Rainbow Realty Group, Inc., and/or Cress Trust v. Katrina Carter and Quentin Lintner

FILED
Sep 27 2018, 9:08 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
Karl L. Mulvaney John E. Brengle
Nana Quay-Smith Indiana Legal Services, Inc.
Bingham Greenebaum Doll LLP New Albany, Indiana
Indianapolis, Indiana Jon Laramore
Cheryl Koch-Martinez
Adam Mueller
Indiana Legal Services, Inc.
Indianapolis, Indiana
ATTORNEYS FOR AMICUS CURIAE
STATE OF INDIANA
Curtis T. Hill, Jr.
Attorney General of Indiana
Thomas M. Fisher
Solicitor General of Indiana
Indianapolis, Indiana
Justin G. Hazlett
Section Chief, Consumer Litigation
Indianapolis, Indiana
Steven P. Frank
Michelle Alyea
Amanda Lee
Julia C. Payne
Deputy Attorneys General
Indianapolis, Indiana
ATTORNEYS FOR AMICUS CURIAE
CONSOLIDATED CITY OF
INDIANAPOLIS AND MARION COUNTY
Maggie L. Smith
Darren A. Craig
Frost Brown Todd LLC
Indianapolis, Indiana
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Donald E. Morgan
Office of Corporation Counsel
Indianapolis, Indiana
ATTORNEYS FOR AMICUS CURIAE
INDIANA ASSOCIATION FOR
COMMUNITY ECONOMIC
DEVELOPMENT INC. D/B/A
PROSPERITY INDIANA
Maggie L. Smith
Darren A. Craig
Frost Brown Todd LLC
Indianapolis, Indiana
ATTORNEYS FOR AMICUS CURIAE
NEIGHBORHOOD CHRISTIAN LEGAL
CLINIC
Maggie L. Smith
Darren A. Craig
Frost Brown Todd LLC
Indianapolis, Indiana
Chase M. Haller
Neighborhood Christian Legal Clinic
Indianapolis, Indiana
ATTORNEY FOR AMICI CURIAE
ECONOMIC JUSTICE PROJECT OF
NOTRE DAME CLINICAL LAW CENTER
AND NATIONAL CONSUMER LAW
CENTER
Judith Fox
Notre Dame Clinical Law Center
South Bend, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Rainbow Realty Group, Inc., September 27, 2018
and/or Cress Trust,
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Appellants/Cross-Appellees/Plaintiffs, Court of Appeals Case No.
49A02-1707-CC-1473
v. Appeal from the Marion Superior
Court
Katrina Carter and The Honorable Marshelle
Quentin Lintner, Dawkins Broadwell, Magistrate
Appellees/Cross- The Honorable James B. Osborn,
Appellants/Defendants. Judge
Trial Court Cause No.
49D14-1505-CC-16629
Bradford, Judge.
Case Summary 1
[1] In May of 2013, Appellees-Defendants Katrina Carter and Quentin Lintner
(collectively, “the Lintners”) signed a contract with Appellants-Plaintiffs
Rainbow Realty Group, Inc., and/or Cress Trust (collectively, “Rainbow”)
styled as a rent-to-buy contract (“the Agreement”) for an uninhabitable house in
Indianapolis (“the Property”). The Agreement provided that the Lintners were
purchasing the house, were responsible for all repairs, could retain all profits if
they sold the house for more than their contractual payoff, would be subject to
eviction if they defaulted, and would have their payments applied to the
1
We heard oral argument in this case on August 28, 2018, in the Indiana Supreme Court Courtroom in the
Indiana Statehouse in Indianapolis. We commend counsel (Mr. Mulvaney for the Appellants and Mr.
Laramore for the Appellees) for the high quality of their presentations and thank the staff of the Indiana
Supreme Court for its assistance in conducting this argument.
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purchase price if timely made for two years. The Agreement did not require
that it would end with a reversion of the Property to Rainbow.
