Tina L. Hemingway v. John P. Scott ( 2016 )

FILED
Dec 30 2016, 7:33 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
A. David Hutson Mark Wynn
Hutson Legal Jenner, Pattison, Sutter & Wynn,
Jeffersonville, Indiana LLP
Madison, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Tina L. Hemingway, December 30, 2016
Appellant-Petitioner/Counter- Court of Appeals Case No.
Respondent, 39A04-1604-PL-957
Interlocutory Appeal from the
v. Jefferson Circuit Court
The Honorable Darrell M. Auxier,
John P. Scott, Judge
Appellee-Respondent/Counter- Trial Court Cause No.
Petitioner 39C01-1509-PL-698
Crone, Judge.
Case Summary
[1] John Scott conveyed his property to himself and his girlfriend Tina
Hemingway. Earlier that day, Hemingway had signed a contract agreeing that
if she cheated on Scott or failed to contribute to the property’s maintenance and
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expenses, she would reconvey her interest in the property to him. Hemingway
later filed a real property partition action against Scott, who filed a
counterclaim for breach of contract and replevin. The trial court found
Hemingway to be in breach of contract and ordered that she execute a
quitclaim deed conveying to Scott all her rights, title, and interest in the
property. Hemingway seeks review of the trial court’s interlocutory order,
arguing that the deed extinguished the contract pursuant to the doctrine of
merger and that the contract was unenforceable as against public policy.
Finding that the doctrine of merger does not apply and that the contract is not
rendered unenforceable for public policy reasons, we affirm.
Facts and Procedural History
[2] In 2001, Scott inherited a ten-acre parcel of land (“the Property”) from his
father. In 2004, Hemingway and Scott began a relationship, and Hemingway
moved in with Scott. The couple broke up for a time, and Hemingway moved
out. On February 17, 2012, the couple executed a handwritten contract,
penned by Hemingway and signed by both, pursuant to which Scott promised
to convey the Property from himself to himself and Hemingway. The contract
included a list of conditions that would constitute a breach, including
“cheating” by either party. Appellant’s App. at 35. The contract also required
both parties to contribute to the care and upkeep of the Property, including the
house, and the expenses attributable to it. The remedies clause stated that any
breach by Hemingway would require her to reconvey her interest in the
Property to Scott via quitclaim deed. According to the express language, the
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contract would “be attached to the property deed pertaining to [the] property at
[the listed address].” Id. That same day, Scott executed a deed conveying the
Property to himself and Hemingway as joint tenants. The contract was neither
referenced in the deed nor filed with the deed for recording purposes.
[3] Hemingway resumed living with Scott. About two months after the contract
and conveyance, Hemingway was impregnated by another man. She delivered
the child on January 6, 2013, and the parties agree that Scott is not the child’s
father. Hemingway moved out in early June 2013, after which she no longer
contributed financially or otherwise to the household or Property. On June 17,
2013, Scott sent Hemingway written notice that she was in breach of the
contract and must convey her interest in the Property back to him pursuant to
the terms of the contract.
[4] On September 17, 2015, Hemingway filed a petition for partition of the
Property. Scott filed a counterclaim for breach of contract and replevin, seeking
a court-ordered conveyance of the Property back to him by quitclaim deed. On
March 28, 2016, the trial court conducted a hearing on Scott’s counterclaim.
On April 1, 2016, the trial court issued an order with findings in favor of Scott,
concluding that Hemingway breached the contract and ordering her to convey
her interest in the Property back to Scott by quitclaim deed.
[5] Upon Hemingway’s request, the trial court certified the order for interlocutory
appeal, and we accepted jurisdiction. Additional facts will be provided as
necessary.
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Discussion and Decision
[6] Hemingway challenges the trial court’s interlocutory order finding her in breach
of contract and ordering her to reconvey her interest in the Property to Scott.
Here, the trial court issued its order with findings of fact pursuant to Indiana
Trial Rule 52(A). In such cases, we review for clear error, first determining
whether the evidence supports the findings and then whether the findings
support the judgment. Baird v. ASA Collections, 910 N.E.2d 780, 785 (Ind. Ct.
App. 2009), trans. denied (2010). We will reverse only if the trial court’s findings
are unsupported by any evidence or reasonable inferences drawn from the
evidence or if the judgment is unsupported by the findings and conclusions. Id.
In conducting our review, we neither reweigh evidence nor judge witness
credibility; rather, we consider the evidence in the light most favorable to the
judgment. Id. With respect to the trial court’s findings of fact, we defer
substantially; with respect to its conclusions of law, we apply a de novo
standard. Id.
Section 1 – The doctrine of merger does not extinguish the
contract or its express provisions concerning acts constituting
breach and effects of breach.
[7] Hemingway maintains that the contract merged into the deed and therefore was
extinguished by the express terms of the deed.
