Michael Thalheimer v. Ramon and Stacey Halum

FOR PUBLICATION
ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
ZACHARY J. EICHEL GARY M. SELIG
Einterz & Einterz JENNIFER A. BONESTEEL
Zionsville, Indiana Indianapolis, Indiana
IN THE FILED
Aug 13 2012, 9:36 am
COURT OF APPEALS OF INDIANA
CLERK
of the supreme court,
court of appeals and
tax court
MICHAEL THALHEIMER, )
)
Appellant-Defendent, )
)
vs. ) No. 49A02-1203-PL-167
)
RAMON and STACEY HALUM, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Cynthia Ayers , Judge
Cause No. 49D04-0906-PL-28898
August 13, 2012
OPINION - FOR PUBLICATION
ROBB, Chief Judge
Case Summary and Issues
Ramon and Stacey Halum (collectively, the “Halums”) entered into a contract with
Michael Thalheimer for Thalheimer to remove carpet and tiles in the Halums’s home and to
install new tiles. After Thalheimer did so, a dispute arose among the parties regarding
whether, when, and what Thalheimer would do about some portion of the work with which
the Halums were dissatisfied. Following a bench trial, Thalheimer appeals the trial court
findings and judgment in favor of the Halums. Thalheimer raises four issues, which we
restate as: 1) whether the Halums’s spoliation of evidence, if at all, required a finding in
favor of Thalheimer; 2) whether the doctrine of economic loss precluded the Halums’s
negligence claim; 3) whether the warranty in the contract precluded the Halums’s breach of
contract claim; and 4) whether the evidence presented supports the trial court’s findings
regarding the quality of Thalheimer’s work. The Halums contend Thalheimer’s appeal was
made in bad faith, and accordingly they request appellate attorney fees.
We affirm upon concluding that Thalheimer waived his claim that the Halums
spoliated evidence; the economic loss doctrine did not preclude the Halums’s negligence
claim; the trial court did not abuse its discretion in finding that Thalheimer’s conduct negated
the warranty in the contract; and the trial court did not abuse its discretion in finding that
Thalheimer’s work was of poor quality. We deny the Halums’s request for appellate attorney
fees.
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Facts and Procedural History1
On June 8, 2008, the Halums entered into a written contract with Thalheimer for his
compensation to remove carpet and tiles in the Halums’s living room, entryway, and at least
one hallway, and to install new tiles. Thalheimer completed the work in late June, the
Halums conducted an initial review2 of his work, and Thalheimer and the Halums made a
verbal agreement for Thalheimer to return at some unspecified later date to fix about six of
the tiles which were unsatisfactory to the Halums. The Halums also paid Thalheimer in full
and provided Thalheimer with two $100 gift cards as well, which Thalheimer believed to be
a bonus.
Over the next several months, Thalheimer and the Halums corresponded by email to
negotiate when and how many tiles Thalheimer would adjust when he returned to the
Halums’s home because the Halums identified additional tiles with which they were
dissatisfied. At some point, the Halums became frustrated with the negotiations, hired
another contractor to redo the flooring, and retained an attorney.
A little over a year after the contract was signed, on June 16, 2009, the Halums filed
suit against Thalheimer, alleging breach of contract, negligence, and violation of an implied
warranty of habitability.
Following a bench trial, the trial court entered an order which states:
1
We note that confidential information appears in the exhibits which are part of the appellate record.
The applicable rules governing the filing of documents excluded from public access are Indiana Appellate Rule
9(G)(1)(f) and Trial Rule 5(G), the latter of which explains how such documents shall be filed.
2
There appears to be some dispute as to the length of time in which the Halums conducted this initial
review of Thalheimer’s work. Because this is an issue of fact, we defer to the fact-finder’s assessment.
3
[T]he Court . . . now finds as follows:
1. That the [Halums] are entitled to Judgment against [Thalheimer] on their
Complaint in the amount of $14,262.38, which represents the amount [the
Halums] paid in labor and materials to Jeremy Keenan to have their floor torn
out and re-installed as a result of [Thalheimer]’s Breach of Contract and
negligence in installing the original floor per the parties’ contract.
