Kansas City Services, Inc. v. Bryan Connan, individually, Julie Connan, individually, and Connan's Zionsville Investore, LLC (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
Nov 19 2015, 8:59 am
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Matthew A. Griffith, Esq. Kent M. Frandsen
Griffith Law Group, LLC Travis W. Montgomery
Indianapolis, Indiana Parr Richey Obremskey Frandsen
& Patterson LLP
Lebanon, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Kansas City Services, Inc., November 19, 2015
Appellant-Plaintiff, Court of Appeals Case No.
06A04-1502-PL-66
v. Appeal from the Boone Superior
Court
Bryan Connan, individually, The Honorable Matthew C.
Julie Connan, individually, and Kincaid, Judge
Connan’s Zionsville Investors, Trial Court Cause No.
LLC, 06D01-1310-PL-557
Appellees-Defendants
Bailey, Judge.
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Case Summary
[1] Kansas City Services, Inc. (“KCS”) appeals a judgment in favor of Bryan
Connan, Julie Connan (collectively, “the Connans”), and Connan Zionsville
Investors (“CZI”), upon KCS’s complaint for breach of contract and equitable
relief and CZI’s counterclaim to quiet title. We affirm the denial of relief on the
breach of contract claim; we reverse the denial of relief on the claim for
equitable relief. We remand for a hearing on the appropriate amount of
restitution.
Issues
[2] KCS presents four issues for review, which we consolidate and restate as the
following two issues:
I. Whether the trial court clearly erred in failing to find the
existence of a contract for the sale of real estate between
KCS and CZI; and
II. Whether the trial court clearly erred by finding that KCS
was not entitled to equitable relief with respect to four
years of payments to CZI because those payments had
been made to benefit a third party to the instant litigation.
Facts and Procedural History
[3] On January 29, 2002, the Connans and William Rabb (“Rabb”) executed a land
contract whereby Rabb agreed to pay the Connans $218,000.00 for real
property located at 95 East Pine in Zionsville (“the Property”). Rabb tendered
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a down payment of $10,000.00 and promised to make monthly payments of
$1,383.83 for sixty months and a balloon payment thereafter.
[4] On April 1, 2007, the Connans and Rabb executed an Addendum to Purchase
Agreement, changing the purchase price to $195,000.00 and the installment
payments to $2,500.00. On January 30, 2008, the Connans quit-claimed their
interest in the Property to CZI.
[5] In December of 2008, Rabb met with Bryan Connan and advised Connan that
his father-in-law, John Petrowski (“Petrowski”), “would start making the
payments for [Rabb].” (Tr. at 174.) Petrowski owns KCS, a real estate
investment company.
[6] On February 6, 2009, Petrowski, as an authorized signer, issued a KCS check to
CZI in the amount of $4,943.55. The Memo portion of the check reflected that
the payment was “Dn Pmt. Bldg 95 E Pine, Zionsville, Ind 46077.” (Pl. Ex. 5.)
KCS began to make monthly payments of $2,500.00 to CZI.
[7] On May 22, 2009, Petrowski, on behalf of KCS, addressed a letter to Connan,
on behalf of CZI, stating in part:
I would like to formalize our agreement on the sale of this
property to [KCS] from [CZI][.] . . . My records indicate that the
agreed purchase price of the property is $170,443.43 after the
February down payment of $4943.55 which paid all outstanding
balances on the property through February, 2009. I also
understand that we agreed that [KCS] would begin making
monthly payments of $2,500.00 for a period of five years at a
seven percent (7%) interest rate amortized over fifteen years.
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Upon completion of the sixty monthly payments in February
2014, a final payment of approximately $62,650 will be due to
complete the sale.
(Pl. Ex. 7.)
[8] Approximately one month later, Connan sent a letter drafted on letterhead of
Connan’s Paint & Body Shop, LLC, responding in part:
Please review and advise if it is agreeable. Per your May 22,
2009 letter, we agree to all points. Regarding property taxes, this
year they are due June 30 and need to be paid to [CZI] as title is
still held in CZI.
(Pl. Ex. 8.) Enclosed with the letter was an “Assignment of Land Contract”
prepared by Connan’s attorney. (Pl. Ex. 8.) The unsigned document recited
that Rabb was to assign to KCS and to Petrowski, individually, his rights under
the land contract with the Connans.1 Rabb was to remain jointly liable with
KCS and Petrowski. Petrowski, on behalf of KCS, responded by letter:
I noticed on the legal description, that the property is assigned to
Rabb and I want to be sure that Rabb will be removed and the
assignment will be changed to Kansas City Services, Inc. as the
only assignee when all the paperwork is complete.
(Pl. Ex. 9.)
1
The parties agree that the attorney was unaware of the transfer from the Connans to CZI.
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[9] Connan, on behalf of CZI, wrote to Petrowski and enclosed a copy of a letter
from Connan’s attorney. The letter provided in pertinent part:
I am not exactly sure what he means regarding his changes.
