Case Information
*1 A TTORNEY FOR A PPELLANT A TTORNEY FOR A PPELLEE Tеrry K. Hiestand Jere L. Humphrey Hiestand Law Office Wyland, Humphrey & Clevenger, Chesterton, Indiana LLP
Plymouth, Indiana I N T H E
COURT OF APPEALS OF INDIANA Larry J. Jernas and April 6, 2016 R & R Horse Haven, Inc., Court of Appeals Case No. 75A03-1511-CC-1903 Appellants ,
Appeal from the Starke Circuit v. Court The Honorable William E. Alexa, Kevin J. Gumz, Special Judge Appellee . Trial Court Cause No.
75C01-1106-CC-192
Brown, Judge.
[1] R & R Horse Haven, Inc., (“R & R”) and Larry J. Jernas appeal the trial court’s
ruling in favor of Kevin J. Gumz and raise three issues on appeal which we consolidate and restate as whether the court’s order is clearly erroneous. We affirm.
Facts and Procedural History
[2] R & R and Gumz entered into an Agreement to Sell Real Estate (the
“Agreement”) dated December 11, 2009. The Agreement provided that it was made “between R & R Horse Haven , Seller, of 7491 S 100 W, City of North Judson, State of IN , and Starke County, Buyer, of 7491 S 100 W, City of North Judson, State of IN .” [1] Plaintiff’s Exhibit 3; Defendant’s Exhibit 1. The Agreement further provided in part:
3. [R & R] agrees to pay [Gumz] the sum of $ 800,000 , which the Seller agrees to accept as full payment. This Agreement, however, is conditional upon [R & R] being able to arrange suitable financing on the following terms at least thirty (30) days prior to the closing date for this Agreement: a mortgage in the amount of 0 , payable in 0 monthly payments, with an annual interest rate of 0 percent.
4. The purchase price will be paid as follows: Earnest deposit (upon signing this Agreement) $ 25,000 *3 Other deposit: _______________ $ ______ Cash or certified check on closing $ ______ (subject to any adjustments or prorations on closing) Total Purchase Price $ 800,000 5. [Gumz] acknowledges receiving the Earnest money deposit of $ 25,000 from [R & R]. If [R & R] fails to perform this Agreement, [Gumz] shall retain this money. If [Gumz] fails to perform this Agreement, this money shall be returned to [R & R] or [R & R] may have the right of specific performance. If [R & R] is unable to obtain suitable financing at least thirty (30) days prior to closing, then this money will be returned to [R & R] without penalty or interest.
6. This Agreement will close on Jan 5 2010 , at 2 o’сlock, at _________, City of ______, State of ________.
Id . The Agreement was signed by Mary H. Wodrich on behalf of R & R. [3] In addition, a check dated December 10, 2009, was written by Larry Jernas [4] made payable to Gumz in the amount of $25,000. The handwritten note in the memo line of the check stated “Down payment horse farm” and “R & R.” Plaintiff’s Exhibit 2.
*4 [3] However, the sale of the property to R & R did not occur, and Gumz later sold
the property to another purchaser. Gumz did not return the $25,000 deposit to R & R or Jernas.