“Where two parties have made a simple contract for any
purpose, and afterwards have entered into an identical
engagement by deed, the simple contract is merged in the deed
and becomes extinct. This extinction of a lesser in a higher
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security, like that extinction of a lesser in a greater interest in
land, is called merger.”
BLACK’S LAW DICTIONARY 1009 (10th ed. 2014) (emphases omitted) (quoting
WILLIAM R. ANSON, PRINCIPLES OF THE LAW OF CONTRACT 85 (Arthur L.
Corbin ed., 3d Am. ed. 1919)). 1
[8] According to the doctrine of merger by deed, “[i]n the absence of fraud or
mistake, all prior or contemporaneous negotiations or executory agreements,
written or oral, leading up to the execution of a deed are merged therein by the
grantee’s acceptance of the conveyance in performance thereof.” Link v. Breen,
649 N.E.2d 126, 128 (Ind. Ct. App. 1995) (citing Thompson v. Reising, 114 Ind.
App. 456, 462, 51 N.E.2d 488, 491 (1943)), trans. denied. Collateral and
independent rights or obligations are allowed to survive the deed because their
performance is not necessary to the conveyance of the real estate and, as such,
there is no need to merge them. Id. The test of merger is the express or implied
intention of the parties. Id. To ascertain the parties’ intent, words and phrases
of the contract cannot be read in isolation but must be read in conjunction with
other language contained in the contract. Id. at 128-29.
1
The doctrine of merger is a product of English common law and has existed since the time of
feudal estates. Under the reasoning nemo potest esse dominus et tenens (no man can be both tenant
and lord) merger traditionally applied to join two consecutive interests in land when both
interests came into the hands of one person. The doctrine primarily operated to simplify real
property titles in an era before land was conveyed by written instruments.
Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., 949 N.E.2d 1195, 1197 (Ind. 2011) (citations
omitted).
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[9] In finding in favor of Scott on his counterclaim for breach of contract, the trial
court issued findings of fact, which read as follows:
1. On February 17, 2012, the parties entered into a written
agreement (“Agreement”) which provided for the transfer of
certain real estate from Scott to Scott and Hemingway.
2. On the same date, Scott conveyed the subject real property
from himself to Scott and Hemingway as joint tenants with full
rights of survivorship.
3. The February 17, 2012 Agreement was drafted by
Hemingway and is in her handwriting.
4. Section 1 of the Agreement provides as follows: “There will
not be any cheating by either parties [sic].” The Agreement also
provides that [] “[i]f this agreement is broken, then the property
will go back to John Scott.”
5. Hemingway had a child on January 6, 2013. The parties
agree that the child is not Scott’s child. The child was most
probably conceived in April of 2012, only a little more than two
months after the execution of the Agreement.
6. “Cheating” in the context of a relationship means that one
party is intimate with a third party.
7. Hemingway cheated by having sexual relations with a third
party, which relations resulted in the birth of a child.
8. Hemingway has breached the Agreement and, as a result, the
property should be conveyed back to [Scott].
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Appellant’s App. at 6-7. The trial court ordered that Hemingway sign and
deliver to Scott a quitclaim deed conveying all of her rights, title, and interest in
the Property. Id. at 7.
[10] Here, the parties executed the contract just hours before the deed, and that
contract was indisputably breached by Hemingway. The contract’s specific
language that it “be attached to the property deed” indicates the clear intent of
the parties that the contract survive the deed. 2 Id. at 35. The contractual
obligations of fidelity and shared expenses and labor, taken on just hours before
the conveyance of the Property, were not obligations whose performance was
necessary to the completion of the conveyance. Rather, those obligations were
prospective in nature and addressed conduct that would trigger the operation of
the remedies clause, specifically here, a reconveyance to Scott. Because the
obligations in the contract were not necessary to the conveyance of the
Property, they are not merged into the deed. See Link, 649 N.E.2d at 128. As
such, we find no error in the trial court’s conclusion that the contract survived
the deed and the doctrine of merger does not apply.
2
Hemingway relies on the fact that the contract was not included with the deed when it was recorded in the
county recorder’s office and therefore was not an interest of record for purposes of third parties’ title searches.
However, we emphasize that this action does not involve an innocent third party but rather individuals who
were parties to the contract itself and therefore were on notice of its terms.
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Section 2 – The contract is not rendered unenforceable as
against public policy prohibiting contracts in consideration of
meretricious sexual services.
[11] Hemingway also contends that the contract is unenforceable based on public
policy that prohibits contracts in consideration of meretricious sexual services. 3
Indiana courts have long recognized and respected the freedom
to contract. We recognize a “very strong presumption of
enforceability of contracts that represent the freely bargained
agreement of the parties.” As a general rule, the law allows
persons of full age and competent understanding the utmost
liberty of contracting, and their contracts, when entered into
freely and voluntarily, are enforced by the courts. It is in the best
interest of the public that persons should not be unnecessarily
restricted in their freedom of contract. However, in certain
circumstances a court may declare an otherwise valid contract
unenforceable if it contravenes the public policy of Indiana.
