Wind Wire, LLC v. Roger Finney and Patricia Finney

FILED
Oct 17 2012, 8:46 am
FOR PUBLICATION CLERK
of the supreme court,
court of appeals and
tax court
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES:
JONATHAN A. WATSON JAMIE C. WOODS
Wandling & Associates PHILLIP A. GARRETT
South Bend, Indiana Thorne • Grodnik, LLP
Mishawaka, Indiana
IN THE
COURT OF APPEALS OF INDIANA
WIND WIRE, LLC, )
)
Appellant-Defendant, )
)
vs. ) No. 71A03-1202-PL-78
)
ROGER FINNEY and )
PATRICIA FINNEY, )
)
Appellees-Plaintiffs. )
APPEAL FROM THE ST. JOSEPH SUPERIOR COURT
The Honorable Jenny Pitts Manier, Judge
Cause No. 71D05-1008-PL-151
October 17, 2012
OPINION - FOR PUBLICATION
BRADFORD, Judge
Appellant-Defendant Wind Wire LLC appeals the trial court’s judgment that it
fraudulently induced Appellees-Plaintiffs Roger and Patricia Finney to execute a contract
for the purchase and installation of a residential wind turbine and that it breached that
contract’s implied warranty of fitness for a particular purpose. We affirm.
FACTS AND PROCEDURAL HISTORY
The trial court based its judgment on these specific findings of fact. At some point
prior to May 14, 2008, the Finneys received a copy of a Wind Wire advertising brochure
that had been left in their mailbox by a Wind Wire representative. The brochure
described the cost savings to be realized through the use of energy producing wind
turbines and included the following representations:
WIND-WIRE provides the average household the means to harness the
wind at a feasible cost for a savings of approximately 75% to 100% of
current electric service.
With a savings of approximately $160 plus per month and a payoff span of
3-4 years you would control 75% to 100% of your electric supply utilizing
nature and doing your small part for the ecology? (sic)
If you could invest in a system that would not only increase the value of
your property but could generate an average of 700K wh [sic] per hour
could you do it?
WIND-WIRE will show how the homeowner can receive a substantial
refund on their (sic) taxes for the installation of the system, saving the
homeowner even more money.
Appellant’s App. p. 4
Wind Wire produced the brochure as an advertising tool to induce people to
contract with Wind Wire for the purchase and installation of wind turbines, and it
conceded at trial that a reasonable person would rely on the information contained in the
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brochure. Intrigued by the brochure’s representations, the Finneys contacted Wind Wire
and later met with Wind Wire representatives to discuss the installation of a wind turbine
on the Finneys’ property.
While meeting with Wind Wire, Mr. Finney declared that the Finneys wanted to
install a turbine to save money on their electric bill. In response to Mr. Finney’s
statement, Wind Wire representative Glen Smith affirmed the cost savings
representations contained in Wind Wire’s brochure. At trial, however, Wind Wire could
not recall the name or location of the customer alleged in the brochure to have generated
an average of 700 kWh through the use of its wind turbine. Moreover, at the time Wind
Wire placed the brochure in the Finneys’ mailbox, it did not know the average wind
speed in the town where the Finneys’ property is located.
Smith also told the Finneys that Wind Wire was highly qualified, had been in the
wind turbine business for awhile, and had installed two turbines at a bank in Mishawaka.
Based on these representations, the Finneys believed Wind Wire’s representatives to be
qualified and knowledgeable. However, the extent of Smith’s formal training was a one-
hour “webinar”; he had no experience with wind turbines prior to undertaking the
business of selling and installing them.
Wind Wire also told the Finneys that the company supplying their electric service,
AEP, would purchase the excess energy produced by their wind turbine. As intended by
Wind Wire, Mr. Finney understood this to mean that AEP would issue him a check for
those periods in which his energy production exceeded his energy consumption. AEP,
however, does not issue checks to its customers for this reason. Moreover, Wind Wire
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failed to inform the Finneys that, in order to measure the production of excess energy,
their wind turbine would require a type of electrical meter other than the typical
residential meter with which their wind turbine was equipped.
Wind Wire’s representatives further told the Finneys that installation of a wind
turbine would entitle them to a tax credit, the amount of which was described in terms of
a percentage of the purchase price. In fact, the credit was fixed at $900.00 for the
Finneys. Wind Wire created the impression that the amount of the Finneys’ tax credit
would be greater.
