Court Opinion

ID: 4378367
Source: CourtListenerOpinion
Date Created: 2019-03-19 16:03:43.846786+00
Date Added: 2024-06-11T07:39:51.645272
License: Public Domain

FILED
                                                                            Mar 19 2019, 8:50 am

                                                                                CLERK
                                                                            Indiana Supreme Court
                                                                               Court of Appeals
                                                                                 and Tax Court

      ATTORNEYS FOR APPELLANT                                    ATTORNEY FOR APPELLEES
      Robert A. Welsh                                            C. Anthony Ashford
      Connor H. Nolan                                            Ashford Law Group, P.C.
      Harris Welsh & Lukmann                                     Valparaiso, Indiana
      Chesterton, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Cheng Song,                                                March 19, 2019
      Appellant-Plaintiff,                                       Court of Appeals Case No.
                                                                 18A-PL-2134
              v.                                                 Appeal from the Porter Superior
                                                                 Court
      Thomas Iatarola and Theresa                                The Honorable Roger V. Bradford,
      Iatarola,                                                  Special Judge
      Appellees-Defendants.                                      Trial Court Cause No.
                                                                 64D02-1109-PL-9151

      Najam, Judge.

                                        Statement of the Case
[1]   Cheng Song appeals the trial court’s order denying his request for attorney’s

      fees. Song presents three issues for our review, which we consolidate and

      restate as one issue, namely, whether the trial court erred when it denied his

      request for attorney’s fees. We reverse and remand with instructions.

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                            Page 1 of 15
                                  Facts and Procedural History
[2]   This is the second appeal in this matter. In our prior opinion, we set out the

      facts and procedural history as follows:

              In 1998, the Iatarolas purchased thirty-four acres of land that was
              zoned for agricultural use. Thomas [Iatarola] built several
              structures on the property to warehouse equipment and inventory
              from his telecommunications and classic car sales business.

              The land, which was adjacent to the Porter County Airport, was
              mortgaged. The Iatarolas decided to try to sell ten acres of their
              land to reduce or repay their debt to the bank. Thomas and
              Theresa [Iatarola] agreed between themselves that Thomas
              would take charge of arranging for the sale of their land, and he
              acted as an agent on behalf of his wife from September 2010
              through September 2011. On September 14, 2010, Thomas
              retained Robert Macmahon as their exclusive real estate agent for
              the sale of the ten acres.

              On September 14, 2010, Macmahon showed Thomas a listing
              agreement for the real estate sale. The form was entitled “Listing
              Contract (Exclusive Right to Sell) Commercial-Industrial Real
              Estate”; under the section entitled “Seller’s Representations,” the
              property is stated to be zoned I-2 Industrial. Macmahon asked
              Thomas to review the listing to ensure its accuracy and asked
              both Thomas and Theresa to initial each page of the listing
              agreement to verify that they read it and that it was accurate.
              Thomas did so, but Theresa refused to sign her initials because
              the listing inaccurately stated that the zoning was I-2 Industrial
              rather than Agricultural. Theresa told Thomas that her reason
              for not initialing the listing and told him to have Macmahon
              correct the listing error.

              A few days later, Thomas told Theresa that he had spoken with
              Macmahon and that the listing had been corrected. Theresa did

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019        Page 2 of 15
        not see or initial a corrected listing. On or around September 14,
        2010, Macmahon began advertising the real estate online. The
        advertisements stated that the land was zoned I-2 Industrial and
        that it was suitable for warehousing and other light industrial
        uses.

        In December 2010, Song saw online the advertisement for the
        sale of the ten acres of land. At this time, Song was a New Jersey
        resident who wanted to buy industrial real estate in northwest
        Indiana to use for an imported tool business he wanted to start.
        Song arranged a meeting with Macmahon to take place on
        December 31, 2010, to visit two industrially zoned properties,
        one of which was the Iatarolas’ land. During their meeting, Song
        told Macmahon that he wanted to buy property that had
        buildings suitable for warehousing for an imported tool business,
        and they discussed Song’s ability to expand and build additional
        industrial warehousing on the property. In an internet
        advertisement that has Macmahon’s handwriting on it, the
        property’s type is described as “Industrial For Sale”; the property
        overview states that the land is “in an established industrial
        area.”

