Court Opinion

ID: 3156111
Source: CourtListenerOpinion
Date Created: 2015-11-19 17:05:14.340259+00
Date Added: 2024-06-11T12:02:39.281248
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
                                                                 Nov 19 2015, 8:59 am
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.

ATTORNEY FOR APPELLANT                                   ATTORNEYS FOR APPELLEE
Matthew A. Griffith, Esq.                                Kent M. Frandsen
Griffith Law Group, LLC                                  Travis W. Montgomery
Indianapolis, Indiana                                    Parr Richey Obremskey Frandsen
                                                         & Patterson LLP
                                                         Lebanon, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Kansas City Services, Inc.,                              November 19, 2015
Appellant-Plaintiff,                                     Court of Appeals Case No.
                                                         06A04-1502-PL-66
        v.                                               Appeal from the Boone Superior
                                                         Court
Bryan Connan, individually,                              The Honorable Matthew C.
Julie Connan, individually, and                          Kincaid, Judge
Connan’s Zionsville Investors,                           Trial Court Cause No.
LLC,                                                     06D01-1310-PL-557
Appellees-Defendants

Bailey, Judge.

Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 1 of 12
                                          Case Summary
[1]   Kansas City Services, Inc. (“KCS”) appeals a judgment in favor of Bryan

      Connan, Julie Connan (collectively, “the Connans”), and Connan Zionsville

      Investors (“CZI”), upon KCS’s complaint for breach of contract and equitable

      relief and CZI’s counterclaim to quiet title. We affirm the denial of relief on the

      breach of contract claim; we reverse the denial of relief on the claim for

      equitable relief. We remand for a hearing on the appropriate amount of

      restitution.

                                                   Issues
[2]   KCS presents four issues for review, which we consolidate and restate as the

      following two issues:

              I.      Whether the trial court clearly erred in failing to find the
                      existence of a contract for the sale of real estate between
                      KCS and CZI; and

              II.     Whether the trial court clearly erred by finding that KCS
                      was not entitled to equitable relief with respect to four
                      years of payments to CZI because those payments had
                      been made to benefit a third party to the instant litigation.

                            Facts and Procedural History
[3]   On January 29, 2002, the Connans and William Rabb (“Rabb”) executed a land

      contract whereby Rabb agreed to pay the Connans $218,000.00 for real

      property located at 95 East Pine in Zionsville (“the Property”). Rabb tendered

      Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 2 of 12
      a down payment of $10,000.00 and promised to make monthly payments of

      $1,383.83 for sixty months and a balloon payment thereafter.

[4]   On April 1, 2007, the Connans and Rabb executed an Addendum to Purchase

      Agreement, changing the purchase price to $195,000.00 and the installment

      payments to $2,500.00. On January 30, 2008, the Connans quit-claimed their

      interest in the Property to CZI.

[5]   In December of 2008, Rabb met with Bryan Connan and advised Connan that

      his father-in-law, John Petrowski (“Petrowski”), “would start making the

      payments for [Rabb].” (Tr. at 174.) Petrowski owns KCS, a real estate

      investment company.

[6]   On February 6, 2009, Petrowski, as an authorized signer, issued a KCS check to

      CZI in the amount of $4,943.55. The Memo portion of the check reflected that

      the payment was “Dn Pmt. Bldg 95 E Pine, Zionsville, Ind 46077.” (Pl. Ex. 5.)

      KCS began to make monthly payments of $2,500.00 to CZI.

[7]   On May 22, 2009, Petrowski, on behalf of KCS, addressed a letter to Connan,

      on behalf of CZI, stating in part:

              I would like to formalize our agreement on the sale of this
              property to [KCS] from [CZI][.] . . . My records indicate that the
              agreed purchase price of the property is $170,443.43 after the
              February down payment of $4943.55 which paid all outstanding
              balances on the property through February, 2009. I also
              understand that we agreed that [KCS] would begin making
              monthly payments of $2,500.00 for a period of five years at a
              seven percent (7%) interest rate amortized over fifteen years.

      Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 3 of 12
                 Upon completion of the sixty monthly payments in February
                 2014, a final payment of approximately $62,650 will be due to
                 complete the sale.

