Court Opinion

ID: 4112419
Source: CourtListenerOpinion
Date Created: 2016-12-30 17:06:31.24107+00
Date Added: 2024-06-11T07:45:44.846553
License: Public Domain

FILED
                                                                   Dec 30 2016, 7:33 am

                                                                       CLERK
                                                                   Indiana Supreme Court
                                                                      Court of Appeals
                                                                        and Tax Court

      ATTORNEY FOR APPELLANT                                    ATTORNEY FOR APPELLEE
      A. David Hutson                                           Mark Wynn
      Hutson Legal                                              Jenner, Pattison, Sutter & Wynn,
      Jeffersonville, Indiana                                   LLP
                                                                Madison, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Tina L. Hemingway,                                        December 30, 2016
      Appellant-Petitioner/Counter-                             Court of Appeals Case No.
      Respondent,                                               39A04-1604-PL-957
                                                                Interlocutory Appeal from the
              v.                                                Jefferson Circuit Court
                                                                The Honorable Darrell M. Auxier,
      John P. Scott,                                            Judge
      Appellee-Respondent/Counter-                              Trial Court Cause No.
      Petitioner                                                39C01-1509-PL-698

      Crone, Judge.

                                            Case Summary

[1]   John Scott conveyed his property to himself and his girlfriend Tina

      Hemingway. Earlier that day, Hemingway had signed a contract agreeing that

      if she cheated on Scott or failed to contribute to the property’s maintenance and

      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016           Page 1 of 11
      expenses, she would reconvey her interest in the property to him. Hemingway

      later filed a real property partition action against Scott, who filed a

      counterclaim for breach of contract and replevin. The trial court found

      Hemingway to be in breach of contract and ordered that she execute a

      quitclaim deed conveying to Scott all her rights, title, and interest in the

      property. Hemingway seeks review of the trial court’s interlocutory order,

      arguing that the deed extinguished the contract pursuant to the doctrine of

      merger and that the contract was unenforceable as against public policy.

      Finding that the doctrine of merger does not apply and that the contract is not

      rendered unenforceable for public policy reasons, we affirm.

                               Facts and Procedural History
[2]   In 2001, Scott inherited a ten-acre parcel of land (“the Property”) from his

      father. In 2004, Hemingway and Scott began a relationship, and Hemingway

      moved in with Scott. The couple broke up for a time, and Hemingway moved

      out. On February 17, 2012, the couple executed a handwritten contract,

      penned by Hemingway and signed by both, pursuant to which Scott promised

      to convey the Property from himself to himself and Hemingway. The contract

      included a list of conditions that would constitute a breach, including

      “cheating” by either party. Appellant’s App. at 35. The contract also required

      both parties to contribute to the care and upkeep of the Property, including the

      house, and the expenses attributable to it. The remedies clause stated that any

      breach by Hemingway would require her to reconvey her interest in the

      Property to Scott via quitclaim deed. According to the express language, the

      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 2 of 11
      contract would “be attached to the property deed pertaining to [the] property at

      [the listed address].” Id. That same day, Scott executed a deed conveying the

      Property to himself and Hemingway as joint tenants. The contract was neither

      referenced in the deed nor filed with the deed for recording purposes.

[3]   Hemingway resumed living with Scott. About two months after the contract

      and conveyance, Hemingway was impregnated by another man. She delivered

      the child on January 6, 2013, and the parties agree that Scott is not the child’s

      father. Hemingway moved out in early June 2013, after which she no longer

      contributed financially or otherwise to the household or Property. On June 17,

      2013, Scott sent Hemingway written notice that she was in breach of the

      contract and must convey her interest in the Property back to him pursuant to

      the terms of the contract.

[4]   On September 17, 2015, Hemingway filed a petition for partition of the

      Property. Scott filed a counterclaim for breach of contract and replevin, seeking

      a court-ordered conveyance of the Property back to him by quitclaim deed. On

      March 28, 2016, the trial court conducted a hearing on Scott’s counterclaim.

