Court Opinion

ID: 2742454
Source: CourtListenerOpinion
Date Created: 2014-10-15 17:03:26.356903+00
Date Added: 2024-06-11T09:55:23.990252
License: Public Domain

ATTORNEY FOR APPELLANT                      ATTORNEY FOR APPELLEE
Shaun T. Olsen                              Katherine A. Brown-Henry
OlsenCampbell Ltd.                          Cline Farrell Christie & Lee, P.C.
Merrillville, Indiana                       Indianapolis, Indiana
__________________________________________________________________________________

                                            In the
                        Indiana Supreme Court                                   Oct 15 2014, 12:37 pm
                             _________________________________

                                     No. 45S03-1407-CT-459

JOSEPH WYSOCKI AND M. CARMEN WYSOCKI,
                                                                             Appellants (Plaintiffs),

                                                 v.

BARBARA A. JOHNSON AND WILLIAM T. JOHNSON, BOTH INDIVIDUALLY
AND AS TRUSTEES OF THE BARBARA A. JOHNSON LIVING TRUST
DATED 12-17-1996,
                                                                           Appellees (Defendants).
                             _________________________________

                  Appeal from the Lake Superior Court, No. 45D04-0805-CT-92
                           The Honorable Gerald N. Svetanoff, Judge
                            _________________________________

       On Petition to Transfer from the Indiana Court of Appeals, No. 45A03-1309-CT-385
                             _________________________________

                                        October 15, 2014

Rush, Chief Justice.

       Even when a plaintiff proves a predicate crime under the Crime Victims Relief Act
(CVRA), the trial court has discretion not to award exemplary damages when it thinks the conduct
is not egregious enough to warrant punishment. And when a plaintiff pleads several alternative
grounds for relief, the trial court has similar discretion not to impose CVRA liability at all, even
when it awards compensatory damages under a different theory. Accordingly, the trial court here
acted within its discretion to compensate Plaintiffs for their common-law damages, while also
refusing to award attorney fees or exemplary damages under the CVRA. We granted transfer to
clarify that point and reiterate several principles about CVRA liability. We affirm the trial court,
though for different reasons than the Court of Appeals.
                           Background Facts and Procedural History

       This case comes before us again after our decision last year affirming in part and remanding
for additional findings. Johnson v. Wysocki, 990 N.E.2d 456, 467 (Ind. 2013). Barbara A. and
William T. Johnson bought a brand-new home in 1973, deeded it into a trust in 1996, and sold it to
Joseph and M. Carmen Wysocki in 2006. The Johnsons had lived in the home continuously through-
out their ownership, and William performed most of the renovation and maintenance work himself,
including building a deck that was later enclosed into a screened porch, and running electrical wiring
to an above-ground swimming pool. The Johnsons also hired a contractor to extend the roofline over
the front porch.

       When the Johnsons sold the home, Barbara as trustee signed a Seller’s Residential Real
Estate Sales Disclosure Form stating there were no building code violations, no work had been per-
formed without any required permits, and there were no foundational, structural, moisture, water, or
roof problems. The Wysockis made a purchase offer contingent on an independent inspection, and
their inspection revealed no problems, so they accepted the property as-is and closed on their
purchase in July 2006.

       But shortly after moving in, the Wysockis discovered water leaks in the garage and over the
front porch, structural problems with the front porch overhang and the foundation of the screened
porch, and grossly substandard electrical wiring to the swimming pool. They spent $1,200 to bring
the pool wiring up to code and about $3,500 to fix the roof; and they obtained estimates of about
$2,800 and $6,300 to fix the porches’ structural problems. They sued the Johnsons for fraudulently
failing to disclose those defects on the disclosure form. (Another count was resolved on summary
judgment and is not at issue here.) After a bench trial, the trial court awarded $13,805.95 in
compensatory damages, but not attorney fees, costs, or exemplary damages under the CVRA:

               12. This Court finds that the damages that should be allocated to
               those repairs are as follows:
               (a) $1,200 . . . for the cost to repair electrical service lines below the
                   screened-in-deck [sic] and to run a dedicated circuit to the pool;
               (b) $3,494.74 . . . for repairs to the roofing of the front porch; and
               (c) The costs as indicated by an estimate the Wysockis obtained . . .
                   to repair the front beam in the amount of $2,786.67, and to repair
                   the rear screened-in room support beams in the amount of
                   $6,324.54.

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               ***
               14. With regard to the Wysockis’ request that the defendant should
               be liable to them for payment to [their expert witness], as well as for
               attorney’s fees and additional damages pursuant to I.C. 34-24-3-1 [the
               CVRA], this Court concludes that the same should be denied.

