty to utilize extreme

       restraint, we decline to exercise our discretion to award appellate attorney fees.

       Both parties did a poor job of presenting evidence during the bench trial, which

       has made our review more difficult. Despite the lack of evidence in the record

       that this court may properly consider, it is clear that the Landlord did not file

       his appeal in bad faith based on his belief that he had complied with the notice

       requirements of the security deposit statute. In fact, had the Landlord

       attempted and succeeded in admitting the document that he now claims to be

       the itemized notice of damages, he may have partially prevailed in this matter.

       Therefore, while we affirm the small claims court’s Judgment, we do not order

       the award of appellate attorney fees.

                                             CONCLUSION
[22]   Based on the foregoing, we conclude that the small claims court properly

       ordered the Landlord to pay the Tenants the sum of their security deposit and

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 14 of 15
       attorney fees. We further conclude that the Tenants are not entitled to an

       award of appellate attorney fees.

[23]   Affirmed.

[24]   Najam, J. and Bradford, J. concur

       Court of Appeals of Indiana | Memorandum Decision 75A05-1609-SC-2100 | May 25, 2017   Page 15 of 15