                                                                              FILED
                                                                         Sep 27 2018, 6:23 am

                                                                              CLERK
                                                                          Indiana Supreme Court
                                                                             Court of Appeals
                                                                               and Tax Court




      ATTORNEYS FOR APPELLANTS                                   ATTORNEY FOR APPELLEE
      Justin K. Clouser                                          T. Andrew Perkins
      Jeffrey M. Miller                                          Peterson Waggoner & Perkins,
      Noel Law                                                   LLP
      Kokomo, Indiana                                            Rochester, Indiana



                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Dr. Curtis K. Deason and                                   September 27, 2018
      Connie S. Deason,                                          Court of Appeals Case No.
      Appellants-Defendants,                                     18A-PL-270
                                                                 Appeal from the
              v.                                                 Howard Superior Court
                                                                 The Honorable
      Bill R. McWhorter and Heather                              A. Christopher Lee, Special Judge
      McWhorter Revocable Living                                 Trial Court Cause No.
      Trust, Dated January 24, 2003,                             34D02-1505-PL-407
      Appellee-Plaintiff.



      Kirsch, Judge.


[1]   Dr. Curtis K. Deason and Connie S. Deason (together, “the Deasons”) appeal

      the trial court’s order awarding judgment in favor of the Bill R. McWhorter and

      Heather McWhorter Revocable Living Trust, Dated January 24, 2003, (“the

      Trust”) for damages after the Deasons defaulted on a contract for sale of real


      Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018                       Page 1 of 11
      estate. The Deasons raise several issues for our review that we consolidate and

      restate as: whether the trial court inappropriately awarded the Trust a remedy

      of foreclosure in contradiction to the language of the contract for sale of real

      estate.


[2]   We reverse and remand.


                                  Facts and Procedural History
[3]   On March 18, 2009, the Deasons and the Trust entered into a Conditional

      Contract for Sale of Real Estate (“the Contract”) to facilitate the Deasons’

      purchase of real property including a residence located at 3473 S. 150 E. in

      Kokomo, Indiana (“the Property”) for the amount of $490,000.00. Over the

      course of several years, the Deasons made a total of thirty-seven installment

      payments of $2,923.31 each, as well as a down payment and earnest money

      payment of $25,500.00. Appellants’ App. Vol. 2 at 81. The remaining balance on

      the Contract was $462,500.00. Id. The total of all installment payments

      towards the value of the Contract was $108,162.47. Id. The remaining balance

      on the Contract after all payments were applied equaled $445,442.07,

      approximately 4% of the total purchase price. Id. at 82.


[4]   Pursuant to the Contract, the entire remaining balance owed was due in a single

      balloon payment on April 18, 2012. Id. at 58. The Deasons were unable to

      make the balloon payment and, instead, tendered a regular monthly payment,

      which breached the Contract. At trial, the parties’ testimony diverged on the

      topic of whether Bill McWhorter (“McWhorter”), as trustee, was informed of

      Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018     Page 2 of 11
      the Deasons’ intent to leave the Property. McWhorter testified that the

      Deasons never asked him about staying on the Property even though they could

      not pay the balloon payment and that the Deasons never told him that they

      would be leaving. Tr. Vol. 2 at 119-20. McWhorter testified that the only thing

      he told the Deasons was “we have to live by what’s in the [C]ontract.” Id. at

      119. Curtis Deason testified that he informed McWhorter that the Deasons

      would be leaving and stated that McWhorter told them to leave the premises by

      May 18, 2012. Id. at 136-37. The Trust, through McWhorter, took possession

      of the Property shortly after the Deasons left on or around May 18, 2012. Id. at

      59. After the Deasons moved from the Property, McWhorter had the locks

      changed, and he began living in the home. Id. at 121. Since May 2012, when

      McWhorter took possession of the Property, it has been titled in his name

      alone. Id. at 59, 130.


[5]   On May 27, 2015, the Trust filed a complaint against the Deasons for damages

      resulting from the Deasons’ breach of the Contract. The Trust sought

      foreclosure and a judgment consisting of “the outstanding unpaid principal

      balance, together with interest from and after the date of the default, late

      charges, default-related expenses and advances, reasonable attorney fees and

      costs of this action, and all other expenses incurred in connection with this

      cause.” Appellants’ App. Vol. 2 at 28. A bench trial was held on October 17,

      2017. At trial, the Trust presented two expert witnesses to testify regarding the

      value of the Property, and one of the experts testified that the Property had an

      appraised value of $316,000.00. Tr. Vol. 2 at 38. To support their valuation of


      Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018     Page 3 of 11
      the Property, the Deasons submitted an order from McWhorter’s dissolution

      case that ordered that the Property be listed for sale in the amount of

      $450,000.00 and the Trust’s insurance policy on the Property. Appellants’ App.

      Vol. 2 at 45; Tr. Vol. 2 at 127.


[6]   The trial court also heard evidence of physical damage that the Trust discovered

      after it took possession of the Property from the Deasons. Much of this

      evidence came in over the Deasons’ continuing objection. Additionally, the

      Trust offered evidence of the attorney fees it had incurred in bringing the breach

      of contract action. On January 11, 2018, the trial court issued its “Judgment,

      Findings of Fact and Conclusions of Law,” which entered judgment for the

      Trust and against the Deasons in the amount of $153,335.24 and foreclosed and

      extinguished the Deasons’ interest in the Property. Appellants’ App. Vol. 2 at 25.

