Conroad Assocs., L.P. v. Castleton Corner Owners Ass'n, Inc.

187 N.E.3d 885

CONROAD ASSOCIATES, L.P., Appellant-Plaintiff,

v.CASTLETON CORNER OWNERS ASSOCIATION, INC. and McKinley, Inc., Appellee-Defendants.

Court of Appeals Case No. 21A-PL-1125

Court of Appeals of Indiana.

FILED April 13, 2022

Attorneys for Appellant: Christopher J. Bayh, John R. Maley, Beth A. Behrens, Barnes & Thornburg LLP, Indianapolis, Indiana

Attorneys for Appellee: Jenny R. Buchheit, Angela P. Krahulik, Meredith A. Wood, Ice Miller LLP, Indianapolis, Indiana

Mathias, Judge.

[1] Conroad Associates, L.P. ("Conroad") owns a building that is maintained by Castleton Corner Owners Association, Inc. ("the Association"). In February 2015, a sewer lift station maintained by the Association at the building failed and flooded a tenant's location with sewage. Following the flood, the tenant terminated its lease with Conroad.

[2] Conroad sued the Association for breach of contract for failing to maintain the lift station. The trial court found for Conroad following a bench trial, and the Association appealed. In a published opinion, we affirmed the trial court's judgment that the Association had breached its contract for failing to maintain the lift station. Castleton Corner Owners Ass'n, Inc. v. Conroad Assocs., L.P. , 159 N.E.3d 604, 607 (Ind. Ct. App. 2020), trans. not sought (" Castleton Corner I "). However, we reversed the trial court's calculation of damages and remanded with specific instructions for the trial court to enter a reduced damage award. Id. at 615.

[3] While the appeal in Castleton Corner I was pending, the trial court held proceedings supplemental to the execution of its judgment against the Association. In the proceedings supplemental, the trial court ordered the Association to transfer title to the sewer lift and associated easements to Conroad in partial satisfaction of the judgment. The Association initiated an appeal of the order in proceedings supplemental in Castleton Corner Owners Association, Inc. v. Conroad Associates, L.P. , No. 20A-PL-1253 (Ind. Ct. App. Jul. 6, 2020) ("Castleton Corner II "). The Association further declared bankruptcy, initiating an automatic stay of the proceedings supplemental and the appeal in Castleton Corner II .

[4] However, the appeal in Castleton Corner I was not stayed, and, following certification of our opinion, the Association moved to have the trial court amend the original judgment damages. The Association also tendered payment, via the trial court clerk, in the amount of the amended judgment to Conroad. The Association thus also moved to vacate the order in proceedings supplemental that was the basis for the appeal in Castleton Corner II . Following the lifting of the bankruptcy court's stay, in May 2021 the trial court: granted the Association's motions and amended the original judgment pursuant to our instructions in Castleton Corner I ; ordered the trial court clerk to release the tendered payment to Conroad in satisfaction of the amount of the amended judgment; and vacated the original order in proceedings supplemental.

[5] Conroad now appeals and raises the following three issues for our review:

I. Whether the trial court had subject matter jurisdiction over the original order in proceedings supplemental due to the pending appeal of that order in Castleton Corner II .

II. Whether the Association's motion to vacate the original order in proceedings supplemental violated the bankruptcy stay or was untimely.

III. Whether the trial court erred when it vacated the original order in proceedings supplemental.

[6] We hold that the trial court's continued exercise of jurisdiction was proper as it did not put Association's liability back into doubt, and the manner of enforcing the judgment on that liability remained in fieri in the trial court. We further hold that the Association's motion to vacate the original proceedings supplemental order did not violate the bankruptcy stay and was not untimely. And, finally, we hold that the trial court did not err when it vacated the original order in proceedings supplemental. Therefore, we affirm the trial court's judgment.

Facts and Procedural History¹

[7] This is the third appeal in this contentious case. We summarized the facts leading to this litigation in our opinion in the first appeal:

In early 2006, Conroad purchased a retail building in an area of Indianapolis known as Castleton Corner. At the time Conroad purchased the Castleton Corner building, it was occupied by Pier 1. On February 28, Conroad and Pier 1 entered into a ten-year lease agreement, which was set to terminate on February 29, 2016. However, Pier 1 had the "right, privilege and option" to extend the lease for two five-year periods.