               15. The Wysockis have incurred damages in the amount of $13,805.95.

Its order specifically relied on common-law fraudulent misrepresentation, quoting Vanderwier v.
Baker’s statement that “sellers can be held liable for errors, inaccuracies, or omissions on the Sales
Disclosure Form if the seller has actual knowledge of the defect.” 937 N.E.2d 396, 400–01 (Ind. Ct.
App. 2010).

       The Wysockis moved to correct error, arguing that the court was required to make some
award for fees and costs because they had established the CVRA predicate crime of deception, Ind.
Code § 34-24-3-1 (2008). They sought $1,000 in expert witness fees and $12,500 in attorney fees,
but the trial court denied the motion, stating in relevant part:

               7. Although the original award referenced specific items for which
               recovery should be given, it was the intent of the Court that the amounts
               for each of such items would include any and all expenses in receiving
               a judgment for them.

               8. Accordingly, the Court concludes that the plaintiffs have received the
               full measure of relief to which they are entitled, and their Motion to
               Correct Errors should be denied.

The Johnsons appealed the judgment, and the Wysockis cross-appealed the denial of fees and costs.
The Court of Appeals reversed in a memorandum decision, finding that the Wysockis had failed
to show the Johnsons had actual knowledge of the defects.

       On transfer, we agreed with the trial court that “seller[s] may be liable for [a] fraudulent mis-
representation[] made on the [Sales] Disclosure Form” when they have “actual knowledge that the
representation was false” at the time they completed the form. Johnson, 990 N.E.2d at 466. But the
trial court’s finding that the defects here had “existed for some time and should have been obvious
to the Johnsons” fell short of establishing whether the Johnsons had actual knowledge of the
defects, so we remanded for new findings on that issue, without reaching the CVRA question in the
Wysockis’ cross-appeal. Id. at 466–67 & n.5.

                                                   3
        On remand, the trial court specifically found that the defects were “clearly” within the
Johnsons’ actual knowledge, but otherwise reaffirmed its judgment—including its denial of fees and
costs to the Wysockis. The Wysockis again appealed, and the Court of Appeals affirmed. Wysocki
v. Johnson, 4 N.E.3d 1218 (Ind. Ct. App. 2014). It held that while the Wysockis could properly
recover compensatory damages, they were not entitled to any additional award under the CVRA
because (1) they had only established common-law fraud, the elements of which differ from the
statutory elements of criminal fraud; (2) criminal fraud requires proof beyond reasonable doubt; and
(3) “the Johnsons were not charged with [a] crime . . ., much less convicted of it in a court of law”
and “[i]n the absence of such a conviction, the CVRA does not apply.” Id. at 1222–23.

        We disagreed with the Court of Appeals’ interpretation of the CVRA and granted transfer to
reiterate and clarify several principles of CVRA liability. But like the Court of Appeals, we affirm
the trial court.

                                        Standard of Review

        Before trial, the Johnsons filed, and the Wysockis joined, a motion for findings of fact and
conclusions of law under Indiana Trial Rule 52(A). We therefore apply a two-tiered review, and
affirm when the evidence supports the findings, and when the findings support the judgment. Marion
Cnty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d 213, 216 (Ind. 2012) (citing Stonger v. Sorrell,
776 N.E.2d 353, 358 (Ind. 2002)). We “shall not set aside the findings or judgment unless [they are]
clearly erroneous,” and we must give “due regard . . . to the opportunity of the trial court to judge
the credibility of the witnesses.” T.R. 52(A). Findings of fact are clearly erroneous only when they
have no factual support in the record, Woodruff v. Ind. Family & Soc. Servs. Admin., 964 N.E.2d
784, 790 (Ind. 2012), cert. denied, 133 S. Ct. 233 (U.S. 2012); and a “judgment is clearly erroneous
if it applies the wrong legal standard to properly found facts,” id. (internal quotation marks omitted).

                                      Discussion and Decision

I. Given a Choice Between Several Alternative Remedies, the Trial Court Had Discretion to
   Decline CVRA Relief—Disclosure Statute Violations Do Not Necessarily Warrant Quasi-
   Criminal Punishment.

        On transfer, the Wysockis ask this Court to adopt a bright-line rule that every knowing mis-
representation on a Sales Disclosure Form constitutes criminal deception, and thus gives rise to

                                                   4
CVRA liability. And because an award of costs and reasonable attorney fees is mandatory when
liability is imposed under the CVRA, Browning v. Walters, 616 N.E.2d 1040, 1045–46 (Ind. Ct. App.
1993), adhered to on reh’g, 620 N.E.2d 28 (Ind. Ct. App. 1993), the Wysockis reason that the trial
court lacked discretion to deny their request for those additional damages. But here, the trial court
expressly relied on common-law fraudulent misrepresentation, and specifically refused to grant
CVRA relief. That decision was well within the trial court’s discretion—though we disagree with
the Court of Appeals’ reasons for that conclusion—and we decline the Wysockis’ proposal to elimi-
nate that discretion in favor of a bright-line rule.