        Also on December 31, 2010, Song told the Iatarolas of his
        intended use of the property he wanted to purchase. That same
        day, Song signed a purchase agreement with the Iatarolas to buy
        their ten acres for $600,000. The contract was entitled “Purchase
        Agreement Commercial-Industrial Real Estate.”

        Sometime before the signing, the Porter County Airport had
        stated that it might impose a runway protection zone in this
        property to comply with Federal Aviation Administration
        (“FAA”) requirements. The purchase agreement included a
        contingency clause that stated, “This agreement is contingent
        upon the Buyer’s agreement with the final approval of FAA
        regarding land use.” After reviewing the airport’s proposal, Song
        worried that the runway protection zone could lead to a
        governmental taking of part of the property that he was

Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019       Page 3 of 15
        purchasing, the removal of some of the warehousing buildings, or
        a restriction on the height of future construction. On January 6,
        2011, he exercised his contingency right and terminated the
        purchase agreement.

        For the next two and one-half months, Song and Thomas
        negotiated a new sale of a different part of the Iatarolas’ land.
        On March 21, 2011, they signed a second purchase agreement for
        sixteen acres, which included most of the original ten acres with
        the warehousing buildings plus additional acres of land outside
        the potential runway protection zone. This second purchase
        agreement was entitled “Purchase Agreement Commercial-
        Industrial Real Estate.” It required $150,000 in earnest money
        and included a provision for liquidated damages of $150,000 if
        either party breached the contract. Song and Thomas signed an
        addendum to the second purchase agreement that provided:

                 Closing date will be predicated on the Seller’s ability
                 to vacate and exit the subject property. A maximum
                 of 180 days (“Due Diligence Period”) from the day of
                 acceptance of this contract, has been agreed by both
                 parties. When the seller advises the Buyer in writing,
                 that the exit is complete, the Buyer will have 30 days,
                 from that date, to close.

        Song deposited the $150,000 earnest money in the bank.

        In early June 2011, Thomas called Macmahon to say that while
        reviewing the transaction paperwork, he saw that the September
        14, 2010, listing inaccurately stated that the property for sale was
        zoned I-2 Industrial instead of Agricultural. Macmahon
        acknowledged the error and made a note to his file of the date
        and subject of their phone call. That same day, Macmahon
        corrected the zoning represented in his advertisements online so
        that they showed the property to be zoned Agricultural. Neither
        Macmahon nor Thomas told Song about this error.

Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019         Page 4 of 15
        On August 7, 2011, Thomas and Song met on the property for a
        final inspection, and Thomas told Song that the property was
        zoned Agricultural. Thomas told Song that Agricultural zoning
        was preferred over Industrial zoning because the tax rate was
        lower; he also stated that Agricultural zoning allowed for the
        land to be used for the industrial warehousing and import tool
        business that Song wanted to start. Song told Thomas that he
        needed to consult an attorney to determine whether the
        Agricultural zoning would suit his needs. Later that day, Song
        saw that the online listing for the property had been updated to
        show that it was zoned Agricultural.

        On August 12, 2011, Lee Lane, Song’s attorney, wrote to
        Macmahon to advise him that the Porter County zoning
        regulations did not permit the use of warehousing for industrial
        purposes on agriculturally-zoned property. Lane stated that Song
        would not continue with his purchase unless the Iatarolas
        secured I-2 Industrial zoning and demanded a price reduction in
        order to compensate Song for the increase in real estate tax that
        would result from the change from agricultural to industrial
        zoning.

        The Iatarolas refused to obtain the I-2 Industrial zoning or
        consider a price reduction. Song subsequently exercised his due
        diligence contingency rights under the contract, terminated the
        purchase agreement within the 180-day due diligence period
        provided in the addendum, and demanded the return of his
        $150,000 earnest money deposit, which was being held in escrow
        at Horizon Bank. The Iatarolas refused to return Song’s escrow
        deposit.