As the owner of the building, Conroad became a member of the Association, which exists to establish "minimum standards pertaining to the development, use and maintenance" of Castleton Corner. Pursuant to the Association's Declaration of Development Standards, Covenants, and Restrictions ("the Declaration"), the Association agreed to pay "all Maintenance Costs in connection with" improvements constructed at Castleton Corner, which costs are then allocated among the members based on their proportionate share.

The Declaration defines "Maintenance Costs" as follows:

"Maintenance Costs" shall mean all of the costs necessary to maintain the Roads, drainage ditches, sewers, utility strips and other facilities within Castle Corner to which the term as used in the relevant sections herein applies, and to keep such facilities operational and in good condition, including, but not limited to, the cost of all upkeep, maintenance, repair, replacement of all or any part of such facilities, payment of any taxes imposed on either the facilities or on the underlying fee, easements or rights-of-way, and any other expense reasonably necessary or prudent for the continuous operation of such facilities.

In addition, the Association's Code of By-Laws requires its Board of Directors to provide for the "ownership, operation, maintenance, upkeep, repair, replacement, administration, and preservation of the roads, drainage ditches, utility strips and sewers, including a sanitary lift station" in Castleton Corner.

The sanitary lift station at Castleton Corner collects the toilet and sink runoff from each of the Association's buildings. The lift station then uses two electrically powered pumps to propel the runoff upward until it eventually joins the City of Indianapolis’ sewer system. In the event of a malfunction with the pumps, there is a window of two to three hours before the lift station overflows. If the lift station were to overflow, the runoff would flood Conroad's building as it is the lowest one on the Association's sewer system.

Beginning in 2006, McKinley, Inc. ("McKinley") provided maintenance services for the Association. Every Friday, Curtis Pitts, an employee of McKinley, performed visual inspections of the lift station. In addition, every Monday, Pitts would test the generator to ensure that it functioned normally. Pitts was always on call in order to respond to issues with the lift station.

On Friday, February 13, 2015, Pitts conducted his inspection of the lift station and concluded that it was operating normally "with no sign of any issue." However, the next morning, a Pier 1 employee opened the store at 9:00 a.m. and found one-quarter to one-half of an inch of water containing "raw human sewage" in the back of the store, which levels continued to rise.

Instead of calling Pitts, the employee called a plumbing company, but that company was unable to stop the flooding. Pitts was ultimately notified about the flood at Pier 1 at 6:00 p.m. Pitts arrived at the location and confirmed that the lift station's control panel was not receiving electrical power, which had caused the lift station to fail. Pitts called several companies, and a plumbing company arrived with a vacuum truck to remove the sewage. By that time, the raw human sewage in Conroad's building had "seeped" into the cracks and spaces between the flooring squares and into the drywall. In addition, an electrician arrived to work on the lift station and ultimately repaired it the next morning.

Following the flood of sewage, Pier 1 informed Conroad that it would not pay rent until Conroad repaired the building. Conroad retained a restoration company to clean and restore the building. However, Pier 1 never reopened its store. Instead, on March 1, Pier 1 returned possession of the building to Conroad. Pier 1 then terminated its lease and paid Conroad a termination payment of $128,000. On April 12, 2016, Conroad leased its building to Furniture Discounters, Inc., which lease "carried a lower Base Rent than the Base Rent that Pier 1 would have paid if Pier 1 had renewed its lease" with Conroad.

On July 3, 2017, Conroad filed an amended complaint against the Association in which Conroad claimed, in relevant part, that the Association was negligent and that it had breached the terms of the Declaration when it failed to ensure that the lift station operated properly. Conroad also claimed that the Association had breached its fiduciary duty to its members.

The court held a three-day bench trial beginning on June 10, 2019. At trial, Lloyd Abrams, Conroad's general partner, testified that, while Pier 1 had no obligation to extend the lease past February 2016, he believed that Pier 1 would have remained in Conroad's building had the lift station failure not occurred. Specifically, Abrams testified that Pier 1 would have exercised its options to extend the lease because Pier 1 had occupied the building for twenty years at the time Conroad purchased the building, the rent Pier 1 was paying to Conroad was "favorable" to Pier 1, and the exterior of the building was a "signature" of Pier 1.

Michael Lady, a real estate appraiser, testified about the value of Conroad's building. During his testimony, Conroad moved to admit Lady's appraisal report, which the court admitted over the Association's

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