A.B.C. Home & Real Estate Inspection, Inc. v. Plummer

A.B.C. HOME & REAL ESTATE

INSPECTION, INC., George Cline, Defendants-Appellants,

Thomas PLUMMER Cathy Plummer, Plaintiffs-Appellees.

No. 49A02-8604-CV-136.

Court of Appeals of Indiana,

Third District.

Dec.

Rehearing Denied Jan. for de- Indiénapolis, Spencer, E.

Frank fendants-appellants. Jennifer Graham, L. Lewis, Kappes, Full- In reliance on report the Plummers Eads, er & Indianapolis, for plaintiffs-ap- made an offer purchase the house. The

pellees. offer was contingent on the seller repairing ‍​​‌‌​‌‌‌‌‌​​​‌‌‌‌‌​‌​​​‌​​‌​​​‌​‌​‌​‌‌​‌​‌‌‌​‌​‌‍the defects listed in the inspection report.

HOFFMAN, Judge. Their offer was accepted and the Plummers A.B.C. Home & Real Estate Inspection, subsequently moved in. Inc., and George Cline appeal the adverse Shortly after taking possession, judgment entered against them in this ac- Plummers discovered significant leaks in begun tion by Thomas and Cathy Plummer. pipes water caused by severe corrosion. The suit was tried without a jury and was At about the same time they began to decided on the trial court's written findings experience problems with the electrical sys- of fact and conclusions of law. appeal On tem and ultimately they had to do exten- A.B.C. and Cline raise a battery issues; of sive work to bоth the electrical and plumb- however, the basic facts are not in dispute ing systems. night, One in December and are simply stated. the Plummers were awakened by the bed- In March of 1982 the Plummers were room ceiling collapsing. Investigation re- interested in purchasing an older house on vealed that there were numerous leaks in the west side of Indianapolis. part As of the roof. There was a large plas- sheet of their decision prоcess, the Plummers asked hung tic to catch water which appar- had agent, their Ludlow Realty, arrange for ently overflowed, causing the interior dam- inspection. home The agent suggested age. A roofing contractor called by the using A.B.C. Plummers testified that the roof had been The Plummers accepted suggestion, repeatedly patched and that the attic raft- part, in because they had seen A.B.C.'s ers were rotted from constant exposure to advertisement in a widely distributed real moisture. He further testified that estate circular. The advertisement listed damage could not have occurred in the George Cline as the "Owner-Contractor" short time the Plummers had owned the implied and that A.B.C. was licensed to house. perform inspections. home The evidence The Plummers attempted to contact was uncontroverted that neither A.B.C. nor A.B.C. Cline, and both by phоne Cline was perform licensed to home inspec- letter. The letter outlined the problems tions. There is no license required per- they had been having and expressed the form this service. opinion that A.B.C. was responsible for the On March 1982, George inspect- Cline expenses. Neither A.B.C. nor Cline ever ed the house. He in turn prepared an responded and action ensued. inspection report which was sent to the The Plummеrs also had their chimney Plummers. The report noted that the elec- inspected by a masonry contractor. They system trical was improperly fused, that were told that the chimney was danger- there problems with slow drains and ous condition and that it would have to be inadequate flow, water but that otherwise rebuilt from below the roofline. At trial plumbing was functioning properly. the contractor testified that the deteriora- report alsо problem noted a with the tion would have taken over years. ten air conditioner. Finally report noted that "Roof good is sign leaks," trial, At George Cline testified that he that, "Condition of chimney good." The personally inspected the Plummers' resi- inspection report's heading implied that dence. He said performs that he one stan- A.B.C. was licensed, bonded and insured type dard inspection, home regardless of for inspections. hоme The report, which whether inspection is for an individual signed by "George E. Cline/In- or for a VA or FHA insured mortgage. He spector," also contained an exculpatory also testified that he would not passed have clause which is discussed below. the Plummers' home for a VA or FHA party as a or named process served further He defects.