        On September 19, 2011, Song filed a complaint against the
        Iatarolas, alleging actual fraud, constructive fraud, breach of
        contract, and contract rescission. The Iatarolas filed a
        counterclaim, also alleging actual and constructive fraud. On
        January 22, 2014, both parties filed motions for summary
        judgment; the trial court denied both. A jury trial took place

Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019         Page 5 of 15
              from May 16-19, 2016. On May 19, 2016, Song filed a motion
              for judgment on the evidence, which the trial court denied. The
              jury returned a verdict for Song, [which stated as follows: “We,
              the Jury, decide in favor of the Plaintiff, Cheng Song, and against
              the Defendants, Thomas Iatarola and Theresa Iatarola, that the
              Plaintiff is entitled to and shall have the return of his earnest
              money in the amount of ONE HUNDRED AND FIFTY
              THOUSAND AND 00/100 DOLLARS ($150,000). A]nd the
              trial court entered judgment on the jury’s verdict in Song’s favor
              for $150,000. On June 20, 2016, the Iatarolas filed a motion to
              correct error[]. On June 23, 2016, Song filed a motion for an
              award of attorney[’]s fees, prejudgment interest, and
              postjudgment interest. On August 12, 2016, Song filed a motion
              for an award of his post-trial attorney[’]s fees.

              On August 12, 2016, the trial court held a joint hearing for the
              Iatarolas’ motion to correct error[] and Song’s motions for
              attorney[’]s fees, prejudgment interest, and postjudgment interest.
              The trial court denied all motions.

      Song v. Iatarola, 76 N.E.3d 926, 930-32 (Ind. Ct. App. 2017) (record citations

      omitted) (“Song I”), clarified on reh’g, 83 N.E.3d 80 (“Song II”), trans. denied.

[3]   Song appealed the trial court’s denial of his motions, and the Iatarolas cross-

      appealed the court’s denial of their motion to correct error. The Iatarolas also

      appealed the trial court’s denial of their motion for summary judgment. In Song

      I we held that the trial court did not err when it denied the Iatarolas’ summary

      judgment motion. But we held that the trial court did err when it denied Song’s

      motion for prejudgment interest and when it “declined to consider” his request

      for attorney’s fees. Id. at 939.

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019           Page 6 of 15
[4]   In particular, on the issue of Song’s attorney’s fee request, we noted that the

      Iatarolas had “argue[d] that because Song repudiated the purchase agreement,

      he [could not] seek to have the agreement’s attorney[’]s fees provision

      enforced.” Id. at 938. That provision provided as follows: “Any party who is

      the prevailing party against any other party in any legal or equitable proceeding

      relating to this Agreement shall be entitled to recover court costs and reasonable

      attorney fees from the non-prevailing party.” Id. However, we did not address

      the Iatarolas’ contention that Song had repudiated the agreement. Instead, we

      addressed the trial court’s conclusion that, because “[t]here was no request

      before the jury . . . with regard to attorney’s fees[,]” the court could not grant

      Song’s attorney’s fee request. Id.

[5]   We rejected the trial court’s reasoning in denying Song’s request for attorney’s

      fees and held as follows:

              Song was not required to submit to the jury a request for
              attorney[’]s fees. In this case, because the jury had already
              fulfilled its role, the trial court was the appropriate trier of fact in
              determining whether attorney[’]s fees should have been awarded.
              Further, Song was not required to submit a petition for
              attorney[’]s fees before the jury returned its verdict; indeed, doing
              so would have been premature. The appropriate time for Song to
              petition the trial court for attorney[’]s fees was after the jury
              returned a verdict in his favor—which is what Song did. The
              trial court erred when, instead of ruling on the issue, it simply
              declined to consider it. Accordingly, the judgment of the trial
              court is reversed and remanded so that the trial court may
              consider the issue of attorney[’]s fees as provided for in the
              parties’ purchase agreement.

