Court Opinion

ID: 4409842
Source: CourtListenerOpinion
Date Created: 2019-06-25 15:03:31.758659+00
Date Added: 2024-06-11T12:31:48.079207
License: Public Domain

FILED
                                                                  Jun 25 2019, 8:32 am

                                                                      CLERK
                                                                  Indiana Supreme Court
                                                                     Court of Appeals
                                                                       and Tax Court

ATTORNEY FOR APPELLANT
Richard E. Bryant
The Law Office of Richard E. Bryant, P.C.
Goshen, Indiana

                                             IN THE
    COURT OF APPEALS OF INDIANA

Jacqueline Smith,                                           June 25, 2019
Appellant,                                                  Court of Appeals Case No.
                                                            19A-SC-36
        v.                                                  Appeal from the St. Joseph Superior
                                                            Court
Laurenz Place LLC,                                          The Honorable Julie P. Verheye,
Appellee.                                                   Magistrate
                                                            Trial Court Cause No.
                                                            71D03-1807-SC-6813

Bailey, Judge.

Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019                           Page 1 of 9
                                            Case Summary
[1]   In Cause No. 71D02-1803-SC-2509 (“Cause 2509”), Jacqueline Smith

      (“Smith”) was sued by her former landlord, Laurenz Place LLC (“Laurenz

      Place”), for an alleged breach of a lease. The parties reached a settlement and

      Smith vacated the premises without an admission of breach. Subsequently,

      Laurenz Place returned Smith’s security deposit, reduced by $650.00, and

      Smith filed the instant lawsuit, Cause No. 71D03-1807-SC-6813 (“Cause

      6813”). Laurenz Place counterclaimed for damages and for attorney’s fees in

      both causes.

[2]   The small claims court entered judgment for Smith in the amount of $1,650.00

      (for unlawful retention of the security deposit and attorney’s fees in Cause

      6813). Despite the prior settlement and Smith having prevailed on her claim,

      the court entered judgment for Laurenz Place in the amount of $1,696.00 (for

      damages and attorney’s fees for both causes). Smith now appeals the judgment

      on the counterclaim. She presents the issue of whether the small claims court

      clearly erred in awarding Laurenz Place damages and attorney’s fees. We

      reverse.

                             Facts and Procedural History
[3]   On March 6, 2018, Laurenz Place gave Smith notice to vacate her rented

      apartment; eight days later, Laurenz Place filed a claim against Smith for

      immediate possession. On the date that the small claims hearing was

      Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019           Page 2 of 9
      scheduled, the parties – both represented by counsel – reached an agreement.

      Smith agreed to vacate the apartment on or before April 30, 2018 and pay the

      existing balance on her rent account. Laurenz Place agreed to dismiss its small

      claims complaint so that Smith would not have an eviction of record. The

      South Bend Housing Authority issued checks for Smith’s accrued rent, which

      were accepted and deposited by Laurenz Place. 1

[4]   Thereafter, Laurenz Place sent Smith an itemization of alleged damages and a

      check for $269.00. This represented the balance of Smith’s $919.00 deposit,

      after deductions of $100.00 for carpet cleaning, $100.00 for water, and $450.00

      for attorney’s fees incurred in Cause 2509. On July 11, 2018, Smith filed her

      complaint in Cause 6813, requesting refund of her deposit, moving expenses of

      $2,000.00, and attorney’s fees. On September 6, 2018, Laurenz Place filed a

      counterclaim.

[5]   The small claims court conducted a hearing on September 20, 2018, at which

      the parties offered documentary and testimonial evidence. On October 4, 2018,

      the court issued an order. The court concluded that Smith was not entitled to

      moving expenses for a wrongful eviction, having reached agreement with

      Laurenz Place in Cause No. 2509. However, the court found that Laurenz

      Place had wrongfully withheld $450.00 in attorney’s fees from Smith’s security

      deposit. Laurenz Place was ordered to refund Smith $450.00 of the deposit and

      1
       During the landlord-tenant dispute, Laurenz Place had returned checks proffered by the South Bend
      Housing Authority.

      Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019                                Page 3 of 9
      pay her $1,200.00 in attorney’s fees in Cause 6813.2 However, the court

      awarded Laurenz Place $650.00 (equivalent to the deduction from Smith’s

      security deposit) and $1,046.00 in attorney’s fees for pursuing its defense and

      counterclaim in Cause 6813.