[2] Almost from the beginning, the Lintners failed to make consistent payments
pursuant to the Agreement, and, in June of 2015, Rainbow filed suit to
terminate it, seeking immediate possession, damages, and attorney’s fees. The
Lintners moved for partial summary judgment on the basis that the Agreement
was actually a lease and that Rainbow had violated Indiana’s warranty of
habitability that applies to residential leases pursuant to Indiana Code article
32-31, chapters 3 through 9 (“the Landlord-Tenant Act”).2 The trial court
entered summary judgment in the Lintners’ favor on the question of whether
Rainbow had violated provisions of the Landlord-Tenant Act. Following a trial
on remaining issues, the trial court entered judgment in favor of the Lintners,
awarding them $4000 for what it concluded were Rainbow’s fraudulently
deceptive statements as well as $3000 in attorney’s fees. Rainbow contends that
the trial court erred in concluding that the Agreement was actually a lease and
that it committed fraud by misrepresenting its true character to them. The
Lintners contend that the trial court’s judgment was correct but that its award of
$3000 in attorney’s fees (when approximately $35,000 was requested)
constituted an abuse of discretion.
2
Indiana Code section 32-31-2.9-2 provides that the term “residential landlord-tenant statute” refers to any
of these chapters. For convenience, they will be referred to, collectively, as “the Landlord-Tenant Act.”
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[3] We conclude that the Agreement is not a lease subject to the Landlord-Tenant
Act. We do so pursuant to a long line of Indiana precedent requiring all leases
to have a definite term and a reversion to the lessor, provisions the Agreement
lacks. Our conclusion leads to the further conclusion that there is no basis on
which to find that Rainbow committed fraud as a matter of law. Finally,
because the Lintners did not prevail in the trial court, they are not entitled to
recover any of their attorney’s fees. We reverse and remand with instructions
to enter judgment in favor of Rainbow on their claim for eviction and
immediate possession of the Property. We also vacate the trial court’s
judgment that Rainbow committed fraud and its award of attorney’s fees to the
Lintners.
Facts and Procedural History
[4] Rainbow was founded in 1974 by James Hotka and buys and sells homes in
inner-city Indianapolis. Rainbow buys vacant, abandoned, or distressed homes
in need of rehabilitation and sells or leases them through various programs to
interested parties. Rainbow sells structures that have not yet been renovated to
purchasers, primarily through its rent-to-buy program, which it began in 1992.
[5] On April 24, 2013, Carter called Rainbow to inquire about home ownership
through the rent-to-buy program. On April 30, 2013, the Lintners returned to
Rainbow’s office to fill out their application after choosing the Property, located
at 910 North Oakland Avenue in Indianapolis. When the Lintners arrived,
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they were given a document which listed the homes available on that date,
including the Property. The document given to the Lintners stated, in part:
THE SELLER(S) OF THE ABOVE PROPERTY HAVE
NEVER LIVED IN THIS PROPERTY. THE PROPERTY,
INCLUDING THE CONTENTS (IF ANY) ARE BEING
SOLD “AS-IS” IN THEIR PRESENT CONDITION. THE
SELLER(S) NOR RAINBOW REALTY GROUP INC. MAKE
NO WARRANTIES NOR GUARANTIES AS TO THE
CONDITION, HABITABILITY AND/OR LAWFUL
ZONING USE OF THE PROPERTY.
Plaintiffs’ Ex. 2.
[6] The Lintners completed an application to purchase the Property and put $100
down to hold it. Another document given to the Lintners provided that they
would pay $449 when they signed the Agreement (the first month’s payment
minus the $100 deposit), and that their regular monthly payments thereafter
would be $549. Carter signed this document, and placed her initials beside the
paragraph which stated, “I HEREBY ACKNOWLEDGE AND
UNDERSTAND THAT ALL PROPERTIES ARE BEING SOLD AS-IS
WITHOUT ANY WARRANTY OF HABITABILITY.” Plaintiffs’ Ex. 6.
[7] After they were approved, the Lintners returned to Rainbow’s office on May 3,
2013, to sign the Agreement, which provided, in part, as follows:
B. METHOD OF PAYMENT: “Rent to Buy” The Buyer shall
pay $.00 down payment plus make rental payments to the
Landlord that are equal to the [principal, interest, taxes, and
insurance] Payment stated below. The 1st rental payment shall
be due upon the execution of this agreement. Said payment shall
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apply to the current month. The Buyer shall make like
payments, as rent, on the first of each month. Once the Buyer
has made twenty-four (24) or more rental payments, the parties
hereto shall execute a “Conditional Sales Contract” (Land
Contract) form embodying the terms contained herein.
Plaintiffs’ Ex. 7 at 1.