      (Pl. Ex. 7.)

[8]   Approximately one month later, Connan sent a letter drafted on letterhead of

      Connan’s Paint & Body Shop, LLC, responding in part:

                 Please review and advise if it is agreeable. Per your May 22,
                 2009 letter, we agree to all points. Regarding property taxes, this
                 year they are due June 30 and need to be paid to [CZI] as title is
                 still held in CZI.

      (Pl. Ex. 8.) Enclosed with the letter was an “Assignment of Land Contract”

      prepared by Connan’s attorney. (Pl. Ex. 8.) The unsigned document recited

      that Rabb was to assign to KCS and to Petrowski, individually, his rights under

      the land contract with the Connans.1 Rabb was to remain jointly liable with

      KCS and Petrowski. Petrowski, on behalf of KCS, responded by letter:

                 I noticed on the legal description, that the property is assigned to
                 Rabb and I want to be sure that Rabb will be removed and the
                 assignment will be changed to Kansas City Services, Inc. as the
                 only assignee when all the paperwork is complete.

      (Pl. Ex. 9.)

      1
          The parties agree that the attorney was unaware of the transfer from the Connans to CZI.

      Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015         Page 4 of 12
[9]    Connan, on behalf of CZI, wrote to Petrowski and enclosed a copy of a letter

       from Connan’s attorney. The letter provided in pertinent part:

               I am not exactly sure what he means regarding his changes.
               Rabb is the original Purchaser and he will be doing the
               assignment to Kansas City Services, Inc. and John Petrowski,
               individually. This will be done with signatures by Rabb, Kansas
               City Services, Inc., John Petrowski and you and Julie, who have
               to approve the assignment. As to having Kansas City Services,
               Inc. only on the assignment, this is not in your best interests in
               that we don’t know whether Kansas City Services, Inc. has been
               appropriately funded or is an entity to which we can look to in
               the event the contract is breached. The document is fine as I
               originally prepared it and should be executed by all parties with
               no further changes.

       (Pl. Ex. 12.) Petrowski, on behalf of KCS, expressed “concern there might be a

       problem having clear title transferred from [CZI] to [KCS] without [Rabb’s]

       name appearing on the title.” (Pl. Ex. 13.) Connan forwarded to Petrowski a

       tax bill for the Property, but sent no revised assignment document. Sometime

       in 2009, Rabb obtained new employment and moved to California.

[10]   On March 24, 2009, Rabb executed a “Transfer of Rights and Interest,”

       purportedly transferring to KCS all Rabb’s contractual rights with respect to the

       Property. (Pl. Ex. 6.) On January 7, 2010, Petrowski wrote to Connan, stating

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 5 of 12
       that he had enclosed a copy of the notarized transfer document. It was not

       acknowledged or signed by the Connans or a representative of CZI.2

[11]   In 2011, the Property was damaged when a water pipe burst. In response to

       Petrowski’s inquiry Connan advised:

                  Now to address your concerns in your April 8th letter. The water
                  has been off for over a year but Indianapolis Water will not
                  discuss this with me as the account is in the name of Smart
                  Dot/Bill Rabb. When a water bill is not paid, it is usually turned
                  off at the shut-off valve out in the street. I, however, do not
                  know the location of the shut-off for 95 Pine. I understand that
                  the Zionsville Fire Department was called to turn off the water
                  when someone observed water running out the door. The
                  building is a total wreck. There is water standing, lights have
                  fallen down, mold on the walls has grown to 6” circles. There is
                  a hole in the back wall big enough to let animals in, gutters are
                  down, etc. There is no way insurance is going to cover the
                  damage after this amount of time. It would appear to me that the
                  only options I have to protect my security is to demand payment
                  in full or to petition the court for possession of the property.

       (Pl. Ex. 31.) Petrowski proposed to Connan that Indiana Insurance Company

       “needs to be involved” and expressed willingness to join Connan in pursuing

       recovery from Indianapolis Water “legally to protect our financial interest in

       the building.” (Pl. Ex. 32.) Connan received an insurance check in the amount

       of $15,000.00. No repairs were performed.

