98 N.E.3d 73
Ind. Ct. App.2018Background
- In September 2011 Gerdon Auto Sales, Inc. and William L. Gerdon ("Gerdon") and John Jones Chrysler Dodge Jeep Ram ("Jones") executed an Asset Purchase Agreement for the dealership assets: real estate ($800,000) and other assets (fixed assets, goodwill, etc., $200,000). The contract provided one purchase price structure, one down payment, one closing date, and contingencies including lender financing for the real estate.
- The parties extended the closing date in December 2011; on December 19 they closed on the sale of the "other assets" for $200,000 but did not close on the real estate because Jones had not obtained bank financing.
- In April 2012 First Savings Bank denied Jones’ loan application for the real estate due to environmental and appraisal issues; Jones made no further loan attempts or alternative collateral offers.
- Gerdon sued in February 2015 alleging breach of contract (failure to buy the real estate), breach of the duty of good faith and fair dealing (failure to seek other financing/collateral), and sought damages. Jones moved for summary judgment arguing the financing contingency was not waived, the contract was severable by conduct, the good-faith claim was barred or unavailable, and William lacked standing.
- The trial court granted summary judgment for Jones. The Court of Appeals affirmed, holding the parties’ partial closing modified and severed the original nonseverable contract by conduct, preserving the financing contingency; the contract did not support an implied duty of good faith and fair dealing; and because summary judgment was proper on those grounds the court did not decide William’s standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Jones breached the Asset Purchase Agreement by buying only the other assets and not the real estate | Gerdon: the Agreement was a single, indivisible transaction; accepting $200,000 but not completing the $800,000 real estate purchase breached the whole contract and waived contingencies | Jones: parties partially performed, thereby severing the contract by conduct; financing contingency on real estate survived and Jones had no obligation to close without loan approval | The court: although originally nonseverable, the parties’ conduct (partial closing) modified and severed the contract as a matter of law; the financing contingency remained intact and Jones did not breach. |
| Whether Gerdon’s claim for breach of the duty of good faith and fair dealing is governed by a 2-year or 10-year statute of limitations (and whether the claim was available) | Gerdon: duty arises from the contract so a 10-year limitations period applies | Jones: claim is tort-like and/or barred by a two-year limitations period; also disputed availability of such implied duty | The court: declined to reach the limitations question because no implied duty of good faith/fair dealing existed here (contract is not ambiguous and is neither employment nor insurance), so the claim was unavailable and summary judgment proper. |
| Whether William L. Gerdon has standing to enforce the contract as a third-party beneficiary | Gerdon: William is a named/identified third-party beneficiary and may enforce the contract | Jones: William is not a contracting party nor an intended third-party beneficiary | The court: did not decide standing because summary judgment in favor of Jones on the substantive claims was affirmed. |
Key Cases Cited
- Williams v. Tharp, 914 N.E.2d 756 (Ind. 2009) (summary judgment standard and burdens of proof)
- Hughley v. State, 15 N.E.3d 1000 (Ind. 2014) (standard of review for summary judgment)
- Heritage Dev. of Ind., Inc. v. Opportunity Options, Inc., 773 N.E.2d 881 (Ind. Ct. App. 2002) (factors for determining whether a contract is entire or divisible)
- Old Nat'l Bank v. Kelly, 31 N.E.3d 522 (Ind. Ct. App. 2015) (elements of a breach of contract claim; limits on implying covenant of good faith)
- W. Wheeled Scraper Co. v. Scott Constr. Co., 27 N.E.2d 879 (Ind. 1940) (partial performance may imply agreement to sever an entire contract)
- City of Indianapolis v. Twin Lakes Enters., Inc., 568 N.E.2d 1073 (Ind. Ct. App. 1991) (contracts requiring written modification can nevertheless be modified orally or by conduct)