loan, because really is attack This A.B.C. from distinct beforehand knows he never that stated both quеstions two-fold, Cline Finally, because Cline before. inspection anwho veil, corporate piercing A.B.C. "owner" is the he testified service. liability without personal issued finding never has corporation of stock. shares conclu court's Factually, the facts, these the basis On ad by Cline's supported primarily sion home concluded corpo issued never has mission breached completely had been contract of shares issuance Indiana stock. rate $3,500.00 as the the Plummers awarded aas doing business precondition is a The trial repairs. expenses (re 28-1-3-5 IND.CODE corporation. § corpo- a sham then 8/1/87).1 condition If this effective pealed George ego of alter ration, mere and a corporation supposed met, the then not personally him found therefore and Cline partnership it were if as treated will be liable. Any contracts proprietorship. a sole or A.B. that concluded next court trial The are entered promoters by the into entered the a violation was advertisement C.'s per they are and names own in their into IND. Act. Sales Deceptive Consumer created. obligations for sonally liable (1986 Supp.). seq. et 24-5-0.5 CODE § Co. American v. Fletcher Sterne stat- of the interpretation its Pursuant 37, denied. 35, reh. N.E. 181 Ind. 204 $3,200.00 in awarded court ute, trial and Cline enjoined and fees attorney's him advertised Additionally, Cline Final- deceptive acts. further from A.B.C. and business "owner" as the self damages punitive awarded trial ly the he advertised that licenses contractor's $7,700.00. award for a total $1,000.00, are These alone. his name in held were that conclusion of issues a number reinforce raise that Cline facts A.B.C. Re- not addressed. separately A.B.C. as doing be business must was Cline corporation. are: these as a consolidаted stated find- erred trial ‍​​‌‌​‌‌‌‌‌​​​‌‌‌‌‌​‌​​​‌​​‌​​​‌​‌​‌​‌‌​‌​‌‌‌​‌​‌‍(1) whether per finding Cline court's The liable; personally ing Cline difficulty. no presents also liable sonally rela- a contractual was there (2) whether him holding denies that the contends Cline A.B.C. tionship between as named not he was because process, due Plummers; reveals record party. original an li- from released was (3) whether complaint and accepted service Cline dismissal stipulated by the ability trial, Clinе, throughout was he Realty; Ludlow un was he therefore, claim cannot clause exculpatory A.B.C.'s (4) whether involved. issues of the or the suit aware liability; barred was issue piercing Moreover, veil while issue Consumer Deceptive pleading, by the (5) raised not whether applied; properly objection Act was without Sales at raised clearly plead by the raised not Issues excessive; from Cline. are damages (6) whether con impliеd express by tried but ings, if as respects in all treated are sent prop- damages were punitive (7) whether pleadings. by raised been had erly allowed. 15(B); Procedure, Rule Trial Ind. Rules raises that Cline issue first (1983), Ind. Erb, Inc. Brink & James person- finding him erred the trial 452 App., never though he liable, even ally it Therefore 23-1-3-5. § gous to IND.CODE determined, Corpora- new can be far as 1. - As has limited issue holding this on appears the Au- fully on effective becomes which tions Act aрplication. prospective is analo- contains gust provision The testimony regarding corpo- inal complaint premised Ludlow's alleged rate structure and its observance of corpo- liability on its supposed failure to properly rate formalities was only relevant to estab- perform its contract to facilitate pur lishing that A.B.C. was a sham and to chase of the real estate. On the other establishing pеrsonal Cline's liability. If hand, A.B.C.'s liability is primarily based Cline had a process due objection to being on its failure to adequately perform its liable, personally he was required to contract inspect. The Plummers' claims object at the proper time. not, Since he did against Ludlow and A.B.C. predicated he cannot now complain that he was sur- separate on breaches of different contracts. prised, nor that he has been denied due Since the parties could not have been held process of law. liable, jointly a release of Ludlow was not a release of A.B.C. and Cline next Acc., urge General that the Fire & trial court Ass. Co. v. erred in finding Tibbs liability, Ind.App. because Life 262, 2 N.E.2d there was no contractual relationship