***
Appellant’s Appendix. at 3-4.
Thalheimer filed a motion to correct error, which the trial court denied in an order
which states:
FINDINGS OF FACT
***
4. [Thalheimer] alleged [in his motion to correct error] that the Court
misapplied the law to the facts of this case and if certain corrections are made
that the outcome would have been in favor of [Thalheimer].
5. The Court rejects [Thalheimer]’s arguments on the Motion to Correct Error
and hereby denies the same.
CONCLUSIONS OF LAW
1. The contract was performed by [Thalheimer] and he was paid in full by the
[Halums]. The contract was also supposed to be performed in a “good and
workmanlike manner”.
2. The tile floor installation was done improperly, installed in an un-
workmanlike manner, and was a poor quality job. The [Halums] attempted to
have [Thalheimer] complete repair to the floor for several months, to no avail,
and ended up having the entire floor replaced.
3. [Thalheimer] breached the contract, but was paid for his work, quantum
meruit.
4. “Damage from a defective product or service may be recoverable under a
tort theory if the defect causes personal injury or damage to other property, but
contract law governs damage to the product or service to perform as expected.”
Gunkel v. Renovations, Inc., 822 N.E.2d 150, 153 (Ind. 2005). [The Halums]
presented additional evidence of physical injury to their son due to scuffing his
feet and falling down due to the unevenness of the tile floor installed by
[Thalheimer] in order to support their claim of negligence. Gunkel is
applicable to the facts of this case because the loss to [the Halums] was not
purely economic. Tort law is therefore pertinent and should have been applied.
5. Expert testimony was presented by [the Halums]’s witness, Jeremy Keenan,
that the tile floor installation was of poor quality and needed to be redone in its
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entirety due to tile color and texture differences found in each new tile lot. He
also found that he could not insure that the replacement of the offending tiles,
by themselves, would not cause further damage to the floor during installation
due to cracking and misalignment when placed next to the other non-offending
tiles. Mr. Keenan was qualified as a skilled witness to establish the standard of
care in installing this type of floor. That standard should have been met by
[Thalheimer] in his initial installation and was not which supports the finding
in favor of [the Halums].
6. Error alleged by [Thalheimer] that relates to spoliation of evidence and
standing to sue were waived by [Thalheimer] and therefore not considered in
this order.
***
Id. at 5-7.
Thalheimer now appeals.
Discussion and Decision
I. Standard of Review
In reviewing an order in which the trial court makes findings of fact and conclusions
of law, our standard of review is well-settled:
First, we determine whether the evidence supports the findings and second,
whether the findings support the judgment. In deference to the trial court’s
proximity to the issues, we disturb the judgment only where there is no
evidence supporting the findings or the findings fail to support the judgment.
We do not reweigh the evidence, but consider only the evidence favorable to
the trial court’s judgment. Challengers must establish that the trial court’s
findings are clearly erroneous. Findings are clearly erroneous when a review
of the record leaves us firmly convinced a mistake has been made. However,
while we defer substantially to findings of fact, we do not do so to conclusions
of law. Additionally, a judgment is clearly erroneous under Indiana Trial Rule
52 if it relies on an incorrect legal standard. We evaluate questions of law de
novo and owe no deference to a trial court’s determination of such questions.
McCauley v. Harris, 928 N.E.2d 309, 313 (Ind. Ct. App. 2010), trans. denied.
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II. Spoliation of Evidence
Thalheimer first argues the Halums committed spoliation of evidence by having
Keenan remove and redo Thalheimer’s tile installation, all in the same month that the Halums
filed suit. The Halums’s spoliation of evidence, Thalheimer argues, required the trial court to
find in his favor. Before we discuss whether spoliation occurred or its effect, if any, on the
trial court’s findings, we address the threshold issue of whether Thalheimer waived appellate
review of this issue.
Waiver is a threshold issue because generally a party is precluded from presenting an
argument or issue to Indiana appellate courts unless the party first raised that argument or
issue to the trial court. GKC Indiana Theatres, Inc. v. Elk Retail Investors, LLC., 764 N.E.2d
647, 651 (Ind. Ct. App. 2002).