      On April 1, 2016, the trial court issued an order with findings in favor of Scott,

      concluding that Hemingway breached the contract and ordering her to convey

      her interest in the Property back to Scott by quitclaim deed.

[5]   Upon Hemingway’s request, the trial court certified the order for interlocutory

      appeal, and we accepted jurisdiction. Additional facts will be provided as

      necessary.

      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 3 of 11
                                   Discussion and Decision
[6]   Hemingway challenges the trial court’s interlocutory order finding her in breach

      of contract and ordering her to reconvey her interest in the Property to Scott.

      Here, the trial court issued its order with findings of fact pursuant to Indiana

      Trial Rule 52(A). In such cases, we review for clear error, first determining

      whether the evidence supports the findings and then whether the findings

      support the judgment. Baird v. ASA Collections, 910 N.E.2d 780, 785 (Ind. Ct.

      App. 2009), trans. denied (2010). We will reverse only if the trial court’s findings

      are unsupported by any evidence or reasonable inferences drawn from the

      evidence or if the judgment is unsupported by the findings and conclusions. Id.

      In conducting our review, we neither reweigh evidence nor judge witness

      credibility; rather, we consider the evidence in the light most favorable to the

      judgment. Id. With respect to the trial court’s findings of fact, we defer

      substantially; with respect to its conclusions of law, we apply a de novo

      standard. Id.

         Section 1 – The doctrine of merger does not extinguish the
       contract or its express provisions concerning acts constituting
                         breach and effects of breach.
[7]   Hemingway maintains that the contract merged into the deed and therefore was

      extinguished by the express terms of the deed.

              “Where two parties have made a simple contract for any
              purpose, and afterwards have entered into an identical
              engagement by deed, the simple contract is merged in the deed
              and becomes extinct. This extinction of a lesser in a higher
      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 4 of 11
                 security, like that extinction of a lesser in a greater interest in
                 land, is called merger.”

      BLACK’S LAW DICTIONARY 1009 (10th ed. 2014) (emphases omitted) (quoting

      WILLIAM R. ANSON, PRINCIPLES OF THE LAW OF CONTRACT 85 (Arthur L.

      Corbin ed., 3d Am. ed. 1919)). 1

[8]   According to the doctrine of merger by deed, “[i]n the absence of fraud or

      mistake, all prior or contemporaneous negotiations or executory agreements,

      written or oral, leading up to the execution of a deed are merged therein by the

      grantee’s acceptance of the conveyance in performance thereof.” Link v. Breen,

      649 N.E.2d 126, 128 (Ind. Ct. App. 1995) (citing Thompson v. Reising, 114 Ind.

      App. 456, 462, 51 N.E.2d 488, 491 (1943)), trans. denied. Collateral and

      independent rights or obligations are allowed to survive the deed because their

      performance is not necessary to the conveyance of the real estate and, as such,

      there is no need to merge them. Id. The test of merger is the express or implied

      intention of the parties. Id. To ascertain the parties’ intent, words and phrases

      of the contract cannot be read in isolation but must be read in conjunction with

      other language contained in the contract. Id. at 128-29.

             1
               The doctrine of merger is a product of English common law and has existed since the time of
             feudal estates. Under the reasoning nemo potest esse dominus et tenens (no man can be both tenant
             and lord) merger traditionally applied to join two consecutive interests in land when both
             interests came into the hands of one person. The doctrine primarily operated to simplify real
             property titles in an era before land was conveyed by written instruments.
      Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., 949 N.E.2d 1195, 1197 (Ind. 2011) (citations
      omitted).

      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016                         Page 5 of 11
[9]   In finding in favor of Scott on his counterclaim for breach of contract, the trial

      court issued findings of fact, which read as follows:

              1. On February 17, 2012, the parties entered into a written
              agreement (“Agreement”) which provided for the transfer of
              certain real estate from Scott to Scott and Hemingway.

              2. On the same date, Scott conveyed the subject real property
              from himself to Scott and Hemingway as joint tenants with full
              rights of survivorship.