be tween A.B.C. and the Plummers. While A.B.C.'s and Cline's next regards issue agent Plummers' arranged for the in the exculpatory clause contained in the in- spеction, the contract that was formed was spection report. This clause ap- which a classic third-party beneficiary contract. peared above signature Cline's read: Plummers, as the third-party benefi "We certify that shall in ciaries were legally entitled to sue under no way be mistaken for a warranty of the contract. guarantee as to the condition of the See, Mogensen v. (1982), Martz Ind.App., above listed items at the designated ‍​​‌‌​‌‌‌‌‌​​​‌‌‌‌‌​‌​​​‌​​‌​​​‌​‌​‌​‌‌​‌​‌‌‌​‌​‌‍loca- 441 34; N.E.2d Fiat Distributors v. Hid tion...." (1978), brader 178 App. 200, Ind. 381 N.E.2d A.B.C. and Cline contend that this shields them from liability. However it is unneces- By issue, their next A.B.C. and Cline sary to decide whether this language is as claim that the Plummers have released effective as claimed. them from liability. The Plummers origi- The evidence is that the clause nally sued both A.B.C. and agent, their only contained in the inspection report. Realty. Ludlow Before trial the Plummers The inspection report was obviously not and Ludlow jointly executed a "Stipulation delivered to the Plummers until after the of Dismissal" which simply recited that the inspection had requested been agreed parties stipulated that the action should be to. The rule is that even a properly word dismissed as to Ludlow Realty only. The ed modification of warranty is ineffective if trial court accordingly issued an order dis- it is not delivered to the buyer until after missing Ludlow. the contract has arisen. Hahn v. Ford A.B.C. and Cline claim that the stip Co., Motor Inc. Ind.App., 434 ulated dismissal was a release. They cite trans. denied. The delivery of cases that stand for the rule that a release the report was the contract's joint-tortfeasor one is a release of all culmination, not its inception and A.B.C.'s joint-tortfeasors. While present the action exculpatory clause is ineffective. It is primarily contract, based in tort, nоt the worth noting this is the exact situation that general same rule applies to contracts ac the rule adopted in Hakn was intended to tions as well. Kirby Cannon 9 limit. It is completely inconsistent with Ind. 371. good business and fair dealing permit to a the case it is unnecessary supplier to initially public reliance, induce to decide whether the dismissal was a re then after made, contract has been to lease or some other type avoid responsibility through vaguely word transaction, because it is clear that A.B.C. and Ludlow ed exculpatory clauses. Consequently - joint were not actors. The orig- Plummers' there was no error in finding A.B.C.'s at- " means a de- act' deceptive 'Uncured warranty clause modification tempted act: ceptive Plummers. against ineffective a consumer to which (A) respect question raises issue next act has by such damages has been who found properly trial whether see- supplier under to the Deceptive notice given had violated and Cline A.B.C. chapter; 5(a) of this 24-5- IND.CODE § tion Act. Sales Consumer pertinent, (1986 Supp.) seq. (B) either: 0.5 et permit is to act this effect practical to made has been to cure (i) offer attorney's recover to plaintiff successful (80) days thirty within consumer such end, the this To damages. actual fees and notice; or such after advertise- A.B.O.'s fоund trial as to cured not been (ii) has the act act; it claimed deceptive ment was a reasonable within consumer such perform to licensed or Cline the offer acceptance his after time 24- See, IND.CODE§ inspections. home cure." to (1986 Supp.). 5-0.5-8(a)(7) specifically case, In this aware, find court was theAs constituted advertisement only precondi is not act deceptive ing a and that act deceptive uncured an contains act also recovery. to tion re- the notice complied with had Plummers explained as limitations time notice quirements. (1982): 24-5-0.5-5(a) IND.CODE § sent Plummers January On brought may be (a) No action "See. described, in con- which a letter Section except under chapter, this under detail, problems siderable decep- (1) the unless chapter, 4(c) The Plummers roof. having with (2) consumer is incurable tive act prob- undeniably expensive their attributed no- given have shall the action bringing inspect. properly failure lems supplier within writing to the tice in type of notice is not