        The Court of Appeals concluded that the Wysockis had failed to prove criminal deception,
because the elements of that offense are not the same as the elements of common-law fraud. Wysocki,
4 N.E.3d at 1222–23. But as our decision last year in this case established, the elements of such a
claim when based on a Sales Disclosure Form distill down to (i) a false representation of past or
existing facts on the Form, (ii) made with actual knowledge of its falsity, (iii) which proximately
caused the complaining party injury. Johnson, 990 N.E.2d at 460–61, 465–66 (holding that statu-
tory disclosure scheme establishes “what would otherwise be the materiality and reasonable reliance
elements in an ordinary common law suit for fraudulent misrepresentation,” but requires actual
knowledge of falsity). In this context, the elements of criminal deception overlap significantly:
“knowingly or intentionally mak[ing] a false or misleading written statement with intent to obtain
property.” I.C. § 35-43-5-3(a)(2).

        Here, the trial court’s amended findings that the statements on the written Disclosure Form
were false, and that the Johnsons had actual knowledge of their falsity, appear to support the first
two elements of the crime: “knowingly or intentionally mak[ing] a false . . . written statement.” Id.
And as we held in Johnson, the Disclosure Form “is a list of features that are most significant and
therefore most material for the average buyer,” 990 N.E.2d at 465—so a seller’s representations
on that form are necessarily intended to “obtain property,” specifically the buyers’ purchase
money, by encouraging the sale to proceed to closing. We therefore disagree with the Court of
Appeals that the different elements are dispositive, because these findings would have been sufficient
to support a CVRA award—if the court’s judgment had actually included such an award.

        But it did not. To the contrary, the court’s original order expressly premised its judgment on
common-law fraud, and it just as expressly refused to award any additional damages under the
CVRA. Then it reiterated its refusal in denying the motion to correct errors, and yet again on remand.

                                                       5
And in these circumstances, it was well within its discretion to impose common-law liability for
fraud as an intentional tort, while declining to impose quasi-criminal CVRA liability.

       Even when a court awards compensatory damages under the CVRA, we have recognized
that “it is highly appropriate for the trial court to weigh any equities before deciding the amount, if
any, owed” as exemplary damages, White v. Ind. Realty Assocs. II, 555 N.E.2d 454, 458 (Ind. 1990).
That is, trial courts have wide discretion not to award any damages in excess of the actual loss.
E.g., Schrenger v. Caesars Ind., 825 N.E.2d 879, 884 (Ind. Ct. App. 2005), trans. denied; Ballard v.
Harman, 737 N.E.2d 411, 418 n.5 (Ind. Ct. App. 2000); Burgett v. Haynes, 572 N.E.2d 1296, 1298
(Ind. Ct. App. 1991). Refusing to do so amounts to an “implicit[] f[i]nd[ing] that the . . . conduct
was not so heinous as to require exemplary damages”—even when the court awards attorney fees
as the statute requires. Citizens Nat. Bank of Evansville v. Johnson, 637 N.E.2d 191, 195 (Ind. Ct.
App. 1994). And if a trial court has discretion to decide whether conduct is “heinous” enough to
warrant punishment under the CVRA, it surely has similar discretion not to invoke the CVRA at
all when plaintiffs plead multiple alternative theories for recovery.

       In our view, the trial court’s judgment reflects precisely that choice. The Wysockis’ open-
ended complaint encompassed multiple alternative theories of liability. The relevant count of their
complaint was simply captioned “Fraud”; they pleaded all the elements of common-law fraudulent
misrepresentation; and their prayer for relief was expressly “not . . . limited to” the CVRA:

               Wherefore, the Wysockis, by counsel, respectfully request that this
               honorable Court . . . afford them complete relief which would include
               but not be limited to an amount reasonably calculated to compensate
               the Wysockis for their damages, treble damages allowed under the
               [CVRA], reasonable attorneys and expert fees, costs of this action,
               pre-judgment and post-judgment interest, and for any and all other
               relief that this honorable Court finds just and proper.

(emphases added). Though the CVRA creates a civil remedy, its reliance on proof of a predicate
criminal offense makes it inherently quasi-criminal. So just as the “heinousness” of the defendant’s
conduct may properly factor into the factfinder’s decision whether to award exemplary damages
under the CVRA, the court’s inchoate sense of the defendants’ criminal culpability is a permissible
factor in assessing whether the CVRA predicate offense has been proven. Accordingly, when the
pleadings give the trial court a choice between an intentional tort and the quasi-criminal CVRA,

                                                  6
the court necessarily has discretion to choose tort liability and reject quasi-criminal liability—even
when, as here, the criminal offense and civil tort are so closely related.