Rabb is the original Purchaser and he will be doing the
assignment to Kansas City Services, Inc. and John Petrowski,
individually. This will be done with signatures by Rabb, Kansas
City Services, Inc., John Petrowski and you and Julie, who have
to approve the assignment. As to having Kansas City Services,
Inc. only on the assignment, this is not in your best interests in
that we don’t know whether Kansas City Services, Inc. has been
appropriately funded or is an entity to which we can look to in
the event the contract is breached. The document is fine as I
originally prepared it and should be executed by all parties with
no further changes.
(Pl. Ex. 12.) Petrowski, on behalf of KCS, expressed “concern there might be a
problem having clear title transferred from [CZI] to [KCS] without [Rabb’s]
name appearing on the title.” (Pl. Ex. 13.) Connan forwarded to Petrowski a
tax bill for the Property, but sent no revised assignment document. Sometime
in 2009, Rabb obtained new employment and moved to California.
[10] On March 24, 2009, Rabb executed a “Transfer of Rights and Interest,”
purportedly transferring to KCS all Rabb’s contractual rights with respect to the
Property. (Pl. Ex. 6.) On January 7, 2010, Petrowski wrote to Connan, stating
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that he had enclosed a copy of the notarized transfer document. It was not
acknowledged or signed by the Connans or a representative of CZI.2
[11] In 2011, the Property was damaged when a water pipe burst. In response to
Petrowski’s inquiry Connan advised:
Now to address your concerns in your April 8th letter. The water
has been off for over a year but Indianapolis Water will not
discuss this with me as the account is in the name of Smart
Dot/Bill Rabb. When a water bill is not paid, it is usually turned
off at the shut-off valve out in the street. I, however, do not
know the location of the shut-off for 95 Pine. I understand that
the Zionsville Fire Department was called to turn off the water
when someone observed water running out the door. The
building is a total wreck. There is water standing, lights have
fallen down, mold on the walls has grown to 6” circles. There is
a hole in the back wall big enough to let animals in, gutters are
down, etc. There is no way insurance is going to cover the
damage after this amount of time. It would appear to me that the
only options I have to protect my security is to demand payment
in full or to petition the court for possession of the property.
(Pl. Ex. 31.) Petrowski proposed to Connan that Indiana Insurance Company
“needs to be involved” and expressed willingness to join Connan in pursuing
recovery from Indianapolis Water “legally to protect our financial interest in
the building.” (Pl. Ex. 32.) Connan received an insurance check in the amount
of $15,000.00. No repairs were performed.
2
Connan testified that he did not receive the document.
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[12] On June 28, 2011, KCS filed in the Boone County Recorder’s Office an
Equitable Interest Affidavit, asserting that KCS claimed an equitable interest in
the Property. (Pl. Ex. 35.) Petrowski also authored some letters to Connan
requesting a written agreement, an allocation of costs for water damage, and
that KCS be permitted to take possession of the Property with the right to rent it
to a third party.
[13] In February of 2012, Petrowski wrote to Connan, enclosing photographs of the
Property “when [KCS] agreed to purchase [it]” and expressing an “expectation”
that the Property would be “in the same general condition prior to completing
the purchase.” (Pl. Ex. 43.) In April of 2013, Connan’s bookkeeper addressed
a letter to Petrowski, individually, demanding payment for delinquent taxes on
the Property.
[14] On October 25, 2013, KCS filed a complaint against the Connans and CZI for
breach of contract, conversion, and unjust enrichment. On December 16, 2013,
CZI counterclaimed for breach of contract and foreclosure against KCS. CZI
also filed a complaint for foreclosure against Rabb. On October of 2014, CZI
obtained a default judgment of foreclosure against Rabb.
[15] On January 20, 2015, a bench trial was conducted with respect to KCS’s claims
and the defendants’ counterclaims. KCS argued that a contract existed and it
was entitled to specific performance or, alternatively, KCS was entitled to
equitable relief or restitution of sums converted. CZI argued that no contract
had been formed, KCS had made payments solely for the benefit of Petrowski’s
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son-in-law (and, indirectly, his daughter) and, lacking an expectation of other
benefit, KCS was not entitled to equitable relief.
[16] On January 21, 2015, the trial court entered its findings of fact, conclusions of
law, and judgment. In relevant part, the trial court determined that no contract
for the sale of the Property had been formed. The trial court found that KCS
was not entitled to recover on a theory of unjust enrichment because CZI had
conferred a benefit of foregoing foreclosure upon Rabb for four years and
Petrowski had hoped to preserve the Property for his children. CZI prevailed
upon its counterclaim and was granted relief from the cloud on its title relative
to KCS’s equitable interest affidavit. In sum, CZI and the Connans retained
possession of the Property with clear title, insurance proceeds, a judgment
against Rabb, and all sums paid by KCS. KCS appeals.
Discussion and Decision
Standard of Review
[17] The trial court entered findings of fact and conclusions of law pursuant to
Indiana Trial Rule 52(A). Such findings must disclose a valid basis for the legal
result reached in the judgment, and the evidence presented must support each
of the specific findings. J.M. v. N.M., 844 N.E.2d 590, 599 (Ind. Ct. App. 2006),
trans. denied.
