Velazquez v. Medloh Dev.

1

Pedro Modesto Velazquez, Appellant v. Medloh Development, LLC, et al., Appellees

No. 23A-CT-1490

Court of Appeals of Indiana

May 29, 2024

Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision is not binding precedent for any court and may be cited only for persuasive value or to establish res judicata, collateral estoppel, or law of the case.

Appeal from the Marion Superior Court The Honorable Timothy W Oakes, Judge Trial Court Cause No. 49D02-1412-CT-39332

ATTORNEY FOR APPELLANT

Amy L Cueller

Striebeck Law P.C.

Indianapolis, Indiana

ATTORNEY FOR APPELLEES

Graham T. Youngs

Steuerwald, Witham, & Youngs, LLP

Danville, Indiana

Crone and Pyle Judges concur.

MEMORANDUM DECISION

Bailey, Judge.

Case Summary

[¶1] Pedro Modesto Velaquez sued Medloh Development, LLC ("Medloh"), and its sole members, Jeffrey M. Rudolf and Russell E. Cunning, (collectively, "Sellers") to rescind a Purchase Agreement for real estate and recover damages. Velaquez appeals the trial court's order reducing the amount of his attorney fee award, and Sellers cross-appeal the trial court's denial of their motions for directed verdict and summary judgment.

[¶2] We affirm in part, reverse in part, and remand with instructions. Issues

[¶3] Velazquez raises the issue of whether the trial court erred in determining the amount of his attorney fee award.

[¶4] On cross-appeal, we address the following restated issues raised by Sellers: I. Whether the trial court erred when it denied Sellers' motion for a directed verdict.

II. Whether the denial of Sellers' motion for partial summary judgment on Velazquez's breach of contract claim is moot.

III. Whether the trial court erred when it awarded attorney fees to Velazquez.

Facts and Procedural History

[¶5] In January 2008, Medloh was formed by Rudolf and Cunning as a limited liability company, with Rudolf and Cunning as its only members, each with a "50%" interest. Ex. at 207-08. In January 2011, Rudolf and Cunning obtained proposals from two different companies for work needed on the foundation of property located at 6845 Doris Drive Indianapolis, IN ("the Property"), which they considered buying. Each of the two proposals indicated proposed work to be done, including installation of "wall anchors" or "Fortress carbon fiber straps" to all four basement walls, to fix the Property's foundation problems. Ex. v. I at 115, 117. However, neither proposal was accepted by Rudolf or Cunning.

[¶6] In April 2011, Medloh purchased and obtained title to the Property. Rudolf and Cunning subsequently made repairs to the Property but did not obtain permits for doing so.

[¶7] In connection with a January 2012 listing of the Property for sale, Rudolph and Cunning executed a Seller's Residential Real Estate Sales Disclosure form ("Sales Disclosure"). The Sales Disclosure was first executed on January 20, 2012, and represented that there were no "foundation problems with the structure," no "structural problems with the building," and no "moisture and/or water problems in the basement, crawl space area, or any other area." Id. at 5-6. The Sales Disclosure was provided to Velazquez, who was considering the purchase of the Property.

[¶8] On May 12, 2012, Velazquez entered into a Purchase Agreement ("the Agreement") with Rudolf and Cunning to purchase the Property. The Agreement does not refer to Medloh at all. The Agreement contains an "Inspection" clause under which Velaquez may obtain an independent inspection of the Property and has fourteen days from the date of the Agreement ("the Inspection/Response Period") within which to respond to the inspection report in writing to the Sellers. Id. at 168. The Inspection clause further provides, in relevant part,

If the Buyer does not comply with any Inspection/Response Period or make a written objection to any problem revealed in a report within the applicable Inspection/Response Period, the Property shall be deemed to be accepted. A REASONABLE TIME PERIOD TO RESPOND IS REQURED TO PREVENT MISUSE OF THIS ACCEPTANCE PROVISION. Factors considered in determining reasonable time periods include, but are not limited to, availability of responding party to respond, type and expense of repairs requested and need of responding party to obtain additional opinions to formulate a response."

Id. (emphasis in original).

[¶9] The Agreement also contains an "Attorney's Fees" provision stating, in full:

Any party to this Agreement who is the prevailing party in any legal or equitable proceeding against any other party brought under or with relation to the Agreement or transaction shall be additionally entitled to recover court costs and reasonable attorney's fees from the non-prevailing party."