[8] The financial terms included a fixed interest rate of 16.30%, thirty years of
monthly payments of $514, and estimated monthly property taxes of $35 for a
total monthly payment of $549. Paragraph E of the Agreement provided that
The Buyer acknowledges and understands that the property is
owned by a Land Trust and the owner must provide the Buyer
with a ‘Seller’s Residential Real Estate Disclosure’ under Indiana
law (IC 24-4.6-2). The Buyer hereby acknowledges the receipt
of said disclosure form. The Buyer also understands the Seller
has never lived in the property and has little or no knowledge of
the properties [sic] condition, and therefore makes no warranties
of condition and/or habitability. The Buyer has been made
aware that independent inspections disclosing the condition of
the property are available, and has been afforded the opportunity
prior to the execution of this agreement to acquire said
inspections. The Buyer agrees to purchase the property as “AS-
IS” (THE OWNER WILL MAKE NO REPAIRS) condition
and hereby releases the Seller, Landlord and/or Property
Manager, it’s [sic] agents and/or employees, of any and all
liability relating to any defect or deficiency affecting the property.
Plaintiffs’ Ex. 7 at 1 (emphases in original). Paragraph C of the Agreement
required the Lintners to make their payment on the first day of each month and
provided that failure to timely make these payments subjected them to the risk
of eviction.
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[9] Along with the Agreement, the Lintners also signed a “Purchase Agreement
Declaration” (“the Declaration”), which was explicitly made part of the
Agreement. The Declaration provides as follows:
PURCHASE AGREEMENT INTENT: Purchase Agreement is
not a “rent with an option to purchase”, buyer is required to
purchase and seller is required to sell under the agreed purchase
price, down payment and monthly payment. Because the
Purchase Agreement mentions the word “rent” [Rainbow]
wishes to prevent misunderstandings and/or confusion about the
intent of this agreement. At the time of signing, the buyer has the
exclusive right to declare his/her intent in this agreement.
Plaintiffs’ Ex. 8.
[10] The Lintners checked and initialed the “buying” option on the Declaration:
My intent is to purchase the property at 910 N. Oakland Av.,
Indianapolis, IN 46201. I am not renting the property. All
payments shall apply to the principal and interest shown on the
amortization schedule provided at closing. If I decide to sell the
property during the term of our agreement I shall be entitled to
all profits above my payoff. In Addition [sic], I wish to save
money by repairing and maintaining the property myself. I do
not expect the property owner to make any repairs to the
property and fully understand that I am buying the property “as-
is” with out [sic] any warranty of habitability.
Plaintiffs’ Ex. 8. Neither the Agreement nor the Declaration contained any
provision requiring reversion of the Property to Rainbow.
[11] The Lintners began arranging for repairs to the Property after signing the
Agreement, finally agreeing to use Rainbow’s contractors, with the costs of the
repairs to be spread out in interest-free amounts added to the monthly
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payments. The Lintners agreed to make increased payments of $649 per month
beginning in June of 2013. The repair work was completed on July 22, 2013,
and the Lintners moved into the Property on or about August 1, 2013.
[12] Meanwhile, the Lintners had not made the May, June, or July of 2013
payments. In July of 2013, Rainbow began eviction proceedings but dismissed
the complaint and agreed to a payment plan for the arrearage. After more
arrearages and being given more chances to cure the delinquency, the Lintners
made their final payment on February 16, 2015. On March 25, 2015, Rainbow
again filed for eviction in Marion Small-Claims Court, and the Lintners
appealed the matter to Marion Superior Court.
[13] On June 8, 2015, Rainbow filed a complaint in Marion Superior Court to
terminate the Agreement and for immediate possession of the Property. On
July 29, 2015, the Lintners answered Rainbow’s complaint, raising defenses
and counterclaims, including allegations of fraud and misrepresentation,
deceptive acts pursuant to Indiana Code section 24-9-3-7, and failure to meet
(and misstatement of) its obligations as a landlord pursuant to Indiana Code
chapters 32-31-1 and 32-31-8.