[4] In June 2011, Jernas and R & R filed a complaint against Kevin Gumz and
Amy Gumz alleging in part that, in the fall of 2009, R & R “reached an agreement with Kevin Gumz to purchase the Horse Farm for the price of $500,000”; that Jernas paid $25,000 to Kevin Gumz on behalf of R & R as an earnest money deposit for the purchase of the property; that after the down payment was made and on or about December 11, 2009, Kevin Gumz presented the Agreement to R & R “which listed the price as $800,000 and included the Trailer Home belonging to the Gumzes” and provided the Agreement wаs contingent on R & R “being able to arrange suitable financing”; that after signing the contract, R & R diligently pursued financing but was unable to obtain suitable financing at the increased price; and that the Gumzes failed to return the earnest money deposit to R & R or Jernas. Defendant’s Exhibit 2 at 1-2. The complaint alleged counts of breach of contract, fraud, conversion, and unjust enrichment. Jernas and R & R filed a motion to amend the complaint in October 2013,
which the court granted in December 2013. The amended complaint eliminated Amy Gumz as a party and alleged in part that Kevin Gumz was at all relevant times the owner of real estate located at 7491 S 100 W, North Judson, Indiana (defined in the complaint as the Horse Farm); that, in the fall of 2009, R & R “believed it had reached a parole [sic] agreement with Kevin *5 Gumz to purchase the Horse Farm for the price of $500,000”; that Jernas paid $25,000 to Gumz on behalf of R & R as an earnest money deposit for the purchase of the property; that after the down payment was made and on or about December 11, 2009, Gumz presented the Agreement to R & R “which listed the price as $800,000” and provided the Agreement was contingent on R & R “being able to arrange suitable financing”; that on or about January 2010, R & R notified Gumz of its inability to obtain suitable financing and requested that Gumz return the earnest money deposit; and that Gumz failed to return the earnest money deposit. Appellants’ Appendix at 11-12. The amended complaint, under Count I, titled Debt Due, alleged in part that
the Agreement “was never an enforceable contract because it omits essential terms of an enforceable contract since the description of the Real Estate is incomplete and the document was not properly executed by both parties”; that “[a]s a consequence of the invalidity of [the Agreement], Gumz held the $25,000 deposited as a trustee pending the execution of an enforceable contract which was never prepared, presented, or signed”; and that, when R & R and Jernas requested the $25,000 deposit be returned, Gumz indicated that he had spent it. at 12-13. Count II of the amended complaint, titled Unjust Enrichment, alleged that Gumz would be unjustly enriched if not required to repay the earnest money deposit to Jernas and R & R. R & R and Jernas requested a judgment against Gumz in the amount of $25,000 and attorney fees, prejudgment interest, and the costs of the action.
[7] Gumz filed a counterclaim alleging that R & R entered into the Agreement,
that it breached the Agreement, that he later sold the property for $400,000 and had been damaged in the amount of $400,000, that R & R previously acknowledged the validity of the Agreement by suing on it in its original complaint, and that it has waived any statute of frauds compliance, and Gumz demanded judgment in the amount of $400,000, prejudgment interest, costs, and all other proper relief.
[8] On July 15, 2015, the court held a bench trial at which it heard testimony from,
among others, Jernas, Wodrich, and Gumz. Jernas testified that, when Gumz was approached about the sale of the property, “the $500,000 figure was thrown out to our group,” that Jernas asked his banker if R & R could obtain a loan for that amount, that his banker told him that R & R could be financed for up to $500,000, that he wrote a check for $25,000 and gave it to Wodrich, who planned to meet with Gumz, and that at the time he wrote the check he had no reason to believe that the sale price was different than $500,000. Transcript at 24. Jernas testified that later, after learning the Agreement was for $800,000, he called Gumz several times and requested that his deposit be returned, and Gumz told him that he had already spent it. Bruce Shanks, Jernas’s banker, testified that Jernas told him that he found