This rule exists because trial courts have the authority to hear and weigh the
evidence, to judge the credibility of witnesses, to apply the law to the facts
found, and to decide questions raised by the parties. Appellate courts, on the
other hand, have the authority to review questions of law and to judge the
sufficiency of the evidence supporting a decision. The rule of waiver in part
protects the integrity of the trial court; it cannot be found to have erred as to an
issue or argument that it never had an opportunity to consider. Conversely, an
intermediate court of appeals, for the most part, is not the forum for the initial
decisions in a case. Consequently, an argument or issue not presented to the
trial court is generally waived for appellate review.
Id. (citations omitted); see, e.g., Harris v. Superior Ct. of Arizona ex rel. Cnty. of Maricopa,
278 Fed. Appx. 719, 722 (9th Cir. 2008) (holding that the appellant waived his appellate
claim of spoliation of evidence by raising it for the first time on appeal).
Thalheimer insists he raised the issue of spoliation to the trial court, referring us to
two portions of the record: 1) one page of the transcript in which Ramon Halum states that in
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June 2009 Keenan redid Thalheimer’s work of June 2008, and 2) portions of Thalheimer’s
motion to correct error in which he summarizes the law regarding spoliation of evidence and
urges the trial court to make an inference in his favor. Thalheimer also appears to contend
the Halums’s spoliation of evidence was so obvious that he should not have needed to
explicitly make such an argument to the trial court.
Arguments articulated in a motion to correct error which were not made at trial do not
preserve issues for appellate review. If the opposite were true, motions to correct error might
contain a bevy of untimely objections, petty complaints regarding the logistical presentation
of evidence, attempts to rework trial strategies that did not work well, and other untimely
arguments that would distract from the purpose of a motion to correct error.3
We are also not persuaded by Thalheimer’s contention that some arguments are so
obvious that they do not require explicit argument or presentation of any evidence. As stated,
an argument must be raised before the trial court to preserve an issue for appeal. If an
argument is as obvious as Thalheimer characterizes his own regarding spoliation, evidence or
an argument will inevitably be presented at trial, even if unintentionally.
It is this latter type of argument which we now address. Specifically, whether the
testimony to which Thalheimer now refers us sufficiently raised the issue of spoliation to
avoid waiver:
3
Cf. P-M Gas & Wash Co., Inc. v. Smith, 268 Ind. 297, 301, 375 N.E.2d 592, 594 (1978):
The motion to correct error serves three purposes: (1) to present to the trial court an
opportunity to correct error which occurs prior to the filing of the motion; (2) to develop
those points which will be raised on appeal by counsel; and (3) to inform the opposing party
concerning the points which will be raised on appeal so as to provide that party an
opportunity to respond in the trial court and on appeal.
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Q [Thalheimer’s trial attorney]: So . . . so just to clarify. June, 2008 Mr.
Thalheimer laid the floor and June, 2009 Mr. Keenan laid the floor. Is that
right?
A [Ramon Hulman] Yes.
Transcript at 57 (ellipses in original).