[14] On May 17, 2016, the Lintners filed for partial summary judgment on their
claims that the Agreement was a lease and that Rainbow breached the warranty
of habitability and made false or deceptive statements regarding its ability to
disclaim the warranty. On August 11, 2016, the trial court granted the
Lintners’ motion for partial summary judgment, ruling that (1) for the first two
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years the Agreement was a lease; (2) the Landlord-Tenant Act therefore
governed the Agreement; (3) Rainbow was liable for breaching the warranty of
habitability; and (4) Rainbow made false or deceptive statements.
[15] A bench trial was held on remaining issues on December 6, 2016, and January
10 and March 22, 2017. On June 8, 2017, the trial court entered its judgment,
sustaining its earlier entry of partial summary judgment in favor of the Lintners.
As for damages, the trial court concluded that while Rainbow had breached the
warranty of habitability, the Lintners had not paid an unconscionable amount
pursuant to the Agreement, were not entitled to the return of their payments,
and were not entitled to damages for unjust enrichment. The trial court
awarded the Lintners $1000 in compensatory and $3000 in punitive damages
for what it found were Rainbow’s fraudulent misrepresentations regarding the
nature of the Agreement and also awarded $3000 in attorney’s fees. Rainbow
contends that the trial court erred in concluding that the Agreement was a lease
and that Rainbow committed actual fraud. The Lintners cross-appeal,
contending that the trial court abused its discretion in awarding them only
$3000 in attorney’s fees.
Discussion and Decision
Direct Appeal Issues
I. Whether the Agreement Is a Lease
[16] Rainbow challenges the trial court’s grant of partial summary judgment to the
Lintners, specifically its determination that the Agreement was a lease subject
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to the Landlord-Tenant Act. In Indiana, pretrial summary judgment rulings are
reviewable after trial. Keith v. Mendus, 661 N.E.2d 26, 35 (Ind. Ct. App. 1996),
trans. denied. As the moving party on summary judgment, the burden was on
the Lintners to make a prima facie showing that there were no genuine issues of
material fact and that they were entitled to judgment as a matter of law. Morris
v. Crain, 71 N.E.3d 871, 879 (Ind. Ct. App. 2017). The trial court’s entry of
partial summary judgment is reviewed under a de novo standard of review. Id.
When reviewing an entry of summary judgment, this Court does not weigh the
evidence but considers the facts in the light most favorable to the nonmoving
party. Reed v. Luzny, 627 N.E.2d 1362, 1363 (Ind. Ct. App. 1994), trans. denied.
Like the trial court, this Court must determine whether there is a genuine issue
of material fact and whether the moving party is entitled to judgment as a
matter of law. Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 39 (Ind. 2002).
[17] The central question of this case is whether the Agreement was a lease governed
by the Landlord-Tenant Act, and to answer this question, we must examine the
provisions of both the Landlord-Tenant Act and the Agreement. An issue of
statutory construction presents a question of law which is reviewed de novo on
appeal. See Chrysler Group, LLC v. Review Bd. of the Ind. Dep’t. of Workforce Dev.,
960 N.E.2d 118, 124 (Ind. 2012); State v. Eichorst, 957 N.E.2d 1010, 1012 (Ind.
Ct. App. 2011), trans. denied. We owe no deference to the trial court’s statutory
interpretation. Art Country Squire, L.L.C. v. Inland Mortg. Corp., 745 N.E.2d 885,
889 (Ind. Ct. App. 2001). Similarly, issues of contract interpretation are pure
questions of law, which we also decide de novo. George S. May Int’l Co. v. King,
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629 N.E.2d 257, 260 (Ind. Ct. App. 1994), trans. denied. We recognize that the
unambiguous language of a contract is conclusive upon the contracting parties
and the courts. Turnpaugh v. Wolf, 482 N.E.2d 506, 508 (Ind. Ct. App. 1985).
[18] Indiana Code section 32-31-2.9-3 defines the scope of the Landlord-Tenant Act,
providing that it “appl[ies] to rental agreements for dwelling units located in
Indiana.” When the Landlord-Tenant Act applies, it requires a landlord to
warrant a rental property’s habitability, providing that, inter alia, “[a] landlord
shall [… d]eliver the rental premises to a tenant in compliance with the rental
agreement, and in a safe, clean, and habitable condition.” Ind. Code § 32-31-8-
5. There is no dispute that if the Landlord-Tenant Act applied to the
Agreement, the Agreement violated the Act’s warranty of habitability for rental
premises. The question is whether the Landlord-Tenant Act applied to the
Agreement.