Gumz’s property for $500,000 for forty acres plus a house and outbuildings, that Shanks went to look at the buildings and house and based on what he could see he felt the collateral would be strong enough to pursue a loan for $500,000, that Jernas later called him and said that the price had changed to *7 $800,000, and that created a “different challenge because . . . the collateral value is going to have to go up higher” and that “[u]ntil we had an official purchasе agreement, I wasn’t going to pursue it anymore.” Id. at 44. When asked if the bank had a commitment to consider financing more than $500,000, Shanks testified “[w]ell, that would all be determined by the appraisal,” that “I could have got an approval of the loan but it still is subject to the appraisal,” and “you don’t want to spend the money for an appraisal until I felt confident the purchase order was with in line, everybody had signed it, and everybody was committed to a set price.” Id. at 44-45. When asked if his bank ever looked at lending more than the $500,000, Shanks replied “No.” Id. at 46. Wodrich testified that she visited the property, [5] that Gumz wanted to keep a track of woods behind the farm to keep as his hunting grounds, and that her group “did not like that idea because of using horses and veterans” and “[h]orses might spook at gunshots, not a very good idea.” Id. at 51. She testified that she was present with Gumz and Jernas when a price of $500,000 was discussed, that she took Jernas’s check to meet with Gumz, that Gumz had the Agreement “all ready,” that Gumz never mentioned that he was asking for $800,000 rather than $500,000, and, when asked if she had an opportunity to read the document before she signed it, that “[i]n my enthusiasm to sign it, I just went ahead and signed it.” at 55. When asked if she had the money, *8 she said that Jernas “said he would fund it for us until we got grants.” Id. at 52. When later asked about a meeting in October with Gumz, Wodrich testified that she and others looked at the house, the barns, and the arena, that Gumz “said he could come down to our price at $500,000,” and that Gumz “still wanted to keep that part of the woods and we still said no.” Id. at 61. When asked “you knew who the seller was,” she replied “I knew who the seller was.” Id. at 62. When asked why she thought she was signing, she testified that she “was very enthusiastic at the time and it just meant a lot of hopes and dreams was going be fulfilled with that place.” Id.
[11] Kevin Gumz testified that Wodrich and several others met him at the property
and that they walked all the barns, the arena, and the house. He testified “[w]e talked about that they didn’t want all the property, only wanted part of it,” that “[s]o we kind of walked where they would like to square it off to separate the property off,” and that they “talked about the price of what that would be. That it would be 800,000.” at 65. He testified that Wodrich visited him at the property shortly after that and stated she wished to purchase the property and that she visited again a couple of weeks later with others, at which time the group walked through the barns to figure out how they were going to change things to fit their needs. He testified that Wodrich later called him to say she wanted to buy the property
and that the next day, December 11, 2009, he met her and two women with her and brought a form land purchase agreement which he had bought at Staples, *9 he wrote the contract out, [6] Wodrich signed it, she gave him the deposit check, and she “said they had the money, it was taken care of, and we would close as soon as we could.” Id. at 69. He testified he told Wodrich that he was going to a title company where the closing would occur to have the legal documents prepared, that he had filled in “the amount of zero” in the blank spaces in the agreement for the amount of the mortgage, the amount of the monthly payments, and the annual interest rate, and when asked why he did so, stated “[s]he told me that they had the money and that it wasn’t an issue, they didn’t need any financing,” and “[t]hat they had it and they wanted to close as soon as we can.” Id. at 69-70. Gumz testified that Jernas later called him and asked why he changed the price
and that he responded that the price had never changed and had always been $800,000. He testified that he and Wodrich walked the property, that he placed some flags “where she wanted it section it off,” and he had said he would “move a fence over to that so there would be a property line on the fence dividing the front part on the back 90 acres.” Id. at 71. Gumz testified that the closing was scheduled for January 5th, that Jernas called him on New Year’s Eve and said that R & R was not going to purchase the property and to send his check back to him, and that he told “him no because I had to – we did move the fence and stuff. I did the survey work. We did the legal work already. I hired *10 movers because the house was fully furnished at that time.” Id. at 72. He testified that, two years later, he sold the property to another purchaser for $400,000. [7] When asked why the property was worth $800,000 in 2009 and $400,000 in 2011, Gumz testified that real estate prices had really gone down, that with the way banking had changed obtaining loans had become really hard, that the property was going to sit there and not be insured because it was vacant, that he was still paying property taxes and for heating and electric, and that when he found someone who had the cash it was time to stop the bleeding and sell the property. When asked on cross-examination how he knew what R & R was purchasing,