On May 14, 2008, in reliance on the representations contained in the brochure and
the statements made by Wind Wire representatives during their meeting with the Finneys,
the Finneys executed a contract with Wind Wire for the purchase and installation of a
wind turbine. The wind turbine was not erected on the Finneys’ property until October
2008, and it did not begin producing electrical power until September 2009. Since that
time, the Finneys’ wind turbine has produced no excess power and has had no effect on
their electric bills. The wind turbine actually consumes energy while it sits idle. Based
on the cost of electricity from AEP, it would not be possible for the Finneys’ wind
turbine to pay for itself in three to four years. AEP represents that it typically takes
twenty-five years for a wind turbine to pay for itself. Moreover, in the approximately one
year since its installation on the Finneys’ property, the wind turbine has produced a total
of only 134.2 kWh. According to AEP, even if the wind turbine were running
continuously at maximum capacity, it would create only 1100-1200 kWh and produce, at
most, a utility savings of $155 per month.
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In July 2010 a Wind Wire representative met with representatives of Southwest
Wind Power (“SWP”), the manufacturer of the wind turbines Wind Wire installs, to
address problems with such installations. SWP had received customer complaints
directed at Wind Wire and was concerned about customer expectations of energy
production associated with Wind Wire’s installation of SWP wind turbines. SWP
questioned Wind Wire about its customers’ experiences, specifically inquiring as to how
Wind Wire arrived at the energy production data it was advertising. SWP was especially
concerned about Wind Wire’s marketing materials and its ability to service its customers
adequately. Ultimately, SWP placed Wind Wire on a sixty-day suspension and
admonished Wind Wire not to “share extraordinary production levels of previous
customers with potential customers during the sales process.” Appellant’s App. p. 4.
SWP further placed Wind Wire on six months probation due to concerns with Wind
Wire’s marketing materials and customer satisfaction.
On August 9, 2010, the Finneys filed a complaint in St. Joseph Superior Court,
alleging, among other things, breach of contract, breach of implied warranty of fitness for
a particular purpose, and fraud. Relevant to these claims, the Finneys’ contract with
Wind Wire contained the following integration clause:
It is understood that this Agreement and any documents which are attached
hereto or referenced herein constitute the intire [sic] agreement between the
parties and all other agreements, represenstion [sic], promises,
inducements, statements, and understandings, prior to and
contemporaneous with this Agreement, written or oral, are suspended by
this Agreement.
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Appellant’s App. p. 17. The contract also included the following paragraph regarding
warranties:
IF PURCHASER MAKES ALL PAYMENTS WHEN DUE, SELLER
AND THE MANUFACTURER OF CERTAIN OF THE MATERIAL
BEING SUPPLIED BY SELLER WILL PROVIDE PURCHASER
WITH SPECIFICATE [sic] WARRANTIES. SELLER MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESEPCT TO THE GOODS COVERED BY THIS
CONTRACT….
Appellant’s App. p. 18. On January 17, 2012, after a bench trial, the trial court entered
judgment in favor of the Finneys. Specifically, the trial court concluded:
Wind Wire has breached [the contract] by failing to provide [the Finneys]
the warranties referenced in paragraph 15.[1]
[Wind Wire] has breached the implied warranty that the turbine at issue
was fit for the particular purpose for which [the Finneys] purchased it.
[Wind Wire] fraudulently induced [the Finneys] to execute the contract by
knowingly and falsely misrepresenting its experience and expertise,
knowingly and falsely misrepresenting the cost savings [the Finneys] would
enjoy as a result of the installation of the wind turbine at issue, and by
having made such representations, fully aware of their falsity, for the
purpose of inducing [the Finneys] to contract with Wind Wire for the
purchase and installation of a wind turbine.
Appellant’s App. p. 9. The trial court determined that the Finneys suffered damages “at
least in the amount of $14,500.00” and that they “are entitled to treble damages due to
[Wind Wire’s] fraudulent conduct.” Appellant’s App. p. 9. The court also awarded the
Finneys reasonable attorneys fees, for a total judgment of “$54,893.00 plus the costs of
this action.” Appellant’s App. p. 9.
1
The warranties are actually referenced in paragraph 16.
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DISCUSSION AND DECISION
I. Integration Clause and Disclaimer
Wind Wire argues that the trial court erred in finding fraud in the inducement.