        Our conclusion does not undermine the mandatory nature of awarding costs and attorney
fees under the CVRA. Browning, 616 N.E.2d at 1045–46; Burgett, 572 N.E.2d at 1298. If the
Wysockis had relied exclusively on the CVRA for recovery, refusing to award costs and reasonable
attorney fees would have been clearly erroneous—if the trial court had ruled in their favor. But as
this case illustrates, a trial court may find compensatory damages to be warranted, yet be reluctant
to find a defendant’s conduct “heinous” enough to punish under the CVRA. In such a case, forcing
the court to choose between those considerations, without pleading an alternative middle ground as
here, might tip the scale towards including fees and costs as part of compensation—or just as readily
tip it towards a defense verdict that leaves the claimants empty-handed.

        We therefore reject the Wysockis’ invitation to adopt a bright-line rule imposing CVRA
liability in all cases involving a knowing misrepresentation on a Sales Disclosure Form—at least
where the claimants plead other grounds for liability in the alternative. Plaintiffs are free to choose,
by their pleadings, to place all their eggs in the CVRA basket and take their chances on the fact-
finder’s assessment of criminality in exchange for the assurance of recovering costs and attorney
fees if they prevail. But they are also free, as here, to plead other remedies in the alternative to the
CVRA to hedge against being shut-out from compensatory damages if the trial court is reluctant
to impose quasi-criminal liability. In those circumstances, the trial court has discretion over which
remedies to award. Accordingly, the trial court was within its discretion to award compensatory
damages for common-law fraudulent misrepresentation, while declining relief under the Wysockis’
alternative CVRA theory.

II. A CVRA Claim Requires Proving the Elements of a Criminal Offense, But Only by the
    Civil Preponderance Standard; and It Does Not Depend on Whether the Defendant Has
    Been Charged with or Convicted of any Criminal Offense.

        The Court of Appeals also stated that the CVRA could not apply because the underlying
offense of criminal deception, “as with all crimes, [requires] the State . . . to prove its case beyond a
reasonable doubt,” and “because the Johnsons were not charged with [fraud] . . . , much less con-
victed of it in a court of law.” Wysocki, 4 N.E.3d at 1223. But as we recently reiterated, “An actual
criminal conviction is not required for recovery [under the CVRA]; a claimant merely must prove

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each element of the underlying crime by a preponderance of the evidence.” Kesling v. Hubler
Nissan, Inc., 997 N.E.2d 327, 334 (Ind. 2013) (internal citation and quotation marks omitted). See
also Klinker v. First Merchs. Bank, N.A., 964 N.E.2d 190, 193 (Ind. 2012) (same); White, 555
N.E.2d at 456 (construing predecessor statute and concluding that “[u]nder this unique statute, a
criminal conviction is not a condition precedent to recovery. The claimant need only prove by a
preponderance of the evidence that the criminal act was committed by the defendant.” (internal
citation omitted)); Obremski v. Henderson, 497 N.E.2d 909, 911 (Ind. 1986) (construing predeces-
sor statute and concluding that “[t]he appropriate standard is preponderance of the evidence.”). And
just as no conviction is required, nothing in the statute suggests that a criminal charge is necessary,
either. Though we agree with the Court of Appeals that denial of relief under the CVRA should be
affirmed, we reiterate that CVRA liability is civil, not criminal, and does not require criminal
charges or proof beyond reasonable doubt.

                                             Conclusion

       A knowing misrepresentation on a Sales Disclosure Form is an intentional tort. But not
every intentional tort is necessarily “so heinous as to require exemplary damages,” Citizens Nat.
Bank, 637 N.E.2d at 195, or as to warrant quasi-criminal CVRA liability at all. In other words, not
every intentional tortfeasor is a criminal. CVRA liability does not depend on whether the tortfeasor
has been charged with or convicted of the CVRA predicate offense, nor even solely on the elements
of the CVRA predicate offense. Instead, liability is also a matter of the factfinder’s discretionary
judgment of whether the defendant is criminally culpable. When a court does impose CVRA liability,
an award of costs and reasonable attorney fees is mandatory by the terms of the statute, even though
additional exemplary damages remain discretionary. But when given a choice, the court need not
impose CVRA liability when it believes ordinary tort liability will do. The trial court acted well
within its discretion to make that judgment in this case, and we affirm its judgment.

Dickson, Rucker, David, and Massa, JJ., concur.

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