56 N.E.3d 95
Ind. Ct. App.2016Background
- Seller Gary Fisher inherited a house he never lived in and listed it for sale; multiple marketing materials and an appraisal indicated city water and sewer connections.
- On the seller disclosure form, Fisher checked that the property was connected to public sewer and indicated no septic system; he believed this to be true based on paying utility bills and the neighborhood context.
- Buyer Duane Harmon purchased the property, later discovered a septic tank under the meter cover, and incurred $3,925 in expenses to connect to city sewer and related costs.
- Harmon sued in small claims alleging fraud/misrepresentation and sought damages and attorney fees; bench trial resulted in a judgment for Fisher.
- The trial court found Fisher lacked actual knowledge the property used a septic system when he completed the disclosure, and therefore was not liable under Indiana’s real estate disclosure statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether seller is liable under Indiana disclosure statute for inaccurate sewer disclosure | Harmon: Fisher’s affirmative disclosure that there was municipal sewer was false and constitutes actionable fraud/misrepresentation | Fisher: Disclosure statute limits liability to errors within seller’s actual knowledge; he reasonably believed sewer service existed | Court: Judgment affirmed — statute requires actual knowledge; Fisher had no actual knowledge and is not liable |
| Whether constructive fraud theory supports recovery despite statutory limit | Harmon: Even if not actual fraud, constructive fraud arises from seller’s representations in the listing, brochure, and disclosure form | Fisher: No fiduciary or superior-knowledge duty; parties were on equal footing and seller lacked unique knowledge | Court: Harmon failed to prove elements of constructive fraud (no duty/ superiority); claim fails |
| Whether appellate consideration of constructive fraud is barred as not raised below | Harmon: Raised on appeal that constructive fraud existed | Fisher: Argument was not presented to trial court and thus waived | Court: Noted waiver rule but also held on the merits Harmon’s constructive-fraud claim fails; appeal does not prevail |
Key Cases Cited
- Trinity Homes, LLC v. Fang, 848 N.E.2d 1065 (Ind. 2006) (standard of appellate review for bench trials and small claims procedure)
- Johnson v. Wysocki, 990 N.E.2d 456 (Ind. 2013) (seller liability for fraudulent disclosures requires actual knowledge)
- American Heritage Banco, Inc. v. Cranston, 928 N.E.2d 239 (Ind. Ct. App. 2010) (elements and limits of constructive fraud between buyer and seller)
- Tamko Roofing Products, Inc. v. Dilloway, 865 N.E.2d 1074 (Ind. Ct. App. 2007) (issue-preservation and waiver on appeal)