[18] Upon review, we apply the following two-tiered standard: whether the
evidence supports the findings and whether the findings support the judgment.
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Redd v. Redd, 901 N.E.2d 545, 549 (Ind. Ct. App. 2009). The trial court’s
findings and conclusions will be set aside only if they are clearly erroneous, that
is, if the record contains no facts or inferences supporting them. Id. A
judgment is clearly erroneous when a review of the record leaves us with a firm
conviction that a mistake has been made. Id. We do not reweigh the evidence,
nor will we assess the credibility of witnesses, but consider only the evidence
most favorable to the judgment. Id. We review conclusions of law de novo. Id.
Existence of a Contract
[19] The existence of a contract is a question of law. Batchelor v. Batchelor, 853
N.E.2d 162, 165 (Ind. Ct. App. 2006). The basic requirements are offer,
acceptance, consideration, and “a meeting of the minds of the contracting
parties.” Id. Here, Connan urged that an assignment be executed by Rabb and
approved by CZI with Petrowski and KCS as new joint obligors. Petrowski did
not agree to personal liability and offered, on behalf of KCS, to purchase the
Property for KCS. This division was never resolved and there was no “meeting
of the minds” as to the identity of the purchaser. The trial court did not err in
concluding that no new contract for the purchase of the Property was formed.
Equitable Relief
[20] A claim for unjust enrichment is a “legal fiction” whereby a person who has
been unjustly enriched at the expense of another is required to make restitution
to the other. Zoeller v. E. Chicago Second Century, Inc., 904 N.E.2d 213, 220 (Ind.
2009) (citing RESTATEMENT OF RESTITUTION § 1 (1937)). To prevail on a
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claim of unjust enrichment, a claimant must establish that a measurable benefit
has been conferred on the defendant under such circumstances that the
defendant’s retention of the benefit without payment would be unjust.
[21] The trial court recognized that KCS had conferred a measurable benefit upon
CZI by making installment payments and paying real estate taxes. However,
the trial court disagreed that CZI had been unjustly enriched:
Under these circumstance[s], CZI did not have a reasonable
expectation of having to pay the benefits – payment of contract
installments and real estate taxes – back to KCS. CZI expected
to have to convey the property to Rabb or his designee once the
contract with Rabb was paid. CZI forebear [sic] foreclosure upon
Rabb for four (4) years when it might have done so due to his
default. CZI thus returned a benefit to Petrowski – that his
children’s interest in a property he hoped would be valuable for
them would not be extinguished.
(App. at 19.) The trial court also made a factual finding that: “John Petrowski
did not want his son-in-law and/or his daughter – particularly his daughter – to
lose the value of the contract.” (App. at 5.) Thus, the trial court was persuaded
that Petrowski (individually) hoped to preserve property for his daughter and
son-in-law.
[22] However, KCS – not Petrowski individually – made each payment to CZI.
There is no evidence of record that any payment was made on behalf of Rabb.
To the contrary, KCS while making payments demanded a contract naming
KCS as purchaser and at times requested possession of the Property to install a
tenant. Connan, while accepting payments on behalf of CZI, demanded an
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assignment with Rabb relinquishing his rights and both KCS and Petrowski
becoming liable to pay for the Property.3 Under neither scenario was there an
expressed intent to benefit Rabb, much less Rabb’s wife who had not contracted
with the Connans or CZI.
[23] Prior to the written communications between representatives of KCS and CZI,
Rabb had expressed to Connan a belief or hope that payments would be made
by Petrowski for Rabb. Rabb abandoned the Property, moved to California,
and did not remain a part of sustained negotiations. For four years, Connan
may have subjectively believed that there was an enforceable assignment.
There was not. Petrowski may have subjectively believed that there was a valid
contract for sale of the Property to KCS. There was not. However, regardless
of individual expectations,4 there is no evidence of record of a manifestation of
intent by KCS (or Petrowski on behalf of KCS) that would support a factual
finding that KCS made installment payments to purchase or preserve property
for any entity other than KCS. KCS made four years of payments and received
nothing in return.
3
The Assignment of Land Contract prepared by Connan’s attorney provided: “Purchaser [Rabb] hereby
assigns any and all right, title and interest under the above Land Contract to Assignee, including but not
limited to all rights, responsibilities and benefits accruing thereto. (Pl. Ex. 8.)
4
Connan’s bookkeeper also testified – not “for the truth of the matter” but to explain her bookkeeping entries
– that she understood Petrowski could make payments on Rabb’s behalf. (Tr. at 222.)
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[24] The trial court’s findings in this regard lack evidentiary support. As no valid
findings support the judgment denying KCS equitable relief and allowing CZI
to retain all monies paid, it must be reversed.
Conclusion
[25] The trial court did not err in concluding that a contract for the purchase of the
Property was not formed. However, the record leaves us with a firm conviction
that the trial court erred by denying KCS restitution upon its claim of unjust
enrichment.
[26] Affirmed in part; reversed in part, and remanded with instructions to conduct a
hearing on restitution.
Mathias, J., and Brown, J., concur.
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