[6]   Smith filed a motion to correct error, which was summarily denied. Laurenz

      Place, having been awarded $1,696.00 and ordered to pay Smith $1,650.00,

      moved the small claims court to offset the judgments. The court entered an

      order of offset.3 Smith now appeals.

                                  Discussion and Decision
[7]   Smith contends that the small claims court erred by awarding Laurenz Place

      damages despite its non-compliance with Indiana’s Security Deposits Statute,

      Indiana Code Section 32-31-3 et seq., and by awarding Laurenz Place attorney’s

      fees absent a statutory or contractual basis.

[8]   We review a small claims court’s judgment for clear error. Bokori v. Martinoski,

      70 N.E.3d 441, 443 (Ind. Ct. App. 2017). A deferential standard of review is

      particularly important in small claims actions, where trials are informal, with

      2
       This was less than the aggregate fees requested by Smith. The small claims court disallowed attorney’s fees
      attributable to Smith’s claim for wrongful eviction.
      3
        The parties did not draw attention to the double recovery by Laurenz Place of the cleaning fee and water
      bill. The judgment in favor of Smith included an order that Laurenz Place pay Smith $450.00 wrongfully
      deducted from Smith’s security deposit, permitting Laurenz Place to retain $200.00. But then the trial court
      awarded Laurenz Place $650.00 (exclusive of attorney’s fees), equivalent to the amount previously deducted
      from the security deposit.

      Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019                                   Page 4 of 9
       the sole objective of dispensing speedy justice between the parties according to

       the rules of substantive law. Lae v. Householder, 789 N.E.2d 481, 483 (Ind.

       2003). Laurenz Place did not file an appellee’s brief, “and thus we may reverse

       upon a prima facie showing of reversible error – but even so, we still may not

       reweigh evidence or reassess witness credibility.” Bokori, 70 N.E.3d at 444.

       “Prima facie error in this context is defined as, at first sight, on first appearance,

       or on the face of it.” Trinity Homes, LLC v. Fang, 848 N.E.2d 1065, 1068 (Ind.

       2006).

[9]    Indiana Code Section 32-31-3-13 dictates that a security deposit may only be

       used for: (1) reimbursement for actual damages to the rental unit not the result

       of ordinary wear and tear; (2) to pay for rent in arrearage under the rental

       agreement and rent due for premature termination; (3) to pay for the last

       month’s rent upon the parties’ stipulation; or (4) reimbursement for unpaid

       utility or sewer charges for which the tenant is obligated.

[10]   Indiana Code Section 32-31-3-12 provides in relevant part:

                (a) Upon termination of a rental agreement, a landlord shall
                    return to the tenant the security deposit minus 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

       Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019              Page 5 of 9
                    (3) unpaid utility or sewer charges that the tenant is obligated
                        to pay under the rental agreement;

                    all as 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. . . .

               (b) If a landlord fails to comply with subsection (a), a tenant may
                   recover all of the security deposit due the tenant and
                   reasonable attorney’s fees.

[11]   Indiana Code Section 32-31-3-14 requires that the itemized list of damages

       include the estimated cost of repair for each damaged item and specify the lease

       on which the landlord intends to assess the tenant. Pursuant to Indiana Code

       Section 32-31-3-15, “[f]ailure by a landlord to provide notice of damages under

       section 14 of this chapter constitutes agreement by the landlord that no

       damages are due, and the landlord must remit to the tenant immediately the full

       security deposit.” A landlord who fails to comply with sections 14 and 15 “is

       liable to the tenant in an amount equal to the part of the deposit withheld by the

       landlord plus reasonable attorney’s fees and court costs.” I.C. § 32-31-3-16. “A

       waiver of th[e] chapter by a landlord or tenant is void.” I.C. § 32-31-3-17.

[12]   The Security Deposit Statute is in derogation of the common law and thus is to

       be strictly construed. Miller v. Geels, 643 N.E.2d 922, 927 (Ind. Ct. App. 1994),

       trans. denied. Its primary aim is to provide for the timely return of the security

       deposit and to protect a tenant from wrongful withholding by the landlord.

       Eppl v. DiGiacomo, 946 N.E.2d 646, 650 (Ind. Ct. App. 2011). “Failure to

       Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019                 Page 6 of 9
       refund and supply the itemized list results in a waiver of any claim for damages

       and exposes the landlord to liability for the tenant’s attorney fees.” Lae, 789

       N.E.2d at 485. And providing an itemization where claimed damages are

       “lumped” together as “other damages” is fatal to statutory compliance.