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019             Page 7 of 15
      Id. at 938-39.1

[6]   On remand, the parties submitted memoranda to the trial court. In their

      memorandum, the Iatarolas reiterated their contention that Song had

      “repudiated the purchase agreement and therefore [could not] seek attorney[’]s

      fees pursuant to the same.” Appellant’s App. Vol. 2 at 29. In particular, the

      Iatarolas asserted that,

               [a]s part of his pretrial contentions, Song acknowledged that he
               “terminated the transaction” with the Iatarolas after determining
               that the zoning on the subject property was agricultural, and not
               industrial. The contentions further reflected that Song was
               seeking the return of his $150,000.00 earnest money based upon
               such claims as breach of contract, fraud in the inducement,
               contractual right to terminate due to “due diligence provision[,”]
               and rescission. Since Song repudiated the purchase agreement
               and sought to be, and was in fact, returned to the status quo ante,
               he cannot now, after the conclusion of trial, seek to enforce an
               attorney fee provision from the repudiated contract.

      Id. at 30. Following a hearing, the trial court awarded prejudgment interest to

      Song but denied his request for attorney’s fees. In particular, in its order, the

      court stated in relevant part as follows:

               The Court has now had the opportunity to review the
               memoranda regarding attorney[’]s fees and the case law cited;
               and [the court] concludes that the jury’s verdict at the jury trial in

      1
        Song contends that our instructions to the trial court on remand constitute law of the case and required the
      court to award him attorney’s fees. However, our instructions left the discretion to award fees, or not, with
      the trial court, and, as such, application of the law of the case doctrine here is not appropriate.

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                                Page 8 of 15
              this cause was based on [Song]’s repudiation of the contract
              between the parties. Therefore, the cont[r]act having been
              repudiated, the attorney[’]s fees provision of the contract is no
              longer applicable and the Court rules that [Song] is not entitled to
              recover attorney[’]s fees in this cause.

      Id. at 22. This appeal ensued.

                                      Discussion and Decision
[7]   Song appeals the trial court’s denial of his request for attorney’s fees following a

      hearing where the parties presented argument, but no witnesses were called.

      Because the trial court’s judgment was based on a paper record, we are in as

      good a position as the trial court to determine whether Song is entitled to

      attorney’s fees under the terms of the parties’ agreement, and our review is de

      novo. Anderson v. Wayne Post 64, Am. Legion Corp., 4 N.E.3d 1200, 1206 (Ind. Ct.

      App. 2014), trans. denied.

[8]   Song contends that he is entitled to attorney’s fees under the parties’ agreement

      because he did not repudiate the contract but exercised his right under the

      contract to terminate the purchase agreement when he discovered that the

      property was not zoned industrial, as advertised, and, thus, that he is the

      prevailing party in this litigation. The Iatarolas contend that Song’s termination

      of the agreement constituted a repudiation and the trial court correctly denied

      his request for attorney’s fees on that basis. We agree with Song.

[9]   To repudiate is to reject without legal justification. Black’s Law Dictionary

      defines “repudiation” as: “A contracting party’s words or actions that indicate

      Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019         Page 9 of 15
       an intention not to perform the contract in the future; a threatened breach of

       contract.” Black’s Law Dictionary 1496 (10th ed. 2014). Thus, the Iatarolas

       contend, in effect, that Song committed an anticipatory breach of the purchase

       agreement. See, e.g., Metro Holdings One, LLC v. Flynn Creek Partner, LLC, 25
N.E.3d 141, 160 (Ind. Ct. App. 2014), trans. denied. However, as we explain

       below, Song did not repudiate the purchase agreement but exercised his right to

       terminate the agreement under the due diligence provision.

[10]   The jury’s verdict was a general verdict in favor of Song and awarded him “the

       return of his earnest money in the amount of” $150,000. Appellant’s App. Vol.

       II at 23. On remand, in support of their contention that Song could not seek

       attorney’s fees under the purchase agreement, the Iatarolas “argued [to the trial

       court] that Song’s claims and the issues presented to and decided by the jury

       were based upon Song’s repudiation, or rejection of the purchase agreement.”