              3. The February 17, 2012 Agreement was drafted by
              Hemingway and is in her handwriting.

              4. Section 1 of the Agreement provides as follows: “There will
              not be any cheating by either parties [sic].” The Agreement also
              provides that [] “[i]f this agreement is broken, then the property
              will go back to John Scott.”

              5. Hemingway had a child on January 6, 2013. The parties
              agree that the child is not Scott’s child. The child was most
              probably conceived in April of 2012, only a little more than two
              months after the execution of the Agreement.

              6. “Cheating” in the context of a relationship means that one
              party is intimate with a third party.

              7. Hemingway cheated by having sexual relations with a third
              party, which relations resulted in the birth of a child.

              8. Hemingway has breached the Agreement and, as a result, the
              property should be conveyed back to [Scott].

      Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 6 of 11
       Appellant’s App. at 6-7. The trial court ordered that Hemingway sign and

       deliver to Scott a quitclaim deed conveying all of her rights, title, and interest in

       the Property. Id. at 7.

[10]   Here, the parties executed the contract just hours before the deed, and that

       contract was indisputably breached by Hemingway. The contract’s specific

       language that it “be attached to the property deed” indicates the clear intent of

       the parties that the contract survive the deed. 2 Id. at 35. The contractual

       obligations of fidelity and shared expenses and labor, taken on just hours before

       the conveyance of the Property, were not obligations whose performance was

       necessary to the completion of the conveyance. Rather, those obligations were

       prospective in nature and addressed conduct that would trigger the operation of

       the remedies clause, specifically here, a reconveyance to Scott. Because the

       obligations in the contract were not necessary to the conveyance of the

       Property, they are not merged into the deed. See Link, 649 N.E.2d at 128. As

       such, we find no error in the trial court’s conclusion that the contract survived

       the deed and the doctrine of merger does not apply.

       2
         Hemingway relies on the fact that the contract was not included with the deed when it was recorded in the
       county recorder’s office and therefore was not an interest of record for purposes of third parties’ title searches.
       However, we emphasize that this action does not involve an innocent third party but rather individuals who
       were parties to the contract itself and therefore were on notice of its terms.

       Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016                           Page 7 of 11
             Section 2 – The contract is not rendered unenforceable as
           against public policy prohibiting contracts in consideration of
                            meretricious sexual services.
[11]   Hemingway also contends that the contract is unenforceable based on public

       policy that prohibits contracts in consideration of meretricious sexual services. 3

                Indiana courts have long recognized and respected the freedom
                to contract. We recognize a “very strong presumption of
                enforceability of contracts that represent the freely bargained
                agreement of the parties.” As a general rule, the law allows
                persons of full age and competent understanding the utmost
                liberty of contracting, and their contracts, when entered into
                freely and voluntarily, are enforced by the courts. It is in the best
                interest of the public that persons should not be unnecessarily
                restricted in their freedom of contract. However, in certain
                circumstances a court may declare an otherwise valid contract
                unenforceable if it contravenes the public policy of Indiana.

       Ransburg v. Richards, 770 N.E.2d 393, 395-96 (Ind. Ct. App. 2002) (citations

       omitted), trans. denied.

[12]   Our courts have refused to enforce private agreements on public policy grounds

       in cases involving: (1) agreements that contravene a statute; (2) agreements that

       clearly tend to injure the public in some way; or (3) agreements that are

       otherwise contrary to the declared public policy of Indiana. Id. at 396.

       3
          We note that Hemingway’s contention contradicts her testimonial assertions that she was merely Scott’s
       live-in housekeeper, she was not sexually intimate with him, and “cheating” probably referred to a potential
       lawsuit involving Walmart. The trial court found that the couple was in a romantic relationship and that
       “cheating” was defined as “one party being intimate with a third party.” Appellant’s App. at 7. It is on this
       basis that Hemingway now raises her public policy argument.

       Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016                       Page 8 of 11
       Hemingway admits that the contract neither contravenes a statute nor clearly

       tends to injure the public. Appellant’s Br. at 17. Instead, she challenges the

       contract as “otherwise contrary to declared public policy.” Ransburg, 770
N.E.2d at 396. As such, we must balance the following factors: (1) the nature

       of the subject matter of the contract; (2) the strength of the public policy

       underlying the statute; (3) the likelihood that refusal to enforce the bargain or

       term will further that policy; (4) how serious or deserved would be the forfeiture

       suffered by the party attempting to enforce the bargain; and (5) the parties’

       relative bargaining power and freedom to contract. Id.

[13]   We disagree with Hemingway’s attempts to characterize the contract as an

       unenforceable agreement requiring forbearance of consensual sexual activity.

       In nature, this contract is akin to a prenuptial agreement, in which the parties

       resolve ahead of time their relative rights in property should the relationship

       dissolve. See Ind. Code § 31-11-3-5(a)(1), -(a)(3) (parties to premarital

       agreement may contract with each other regarding “rights and obligations of

       each of the parties in any property of either or both of them whenever and

       wherever acquired or located …. disposition of property upon … legal

       separation … or … the occurrence or nonoccurrence of any other event.”).

       Here, the parties had previously cohabited and separated, and the contract was

       executed with the intent that the parties would resume their relationship and

       conduct themselves as a unit with respect to the Property. While we

       acknowledge that the record is devoid of any evidence concerning the parties’

       intent to marry, we note that our courts have ceased to distinguish between

       Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 9 of 11
       married and unmarried cohabitants when evaluating the parties’ rights in

       situations where an express contract exists or the circumstances support an

       equitable remedy such as unjust enrichment. See, e.g., Bright v. Kuehl, 650
N.E.2d 311, 315 (Ind. Ct. App. 1995) (adopting rule that party who cohabits

       with another without subsequent marriage is entitled to relief upon a showing

       of express contract or viable equitable theory); see also Turner v. Freed, 792
N.E.2d 947, 950 (Ind. Ct. App. 2003) (holding that cohabitant was entitled to

       relief by establishing express or implied contract or unjust enrichment even

       though couple never married).

[14]   Hemingway cites as support for her public policy argument Indiana Code

       Section 34-12-2-1, which abolished certain torts pertaining to sexual activity, 4

       and the advent of no-fault divorce. We find her reliance misplaced, as neither

       tort liability nor marital dissolution is implicated in this case. Even so, we

       observe that the contract does not require either party to perform sexual

       services. Nor does it require either party to abstain from all sexual activity.

       Rather, it simply lists cheating by either party as one of the acts constituting

       breach.

[15]   As for the remaining factors, we believe that the forfeiture suffered by Scott,

       were the contract not enforced, would be serious and grievous. The record

       shows that the Property had been his parents’ home, which he inherited at his

       4
         See Ind. Code § 34-12-2-1 (abolishing torts of alienation of affections, criminal conversation, and seduction
       of any female person of at least eighteen years of age as well as action for breach of promise to marry).

       Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016                       Page 10 of 11
       father’s death. By way of contrast, Hemingway wasted little time in breaching

       the contract, has shown no interest in contributing to the Property since moving

       out, and now seeks half of the Property through partition. Moreover, nothing

       in the record indicates any substantial disparity in the parties’ relative

       bargaining power or freedom to contract.

[16]   Finally, we note that Hemingway’s public policy argument applies only to the

       no-cheating provision of the contract. Nevertheless, she admits that she ceased

       contributing to the expenses pertaining to the ownership of the Property as of

       June 2013. As such, she breached a separate provision of the contract and is

       subject to the remedies clause contained therein, which requires her

       reconveyance of her interest in the Property to Scott by quitclaim deed. See Lee

       v. State, 816 N.E.2d 35, 39 (Ind. 2004) (mere fact that contract contains

       objectionable provision does not prevent enforcement of other provisions that

       are severable). We find no error in the trial court’s order. Accordingly, we

       affirm.

[17]   Affirmed.

       Riley, J., and Altice, J., concur.

       Court of Appeals of Indiana | Opinion 39A04-1604-PL-957 | December 30, 2016   Page 11 of 11