Court Opinion

ID: 4225668
Source: CourtListenerOpinion
Date Created: 2017-12-04 16:08:20.106896+00
Date Added: 2024-06-11T14:41:40.054193
License: Public Domain

MEMORANDUM DECISION
      Pursuant to Ind. Appellate Rule 65(D),
      this Memorandum Decision shall not be                                     FILED
      regarded as precedent or cited before any                            Dec 04 2017, 6:13 am
      court except for the purpose of establishing
                                                                                CLERK
      the defense of res judicata, collateral                               Indiana Supreme Court
                                                                               Court of Appeals
      estoppel, or the law of the case.                                          and Tax Court

      ATTORNEY FOR APPELLANT                                   ATTORNEYS FOR APPELLEE
      Jeffrey J. Jinks                                         Donald D. Levenhagen
      Carmel, Indiana                                          Indianapolis, Indiana

                                                IN THE
          COURT OF APPEALS OF INDIANA

      Carriage Courts Homeowners                               December 4, 2017
      Association, Inc.,                                       Court of Appeals Case No.
      Appellant-Defendant,                                     49A04-1705-PL-968
                                                               Appeal from the Marion Superior
              v.                                               Court
                                                               The Honorable David J. Dreyer,
      Rocklane Company, LLC,                                   Judge
      Appellee-Plaintiff                                       Trial Court Cause No.
                                                               49D10-1508-PL-26526

      Altice, Judge.

                                               Case Summary

[1]   Carriage Courts Homeowners Association, Inc. (the HOA) appeals from the

      entry of summary judgment in favor of Rocklane Company, LLC (Rocklane)

      Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017        Page 1 of 14
      on Rocklane’s complaint for breach of contract. On appeal, the HOA raises the

      following arguments:

              1. Did the trial court err in rejecting the HOA’s argument that a
              mutual mistake of fact prevented the formation of a contract?

              2. Did the trial court err in concluding that the liquidated
              damages clause was enforceable?

      Rocklane cross-appeals and raises the following issue:

              3. Did the trial court abuse its discretion in awarding Rocklane
              only a portion of its requested attorney fees?

[2]   We affirm in part, reverse in part, and remand with instructions.

                                       Facts & Procedural History

[3]   The HOA is the governing body for Carriage Courts, a thirty-six-building

      condominium complex in Indianapolis. Rocklane is a contractor focusing on

      commercial and residential roofing projects, and a large part of its business

      involves working with insurance adjusters to settle customers’ insurance claims.

[4]   In the summer of 2014, after a hail storm caused damage to some of the roofs in

      the Carriage Courts community, the HOA contacted Rocklane and prepared to

      file a claim with its insurer. On August 12, 2014, Rocklane representatives

      Randal Adkins and Jay Burkert attended an HOA board meeting to discuss the

      potential hail damage and the assistance Rocklane could provide. Also in

      attendance were the HOA board members and a representative of Kirkpatrick

      Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 2 of 14
      Management Company, which provides professional property management

      services for the HOA. During the meeting, the HOA signed a written

      agreement (the Agreement) pursuant to which Rocklane was authorized to

      perform inspections with the HOA’s insurer and to complete all storm damage

      repairs authorized in the final insurance settlement. The Agreement provided

      further that failure to complete the contract would result in a twenty percent

      cancellation fee and failure to provide payment as specified would result in

      additional collection and attorney fees. When HOA president Sara Hanson

      asked Adkins how many roofs he thought would be covered, Adkins said he

      hoped at least five. Hanson responded that she would be happy if Rocklane

      could get two roofs replaced.

[5]   Rocklane performed the inspections with the HOA’s insurer as agreed, and the

      insurer ultimately agreed to replace the roofs on twenty buildings in the

      Carriage Courts community. This resulted in an insurance settlement in the

      amount of $628,393.78. Despite the Agreement with Rocklane, the HOA took

      bids from other contractors and ultimately hired another company to do the

      repairs.

[6]   On August 7, 2015, Rocklane filed a complaint for breach of contract seeking

      damages in the amount of $125,678.75, or twenty percent of the total insurance

      settlement. The parties filed cross-motions for summary judgment and, after a

      hearing, the trial court granted Rocklane’s motion and entered judgment

      against the HOA in the full amount requested. The trial court subsequently

      conducted a hearing to determine attorney fees and prejudgment interest.

      Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 3 of 14
      Rocklane’s counsel submitted an affidavit attesting to fees in the amount of

      $14,880.50. The HOA did not submit opposing evidence or dispute the

      reasonableness of the fees. On April 17, 2017, the trial court entered an order

      awarding Rocklane prejudgment interest in the amount of $23,166.21 and

      attorney fees in the amount of $2500, as well as court costs. This appeal

      ensued.

                                          Discussion & Decision

[7]   We review summary judgment de novo and apply the same standard as the trial

      court. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). The moving party

      must show that there are no genuine issues of material fact and that it is entitled

      to judgment as a matter of law; if the movant carries this burden, then the

      nonmoving party must present evidence establishing the existence of a genuine

      issue of material fact. Asklar v. Gilb, 9 N.E.3d 165, 167 (Ind. 2014). “We

      construe all factual inferences in the non-moving party’s favor and resolve all

      doubts as to the existence of a material issue against the moving party.” Sargent

      v. State, 27 N.E.3d 729, 732 (Ind. 2015). That the parties have filed cross-

      motions for summary judgment does not alter our standard of review; we

      consider each motion separately to determine whether the moving party is

      entitled to judgment as a matter of law. Id. We will affirm summary judgment

      on any basis supported by the record. Pfenning v. Lineman, 947 N.E.2d 392,

      408-09 (Ind. 2011).

                                        1. Mutual Mistake of Fact

      Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 4 of 14
[8]   We first address the HOA’s argument that a mutual mistake of fact prevented

      the formation of a contract.

              The doctrine of mutual mistake provides that “[w]here both
              parties share a common assumption about a vital fact upon
              which they based their bargain, and that assumption is false, the
              transaction may be avoided if because of the mistake a quite
              different exchange of values occurs from the exchange of values
              contemplated by the parties.” Bowling [v. Poole, 756 N.E.2d 983,
              988-989 (Ind. Ct. App. 2001)] (quoting Wilkin v. 1st Source Bank,
              548 N.E.2d 170, 172 (Ind. Ct. App. 1990)). “It is not enough
              that both parties are mistaken about any fact; rather, the
              mistaken fact complained of must be one that is ‘of the essence of
              the agreement, the sine qua non, or, as is sometimes said, the
              efficient cause of the agreement, and must be such that it
              animates and controls the conduct of the parties.’” Bowling, 756
N.E.2d at 989 (quoting Jackson v. Blanchard, 601 N.E.2d 411, 416
              (Ind. Ct. App. 1992)).

      Perfect v. McAndrew, 798 N.E.2d 470, 478 (Ind. Ct. App. 2003). Parol evidence

      may be considered in determining whether the parties entered into a contract

      based on a mutual mistake of fact. Kramer v. Focus Realty Group, LLC, 51
N.E.3d 1240, 1243 (Ind. Ct. App. 2016).

[9]   The HOA asserts that at the time the parties entered into the Agreement, they

      both believed that the damage settlement with the HOA’s insurer would

      encompass only two or three roofs in the Carriage Courts community, not the

      twenty roofs ultimately found to be in need of replacement. But the designated

      evidence relied upon by the HOA in support of this argument establishes that at

      the time the Agreement was executed, Rocklane and the HOA were uncertain

      Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 5 of 14
       of the extent of the storm damage, but hoped the insurer would cover at least

       two to five roofs—the implication being that a larger settlement amount was

       hoped for by both parties. In other words, the number of roof replacements

       ultimately covered by the HOA’s insurer was not the essence of the agreement.

       Regardless of the amount the HOA’s insurer ultimately paid, the HOA’s

       obligation remained the same; that is, it would be liable for only its deductible

       and any upgrades it sought. This is not a situation in which “one party

       experienced an unexpected, unbargained-for gain while the other party

       experienced an unexpected, unbargained-for loss.” Wilkins, 548 N.E.2d at 172.

       Rather, the bigger-than-expected settlement was a mutually beneficial

       resolution of uncertainties contemplated at the time the parties entered into the

       Agreement. Accordingly, the HOA cannot avoid its obligations under the

       Agreement based on the doctrine of mutual mistake. 1

                                              2. Liquidated Damages

[10]   The HOA does not dispute that, if a contract was formed, its refusal to allow

       Rocklane to complete the work amounted to a material breach. Instead, the

       HOA argues that the twenty percent cancellation fee set forth in the Agreement

       is an unenforceable penalty rather than a valid liquidated damages clause.