       Appellees’ Br. at 11. However, our review of the trial transcript reveals no

       argument or jury instructions addressing Song’s alleged repudiation of the

       purchase agreement.2 And the Iatarolas do not direct us to any evidence

       presented at trial to support their claim that Song repudiated the agreement.

       2
         We take judicial notice of the trial transcript, which we have obtained via the Odyssey case management
       system. See Horton v. State, 51 N.E.3d 1154, 1160-61 (Ind. 2016) (observing that Ind. Evidence Rule 201(b)(5)
       “now permits courts to take judicial notice of ‘records of a court of this state,’” and that such records are
       presumptively sources of facts “that cannot reasonably be questioned”); see also Ind. Appellate Rule 27
       (providing that the “Record on Appeal . . . consist[s] of the Clerk’s Record and all proceedings before the trial
       court . . . whether or not transcribed or transmitted to the Court on Appeal”).

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                                 Page 10 of 15
[11]   Rather, the Iatarolas categorically assert that Song’s acknowledgment that he

       terminated the agreement meant that he had repudiated or rescinded the

       contract. Both in their argument to the trial court and in their brief on appeal,

       the Iatarolas conflate and confuse the terms termination, repudiation, and

       rescission. But those terms have distinct meanings in the law, and, on these

       facts and this record, the Iatarolas’ contention that Song’s termination was

       equivalent to a repudiation or rescission is not well taken.3

[12]   The addendum to the purchase agreement included a 180-day due diligence

       period “from the day of acceptance of [the] contract [on March 21, 2011].” Id.

       at 187. As we observed in Song I, “[g]enerally, in real estate transactions, the

       term ‘due diligence’ refers to the parties’ obligations to ‘investigate facts rather

       than make assumptions about them.’” 76 N.E.3d at 933 (quoting Hartig v.

       Stratman, 760 N.E.2d 668, 671 (Ind. Ct. App. 2002)). But we noted that the

       parties’ purchase agreement “does not state the purpose of the due diligence

       period” and is, therefore, “ambiguous.” Id. At trial, Song argued that, in light

       of the zoning discrepancy, that provision entitled him to terminate the purchase

       agreement during the due diligence period, which he did, and to recover the

       3
         To the extent the Iatarolas contend that the jury’s verdict was based on Song’s request to rescind the
       contract, there is no indication in the record that Song’s alternative claim for rescission was even tried to the
       jury. Indeed, in Song I we noted that the trial court “did not grant Song’s request to rescind the contract,” 76
N.E.3d at 937, and it is well settled that “rescission is an equitable remedy and must be tried by the court,”
       Stevens v. Olsen, 713 N.E.2d 889, 891 (Ind. Ct. App. 1999), trans. denied. The Iatarolas’ contention is without
       merit.

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                                  Page 11 of 15
       earnest money. Because the due diligence provision is ambiguous, the jury, as

       factfinder, was entitled to adopt Song’s interpretation.4

[13]   The evidence presented at trial shows that, during the final inspection of the

       property on August 7, 2011, which occurred within the due diligence period,

       Thomas informed Song, for the first time, that the property was zoned

       agricultural, not industrial. By letter dated August 12, Song’s attorney advised

       Macmahon “that Song would not continue with his purchase unless the

       Iatarolas secured I-2 Industrial zoning and demanded a price reduction in order

       to compensate Song for the increase in real estate tax that would result from the

       change from agricultural to industrial zoning.” Song I, 76 N.E.3d at 932. The

       Iatarolas responded that they would not secure different zoning for the

       property. Accordingly, “Song subsequently exercised his due diligence

       contingency rights under the contract, terminated the purchase agreement within

       the 180-day due diligence period provided in the addendum, and demanded the

       return of his $150,000 earnest money deposit,” which the Iatarolas refused to

       return. Id. (emphasis added).