[19] While the Landlord-Tenant Act does not define “lease,” it broadly defines a
“rental agreement” as “an agreement together with any modifications,
embodying the terms and conditions concerning the use and occupancy of a
rental unit.”3 Ind. Code § 32-31-3-7(a). This limited guidance for determining
whether a particular instrument is a lease is not quite sufficient to dispose of the
3
While the parties seem to assume, and we agree, that a lease would qualify as a “rental agreement,” the
Landlord-Tenant Act seems to have been drafted to also cover rental agreements that are not in written form.
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question in this case. Fortunately, the Indiana Supreme Court has provided us
with the additional guidance required.
[20] In a line of cases, the Indiana Supreme Court has made it clear that a lease,
among other requirements, lasts a definite term and ends with the reversion of
the real property to the grantor. In 1845, the Court stated that
[n]o particular form is necessary to make a good lease. Any
words expressive of the intention of the parties, one to part with
and the other to take the possession of premises for a definite time,
whether in the form of “a license, covenant, or agreement,” will
constitute a good demise for years.
Munson v. Wray, 7 Blackf. 403, 404 (Ind. 1845) (citation omitted and emphasis
added). In 1885, the Indiana Supreme Court reiterated that a lease must have
an endpoint: “But it may be said, in general terms that where the conveyance
of an estate in land, subordinate to that of the grantor, to a grantee, upon a valid
consideration, and for a definite term, is made, the instrument making the
conveyance is a lease.” New York, Chicago & St. Louis Ry. Co. v. Randall, 102 Ind.
453, 457, 26 N.E. 122, 123 (1885) (emphasis added).
[21] In the 1892 case of Haywood v. Fulmer, the Indiana Supreme Court adopted the
following definition of “lease,” which now also explicitly required the
previously-implied reversion to the original grantor: “‘A lease at the common
law is a grant or assurance of a present or future interest for life, for years, or at
will, in lands or other property of a demisable nature, a reversion being left in the
party from whom the grant or assurance proceeds.’” 158 Ind. 658, 660, 32 N.E. 574,
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575 (1892) (citation omitted and emphasis added). The Court was even more
emphatic about the reversion requirement two decades later:
The effect of a lease is to give the lessee the right to the
possession of the property for a term of years, or at the pleasure
of the parties. It is within the contemplation of every lease that the
property shall at some time, definitely fixed, or to be determined later,
revert to the lessor.
Mendenhall v. 1st New Church Soc’y of Indpls., 177 Ind. 336, 342, 98 N.E. 57, 60
(1912) (emphasis added).
[22] Although the question has been revisited infrequently since Mendenhall, the
results have been consistent with that case and its predecessors. In 1914, this
court stated that “[a] lease of real estate is a contract by which, ordinarily the
owner divests himself of the possession and use of his property, in favor of the
lessee, upon a valid consideration, for a definite term.” Spiro v. Robertson, 57
Ind. App. 229, 234, 106 N.E. 726, 728 (1914) (citations omitted). In 1932, we
said, “‘it is one of the essentials of a lease, that it should contain a reversion in
favor of the party from whom the grant or assurance proceeds.’” Indian Ref. Co.
v. Roberts, 97 Ind. App. 615, 630, 181 N.E. 283, 288 (1932) (quoting Smiley v.
Van Winkle, 6 Cal. 605, 606 (1856)). Most recently, we noted that “[i]t has long
been the law in Indiana that ‘[a] lease of real estate is a contract by which,
ordinarily[] the owner divests himself of the possession and use of his property,
in favor of the lessee, upon a valid consideration, for a definite term.’”
Smyrniotis v. Marshall, 744 N.E.2d 532, 535 (Ind. Ct. App. 2001) (quoting Spiro,
57 Ind. App. at 234, 106 N.E. at 728), trans. denied. Finally, the Landlord-
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Tenant Act itself recognizes that a defining characteristic of “rental agreements”
is that they end at some point: “The term [rental agreement] includes an
agreement, regardless of what the agreement is called, that satisfies the
following: […] (2) The agreement provides for a rental period, explicitly or
implicitly, regardless of the term of the rental period.” Ind. Code § 32-31-3-
7(b). Our research has revealed no indication that the propositions for which
the cited authority stands have been overturned, abrogated, limited, or even
questioned, either judicially or legislatively.