This single question and answer is insufficient to argue spoliation occurred, and thus,
insufficient to preserve the issue of spoliation for appellate review. This question was part of
cross-examination which spanned less than one and one-half pages in the transcript. Read in
context, this question appears to have been intended to clarify that Keenan redid
Thalheimer’s work during the two-year warranty period after Thalheimer completed the
work. This question – and the focused, limited cross-examination in the entirety – did not
explicitly seek to present evidence of spoliation, appear to have been intended to demonstrate
evidence of spoliation, or raise the issue of spoliation at all.4
III. Economic Loss
Generally, the economic loss doctrine provides that where a contract exists, that
“contract is the only available remedy where the loss is solely economic in nature, as where
the only claim of loss relates to the [service or] product’s failure to live up to expectations,
and in the absence of damage to other property or person.” Gunkel, 822 N.E.2d at 152
4
We note that even if Thalheimer did not waive the issue of spoliation of evidence, and even if the
trial court should have concluded the Halums did, in fact, spoliate evidence, the trial court was not required to
find in favor of Thalheimer. It is well-settled that when one party demonstrates that an opposing party
spoliated evidence, the fact-finder has the discretion to find that the missing evidence was unfavorable to the
party which destroyed the evidence, and likewise, the discretion to find that the missing evidence was not
necessarily unfavorable to the party which destroyed the evidence. Glotzbach v. Froman, 854 N.E.2d 337, 338
(Ind. 2006) (“If spoliation by a party to a lawsuit is proved, rules of evidence permit the jury to infer that the
missing evidence was unfavorable to that party.”) (emphasis added); Am. Nat. Prop. & Cas. Co. v. Wilmoth,
893 N.E.2d 1068, 1070 (Ind. Ct. App. 2008) (“If spoliation by a party to a lawsuit is proved, the jury may infer
8
(quotation omitted). Thalheimer argues the trial court failed to apply the economic loss
doctrine in determining the claims and remedies available to the Halums. The Halums
respond that the economic loss doctrine does not apply because the trial court entered a
factual finding that the Halums’s young son sustained physical injury.
We are guided by Indiana case law regarding the economic loss doctrine, which began
with Reed v. Cent. Soya, 621 N.E.2d 1069 (Ind. 1993), modified on reh’g on other grounds
by 644 N.E.2d 84 (Ind. 1994). In Reed, the supreme court principally addressed whether,
under Indiana’s Strict Product Liability Act, one may recover damages for property damage.
The court adopted the economic loss doctrine, which is common in other states, and held that
“[w]here . . . only economic loss is alleged, no recovery is allowed under the Act.” Id. at
1074 (emphasis in original). The court continued:
[W]here the loss is solely economic in nature, as where the only claim of loss
relates to the product’s failure to live up to expectations, and in the absence of
damage to other property or person, then such losses are more appropriately
recovered by contract remedies.
. . . Allowing a buyer to recover in tort where he has suffered only economic
loss allows him to circumvent the seller’s effective limitation or exclusion of
warranties under the UCC, and subjects manufacturers to liability for damages
of unknown and unlimited scope.
Id. at 1074-75.
In Gunkel, the court clarified:
Indiana law under the Products Liability Act and under general negligence law
is that damage from a defective product or service may be recoverable under a
tort theory if the defect causes personal injury or damage to other property, but
contract law governs damage to the product or service itself and purely
that the missing evidence was unfavorable to that party.”) (emphasis added), trans. denied.
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economic loss arising from the failure of the product or service to perform as
expected.
***
The theory underlying the economic loss doctrine is that the failure of a
product or service to live up to expectations is best relegated to contract law
and to warranty either express or implied. The buyer and seller are able to
allocate these risks and price the product or service accordingly.
822 N.E.2d at 153.
In other words, a plaintiff may bring an action for breach of contract and may only
recover economic losses under that contract, but the same plaintiff may also bring a tort
action for a loss that is not purely economic and not covered in the contract. Whether the
plaintiff may succeed under the tort theory is another question, but the point here is that the
plaintiff is not precluded from bringing an action for personal injuries merely because a
contract existed and the plaintiff also seeks a remedy under the contract. See Fleetwood
Enters., Inc. v. Progressive N. Ins. Co., 749 N.E.2d 492, 495 (Ind. 2001) (“[U]nder Indiana
procedure, a plaintiff may readily pursue both a contract claim for damage to the product
itself and a tort claim for personal injury or damage to other property under the Products
Liability Act.”).
Here the Halums sued Thalheimer for a breach of contract, and the trial court found in
their favor. The Halums also sued Thalheimer for negligence for the injury to their son, and
the trial court found in their favor. The economic loss doctrine does not lead us to conclude
the trial court committed reversible error.
Thalheimer appears to challenge the trial court’s finding that the Halums’s son
sustained an injury, but this is quite different from arguing the trial court improperly failed to
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apply the economic loss doctrine, and is unpersuasive in its own right because we do not
reweigh evidence.