[14]   There is no evidence that Song repudiated the purchase agreement. Indeed, the

       trial court did not instruct the jury on repudiation and the parties made no

       argument on repudiation. Instead, the court instructed the jury that it could

       4
         The Iatarolas argued at trial that the due diligence provision applied only to the Iatarolas’ responsibility to
       vacate the premises within 180 days of the date of the purchase agreement. The jury verdict in favor of Song
       shows that the jurors rejected that interpretation of the provision.

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                                  Page 12 of 15
       find that either Song or the Iatarolas had breached the purchase agreement and

       that the non-breaching party was entitled to the earnest money.5 Consistent

       with that instruction, Song argued that the purchase agreement

                 gave 180-days’ due diligence to Mr. Song to investigate the
                 usability of this property for his intended purpose. Within that
                 180 days, he did so and withdrew because the property did not
                 qualify, could not be used for his intended purpose, and because
                 the Iatarolas refused as a part of the transaction before a closing
                 to go ahead and get it zoned [industrial].

       Trial Tr. Vol. 4 at 186. And Song argued that the Iatarolas breached the

       purchase agreement when, upon his termination of the agreement during the

       due diligence period, they did not return the earnest money. Our review of the

       record, including the jury instructions and arguments, reveals that the jury’s

       award of earnest money to Song could only have been based on a finding that

       the Iatarolas breached the purchase agreement.

[15]   Further, the law is well settled that,

       5
           Final Instruction No. 5 provided as follows:

                 The terms of the March 21, 2011[,] contract, also called a Purchase Agreement, state that
                 upon a breach of the agreement by either party, the non-breaching party is entitled to
                 liquidated damages. If you determine that the Defendants breached the March 21,
                 2011[,] contract, then under the terms of the contract, Plaintiff is entitled to a return of his
                 earnest money deposit for the Defendants’ breach. If however, you find that the Plaintiff
                 breached the March 21, 2011[,] contract, then the Defendants are entitled to receive the
                 earnest money deposit.

       Appellant’s App. Vol. II at 107.

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019                                     Page 13 of 15
               [w]hen one party repudiates the contract, the injured party has the
               option of pursuing one of three remedies: 1) he may treat the
               contract as rescinded and recover upon quantum meruit; 2) he may
               keep the contract alive for the benefit of both parties, being at all
               time ready and able to perform, and at the end of the time
               specified in the contract for performance, sue to recover under the
               contract; or 3) he may treat the repudiation as putting an end to
               the contract and sue to recover the damages caused by refusing to
               carry out the contract.

       Scott-Reitz Ltd. v. Rein Warsaw Assoc., 658 N.E.2d 98, 103-04 (Ind. Ct. App.

       1995) (emphases added). Here, if, as the trial court found, the jury had based its

       verdict on Song’s repudiation of the purchase agreement, then the Iatarolas

       would have been the injured party and entitled to damages rather than Song.

       See Scott-Reitz Ltd., 658 N.E.2d at 103-04. But the jury entered a verdict in

       Song’s favor and awarded him the earnest money. Thus, both as a matter of

       fact and a matter of law, the jury’s damage award precludes the trial court’s

       determination that the verdict was based on Song’s repudiation of the purchase

       agreement.

[16]   We hold that the trial court erred when it found that the jury’s verdict was

       based on Song’s repudiation of the purchase agreement and concluded that

       Song was not entitled to attorney’s fees under the agreement. Song was the

       prevailing party at trial and, as such, is “entitled to recover court costs and

       reasonable attorney[’]s fees” incurred in the course of this litigation.

       Appellant’s App. Vol. II at 185. Accordingly, we reverse and remand with

       instructions for the trial court to conduct a hearing to determine the amount of

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019         Page 14 of 15
       reasonable attorney’s fees incurred by Song, including appellate attorney’s fees,

       and to award those fees and court costs to Song.

[17]   Reversed and remanded with instructions.

       Pyle, J., and Altice, J., concur.

       Court of Appeals of Indiana | Opinion 18A-PL-2134 | March 19, 2019     Page 15 of 15