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Rainbow Realty Group, Inc. v. Carter

Court of Appeals of Indiana

September 27, 2018

Rainbow Realty Group, Inc., and/or Cress Trust, Appellants/Cross-Appellees/Plaintiffs,
v.
Katrina Carter and Quentin Lintner, Appellees/Cross-Appellants/Defendants .

          Appeal from the Marion Superior Court The Honorable Marshelle Dawkins Broadwell, Magistrate The Honorable James B. Osborn, Judge Trial Court Cause No. 49D14-1505-CC-16629

          ATTORNEYS FOR APPELLANTS Karl L. Mulvaney Nana Quay-Smith Bingham Greenebaum Doll LLP Indianapolis, Indiana

          ATTORNEYS FOR APPELLEES John E. Brengle Indiana Legal Services, Inc. New Albany, 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 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

          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 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.

         [¶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, 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 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 ...


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