Gumz testified “[b]ecause when [Wodrich] and the two ladies were out there before, like I said, wе walked and put stakes on the property line where they wanted it to be, what they were interested in buying, and not buying the whole 141 acres,” “[t]hey didn’t want the back part because they said they couldn’t afford that much,” and “so we walked the property line and put flags and I said that’s where we would -- I would have the survey to and move the fence to that property line.” Id. at 80. He stated forty acres were being purchased, that he knew the acreage after the property was surveyed, and that at the time of the Agreement he did not know the exact acreage but he “had measured it off and guessed it at about 40 acres.” at 81. He testified “[t]hey said that’s where *11 they want it,” “we never really talked about exact acres,” “[w]e said this is the property line. This is where we flagged it off, put stakes,” “[w]e’d move the fence up to that because she said – [Wodrich] wanted it fenced in,” and “[s]o we fenced it in so that way, that would be where the property was and when the survey people came out, they surveyed it to that.” Id. at 81-82. He indicated he installed the fence in mid-December and that he hired three people to help him. Wodrich was recalled to the stand and, when asked about the property R & R was purchasing and the property that would be remaining, testified that “[t]here was a boundary of woods in the back of that one barn, the last barn there” and that “[h]e wanted to keep that for his hunting.” Id. at 89. When asked “did you go with him and put any stakes out where there might be boundaries,” Wodrich testified “[he] showed me, yes, but there was nothing staked out there.” Id. When asked what she meant, she testified “[h]e drove me out there in a golf cart and he showed me where the boundaries was that he wanted.” Id. When asked “this was something that was agreed or understood that for $500,000, you were getting to that point,” Wodrich testified “[w]e did not want that done because, like I said, the guns and the hunting would square [sic] the horses, and this was discussed with the board of directors.” Id. When asked if the matter of Gumz keeping the woods had been resolved by the time she gave him the $25,000 deposit, she testified “[h]e had agreed he wasn’t going to use – . . . [h]e had supposedly agreed that he wasn’t going to use that.” at 91. When asked “[s]o then it had been resolved,” she stated “[t]hat had been *12 resolved” and that “[o]therwise, I wouldn’t have never give him that check.” at 91-92. [16] The court also admitted documentary evidence which included the Agreement,
Jernas’s check, R & R’s bylaws, a title commitment related to Gumz’s 2011 sale of the property, and an advertisement for the sale of the property, which Gumz indicated ran after the deal with Jernas fell through, stating “40 Acres of fenced pasture and paddocks,” “custom brick ranch home,” and “$795,000 – well below the appraised value.” Defendant’s Exhibit 4. [8] On October 6, 2015, the court entered Findings of Facts and Conclusions of Law. The court found that R & R and Gumz had entered into a contract for the property, that the Agreement “between R & R and [Gumz] gives a location of the land, and this is sufficient for a description of the land,” that “even though R & R was listed as the seller, both parties knew who was selling and who was purchasing the land,” that although the Agreement “was only signed by one party, it was signed by the appropriate party, the party charged with the sale,” and that “[a]s the [A]greement gave an adequate description of the property, the parties knew their roles in the [A]greement and the party who was charged was the party who signed, the . . . [A]greement is a valid contract.” Appellants’ Appendix at 8.
*13 [18] The court further concluded that the Agreement “clearly states that the $25,000
is in the form of earnest money,” that it provided that “if the buyer fails to perform this Agreement, the Seller shall retain this money,” and that Gumz “is entitled to keep the earnest money and could seek [ ] other damages from R & R.” Id. at 8-9. The court noted that Gumz chose to waive other damages and limit his recovery to the earnest money already paid and that, should Jernas seek recourse for his $25,000 earnest money, he may seek it frоm R & R as he paid the money on its behalf.
Discussion The issue is whether the judgment of the trial court that an enforceable
agreement existed between R & R and Gumz and that Gumz is entitled to
retain the earnest money deposit is clearly erroneous. When a trial court enters
findings of fact and conclusions thereon, findings control only as to the issues
they cover and a general judgment will control as to the issues upon which
there are no findings.