       Liquidated damages clauses provide for the forfeiture of a stated sum of money

       1
         The HOA also makes a brief argument that Adkins’s statement that he hoped the insurer would cover at
       least five roofs amounted to a misrepresentation of material fact sufficient to support a claim of constructive
       fraud. The statement at issue is clearly not a representation of fact, material or otherwise. Rather, Adkins
       simply expressed his hope that at least five roofs would be covered.

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017              Page 6 of 14
upon breach without proof of damages. Corvee, Inc. v. French, 943 N.E.2d 844,

846 (Ind. Ct. App. 2011). We are tolerant of liquidated damages provisions,

and they are generally enforceable where the nature of the agreement is such

that the damages resulting from a breach would be uncertain and difficult to

ascertain. Gershin v. Demming, 685 N.E.2d 1125, 1127 (Ind. Ct. App. 1997).

Where the stipulated sum is not greatly disproportionate to the loss likely to

occur, the provision will be accepted and enforced as a liquidated damages

clause. Id. at 1128. On the other hand, “where the sum sought to be fixed as

liquidated damages is grossly disproportionate to the loss which may result

from the breach, the courts will treat the sum as a penalty rather than as

liquidated damages.” Id. In determining whether a stipulated sum constitutes

liquidated damages or a penalty, we consider the facts, the intentions of the

parties, and the reasonableness of the stipulation under the circumstances. Id.

“The distinction between a penalty provision and one for liquidated damages is

that a penalty is imposed to secure performance of the contract and liquidated

damages are to be paid in lieu of performance.” Id. The use of specific words

such as “penalty,” “forfeiture,” or “liquidated damages” is not controlling, but

should be considered in connection with the rest of the contract to determine

the nature of the provision. Weinreb v. Fannie Mae, 993 N.E.2d 223, 233 (Ind.

Ct. App. 2013), trans. denied. Whether a liquidated damages clause is valid or

constitutes an unenforceable penalty is a pure question of law. Gershin, 685
N.E.2d at 1128.

Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 7 of 14
[11]   The HOA first argues that the cancellation fee provision should not be enforced

       because Rocklane’s actual damages were reasonably ascertainable. Indeed, the

       HOA argues that, as a general matter, “damages for construction and repair

       contracts are not of the speculative nature that makes liquidated damages

       appropriate[.]” Appellant’s Brief at 10-11. None of the cases the HOA cites on

       appeal provide support for this broad assertion. To support an award of

       liquidated damages, it is not necessary to prove that actual damages are

       impossible to calculate or even “speculative.” Rather, liquidated damages

       awards are appropriate when actual damages are “uncertain and difficult to

       ascertain.” Gershin, 685 N.E.2d at 1127. This is a significantly lower hurdle

       than the one the HOA seeks to erect.

[12]   We have little difficulty accepting Rocklane’s argument that its actual damages

       resulting from the HOA’s breach are uncertain and difficult to ascertain. The

       net profits realized from construction projects, particularly large projects like the

       one at issue here, are variable and may be affected by numerous factors,

       including fluctuating material costs and availability, labor stoppages, accidents,

       weather, and other delays. Because Rocklane’s actual damages are not readily

       ascertainable, an award of liquidated damages is not inappropriate.

[13]   The HOA next argues that Rocklane’s designated evidence was insufficient to

       establish that the twenty percent cancellation fee was not grossly

       disproportionate to Rocklane’s actual damages. Specifically, the HOA notes

       that the only evidence concerning the proportionality of the fee was Burkert’s

       affidavit, in which he averred that Rocklane’s lost profits are not amenable to a

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 8 of 14
       precise calculation where, as here, the company has been prevented from

       performing the work, but that the twenty percent cancellation fee “is a

       reasonable estimate of Rocklane’s lost profits.” Appellant’s Appendix Vol. 2 at 52.

       On appeal, the HOA complains that this evidence is not “independent” and

       argues that it is insufficient to show that the liquidated damages are “even

       remotely approximate” to Rocklane’s lost profits. Appellant’s Brief at 12. Thus,

       according to the HOA, the designated evidence was insufficient to establish that

       the cancellation fee was not an unenforceable penalty.

