Cheng Song v. Thomas Iatarola and Theresa Iatarola
2017 Ind. App. LEXIS 197
| Ind. Ct. App. | 2017Background
- Thomas and Theresa Iatarola listed 10 acres of their 34-acre parcel near Porter County Airport with a broker; listing and later ads described the property as I-2 (industrial) though it was zoned agricultural.
- Cheng Song, seeking industrial property for warehousing, negotiated and signed a second "Commercial-Industrial" purchase agreement for 16 acres with a $150,000 earnest-money deposit held in escrow; the contract included a 180-day "Due Diligence Period" addendum tied to seller exit and closing timing.
- Song terminated the earlier contract over FAA runway-protection concerns, then exercised his due-diligence rights under the second contract after learning of the agricultural zoning and demanded return of the $150,000; the Iatarolas refused.
- Song sued for actual fraud, constructive fraud, breach of contract, and rescission; the Iatarolas counterclaimed. Both sides moved for summary judgment; the trial court denied both. A jury returned a verdict for Song ordering return of the $150,000.
- After judgment, the trial court denied Song’s motions for attorney fees and prejudgment/postjudgment interest. On appeal/cross-appeal, the court affirmed denial of the Iatarolas’ summary-judgment arguments but reversed and remanded for the trial court to determine attorney fees and prejudgment interest.
Issues
| Issue | Plaintiff's Argument (Song) | Defendant's Argument (Iatarolas) | Held |
|---|---|---|---|
| Meaning of the addendum "Due Diligence Period" and summary judgment | Due diligence clause is for buyer’s investigation; Song validly terminated within that period | Clause relates only to seller’s ability to vacate; no buyer termination right | Clause ambiguous; construed against drafters (Iatarolas); summary judgment properly denied to let factfinder resolve |
| Actual fraud re: zoning representations | Listings and broker statements expressly represented I-2 zoning and industrial use; Song relied on them to contract | No representations were made to Song (or statements were truthful later); integration clause bars extrinsic evidence; zoning is public record | Genuine issue of material fact existed about false, material representations and reliance; summary judgment denial affirmed |
| Constructive fraud (duty/superiority) | Misrepresentation and silence misled buyer; seller had superior knowledge; public-record argument insufficient | Zoning is public record; no fiduciary relationship; buyer could have discovered zoning | Constructive fraud viable; public-record status does not automatically defeat claim; summary judgment denial affirmed |
| Attorney fees and prejudgment interest post-verdict | Contract entitles prevailing party to fees; statutory prejudgment interest applies to money judgment | Plaintiff repudiated contract; escrow interest suffices; jury should have addressed interest/fees | Trial court erred by refusing to consider fees and prejudgment interest; remanded to calculate/award attorney fees and prejudgment (and postjudgment) interest at statutory rates |
Key Cases Cited
- Williams v. Tharp, 914 N.E.2d 756 (Ind. 2009) (summary-judgment standard and inferences)
- Hughley v. State, 15 N.E.3d 1000 (Ind. 2014) (definition of material and genuine issues)
- Metro Holdings One, LLC v. Flynn Creek Partner, LLC, 25 N.E.3d 141 (Ind. Ct. App. 2014) (due diligence clause construed by its specific contract terms)
- Hartig v. Stratman, 760 N.E.2d 668 (Ind. Ct. App. 2002) (due diligence refers to investigating facts)
- Rice v. Strunk, 670 N.E.2d 1280 (Ind. 1996) (elements of actual fraud)
- Prall v. Ind. Nat’l Bank, 627 N.E.2d 1374 (Ind. Ct. App. 1994) (integration clause and parol evidence rule)
- Circle Ctr. Dev. Co. v. Y/G Ind., L.P., 762 N.E.2d 176 (Ind. Ct. App. 2002) (fraud-in-the-inducement exception to integration clause)
- Shuee v. Gedert, 395 N.E.2d 804 (Ind. Ct. App. 1979) (false statements may be relied upon even if the fact is of public record)
- Bank One, Nat. Ass’n v. Surber, 899 N.E.2d 693 (Ind. Ct. App. 2008) (prejudgment interest rate governed by statute when contract/savings agreement does not specify rate)