Yanoff v. Muncy
,
[21] Gumz maintains that the Agreement’s reference to R & R as the seller rather
than the purchaser is nothing more than a scrivener’s error and that the
testimony shows that the parties knew the identity of the seller. He argues that
the Agreement was signed by R & R’s authorized agent, that Wodrich had the
authority to act on behalf of R & R, and that the court found the description of
the property to be adequate, the address оf the property was given, and
Wodrich testified she was satisfied with the forty acres and there was no
uncertainty to her. Gumz further argues that his signature was not required for
him to be able to enforce the Agreement, and that the Agreement need be
signed only by Wodrich as R & R’s agent to be enforceable against R & R
under the statute of frauds. He also asserts that Jernas and R & R have forfeited
their request for a constructive trust as it is raised for the first time on appeal,
and that Jernas has no cause of action as he loaned the money to R & R.
If a contract’s terms are clear and unambiguous, courts must give those terms
their clear and ordinary meaning.
Lily, Inc. v. Silco, LLC
,
the Agreement is defective, we note that the Statute of Frauds “does not govern
the formation of a сontract but only the enforceability of contracts that have
*17
been formed.”
Schuler v. Graf
,
[24] Contracts are formed when parties exchange an offer and acceptance. Fox Dev. ,
and certain.
Allen v. Clarian Health Partners, Inc.
,
property be in writing.
Fox Dev.
,
Wodrich, by her conduct, including several visits to Gumz’s property with
other representatives of R & R and discussions regarding the property and her
meeting with Gumz to sign the Agreement and deliver the earnest money
check, had apparent authority to enter into the Agreement on behalf of R & R.
A reasonable person would believe Wodrich possessed the authority to act on
behalf of R & R, and R &R and Jernas do not point to evidence to show they
informed Gumz that any agreement with R & R regarding the sale and
purchase of real property was required to be signed or otherwise ratified by
other representatives of R & R under its bylaws.
[9]
See Somerville Auto Transp.
Serv., Inc. v. Auto. Fin. Corp.
,
extent the name “R & R” was handwritten into the blank space for the seller on
the form purchase agreement rather than the blank space for the buyer, we note
that the tеstimony of Jernas, Wodrich, and Gumz reflected their understanding
that Gumz owned the real property which was the subject of the Agreement
and was the seller, and this is consistent with the pleadings filed and the
exhibits introduced by the parties. As to the description of the property, the
Agreement referred to the street address of the property to be purchased and did
not include a legal description. All that is required to render a contract
enforceable is reasonable certainty in its terms.
Conwell
,
the Agreement’s deposit provisions against R & R. As noted, contracts for the
sale of real property that do not satisfy the Statute of Frauds are voidable, not
void.
Fox Dev.
,
the Statute of Frauds does not prevent Gumz from enforcing the Agreement.
The Statute provides that a person may not bring an action involving a contract
for the sale of land unless the contract “is in writing and signed by the party
against whom the action is brought or by the party’s authorized agent.” Ind.
Code § 32-21-1-1. Gumz brought his counterclaim against R & R and the
Agreement was signed by Wodrich on behalf of R & R. Thus, the Statute of
Frauds is not a valid defense against Gumz’s action to enforce the Agreement
or its terms regarding the earnest money deposit. We also observe that the
Statute of Frauds requires that the writing be signed only by the party against
whom the action is brought and not by all рarties to the agreement, and thus the
fact that Gumz did not sign the Agreement does not render the Agreement
unenforceable by him.
See
Ind. Code § 32-21-1-1;
Grabill Cabinet Co., Inc. v.
*24
Sullivan
,
identifying the parcel to be conveyed to satisfy the Statute of Fraud’s
*25
requirement that the essential terms of the agreement be in writing.