[14]   As this court has explained, there is “some contradiction” in the rules relating

       to distinguishing liquidated damages and penalties. Harbours Condominium

       Ass’n v. Hudson, 852 N.E.2d 985, 993 (Ind. Ct. App. 2006).

               Specifically, in order to show that the sum stipulated in an
               agreement as liquidated damages is not “grossly
               disproportionate” to the loss, the party seeking to enforce the
               liquidated damages provision must demonstrate some
               proportionality between the loss and the sum established as
               liquidated damages. [Gershin, 685 N.E.2d at 1128.] Yet a
               “typical liquidated damages provision provides for the forfeiture
               of a stated sum of money without proof of damages.” Gaddis v.
               Stardust Hills Owners Ass'n, Inc., 804 N.E.2d 231, 236 (Ind. Ct.
               App. 2004). We resolve this apparent conundrum by looking to
               the purpose of liquidated damages, which . . . is to compensate
               for damages that would be uncertain and difficult to ascertain.
               See Gershin, 685 N.E.2d at 1127; Harris v. Primus, 450 N.E.2d 80,
               84 (Ind. Ct. App. 1983). Thus, a party who seeks to enforce a
               liquidated damages clause need not prove actual damages but
               may be required to show a correlation between the liquidated
               damages and actual damages in order to assure that a sum

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 9 of 14
               charged may fairly be attributed to the breach. See Gershin, 685
N.E.2d at 1127.

       Id.

[15]   Although a plaintiff seeking to enforce a liquidated damages clause need not

       prove actual damages, case law discussing the sufficiency of the evidence to

       support an award of actual damages in the form of lost profits is nevertheless

       instructive here. This court has often explained that lost profits need not be

       proven with mathematical certainty, and such damages “are not uncertain

       where there is testimony that, while not sufficient to put the amount beyond

       doubt, is sufficient to enable the factfinder to make a fair and reasonable finding

       as to the proper damages.” Berkel & Co. Contractors, Inc. v. Palm & Assocs, Inc.,

       814 N.E.2d 649, 659 (Ind. Ct. App. 2004). Further, this court has found the

       testimony of the injured party to be sufficient proof of lost profits. See Eden

       United, Inc. v. Short, 573 N.E.2d 920, 928 (Ind. Ct. App. 1991) (“The plaintiff’s

       own reasonable testimony concerning lost profit will suffice.”), trans. denied.

[16]   If a plaintiff’s testimony concerning his or her lost profits is sufficient standing

       alone to support an award of actual damages, such testimony is surely also

       sufficient to establish a mere correlation between the liquidated and actual

       damages. The affidavit of Burkert, one of Rocklane’s owners, is sufficient to

       satisfy Rocklane’s initial burden of proving that the liquidated damages were

       not grossly disproportionate to its actual damages. Because the HOA did not

       come forward with any contrary evidence to establish a genuine issue of

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 10 of 14
       material fact as to the proportionality of the liquidated damages amount,

       summary judgment was appropriate.

[17]   Citing a handful of this court’s older cases, the HOA also argues that the

       cancellation fee is a penalty because under the terms of the Agreement, the

       HOA would be liable for the whole amount even in the event of a partial or

       inconsequential breach. See Mandle v. Owens, 330 N.E.2d 362, 365 (Ind. Ct.

       App. 1975) (explaining that “where there are covenants of varied kinds and

       importance, and the sum named is payable for the breach of any, even the least,

       it is a penalty”), trans. denied; Beiser v. Kerr, 20 N.E.2d 666, 669 (Ind. Ct. App.

       1939) (explaining that “if the stipulation to pay a certain sum of money upon a

       default . . . renders the defaulting party liable in the same amount at all events,

       both when his failure to perform is complete, and when it is only partial, the

       sum must be regarded as a penalty”); Tudor v. Beath, 131 N.E. 848, 851 (Ind. Ct.

       App. 1921) (concluding that a stipulated sum was an unenforceable penalty

       because it would be forfeited regardless of the seriousness of the breach and the

       amount of actual damages resulting therefrom, and reasoning that “being a

       penalty as to one of the stipulations, it must be held to be a penalty as to all”).

       But see Restatement (Second) of Contracts § 356 cmt. b (1981) (“The amount

       fixed is reasonable to the extent that it approximates the actual loss that has

       resulted from the particular breach, even though it may not approximate the

       loss that might have been anticipated under other possible breaches.”).

