Flaherty & Collins, Inc. v. BBR-Vision I, L.P., and New Castle Realty, LLC
990 N.E.2d 958
Ind. Ct. App.2013Background
- BBR and NCR sued F&C for breach of contract, negligent supervision, indemnity, fraud, and Crime Victims Statute damages regarding tax-credit compliance at Autumn Oaks.
- BBR-NCR and F&C signed a management agreement wherein F&C would manage Autumn Oaks and obtain income certifications under Section 42; indemnity in Section 12(a) potentially obligated F&C to pay attorney fees.
- BBR and NCR alleged F&C’s site manager Huse altered income verifications, triggering tax-credit noncompliance and Possible recapture; F&C argued indemnity did not cover first-party fees.
- F&C discovered falsifications in 2001; Moreland Consulting advised on remediation; Johnsons were removed from Unit 216 and New management replaced F&C in 2002.
- BBR terminated F&C in 2002; NCR funded an escrow for potential recapture; suit filed April 2002; trial court granted partial summary judgment favoring BBR and NCR on some claims and found F&C liable under Crime Victims Statute.
- This interlocutory appeal addresses whether indemnity covers first-party attorney fees, Crime Victims Statute damages, and NCR’s status as a party; court reverses in part and remands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Indemnification scope for attorney fees | BBR seeks first-party attorney fees under 12(a) | Indemnity covers third-party losses, not first-party fees | Indemnity does not clearly cover first-party attorney fees |
| Crime Victims Statute damages viability | F&C damages under statute should be available | Statute requires mens rea and specific code violations linked to losses | Issues of fact remain; statute damages not foreclosed, but need trial on merits |
| NCR’s standing as third-party beneficiary | NCR intended result of agreements benefits NCR | NCR not a party to management agreement | NCR has standing as a third-party beneficiary |
Key Cases Cited
- L.H. Controls, Inc. v. Custom Conveyor, Inc., 974 N.E.2d 1031 (Ind. Ct. App. 2012) (indemnity contracts and contract construction principles apply to first-party claims)
- Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126 (Ind. 1995) (strict construction of indemnity provisions)
- Sequa Coatings Corp. v. N. Ind. Commuter Transp. Dist., 796 N.E.2d 1216 (Ind. Ct. App. 2003) (plain-language indemnity may cover first-party actions when explicit)
- NationsCredit Commercial Corp. v. Grauel Enters., Inc., 703 N.E.2d 1072 (Ind. Ct. App. 1998) (punitive Crime Victims Statute requires strict construction)
- Prime Mortg. USA, Inc. v. Nichols, 885 N.E.2d 628 (Ind. Ct. App. 2008) (scope of employment for employee criminal acts)
- Klinker v. First Merchants Bank, N.A., 964 N.E.2d 190 (Ind. 2012) (mens rea and factual weighing limits on summary judgments)