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Song v. Iatarola

Court of Appeals of Indiana

May 10, 2017

Cheng Song, Appellant-Cross-Appellee,
v.
Thomas Iatarola and Theresa Iatarola, Appellees-Cross-Appellants

         Appeal from the Porter Superior Court The Honorable William E. Alexa, Judge Trial Court Cause No. 64D02-1109-PL-9151

          Attorneys for Appellant Robert A. Welsh Connor H. Nolan Harris Welsh & Lukmann Chesterton, Indiana

          Attorney for Appellee Benjamen W. Murphy Law Office of Ben Murphy Griffith, Indiana

          Baker, Judge.

         [¶1] Cheng Song planned to purchase land from Thomas and Theresa Iatarola until he discovered that the land was zoned for agricultural use, rather than for industrial use, as had been represented to him. After terminating the purchase agreement, Song sued the Iatarolas for the $150, 000 he had placed in escrow. A jury verdict awarded him the return of his money. He now appeals the trial court's denial of his petition for attorney fees and prejudgment interest. The Iatarolas cross-appeal, arguing that the trial court erred in denying their motion for summary judgment and motion to correct errors. Finding that the trial court did not err in denying the Iatarolas' motions, but that it did err in denying Song's motions, we affirm in part, reverse in part, and remand.

         Facts

         [¶2] In 1998, the Iatarolas purchased thirty-four acres of land that was zoned for agricultural use. Thomas built several structures on the property to warehouse equipment and inventory from his telecommunications and classic car sales business.

         [¶3] The land, which was adjacent to the Porter County Airport, was mortgaged. The Iatarolas decided to try to sell ten acres of their land to reduce or repay their debt to the bank. Thomas and Theresa agreed between themselves that Thomas would take charge of arranging for the sale of their land, and he acted as an agent on behalf of his wife from September 2010 through September 2011. On September 14, 2010, Thomas retained Robert Macmahon as their exclusive real estate agent for the sale of the ten acres.

         [¶4] On September 14, 2010, Macmahon showed Thomas a listing agreement for the real estate sale. The form was entitled "Listing Contract (Exclusive Right to Sell) Commercial-Industrial Real Estate"; under the section entitled "Seller's Representations, " the property is stated to be zoned I-2 Industrial. Appellant's App. Vol. II p. 90-91. Macmahon asked Thomas to review the listing to ensure its accuracy and asked both Thomas and Theresa to initial each page of the listing agreement to verify that they read it and that it was accurate. Thomas did so, but Theresa refused to sign her initials because the listing inaccurately stated that the zoning was I-2 Industrial rather than Agricultural. Theresa told Thomas that her reason for not initialing the listing and told him to have Macmahon correct the listing error.

         [¶5] A few days later, Thomas told Theresa that he had spoken with Macmahon and that the listing had been corrected. Theresa did not see or initial a corrected listing. On or around September 14, 2010, Macmahon began advertising the real estate online. The advertisements stated that the land was zoned I-2 Industrial and that it was suitable for warehousing and other light industrial uses.

         [¶6] In December 2010, Song saw online the advertisement for the sale of the ten acres of land. At this time, Song was a New Jersey resident who wanted to buy industrial real estate in northwest Indiana to use for an imported tool business he wanted to start. Song arranged a meeting with Macmahon to take place on December 31, 2010, to visit two industrially zoned properties, one of which was the Iatarolas' land. During their meeting, Song told Macmahon that he wanted to buy property that had buildings suitable for warehousing for an imported tool business, and they discussed Song's ability to expand and build additional industrial warehousing on the property. In an internet advertisement that has Macmahon's handwriting on it, the property's type is described as "Industrial For Sale"; the property overview states that the land is "in an established industrial area." Appellant's App. Vol II p. 87.

         [¶7] Also on December 31, 2010, Song told the Iatarolas of his intended use of the property he wanted to purchase. That same day, Song signed a purchase agreement with the Iatarolas to buy their ten acres for $600, 000. The contract was entitled "Purchase Agreement Commercial-Industrial Real Estate." Appellees' App. Vol. II p. 97.

         [¶8] Sometime before the signing, the Porter County Airport had stated that it might impose a runway protection zone in this property to comply with Federal Aviation Administration ("FAA") requirements. The purchase agreement included a contingency clause that stated, "This agreement is contingent upon the Buyer's agreement with the final approval of FAA regarding land use." Id. After reviewing the airport's proposal, Song worried that the runway protection zone could lead to a governmental taking of part of the property that he was purchasing, the removal of some of the warehousing buildings, or a restriction on the height of future construction. On January 6, 2011, he exercised his contingency right and terminated the purchase agreement.