Id. at 170.^[1]

[¶10] On May 15, 2012, Acapulco Home Inspections LLC inspected the Property for Velazquez and prepared a "Property/Building Inspection Report." Id. at 7. Concerning the Property's foundation, Tim Foddrill, the Acapulco Home inspector, noted that the basement inspection was "limited due to finished or partially finished surface(s)." Id. at 19. Foddrill also noted that the Property's basement/crawl space "was dry but has signs of serious water problems, . . . [m]ultiple [s]ump pumps in use (including a battery backup) probably indicating that the basement has had water issues in the past and may again in the future." Id. Foddrill also observed: "[T]he back wall of the basement in the mechanical room has been stabilized to prevent collapse. It is not known to what extent the wall was leaning or how effective this remedy has been. It is also not known what other walls may have been addressed in this or some other manner as inspection is not possible due to the finishes." Id.

[¶11] Rudolf and Cunning had provided Valezquez and his realtor a list of work that Rudolf and Cunning had purportedly performed as part of their renovation of the Property which included "Waterproofing for basement walls," and "New sump pump system." Id. at 38. Further, Rudolf and H&R Excavating-which was owned by Rudolf-presented an Invoice to Valezquez and his realtor for work on the Property that included "Installation perimeter drain, and sealed basement walls." Id. at 39.

[¶12] On May 21, 2012-in reliance on Rudolf's and Cunning's Sellers Disclosure and "assurances"-Valezquez executed an "Independent Inspection Response - Buyer's Inspection Response #1" ("Inspection Response"). Tr. v. III at 100; Ex. v. 1 at 23.^[2] Because Valezquez had been assured by Rudolf and Cunning by way of their Sales Disclosure that there were no moisture or water issues in the basement and no foundation or structural issues, and because Valezquez relied on those "assurances," he did not request any action from Rudolf and Cunning concerning the Acapulco Home inspector's observation regarding the back wall of the basement and past water issues in the basement. Id. Rather, Valezquez listed five more minor conditions to be corrected, following which he would "release[] and hold[] harmless the Seller[s], ... from any and all liability, including attorney's fees and costs, arising out of or related to any inspection, inspection result, repair, disclosed defect or deficiency affecting the Property..." Ex. v. 1 at 23.

[¶13] On June 27, 2012, Rudoph signed a certification at the end of the Sales Disclosure stating that "the condition of the [P]roperty is substantially the same as it was when the Seller's Disclosure was originally provided to the Buyer." Id. at 27. Valezquez closed on the Property on that same date.

[¶14] In August 2012, Valezquez began to notice water on the floor of the basement. In January of 2013, the basement was "flood[ed]" with water due to a sump pump failure. Tr. v. 3 at 108. In correcting that problem, Valezquez had the saturated first two feet of the drywall on all four basement walls removed and discovered "foundation defects" that were not visible before the drywall was removed. Id. at 113. Specifically, Valezquez could see that "the foundation ... got shifted" on the south and west walls. Id. at 116.

[¶15] In January 2013, Matthew Holbrook, a structural engineer, inspected the Property while the basement walls were still exposed. Holbrook observed that the west wall had a "significant bow inward" with a lot of patching on the wall but no reinforcement, and it required "significant repair." Id. at 228; Ex. v. 1 at 109. Holbrook stated that, prior to his January 2013 inspection, someone had done a "partial fix" to the basement walls, but "they didn't do anything with that west wall." Tr. v. 4 at 14. He testified that "whoever[] cover[ed] those basement walls had to have known that the west wall was in bad shape . . . because the repair material was not original to the wall." Tr. v. III at 235. Holbrook observed that, "at several locations in all walls around the perimeter of the basement[,] the first full block above the slab had displaced into the basement as much as 2"." Ex. v. 1 at 109. In his January 28, 2013, report regarding his inspection findings, Holbrook stated: "It is obvious that whoever built or contracted the finished basement walls to be built kn[e]w they were covering a structural defect that at a minimum requires the ability to be visually monitored occasionally." Id.^[3]

[¶16] On December 3, 2014, Velazquez filed his Verified Complaint for Recission of Purchase Agreement in which he raised: Count I, alleging fraud and deception; Count II, alleging negligence; Count III, alleging breach of contract; and Count IV, alleging breach of warranty. For his claims of fraud and deception, Velazquez requested, among other relief, treble damages under the Crime Victims Relief Act ("CVRA") and an award of his attorney fees pursuant to the attorney fee...