IV. Warranty
Thalheimer next argues that the trial court erred in not considering the warranty
included in the contract when it ruled in favor of the Halums. The portion of the contract to
which Thalheimer refers states: “All workmanship guaranteed for two (2) years from date of
completion.” Appellant’s App. at 92. Thalheimer contends that because of this clause, the
Halums are not entitled to reimbursement from Thalheimer for having another contractor
redo the tiling work within two years after Thalheimer completed his work.
In addressing Thalheimer’s argument as to the warranty, at least two sub-issues arise.
It appears from the evidence that the Halums sought Thalheimer’s additional work under the
warranty and Thalheimer was dilatory in responding. The degree to which the Halums
diligently sought redress under the warranty and the degree to which Thalheimer was dilatory
were factual issues at trial. The first sub-issue then, is whether the trial court abused its
discretion by apparently concluding that Thalheimer’s dilatory response in effect voided the
warranty.5 As stated, this was an issue thoroughly covered by the testimonies of Thalheimer
and the Halums and the email correspondence between them. This is a factual issue, and we
defer to the fact-finding court that the communication between the parties beginning at the
time Thalheimer first completed the work led to the finding that Thalheimer’s conduct
5
Stated differently, in a manner more common when addressing breach of contract claims, did
Thalheimer breach the contract first by not honoring the warranty? This is essentially what the trial court
addressed, but the issue was presented at trial in a manner that is better described in the text.
11
effectively voided the warranty. We do not second-guess the trial court’s findings in this
regard.
The second sub-issue is whether the warranty in the contract was clear. In Schultz v.
Erie Ins. Grp., 754 N.E.2d 971 (Ind. Ct. App. 2001), trans. denied, our court explained how
the term “faulty workmanship” in an insurance contract could be read in at least two ways.
Id. at 974-77. The term workmanship could refer to a final product, or it could refer to one’s
craftsmanship. This ambiguity could be relevant here, where Thalheimer argues the warranty
in the contract only entitled the Halums to his continued labor (i.e., craftsmanship) in the
event of their dissatisfaction; while the Halums argue the warranty in the contract entitled
them to a satisfactory product. Because of this genuine dispute over the interpretation of the
terms of a contract, it would not have been unreasonable for the trial court to construe it
against Thalheimer, who drafted it. See Binford v. Shicker, 553 N.E.2d 845, 848 (Ind. Ct.
App. 1990), trans. denied.
In sum, the trial court did not abuse its discretion in finding for the Halums in spite of
the disputed warranty included in the contract.
V. Quality of Thalheimer’s Work
Thalheimer next argues the trial court erred in concluding that Thalheimer’s tile work
was done in an unworkmanlike manner. He refers us to portions of the record which support
his view that his work was done properly, but this is contrary to other portions of the record
which support the trial court’s finding that the quality of his work was of poor quality,
namely, the testimonies of the Halums and Keenan. Thalheimer invites us to reweigh the
12
evidence and assess the credibility of witnesses. Per our standard of review, we decline this
request and affirm this conclusion of the trial court.
VI. Appellate Attorney Fees
The Halums argue Thalheimer’s appeal is frivolous and was made in bad faith, and
therefore they seek appellate attorney fees under Appellate Rule 66(E). Our discretion to
award attorney fees under this rule is “limited to instances when an appeal is permeated with
meritlessness, bad faith, frivolity, harassment, vexatiousness, or purpose of delay.” Life v.
F.C. Tucker Co., Inc., 948 N.E.2d 346, 353 n.3 (Ind. Ct. App. 2011). We do not believe
Thalheimer’s appeal warrants an award of appellate attorney fees to the Halums, and deny
the request.
Conclusion
Thalheimer waived the issue of the Halums’s spoliation of evidence by not presenting
the issue to the trial court. The economic loss doctrine did not preclude the Halums’s
negligence claim. The trial court did not abuse its discretion in determining the contract
warranty did not bar the Halums’s breach of contract claim, or in finding that Thalheimer’s
work was of poor quality. Therefore we affirm, but the Halums’s request for attorney fees is
denied.
Affirmed.
BAILEY, J., and MATHIAS, J., concur.
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