         [¶9] For the next two and one-half months, Song and Thomas negotiated a new sale of a different part of the Iatarolas' land. On March 21, 2011, they signed a second purchase agreement for sixteen acres, which included most of the original ten acres with the warehousing buildings plus additional acres of land outside the potential runway protection zone. This second purchase agreement was entitled "Purchase Agreement Commercial-Industrial Real Estate." Appellant's App. Vol. II p. 35. It required $150, 000 in earnest money and included a provision for liquidated damages of $150, 000 if either party breached the contract. Song and Thomas signed an addendum to the second purchase agreement that provided:

Closing date will be predicated on the Seller's ability to vacate and exit the subject property. A maximum of 180 days ("Due Diligence Period") from the day of acceptance of this contract, has been agreed by both parties. When the seller advises the Buyer in writing, that the exit is complete, the Buyer will have 30 days, from that date, to close.

Id. at 40. Song deposited the $150, 000 earnest money in the bank.

         [¶10] In early June 2011, Thomas called Macmahon to say that while reviewing the transaction paperwork, he saw that the September 14, 2010, listing inaccurately stated that the property for sale was zoned I-2 Industrial instead of Agricultural. Macmahon acknowledged the error and made a note to his file of the date and subject of their phone call. That same day, Macmahon corrected the zoning represented in his advertisements online so that they showed the property to be zoned Agricultural. Neither Macmahon nor Thomas told Song about this error.

         [¶11] On August 7, 2011, Thomas and Song met on the property for a final inspection, and Thomas told Song that the property was zoned Agricultural. Thomas told Song that Agricultural zoning was preferred over Industrial zoning because the tax rate was lower; he also stated that Agricultural zoning allowed for the land to be used for the industrial warehousing and import tool business that Song wanted to start. Song told Thomas that he needed to consult an attorney to determine whether the Agricultural zoning would suit his needs. Later that day, Song saw that the online listing for the property had been updated to show that it was zoned Agricultural.

         [¶12] On August 12, 2011, Lee Lane, Song's attorney, wrote to Macmahon to advise him that the Porter County zoning regulations did not permit the use of warehousing for industrial purposes on agriculturally-zoned property. Lane stated that Song would not continue with his purchase unless the Iatarolas secured I-2 Industrial zoning and demanded a price reduction in order to compensate Song for the increase in real estate tax that would result from the change from agricultural to industrial zoning.

         [¶13] The Iatarolas refused to obtain the I-2 Industrial zoning or consider a price reduction. Song subsequently exercised his due diligence contingency rights under the contract, terminated the purchase agreement within the 180-day due diligence period provided in the addendum, and demanded the return of his $150, 000 earnest money deposit, which was being held in escrow at Horizon Bank. The Iatarolas refused to return Song's escrow deposit.

         [¶14] On September 19, 2011, Song filed a complaint against the Iatarolas, alleging actual fraud, constructive fraud, breach of contract, and contract rescission. The Iatarolas filed a counterclaim, also alleging actual and constructive fraud. On January 22, 2014, both parties filed motions for summary judgment; the trial court denied both. A jury trial took place from May 16-19, 2016. On May 19, 2016, Song filed a motion for judgment on the evidence, which the trial court denied. The jury returned a verdict for Song, and the trial court entered judgment on the jury's verdict in Song's favor for $150, 000. On June 20, 2016, the Iatarolas filed a motion to correct errors. On June 23, 2016, Song filed a motion for an award of attorney fees, prejudgment interest, and postjudgment interest. On August 12, 2016, Song filed a motion for an award of his post-trial attorney fees.

         [¶15] On August 12, 2016, the trial court held a joint hearing for the Iatarolas' motion to correct errors and Song's motions for attorney fees, prejudgment interest, and postjudgment interest. The trial court denied all motions. Song now appeals, and the Iatarolas cross-appeal.

         Discussion and Decision

         I. Summary Judgment

         [¶16] On cross-appeal, the Iatarolas argue that the trial court erred when it denied their motion for summary judgment. In their motion for summary judgment, the Iatarolas argued that there were no genuine issues of material fact regarding Song's breach of the purchase agreement because nothing in the four corners of the contract allowed him to terminate it for zoning and because any representations regarding zoning could not establish the defenses or claims of fraud, constructive fraud, or mutual mistake.

         [¶17] Our standard of review on summary judgment ...


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