[23] In light of the above authority, the requirement that a lease contemplate a
definite term and a reversion to the lessor remains good law and, insofar as it
was issued by the Indiana Supreme Court, is absolutely binding on this court:
We are bound by the decisions of our supreme court. See In re
Petition to Transfer Appeals, 202 Ind. 365, 376, 174 N.E. 812, 817
(1931). Supreme court precedent is binding upon us until it is
changed either by that court or by legislative enactment. Id.
While Indiana Appellate Rule 65(A) authorizes this Court to
criticize existing law, it is not this court’s role to “reconsider”
supreme court decisions.
Dragon v. State, 774 N.E.2d 103, 107 (Ind. Ct. App. 2002), trans. denied.
[24] Turning to the Agreement, it did not require that it would end after a definite
term, much less end with reversion of the Property to Rainbow, which are
necessary features of all leases in Indiana. We are therefore bound to conclude
that the Agreement was not a lease and that the Landlord-Tenant Act’s
provisions did not govern it.
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[25] The Lintners nonetheless argue that the Agreement was actually a lease because
it contained many features they characterize as lease-like: it (1) required them
to make monthly payments which generated no immediate equity; (2) allowed
them to be evicted, not foreclosed; (3) explicitly referred to the first twenty-four
payments as “rent”; and (4) placed restrictions on their use of the Property,
such as limitations on plaster and stud removal and forbidding pets and unused
vehicles. The Lintners characterize the Agreement as a “contract which […]
mingled [the] concepts of lease and purchase, selectively using them to
exclusively benefit [Rainbow].” Appellees’/Cross-Appellants’ Brief p. 17.
While we agree that many of the identified provisions are like those generally
found in leases (as opposed to sales agreements), none of this makes the
Agreement a lease if it did not also require reversion to Rainbow at some point.
[26] This is not quite the end of our inquiry, however. In their Appellees’ brief, the
Lintners argue that even if the Agreement is not a lease, it was created to avoid
application of the Landlord-Tenant Act and is thereby subject to its provisions.
“The [Landlord-Tenant Act does] not apply to [… o]ccupancy under a contract
of sale of a rental unit […] if the occupant is the purchaser […] unless the
arrangement was created to avoid application of [the Landlord-Tenant Act.]”
Ind. Code § 32-31-2.9-4 (statutory provisions reordered for clarity).
[27] Avoidance, however, was not advanced as a basis for relief by the Lintners in
the trial court and is therefore waived for appellate consideration. “A party
may not raise an issue for the first time […] on appeal that was not raised in the
trial court.” Rodgers v. Rodgers, 503 N.E.2d 1255, 1257 (Ind. Ct. App. 1987),
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trans. denied. That said, Rainbow began its rent-to-buy program in 1992, over
ten years before the Landlord-Tenant Act was enacted, and the Lintners point
to nothing specific in the record, other than the Agreement itself, as evidence
that the Agreement was created to avoid application of the Landlord-Tenant
Act. While the Lintners characterize the Agreement as “a tangled and
confusing array of provisions [that impose] additional duties of ‘homeowners’
but none of the benefits, in a high-risk rental contract with severe consequences
for even a minor breach[,]” Appellees’/Cross-Appellants’ Br. p. 38, this does
not constitute evidence that it was created to avoid application of the Landlord-
Tenant Act. In fact, the Declaration explicitly provides that it “is not an
attempt to waiver or avoid application of the residential landlord-tenant
statutes; its purpose is to clarify the intent of the agreement and to spell out
financial responsibilities for repair and maintenance.” Ex. 8. Even if the
Linters had properly preserved this issue, our review of the record reveals
nothing that would support a finding that the Agreement was created to avoid
application of the Landlord-Tenant Act.