       Pinnacle Prop. v. Saulka, 693 N.E.2d 101, 104 (Ind. Ct. App. 1998).

[13]   Here, the small claims court found that Laurenz Place had timely provided

       Smith with the requisite statutory notice but also determined that Laurenz Place

       had included a deduction not encompassed by the statute, that is, attorney’s

       fees. Smith argues that Laurenz Place’s inclusion of the attorney’s fees

       constitutes “fail[ure] to comply with subsection (a)” of Indiana Code Section

       32-31-3-12 and thus Laurenz Place waived any claim for damages. We do not

       interpret the statutory language so narrowly.

[14]   We seek to give practical application to a statute, and to avoid results that are

       absurd, a hardship, or unjust. Suggs v. State, 51 N.E.3d 1190, 1194 (Ind. 2016).

       Where a landlord fails to timely return a tenant’s security deposit, accompanied

       by an itemization of specificity, the entire security deposit is recoverable by the

       tenant. Pinnacle, 693 N.E.2d at 104. But we discern no legislative intent that a

       tenant may avoid liability for accrued rent, damages, or utilities because of an

       itemization’s inclusion of a disallowable item (which the tenant may then

       challenge). Rather, a security deposit deduction is appropriate for owed

       damages, rent, and utilities properly noticed and itemized, but a tenant may be

       awarded attorney’s fees incurred to recover unauthorized deductions. Smith

       has not shown that she was entitled to the refund of her entire security deposit

       Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019            Page 7 of 9
       because of waiver. And there is no factual dispute that Smith owed $100.00 for

       water; the deduction for past due water bills was by statute allowable.4

[15]   Smith was ordered to pay attorney’s fees of $450.00 attributable to Cause 2509

       and attorney’s fees of $1,046.00 attributable to Cause 6813.5 The latter sum

       included defense of the claim on which Smith prevailed, wrongful withholding

       of a portion of the security deposit. Indiana has consistently followed the

       American Rule with respect to attorney’s fees. Loparex, LLC v. MPI Release

       Technologies, LLC, 964 N.E.2d 806, 816 (Ind. 2012). In the absence of statutory

       authority, an agreement, or an equitable exception, a prevailing party has no

       right to recover attorney’s fees from the opposition. Id.

[16]   A lease may provide for the payment of attorney’s fees occasioned by a party’s

       breach, Miller, 643 N.E.2d at 932, and the lease between Laurenz Place and

       Smith contained such a provision. That said, the parties settled their prior legal

       action. The settlement agreement reached by the parties did not obligate Smith

       to pay Laurenz Place’s attorney’s fees for a claimed breach of the lease. The

       $450.00 attributable to Cause No. 2509 was not properly assessed against Smith

       in this action. As for the legal fees incurred by Laurenz Place in Cause 6813,

       4
         Smith was also charged a fee of $100.00, pursuant to a lease term that imposed a “standard” carpet cleaning
       fee. The Security Deposit Statute contemplates “damages” going beyond “ordinary wear and tear” and thus
       does not provide for pre-authorized deductions from a security deposit for routine cleaning. I.C. § 32-31-3-
       13. However, agreements that a tenant clean or pay for cleaning of leased premises may be upheld in a lease
       enforcement action. See Miller, 643 N.E.2d at 926 (recognizing that the Security Deposit Statute provides
       special protection for security deposits but does not limit the freedom of landlords and tenants to contract
       regarding an obligation for cleaning the premises), trans. denied.
       5
           This aggregate award was reduced by $50.00 in the order of offset.

       Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019                                   Page 8 of 9
       wherein Laurenz Place was found to have wrongfully reduced Smith’s security

       deposit, there is neither a contractual or statutory basis for shifting those fees to

       Smith.

                                                 Conclusion
[17]   The small claims court clearly erred in assessing attorney’s fees against Smith

       and then offsetting the judgment Smith obtained against Laurenz Place. The

       evidence established that Smith owed Laurenz Place $200.00. The judgment in

       Smith’s favor awarded Smith the refund of only $450.00 of the $650.00

       deducted from her security deposit; accordingly, Laurenz Place has retained the

       $200.00 Smith owed. Laurenz Place is not entitled to double recovery of those

       items upon its counterclaim and Laurenz Place is not entitled to attorney’s fees

       from Smith. Thus, the judgment upon the counterclaim is reversed.

[18]   Reversed.

       Riley, J., and Pyle, J., concur.

       Court of Appeals of Indiana | Opinion 19A-SC-36 | June 25, 2019              Page 9 of 9