Unfortunately this after (6) months (i) six sooner requires. statute act, (ii) deceptive discovery of the initial consumer following such (1) year one by IND.CODE required notice The limitation, (iii) any time transaction, or only a not contain 24-5-0.5-5(a) must § any days, of (80) thirty than not less damage actual of the description complete to applicable warranty of period of the al description a suffered, also but fully state shall transaction, notice which reason obvious act. deceptive leged act deceptive alleged the nature supplier so that is requirement for this there- damage suffered the actual problem. to correct opportunity has an act shall deceptive from, such and unless adequately failed lettеr The Plummers' deceptive act." an uncured have become requirements. either fulfill lia- establish can Thus, a consumer before with compliance be either must bility, there the roof spoke letter proof coupled with requirements notice leaks; by damage caused interior proof that or is "uncured" act that the single item a were but however, leaks "incurable." act letter damage. The lengthy list in the at is defined act of the deceptive apprise incurable wholly An failed also (1986 Supp.): 24-5-0.5-2(7) act, IND.CODE § which deceptive of the nature de- the advertise a to be means deceptive act' specifically "'Incurable findings, part special reviewing as by supplier In done ment. ceptive act legal by is bound Appeals intent artifice, device scheme, Court or cannot by mislead." the trial or theory defraud used clear theory, evеn when alternate adopt an act deceptive uncured Alternatively, an v. Best Best evidence. by the ly supported is defined complicated more somewhat N.E.2d (1984),Ind.App., (1986 Supp.): 24-5-0.5-2(6) at IND.CODE § Since the finding of compliance with the for punitive damages. punitive Before notice requirements is clearly erroneous, damages are properly awardable in a con- the finding of liability, under statute, action, tract there must be additional evi- must be This, reversed. however, does not dence that defendant's conduct is indepen- necessitate a complete reversal. As has dently tortious; that there are elements of already found, been liability is also fraud, malice gross negligence inter- properly grounded on its breach of the mixed with the breach. Finally, in all puni- contract to inspect. Thus reversal on this tive damage situations the evidence must issue оnly leads to deleting the award of support a finding that public interest attorney's fees and to lifting the injunction will be served the addition punish that the trial imposed. ment to the already adequate compensa- A.B.C. and tion. Cline next contend that the measure of actual damages employed by Art Ford, Hill Inc. v. (1981), Callender the trial court places the Plummers in a Ind., 423 601; N.E.2d Dotlich v. Dotlich position better they than were before A.B. (1985), Ind.App., 475 N.E.2d trans. C.'s action. Therefore, the appellants con- denied. clude the damages are excessive. The trial court found that A.B.C. The damages recoverable in a and Cline were not only careless, but gross breach of contract case are limited to actu ly negligent in their inspection of the Plum- al damages suffered. Bymaster v. Bank mers' house and also that this conduct ers Nat. Ins. Co. Ind.App., 480 Life manifested a reckless disregard of the trаns. denied. Actual dam Plummers' rights. Additionally, the trial ages include those expenses reasonable court found that A.B.C.'s advertisements that are a natural consequence of the contained intentional misrepresentations breach. Ethyl Corp. v. Forcum-Lannom that were intended to mislead consumers Associates Ind.App., 433 N.E.2d into misplaced reliance. The sup record 1214, trans. denied. The evidence clearly ports these findings, which in turn fully dеmonstrates that the Plummers relied on support the award punitive damages. A.B.C.'s and representations Cline's the house was good repair. gross Cline's negligence evi is obvious. dence also amply shows that the inspection report stated, he "Roof is Cline completely good breached its contract. no sign As of leaks." Yet within a few a direct consequence of breach, months the bedroom ceiling collapsed, be- Plummers spent $3,500.00 to obtain cause what of roof leaks. Simple visual inspec- Cline and A.B.C. had said origi tion of the attic plastic revealed a tarp nally getting. The evidence clearly placed sup to catch in-coming water and wood-