[28] Finally, while the Lintners do not argue (and the trial court did not conclude)
that the Agreement is unconscionable, it is fair to say that the Lintners have
consistently emphasized what they characterize as the predatory nature of the
Agreement and argue that a liberal construction of the Landlord-Tenant Act—
and a narrow construction of its exceptions—is sound public policy. Even if we
accept the proposition that a broad reading of the Landlord-Tenant Act is
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sound public policy, it simply cannot be read broadly enough to make a lease
out of something that lacks some of a lease’s most fundamental characteristics.4
II. Actual Fraud by Misrepresenting
the Nature of the Agreement
[29] Rainbow contends that the trial court erred in concluding that it had committed
fraud by misrepresenting the true nature of the Agreement, namely that
Rainbow was not required to warrant the Property’s habitability. Actual fraud
consists of the following: “(1) a material representation of a past or existing fact
by the party to be charged that; (2) was false; (3) was made with knowledge or
reckless ignorance of its falsity; (4) was relied upon by the complaining party;
and (5) proximately caused the complaining party’s injury.” Ruse v. Bleeke, 914
N.E.2d 1, 10 (Ind. Ct. App. 2009). We have concluded that the Agreement was
not a lease and therefore not subject to the provisions of the Landlord-Tenant
Act and its warranty of habitability. Therefore, any representations to that
effect were not, in fact, false, which by itself fatally undercuts any finding of
actual fraud and requires reversal of the trial court’s judgment to that effect.
4
The various amici also argue, inter alia, that devices such as the Agreement are deceptive and predatory,
shift all of the risk and cost of the transaction onto the buyer, and are used by companies to exploit persons
who they know will be very unlikely to be able to make payments over time. Some amici provide background
on attempts over the years to circumvent consumer-protection laws by real-estate speculators and note that
several surrounding states have recently amended their laws to curb such practices. There is no attempt to
characterize these arguments as based on anything other than public policy grounds, and it is well-settled that
“public policy is a matter for the General Assembly subject only to constitutional limitations on legislative
authority.” Murray v. Conseco, Inc., 795 N.E.2d 454, 457 (Ind. 2003).
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Cross-Appeal Issue
III. Attorney’s Fees
[30] Pursuant to the Landlord-Tenant Act,
[i]f the tenant is the prevailing party in an action under this
section, the tenant may obtain any of the following, if
appropriate under the circumstances:
(1) Recovery of the following:
(A) Actual damages and consequential damages.
(B) Attorney’s fees and court costs.
Ind. Code § 32-31-8-6(d).
[31] The Lintners contend that the trial court abused its discretion in awarding them
only $3000 in attorney’s fees after they submitted an affidavit of attorney’s fees
in the amount of $35,475. Because we have concluded that the trial court
erroneously entered judgment in favor of the Lintners in all respects, however,
the Lintners are not the “prevailing party in an action” pursuant to the
Landlord-Tenant Act and are not entitled to seek recovery of any of their
attorney’s fees.
Conclusion
[32] The Agreement admittedly has some characteristics that are commonly
associated with sales contracts and some commonly associated with leases. On
the one hand, the Agreement requires buyers to pay for taxes, insurance, and
necessary repairs; allows them to build equity (eventually); and provides that
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they may sell the property and keep the profit, which are all provisions
commonly associated with sales contracts and ownership. On the other hand,
the Agreement does not provide for the immediate accumulation of equity,
places somewhat severe restrictions on the use and alteration of the property,
and allows Rainbow to evict in the event of default rather than resort to
foreclosure. Devices such as the Agreement seem to be a sort of hybrid, and an
argument could be made that neither the current law pertaining to sales
contracts nor the current law pertaining to leases is adequate to address the
issues such devices raise. The Lintners and the amici also argue that rent-to-
own contracts such as the Agreement are against public policy, alleging that
they are used to prey on ignorant and unsophisticated “buyers” lured by the
dream of home ownership who almost invariably end up with neither the home
nor their investment in it. This may happen in some cases. Such concerns,
however, are beyond the scope of this opinion and are the province of the
General Assembly.
[33] That said, the central legal issue in this case is whether the Agreement was a
lease, and we have concluded that it was not. Consequently, we reverse the
trial court’s entry of summary judgment in favor of the Lintners based on the
conclusion that Rainbow violated the Landlord-Tenant Act’s warranty of
habitability. Moreover, we reverse the trial court’s judgment that Rainbow
committed actual fraud by misrepresenting the nature of the Agreement.
Finally, we reverse the award of attorney’s fees to the Lintners. We reverse the
judgment of the trial court and remand with instructions to enter summary
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judgment in favor of Rainbow on its action for eviction and immediate
possession of the Property and for further proceedings, as necessary.
[34] The judgment of the trial court is reversed and remanded with instructions.
Baker, J., and Crone, J., concur.
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