See Schuler
,
to the Agreement’s terms regarding R & R’s earnest money deposit. The
Agreement unambiguously provided that R & R’s $25,000 payment to Gumz
constituted an earnest money deposit. Further, the pre-printed form language
of paragraph 5 of the Agreement provides that, if R & R fails to perform, Gumz
shall retain the deposit, except that, if R & R is unable to obtain suitable
financing at least thirty days prior to closing, then the deposit would be returned
*26
to R & R. However, the court heard Gumz’s testimony that Wodrich told him
that R & R did not need financing and that the languagе in the form agreement
related to financing terms was not applicable. Gumz testified that, in the blank
spaces in the Agreement setting forth the terms of suitable financing, he had
filled in “the amount of zero” for the amount of the mortgage, the amount of
the monthly payments, and the annual interest rate because R & R did not need
financing and the section was not applicable to the contract. Transcript at 69.
Paragraph 3 of the Agreement provides that the Agreement “is conditional
upon [R & R] being able to arrange suitable financing on the following terms at
least thirty (30) days prior to the closing date for this Agreement: a mortgage in
the amount of 0 , payable in 0 monthly payments, with an annual
interest rate of 0 percent.” Plaintiff’s Exhibit 3; Defendant’s Exhibit 1. The
handwritten “0” in the blanks support the conclusion that the parties did not
intend that R & R’s obligations under the Agreement be conditioned upon R &
R obtaining financing.
See Ryan
,
of R & R and Jernas, we agree with the trial court that the parties’ Agreement
governs the earnest money deposit, and based on the record we cannot
conclude that the court erred or abused its discretion in not finding that Gumz
obtained the deposit from R & R through wrongful means or that Gumz would
be unjustly enriched by retaining the deposit, and thus do not find the
arguments of R & R and Jernas that a constructive trust must be imposed to be
persuasive.
See Presbytery of Ohio Valley, Inc. v. OPC, Inc.
,
Conclusion
[35] For the foregoing reasons, we affirm the judgment of the trial court. Affirmed.
Kirsch, J., and Mathias, J., concur.
Notes
[1] The underlined portions were handwritten on blank spaces/lines provided on a pre-printed form Agrеement to sell real estate. Gumz, Jernas, and Mary Wodrich indicated at trial that Gumz was the seller of the property and R & R was the purchaser of the property.
[2] The numbers were also handwritten on blank spaces/lines in the Agreement. Also, the dollar amounts were handwritten on blank spaces/lines in sections 3, 4, and 5 of the Agreement and the date and time were handwritten on the blank spaces/lines in section 6.
[3] Wodrich’s signature appears near the top of the first page of the Agreement rather than at the end of the document or on a prepared signature line. An exhibit admitted at trial listed Wodrich as the chair of the board of directors of R & R. The Agreement does not include a signature by Gumz.
[4] An exhibit listed Jernas as the vice-chair of the board of directors of R & R.
[5] The then-treasurer of R & R’s board of directors indicated that she toured the property with Wodrich and Gumz. Wodrich testified that, the first time she went to the property, she went with Jernas and that, a few weeks later, she went with R & R’s treasurer as well as two others.
[6] Gumz first stated “I wrote the contract out” and then later in his explanation stated “[w]e filled it out.” Transcript at 68-69. He stated that he “put the zeros” in the blanks of the Agreement. Id. at 69. In his cross- examination, he said “I wrote it out.” at 79.
[7] Defendant’s Exhibit 7 is a title insurance commitment related to the 2011 sale of property owned by Gumz which provides a legal description of the insured property indicating the land contained 39.23 acres more or less.
[8] This exhibit also contains a summary of a listing with an entry date of March 8, 2004 and expiration date of February 8, 2006, for property located at 7491 S 100 West, North Judson, Indiana, consisting of 141 acres, and which showed a list price of $1,680,000.
[9] A section of R & R’s bylaws states that “Both the Treasurer and Executive Director shall sign all financial instruments, such as checks, issued from the Corporation.” Plaintiff’s Exhibit 1. Wodrich testified she was the president of R & R at the time she signed the Agreement.