United States District Court, N.D. Indiana, South Bend Division
JEFFREY S. SMITH and KATHRYN N. SMITH, Plaintiffs,
SUSAN E. HEARN, Defendant.
OPINION AND ORDER
P. SIMON, JUDGE
and Kathryn Smith purchased a house from Susan Hearn which
the Smiths say is chock-full of defects that weren't
disclosed to them at the time of the purchase. According to
their complaint, after the Smiths moved in, they discovered
the house had extensive water damage and black mold, among
other problems. Ms. Hearn answered the complaint and went on
the offensive filing two counterclaims against the Smiths.
Presently before me is the Smiths' motion to dismiss
those counterclaims. [DE 11.] Hearn's first counterclaim
alleges breach of contract rationalizing that the Smiths are
effectively seeking a post-purchase reduction of the price of
the home. The second counterclaim is for malicious
prosecution. Both counterclaims fail as a matter of law.
Smiths filed a complaint in state court on June 28, 2018 [DE
3], and Hearn removed the case on the basis of diversity
jurisdiction. [DE 1 at 2.] I will take the facts in the
complaint as true, as I must at this stage of the
proceedings. Here's what they reveal:
Smiths purchased a home from Hearn which is located on Lake
Tippecanoe in Leesburg, Indiana. The Smiths paid the purchase
price of $457, 000. [DE 3 at 6.] Before entering into the
purchase agreement and closing, Hearn made material
representations to the Smiths regarding the condition of the
home. The Smiths allege that Hearn verbally told them the
house had not flooded in 10 years, which they contend is
false - they believe it flooded 8 years before the sale and
again in April of May of 2011, and in 2014. [DE 3 at 1-2.] As
part of the sale, as is common in real estate transactions,
Hearn also gave the Smiths a residential real estate sales
disclosure which falsely represented there had never been a
hazardous condition on the property like mold, there was no
moisture and/or water problems in the basement, crawl space
or any other area, and there was no damage due to flooding.
[DE 3 at 2; Ex. B.]
the Smiths moved in, they discovered that the home had
experienced a significant flood and there was a lot of damage
to the house including to subflooring, floor joists, rotted
studs, and black mold in the house. [Id. at 2.] The
Smiths claim they cannot use the home in its present state,
and wish to tear it down and rebuild. [Id. at 3.]
They state a claim for fraud and statutory deception in
violation of Indiana Code § 35-43-5-3(a)(2). They seek
damages exceeding $400, 000, plus attorneys fees, punitive
damages, prejudgment interest, and costs. [Id. at
filed an answer and two counterclaims on August 27, 2018 [DE
8]. The first counterclaim is for breach of contract in which
Hearn states because the Smiths are seeking damages that
exceed $400, 000, they are “effectively seeking a
post-purchase reduction of the price of the Home to which
they are not entitled.” [DE 8 at 10.] The second
counterclaim is for malicious prosecution. Hearn states the
Smiths “are in truth attempting to force
Defendant/Counterclaimant to bankroll efforts to repair
damages caused to the Home by flooding that occurred in 2018,
after the Plaintiffs  purchased the Home.”
[Id. at 11.]
Smiths filed the instant motion to dismiss the counterclaims
pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing
they fail to state a claim upon which relief may be granted.
[DE 11.] This motion is fully briefed and ripe for
Rule of Civil Procedure 12(b)(6) allows a complaint to be
dismissed if it fails to “state a claim upon which
relief can be granted.” Fed.R.Civ.P. 12(b)(6).
Allegations other than fraud and mistake are governed by the
pleading standard outlined in Federal Rule of Civil Procedure
8(a), which requires a “short and plain
statement” that the pleader is entitled to relief.
Maddox v. Love, 655 F.3d 709, 718 (7th Cir. 2011).
order to survive a Rule 12(b)(6) motion, the complaint
“must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face'.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)(quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). All well-pleaded
facts must be accepted as true, and all reasonable inferences
from those facts must be resolved in the plaintiff's
favor. Pugh v. Tribune Co., 521 F.3d 686, 692 (7th
Cir. 2008). However, pleadings consisting of no more than
mere conclusions are not entitled to the assumption of truth.
Iqbal, 556 U.S. at 678-79. This includes legal
conclusions couched as factual allegations, as well as
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements.”
Id. at 678 (citing Twombly, 550 U.S. at
of Contract (Counterclaim I)
sets forth in her first counterclaim a claim for breach of
contract. She states that because the Smiths seek prejudgment
interest, costs, attorney fees, and punitive damages, and
allege their damages exceed $400, 000, this is an
“attempt at an after-the fact modification of the
parties' arrangement as to the price of the home”
which constitutes a breach of the purchase agreement. [DE 8
at 10.] With all due respect to Hearn, this counterclaim
borders on the nonsensical.
breach of contract claim requires: (1) the existence of a
contract; (2) the breach of the contract; and (3) damages.
Hopper v. Colonial Motel Properties, Inc., 762
N.E.2d 181, 187 (Ind.Ct.App. 2002). Here, it is undisputed
that under the purchase agreement, the Smiths agreed to pay
the sum of $457, 000 in exchange for title to the home. [DE 8
Ex. A.] Hearn does not contest that the Smiths tendered the
full purchase price of $457, 000 and received title to the
house. [DE 8 at 2.] As such, there cannot be a breach ...