       2
           Connan testified that he did not receive the document.

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 6 of 12
[12]   On June 28, 2011, KCS filed in the Boone County Recorder’s Office an

       Equitable Interest Affidavit, asserting that KCS claimed an equitable interest in

       the Property. (Pl. Ex. 35.) Petrowski also authored some letters to Connan

       requesting a written agreement, an allocation of costs for water damage, and

       that KCS be permitted to take possession of the Property with the right to rent it

       to a third party.

[13]   In February of 2012, Petrowski wrote to Connan, enclosing photographs of the

       Property “when [KCS] agreed to purchase [it]” and expressing an “expectation”

       that the Property would be “in the same general condition prior to completing

       the purchase.” (Pl. Ex. 43.) In April of 2013, Connan’s bookkeeper addressed

       a letter to Petrowski, individually, demanding payment for delinquent taxes on

       the Property.

[14]   On October 25, 2013, KCS filed a complaint against the Connans and CZI for

       breach of contract, conversion, and unjust enrichment. On December 16, 2013,

       CZI counterclaimed for breach of contract and foreclosure against KCS. CZI

       also filed a complaint for foreclosure against Rabb. On October of 2014, CZI

       obtained a default judgment of foreclosure against Rabb.

[15]   On January 20, 2015, a bench trial was conducted with respect to KCS’s claims

       and the defendants’ counterclaims. KCS argued that a contract existed and it

       was entitled to specific performance or, alternatively, KCS was entitled to

       equitable relief or restitution of sums converted. CZI argued that no contract

       had been formed, KCS had made payments solely for the benefit of Petrowski’s

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 7 of 12
       son-in-law (and, indirectly, his daughter) and, lacking an expectation of other

       benefit, KCS was not entitled to equitable relief.

[16]   On January 21, 2015, the trial court entered its findings of fact, conclusions of

       law, and judgment. In relevant part, the trial court determined that no contract

       for the sale of the Property had been formed. The trial court found that KCS

       was not entitled to recover on a theory of unjust enrichment because CZI had

       conferred a benefit of foregoing foreclosure upon Rabb for four years and

       Petrowski had hoped to preserve the Property for his children. CZI prevailed

       upon its counterclaim and was granted relief from the cloud on its title relative

       to KCS’s equitable interest affidavit. In sum, CZI and the Connans retained

       possession of the Property with clear title, insurance proceeds, a judgment

       against Rabb, and all sums paid by KCS. KCS appeals.

                                 Discussion and Decision
                                          Standard of Review
[17]   The trial court entered findings of fact and conclusions of law pursuant to

       Indiana Trial Rule 52(A). Such findings must disclose a valid basis for the legal

       result reached in the judgment, and the evidence presented must support each

       of the specific findings. J.M. v. N.M., 844 N.E.2d 590, 599 (Ind. Ct. App. 2006),

       trans. denied.

[18]   Upon review, we apply the following two-tiered standard: whether the

       evidence supports the findings and whether the findings support the judgment.

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 8 of 12
       Redd v. Redd, 901 N.E.2d 545, 549 (Ind. Ct. App. 2009). The trial court’s

       findings and conclusions will be set aside only if they are clearly erroneous, that

       is, if the record contains no facts or inferences supporting them. Id. A

       judgment is clearly erroneous when a review of the record leaves us with a firm

       conviction that a mistake has been made. Id. We do not reweigh the evidence,

       nor will we assess the credibility of witnesses, but consider only the evidence

       most favorable to the judgment. Id. We review conclusions of law de novo. Id.

                                        Existence of a Contract
[19]   The existence of a contract is a question of law. Batchelor v. Batchelor, 853
N.E.2d 162, 165 (Ind. Ct. App. 2006). The basic requirements are offer,

       acceptance, consideration, and “a meeting of the minds of the contracting

       parties.” Id. Here, Connan urged that an assignment be executed by Rabb and

       approved by CZI with Petrowski and KCS as new joint obligors. Petrowski did

       not agree to personal liability and offered, on behalf of KCS, to purchase the

       Property for KCS. This division was never resolved and there was no “meeting

       of the minds” as to the identity of the purchaser. The trial court did not err in

       concluding that no new contract for the purchase of the Property was formed.