Ransburg v. Richards, 770 N.E.2d 393, 395-96 (Ind. Ct. App. 2002) (citations
omitted), trans. denied.
[12] Our courts have refused to enforce private agreements on public policy grounds
in cases involving: (1) agreements that contravene a statute; (2) agreements that
clearly tend to injure the public in some way; or (3) agreements that are
otherwise contrary to the declared public policy of Indiana. Id. at 396.
3
We note that Hemingway’s contention contradicts her testimonial assertions that she was merely Scott’s
live-in housekeeper, she was not sexually intimate with him, and “cheating” probably referred to a potential
lawsuit involving Walmart. The trial court found that the couple was in a romantic relationship and that
“cheating” was defined as “one party being intimate with a third party.” Appellant’s App. at 7. It is on this
basis that Hemingway now raises her public policy argument.
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Hemingway admits that the contract neither contravenes a statute nor clearly
tends to injure the public. Appellant’s Br. at 17. Instead, she challenges the
contract as “otherwise contrary to declared public policy.” Ransburg, 770
N.E.2d at 396. As such, we must balance the following factors: (1) the nature
of the subject matter of the contract; (2) the strength of the public policy
underlying the statute; (3) the likelihood that refusal to enforce the bargain or
term will further that policy; (4) how serious or deserved would be the forfeiture
suffered by the party attempting to enforce the bargain; and (5) the parties’
relative bargaining power and freedom to contract. Id.
[13] We disagree with Hemingway’s attempts to characterize the contract as an
unenforceable agreement requiring forbearance of consensual sexual activity.
In nature, this contract is akin to a prenuptial agreement, in which the parties
resolve ahead of time their relative rights in property should the relationship
dissolve. See Ind. Code § 31-11-3-5(a)(1), -(a)(3) (parties to premarital
agreement may contract with each other regarding “rights and obligations of
each of the parties in any property of either or both of them whenever and
wherever acquired or located …. disposition of property upon … legal
separation … or … the occurrence or nonoccurrence of any other event.”).
Here, the parties had previously cohabited and separated, and the contract was
executed with the intent that the parties would resume their relationship and
conduct themselves as a unit with respect to the Property. While we
acknowledge that the record is devoid of any evidence concerning the parties’
intent to marry, we note that our courts have ceased to distinguish between
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married and unmarried cohabitants when evaluating the parties’ rights in
situations where an express contract exists or the circumstances support an
equitable remedy such as unjust enrichment. See, e.g., Bright v. Kuehl, 650
N.E.2d 311, 315 (Ind. Ct. App. 1995) (adopting rule that party who cohabits
with another without subsequent marriage is entitled to relief upon a showing
of express contract or viable equitable theory); see also Turner v. Freed, 792
N.E.2d 947, 950 (Ind. Ct. App. 2003) (holding that cohabitant was entitled to
relief by establishing express or implied contract or unjust enrichment even
though couple never married).
[14] Hemingway cites as support for her public policy argument Indiana Code
Section 34-12-2-1, which abolished certain torts pertaining to sexual activity, 4
and the advent of no-fault divorce. We find her reliance misplaced, as neither
tort liability nor marital dissolution is implicated in this case. Even so, we
observe that the contract does not require either party to perform sexual
services. Nor does it require either party to abstain from all sexual activity.
Rather, it simply lists cheating by either party as one of the acts constituting
breach.
[15] As for the remaining factors, we believe that the forfeiture suffered by Scott,
were the contract not enforced, would be serious and grievous. The record
shows that the Property had been his parents’ home, which he inherited at his
4
See Ind. Code § 34-12-2-1 (abolishing torts of alienation of affections, criminal conversation, and seduction
of any female person of at least eighteen years of age as well as action for breach of promise to marry).
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father’s death. By way of contrast, Hemingway wasted little time in breaching
the contract, has shown no interest in contributing to the Property since moving
out, and now seeks half of the Property through partition. Moreover, nothing
in the record indicates any substantial disparity in the parties’ relative
bargaining power or freedom to contract.
[16] Finally, we note that Hemingway’s public policy argument applies only to the
no-cheating provision of the contract. Nevertheless, she admits that she ceased
contributing to the expenses pertaining to the ownership of the Property as of
June 2013. As such, she breached a separate provision of the contract and is
subject to the remedies clause contained therein, which requires her
reconveyance of her interest in the Property to Scott by quitclaim deed. See Lee
v. State, 816 N.E.2d 35, 39 (Ind. 2004) (mere fact that contract contains
objectionable provision does not prevent enforcement of other provisions that
are severable). We find no error in the trial court’s order. Accordingly, we
affirm.
[17] Affirmed.
Riley, J., and Altice, J., concur.
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