The elements of fraud are “(1) a material representation of […] facts which (2) was false,
(3) was made with knowledge or reckless ignorance of its falsity, (4) was made with the
intent to deceive, (5) was rightfully relied upon by the complaining party, and (6)
proximately caused injury to the complaining party.” Tru–Cal, Inc. v. Conrad Kacsik
Instrument Sys., Inc., 905 N.E.2d 44-45 (Ind. Ct. App. 2009). Wind Wire claims the
Finneys are precluded from satisfying the fifth element—justifiable reliance—because its
contract with the Finneys contained an integration clause that disclaimed reliance on any
prior representations. We restate this issue as whether the trial court committed clear
error by applying the wrong legal standard.
In the appellate review of claims tried without a jury, the findings
and judgment are not to be set aside unless clearly erroneous, and due
regard is to be given to the trial court’s ability to assess the credibility of
the witnesses. A judgment will be clearly erroneous when there is “no
evidence supporting the findings or the findings fail to support the
judgment,” and when the trial court applies the wrong legal standard to
properly found facts. While findings of fact are reviewed under the clearly
erroneous standard, appellate courts do not defer to conclusions of law,
which are reviewed de novo.
Fraley v. Minger, 829 N.E.2d 476, 482 (Ind. 2005) (internal citations omitted).
“An integration clause of a contract is to be considered as any other contract
provision to determine the intention of the parties and to determine if that which they
intended to contract is fully expressed in the four corners of the writing.” Prall v. Ind.
Nat’l Bank, 627 N.E.2d 1374, 1377-78 (Ind. Ct. App. 1994) (citing Franklin v. White 493
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N.E.2d 161, 166 (Ind. 1986)). “Generally, where parties have reduced an agreement to
writing and have stated in an integration clause that the written document embodies the
complete agreement between the parties, the parol evidence rule prohibits courts from
considering extrinsic evidence for the purpose of varying or adding to the terms of the
written contract.” Id. (citing I.C.C. Protective Coatings, Inc. v. A.E. Staley Mfg. Co., 695
N.E.2d 1030, 1035 (Ind. Ct. App. 1998)). “An exception to the parol evidence rule
applies, however, in the case of fraud in the inducement, where a party was ‘induced’
through fraudulent representations to enter a contract.” Circle Ctr. Dev. Co. v. Y/G Ind.,
L.P, 762 N.E.2d 176, 179 (Ind. Ct. App. 2002).
Wind Wire contends the fraudulent inducement exception to the parol evidence
rule only applies if the alleged misrepresentation specifically “‘induced or produced the
execution of the … disclaimer,’” as opposed to the signing of the contract generally.
Appellant’s Br. p. 9 (quoting Circle Ctr. Dev. Co., 762 N.E.2d at 180). Although Wind
Wire accurately quotes our decision in Circle Ctr. Dev. Co., the proposition upon which
it relies has a broader application. “In both Prall and Circle Ctr. Dev. Co. we
acknowledged that a party could overcome the effect of an integration clause if it could
show it had a right to rely on the alleged misrepresentations and did in fact rely on them
in executing the release and/or integration clause.”2 Tru-Cal, Inc., 905 N.E.2d at 45
(emphasis added) (citing Prall, 627 N.E.2d 1374; Circle Ctr. Dev. Co., 762 N.E.2d 176).
Moreover, our decision in Circle Ctr. Dev. Co. did not overrule the requirement that the
weight given to a contract’s integration clause be decided on a case-by-case basis. See id.2
“A release is a species of contract….” Prall, 627 N.E.2d at 1377.
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at 46 (quoting Prall, 627 N.E.2d at 1379) (“‘Whether one has the right to rely depends
largely on the facts of the case.’”).
We conclude that the trial court did not apply the wrong legal standard and,
therefore, that its judgment is not clearly erroneous. We note that Wind Wire makes no
claim in its Appellant’s Brief that the evidence does not support the trial court’s findings
of fact or that these findings fail to support the court’s conclusions of law. The trial
court’s judgment on this issue is affirmed.
II. Warranty of Fitness for a Particular Purpose
Having affirmed the trial court’s judgment on fraud in the inducement, we need
not reach Wind Wire’s second argument that the court erred in finding breach of the
implied warranty of fitness for a particular purpose. As Wind Wire correctly highlights
in its reply brief, “the breach of warranty did not form the basis of [the trial court’s]
decision” or the resulting calculation of damages. Reply Br. p. 7. “Rather, the decision
was based entirely on the finding of fraud.” Reply Br. p. 7. Any error pertaining to this
issue is, therefore, harmless.
The judgment of the trial court is affirmed.
ROBB, C.J., and BAKER, J., concur.
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