                                             Equitable Relief
[20]   A claim for unjust enrichment is a “legal fiction” whereby a person who has

       been unjustly enriched at the expense of another is required to make restitution

       to the other. Zoeller v. E. Chicago Second Century, Inc., 904 N.E.2d 213, 220 (Ind.

       2009) (citing RESTATEMENT OF RESTITUTION § 1 (1937)). To prevail on a

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 9 of 12
       claim of unjust enrichment, a claimant must establish that a measurable benefit

       has been conferred on the defendant under such circumstances that the

       defendant’s retention of the benefit without payment would be unjust.

[21]   The trial court recognized that KCS had conferred a measurable benefit upon

       CZI by making installment payments and paying real estate taxes. However,

       the trial court disagreed that CZI had been unjustly enriched:

               Under these circumstance[s], CZI did not have a reasonable
               expectation of having to pay the benefits – payment of contract
               installments and real estate taxes – back to KCS. CZI expected
               to have to convey the property to Rabb or his designee once the
               contract with Rabb was paid. CZI forebear [sic] foreclosure upon
               Rabb for four (4) years when it might have done so due to his
               default. CZI thus returned a benefit to Petrowski – that his
               children’s interest in a property he hoped would be valuable for
               them would not be extinguished.

       (App. at 19.) The trial court also made a factual finding that: “John Petrowski

       did not want his son-in-law and/or his daughter – particularly his daughter – to

       lose the value of the contract.” (App. at 5.) Thus, the trial court was persuaded

       that Petrowski (individually) hoped to preserve property for his daughter and

       son-in-law.

[22]   However, KCS – not Petrowski individually – made each payment to CZI.

       There is no evidence of record that any payment was made on behalf of Rabb.

       To the contrary, KCS while making payments demanded a contract naming

       KCS as purchaser and at times requested possession of the Property to install a

       tenant. Connan, while accepting payments on behalf of CZI, demanded an

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 10 of 12
       assignment with Rabb relinquishing his rights and both KCS and Petrowski

       becoming liable to pay for the Property.3 Under neither scenario was there an

       expressed intent to benefit Rabb, much less Rabb’s wife who had not contracted

       with the Connans or CZI.

[23]   Prior to the written communications between representatives of KCS and CZI,

       Rabb had expressed to Connan a belief or hope that payments would be made

       by Petrowski for Rabb. Rabb abandoned the Property, moved to California,

       and did not remain a part of sustained negotiations. For four years, Connan

       may have subjectively believed that there was an enforceable assignment.

       There was not. Petrowski may have subjectively believed that there was a valid

       contract for sale of the Property to KCS. There was not. However, regardless

       of individual expectations,4 there is no evidence of record of a manifestation of

       intent by KCS (or Petrowski on behalf of KCS) that would support a factual

       finding that KCS made installment payments to purchase or preserve property

       for any entity other than KCS. KCS made four years of payments and received

       nothing in return.

       3
         The Assignment of Land Contract prepared by Connan’s attorney provided: “Purchaser [Rabb] hereby
       assigns any and all right, title and interest under the above Land Contract to Assignee, including but not
       limited to all rights, responsibilities and benefits accruing thereto. (Pl. Ex. 8.)
       4
         Connan’s bookkeeper also testified – not “for the truth of the matter” but to explain her bookkeeping entries
       – that she understood Petrowski could make payments on Rabb’s behalf. (Tr. at 222.)

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015           Page 11 of 12
[24]   The trial court’s findings in this regard lack evidentiary support. As no valid

       findings support the judgment denying KCS equitable relief and allowing CZI

       to retain all monies paid, it must be reversed.

                                               Conclusion
[25]   The trial court did not err in concluding that a contract for the purchase of the

       Property was not formed. However, the record leaves us with a firm conviction

       that the trial court erred by denying KCS restitution upon its claim of unjust

       enrichment.

[26]   Affirmed in part; reversed in part, and remanded with instructions to conduct a

       hearing on restitution.

       Mathias, J., and Brown, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 06A04-1502-PL-66 | November 19, 2015   Page 12 of 12