[18]   This is not, however, a situation in which the contract provides for the payment

       of a stipulated sum in event of any breach, regardless of its materiality. Rather,

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 11 of 14
       the Agreement provides for a twenty percent “cancellation fee” for “[f]ailure to

       complete this contract . . . except for occurrences beyond [the HOA’s] control.”

       Appellant’s Appendix Vol. 2 at 14. Contrary to the HOA’s assertion on appeal,

       immaterial breaches, such as the HOA’s failure to include Rocklane’s name and

       tax identification number on any bank drafts as set forth in the Agreement,

       would not constitute failure to complete the contract so as to trigger the

       application of the cancellation fee.

[19]   There is no question that the HOA breached the Agreement and, for the

       reasons set forth above, we conclude that the cancellation fee set forth in the

       Agreement is a valid and enforceable liquidated damages clause.

       Consequently, summary judgment was properly entered in Rocklane’s favor.

                                    3. Cross Appeal: Attorney Fees

[20]   On cross-appeal, Rocklane argues that the trial court abused its discretion in

       awarding only a portion of its requested attorney fees. Indiana follows the

       American Rule, which requires each party to pay his or her own attorney fees.

       Rogers Group, Inc. v. Diamond Builders, LLC, 816 N.E.2d 415, 420 (Ind. Ct. App.

       2004), trans. denied. The parties may, however, shift the obligation to pay

       attorney fees through contract or agreement, and such agreements will be

       enforced as long as they are not contrary to law or public policy. Id.

       Nevertheless, even where attorney fees are awarded pursuant to a contract, such

       fees must be reasonable. Corvee, 943 N.E.2d at 847. Trial courts are afforded

       discretion in determining reasonable attorney fees, and we will reverse such an

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017   Page 12 of 14
       award only if it is clearly against the logic and effect of the facts and

       circumstances presented. Walton v. Claybridge Homeowners Ass’n, Inc., 825
N.E.2d 818, 826 (Ind. Ct. App. 2005).

[21]   The parties do not dispute that, having prevailed on the merits, Rocklane is

       entitled to attorney fees under the Agreement. Only the amount of the award is

       at issue here. “We review the amount a trial court awards for attorney fees for

       an abuse of discretion.” Cavallo v. Allied Physicians of Michiana, LLC, 42 N.E.3d
995, 1009 (Ind. Ct. App. 2015). The trial court may consider a number of

       factors in determining the reasonableness of a fee, but the hours worked and the

       rate charged are a common starting point. Id. The court may also consider the

       responsibility of the parties in incurring the attorney fees, and the trial judge

       may use his or her personal expertise in determining reasonable attorney fees.

       Id. Indiana Professional Conduct Rule 1.5(a) also sets forth a helpful, non-

       exhaustive list of factors for a trial court to consider in evaluating the

       reasonableness of attorney fees. Id. at 1009-10.

[22]   At the hearing on attorney fees, Rocklane’s counsel submitted a detailed

       attorney fee affidavit indicating that he had worked a total of fifty-eight hours

       on the case, resulting in fees totaling $14,880.50.2 The HOA presented no

       evidence and made no argument that the attorney fees requested were

       unreasonable. Nevertheless, the trial court awarded only $2500 in attorney

       2
        This total included counsel’s work in responding to a premature appeal filed by the HOA, which this court
       dismissed without prejudice.

       Court of Appeals of Indiana | Memorandum Decision 49A04-1705-PL-968 | December 4, 2017        Page 13 of 14
       fees—less than seventeen percent of the amount set forth in the affidavit—and

       entered no findings supporting its determination that $2500 would reasonably

       compensate Rocklane for its attorney fees. Because the trial court did not enter

       findings and we are unable to discern a basis for its judgment, we find the

       award to be an abuse of discretion and remand with instructions to determine

       reasonable attorney fees. See Boonville Convalescent Ctr., Inc. v. Cloverleaf

       Healthcare Servs., Inc., 834 N.E.2d 1116, 1128 (Ind. Ct. App. 2005) (remanding

       for calculation of reasonable attorney fees where trial court, without making

       findings to support its decision, awarded attorney fees far below the amount

       requested and supported by the prevailing party’s evidence), trans. denied. We

       express no opinion on what amount might constitute reasonable attorney fees

       in this case.

[23]   Judgment affirmed in part, reversed in part, and remanded with instructions.

[24]   Baker, J. and Bailey, J., concur.

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