Kansas City Services, Inc. v. Bryan Connan, Julie Connan, and Connan's Zionsville Investors, LLC (mem. dec.)
06A01-1606-PL-1274
| Ind. Ct. App. | Feb 3, 2017Background
- In 2002 the Connans sold a commercial building to Rabb via a land contract; in 2008 they transferred title to Connan’s Zionsville Investors, LLC (CZI). Rabb defaulted and KCS (via Petrowski) began paying the $2,500 monthly installments to CZI from Feb 2009–Apr 2013, totaling about $142,000, while negotiating to buy the property. No sale agreement was ever finalized.
- KCS sued CZI and the Connans (breach, conversion, unjust enrichment); CZI counterclaimed and foreclosed on Rabb; default foreclosure against Rabb was entered in 2014.
- On initial trial the court held no enforceable sale contract existed and denied unjust enrichment; the Court of Appeals affirmed no contract but reversed on unjust enrichment and remanded for a restitution hearing.
- On remand the trial court found CZI was unjustly enriched but offset that enrichment by lost rental and diminution in value (including water/mold damage), awarding KCS base restitution of $22,046.65 and added 6% simple interest (calculated incorrectly in the order).
- KCS appealed the amount, interest calculation, and sought personal liability against the Connans; the Court of Appeals affirmed the base restitution, rejected piercing the corporate veil, and remanded to correct interest to $4,409.33, for a total of $26,455.98.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper base amount of restitution for unjust enrichment | KCS: must be repaid the full $142,046.65 it paid (measure plaintiff’s loss). | CZI: restitution measures defendant’s gain; offsets allowable (rent, lost value); full repayment would be inequitable. | Court: restitution measures defendant’s gain; awarded $22,046.65 after offsetting rent and diminution—affirmed. |
| Prejudgment interest (rate & calculation) | KCS: entitled to 8% (apparently compounded) on full amount claimed. | CZI: trial court within discretion to set simple interest within statutory 6–10% range; acknowledged calculation error. | Court: 6% simple interest within statutory range appropriate; trial court miscalculated interest and remanded to award $4,409.33. |
| Personal liability of Bryan and Julie Connan (piercing the corporate veil) | KCS: Connans should be personally liable for restitution. | Connans/CZI: payments were made to CZI; no evidence of misuse of corporate form or fraud. | Court: KCS failed to prove veil-piercing elements; no personal liability. |
| Scope of restitution hearing / evidence allowed | KCS: hearing improperly revisited facts and allowed CZI to "retry" case. | CZI: evidence on rent, possession, and diminution of value relevant to measuring unjust enrichment. | Court: evidence on fair rental value and mitigation was relevant to measuring defendant’s gain; no improper retrial. |
Key Cases Cited
- Bayh v. Sonnenburg, 573 N.E.2d 398 (Ind. 1991) (elements and purpose of unjust enrichment)
- Rollings v. Smith, 716 N.E.2d 502 (Ind. Ct. App. 1999) (restitution measures defendant’s gain)
- Troutwine Estates Dev. Co., LLC v. Comsub Design and Eng’g, Inc., 854 N.E.2d 890 (Ind. Ct. App. 2006) (restitution as equitable remedy)
- Zoeller v. E. Chicago 2nd Century, Inc., 904 N.E.2d 213 (Ind. 2009) (unjust enrichment principles)
- Inman v. State Farm Mut. Auto. Ins. Co., 981 N.E.2d 1202 (Ind. 2012) (standard for review of prejudgment interest decision)
- Aronson v. Price, 644 N.E.2d 864 (Ind. 1994) (standards for piercing corporate veil)