112 N.E.3d 1082
Ind. Ct. App.2018Background
- In 2009 the Deasons entered a conditional contract to buy real property from the McWhorter Revocable Living Trust for $490,000 with a balloon payment due April 18, 2012.
- The Deasons paid a $25,500 down/earnest payment and 37 installments totaling $108,162.47 (≈4% of purchase price); the remaining balance was due in the balloon payment.
- The Deasons could not make the balloon payment and tendered a regular payment instead; within 30 days they vacated the property and the trustee (McWhorter) took possession and lived there.
- The Trust waited over three years after taking possession and then sued (May 27, 2015) seeking foreclosure, unpaid principal, interest, repairs, taxes, attorneys’ fees, and other damages.
- At bench trial the court found breach, awarded the Trust $153,335.24, retained title/possession for the Trust, and purported to foreclose and enter a deficiency judgment despite no sheriff’s sale.
- Deasons appealed arguing the Trust had elected forfeiture (per contract language and conduct) and therefore could not later obtain foreclosure and a deficiency judgment.
Issues
| Issue | Trust (Plaintiff) Argument | Deasons (Defendant) Argument | Held |
|---|---|---|---|
| Whether the Trust could obtain foreclosure and a deficiency judgment after taking possession of the property following default | The Trust sought foreclosure and deficiency judgment to recover unpaid balance, interest, fees, and expenses. | The Trust’s post-default conduct (accepting possession, changing locks, occupying property) and contract terms effected a forfeiture, barring later foreclosure/deficiency recovery. | Court held the Trust elected forfeiture by its conduct and under the contract; foreclosure/deficiency judgment was not permitted. |
| Whether the contract permitted the seller to choose foreclosure despite surrender of possession | The Trust argued it could pursue remedies at law or equity. | Deasons argued the contract permits forfeiture when buyer pays <25% and surrenders possession within 30 days; foreclosure is only for buyers who withhold possession. | Court read the contract to allow forfeiture where buyers surrendered possession and had paid <25%; foreclosure contemplated only when buyer failed to surrender possession. |
Key Cases Cited
- Skendzel v. Marshall, 301 N.E.2d 641 (Ind. 1973) (vendor’s proper relief on vendee’s material breach ordinarily is foreclosure under Trial Rule 69(C)).
- Powers v. Ford, 415 N.E.2d 734 (Ind. Ct. App. 1981) (once a seller elects forfeiture and retains possession, the seller may not later enforce the contract by foreclosure/deficiency judgment).
- McLemore v. McLemore, 827 N.E.2d 1135 (Ind. Ct. App. 2005) (foreclosure leaves vendee a lien on sale proceeds; deficiency judgment appropriate if foreclosure sale insufficient to satisfy balance).
- Hooker v. Norbu, 899 N.E.2d 655 (Ind. Ct. App. 2008) (forfeiture cancels contract without restitution; seller may retain payments and recoup actual damages in limited circumstances).