ports the award and there was no error in ‍​​‌‌​‌‌‌‌‌​​​‌‌‌‌‌​‌​​​‌​​‌​​​‌​‌​‌​‌‌​‌​‌‌‌​‌​‌‍en supports rotted from long term expo- the method of calculation. sure to moisture. The plumbing had to be extensively repaired, yеt Cline only noted The final issue raised is wheth slow drains. The chimney was in $1,000.00 danger er the punitive damage award condition, ous and apparently had been proper. was for Indiana's puni standard for years, several yet Cline advised tive the chim- damage places awards a heavy burden ney was good in condition. on plaintiff. the These are In order to justify an clearly negligent acts committed award with punitive of com- damages there must be plete disregard for the consequences. clear and convincing evidence that over comes the presumption that the defend A.B.C.'s implied advertisements it ant's conduct was merely negligent or the was inspect licensed to homes. inspec- The product of some honest error. Orkin Ex tion report itself implied that A.B.C. or terminating Co., Inc. v. (1986), Traina Cline were bonded and insured. Both of Ind., 486 N.E.2d 1019. Breach of contract these imрlications were completely false actions are traditionally ground infertile and both were calculated to induce reliance

1264 a over jurisdiction acquires "The inspect ability to Cline's and A.B.C.'s on rules these under who person or party manner. professional in a homes action, is joins in the or commences pre overwhelms evidence This ap- an or enters with summons served merely was conduct A.B.C.'s sumption that pоw- subjected to is or who pearance, fact. of a mistake ‍​​‌‌​‌‌‌‌‌​​​‌‌‌‌‌​‌​​​‌​​‌​​​‌​‌​‌​‌‌​‌​‌‌‌​‌​‌‍negligent law." any other under the court er of negligence and gross demonstrates conduct v. Co. Ins. rel. Travelers ex State See today's misrepresentation. fraudulent 287, 354 (1976), Ind. 265 Sup. Ct. Madison ser valuable is a society, home v. Madison 188; also Idlewine see N.E.2d knowledge of little have buyers who to vice 439 (1982), Ind.App., Trust Co. & Bank Co. their homes. of aspects mechanical N.E.2d of the nоt insurers are inspectors Home the conse- to avoid seeks majority however, public inspect; homes out by pointing higher flaw far this basic care quences a standard expect must complaint accepted and Cline. service by A.B.C. that Cline exhibited than by It furthered throughout interest public was Thus piercing question behavior. rapacious also asserts deterring sort actually litigated veil was corporate awarding punitive in error was There objection. without damages. very to the subject the extent are to assertions Both is reversed This cause never was injunction me: Cline that concerns fees defect attorney's held might be Practices that he Deceptive legal notice on put under awarded sum- complaint the trial liable. things personally In all other Act. and Cline's to addressed mons were affirmed. trial as presence at of them aсceptance part. in affirmed part and Reversed with- appropriate A.B.C. were an officer liabili- personal any claim of regard to out P.J., STATON, concurs. had no non-party he Similarly, as a ty. opinion. J., with GARRARD, dissents the evidence object to standing to personal any particular trial or at offered dissenting. motivation GARRARD, Judge, to do so. its except for majority I with concur conduct his wholeheartedly agree that I properly was judgment determinations reprehen- Plummers concerning the Cline, individually, George against entered jurisdic- was without properly the court But damages sible. punitive person- him against judgment to enter tion awarded. non-party. ally as a I these issues first of Concerning dam punitive award Concerning the ample to evidence that the agree quite findings are special court's ages the part of liability on personal establish un award justify inаdequate me, simply how- appears to majority Cline. Ex imposed Orkin restrictions der liability for this basis ever, to confuse Co., Traina Inc. v. terminating judg- enter jurisdiction for the basis In Travelers 1019 and Ind., personal enter ment. Jurisdiction Ind., Armstrong demmity Co. having upon the depends judgment in N.E.2d person over the jurisdiction personal made was never George Cline question, dissent. I therefore not sued He was lawsuit. to this party summons, individually and served him or substi- add made to was ever motion party. him as

tute Procedure, Rules to Indiana

Pursuant 4(A): Rule

Trial

Case Details

Case Name: A.B.C. Home & Real Estate Inspection, Inc. v. Plummer

Court Name: Indiana Court of Appeals

Date Published: Dec 8, 1986

Citation: 500 N.E.2d 1257

Docket Number: 49A02-8604-CV-136

Court Abbreviation: Ind. Ct. App.