      The trial court reached this amount by applying the balance of the Contract

      purchase price, unpaid taxes, repairs, and attorney and legal fees, and then

      subtracting the value of the Property, which it found to be $316,000.00. Id. at

      23-25. The Deasons now appeal.


                                      Discussion and Decision
[7]   When a trial court has made findings of fact, we review the sufficiency of the

      evidence using a two-step process. Huber v. Sering, 867 N.E.2d 698, 706 (Ind.

      Ct. App. 2007), trans. denied. We first determine whether the evidence supports

      the trial court’s findings of fact, and then we determine whether those findings

      of fact support the trial court’s conclusions of law. Id. We will set aside the


      Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018     Page 4 of 11
      findings only if they are clearly erroneous. Id. Findings are clearly erroneous

      only when the record contains no facts to support them either directly or by

      inference. Campbell v. Campbell, 993 N.E.2d 205, 209 (Ind. Ct. App. 2013),

      trans. denied. A judgment is clearly erroneous if it applies the wrong legal

      standard to properly found facts. Id. In applying this standard, we neither

      reweigh the evidence nor judge the credibility of the witnesses. Merrillville 2548,

      Inc. v. BMO Harris Bank N.A., 39 N.E.3d 382, 389 (Ind. Ct. App. 2015), trans.

      denied. Rather, we consider the evidence that supports the judgment and the

      reasonable inferences to be drawn therefrom. Id. To make a determination that

      a finding or conclusion is clearly erroneous, our review of the evidence must

      leave us with the firm conviction that a mistake has been made. Kieffer v.

      Trockman, 56 N.E.3d 27, 33 (Ind. Ct. App. 2016).


[8]   The Deasons argue that the trial court’s order was clearly erroneous because it

      awarded the Trust both forfeiture and foreclosure remedies. They contend that

      the Trust, through its actions after the Deasons defaulted on the Contract,

      elected a remedy of forfeiture, which was the remedy warranted by the

      language in the Contract. They also assert that because the Trust elected a

      forfeiture remedy, it was barred from also seeking a remedy of foreclosure, and

      the trial court clearly erred when it allowed the Trust to be awarded both

      forfeiture and a deficiency judgment.


[9]   In Skendzel v. Marshall, 261 Ind. 226, 301 N.E.2d 641 (1973), cert. denied, 415

      U.S. 921 (1974), our Supreme Court held that in all but a few specific instances,

      the proper relief to be granted a vendor upon the vendee’s material breach of a

      Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018     Page 5 of 11
       land sale contract is a judgment of foreclosure pursuant to Indiana Trial Rule

       69(C). 261 Ind. at 240, 301 N.E.2d at 650. “Upon foreclosure, the vendee

       retains a vendee’s lien upon the sale, and once the balance owed under the

       contract has been paid to the vendor, the vendee may retain the proceeds from

       the sale.” McLemore v. McLemore, 827 N.E.2d 1135, 1143 (Ind. Ct. App. 2005).

       “If the foreclosure does not net a sufficient amount to satisfy the vendor’s

       remaining security interest in the property, a damage judgment for waste caused

       by the vendee equivalent to the amount recoverable by a mortgagee as a

       deficiency judgment would be appropriate.” Id. Forfeiture divests property

       without compensation; in other words, forfeiture terminates an existing contract

       without restitution. Hooker v. Norbu, 899 N.E.2d 655, 658 (Ind. Ct. App. 2008),

       trans. denied. A vendor who has obtained the remedy of forfeiture may cancel

       the contract, retain the payments made, retain the real estate, and recoup actual

       damages sustained as a result of the transaction. Id. at 659. Forfeiture may be

       considered an appropriate remedy in limited circumstances, that is, (1) an

       abandoning or absconding vendee or (2) where the vendee has paid a minimal

       amount and the vendor’s security interest in the property has been jeopardized

       by the acts or omissions of the vendee. McLemore, 827 N.E.2d at 1140.


[10]   Here, the Deasons entered into the Contract with the Trust, paid a down

       payment and earnest money and, over the course of three years, made a total of

       thirty-seven installment payments of $2,923.31 each, totaling $108,162.47. On

       April 18, 2012, the remaining balance was due in one single balloon payment,

       but the Deasons were unable to make the balloon payment, and instead,


       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018    Page 6 of 11
       tendered a regular monthly payment, which breached the Contract.

       McWhorter testified that the Deasons never told him that they would be

       leaving, but that he told the Deasons “[W]e have to live by what’s in the

       [C]ontract.” Tr. Vol. 2 at 119. The Deasons testified that McWhorter told them

       to leave the premises by May 18, 2012. Id. at 136-37. The Trust took

       possession of the Property shortly after the Deasons left around May 18, 2012

       and had the locks changed, and McWhorter began living in the home. Id. at 59,

       121. Neither party pursued any obligation on the Contract thereafter. On May

       27, 2015, more than three years after taking possession of the Property, the

       Trust filed a complaint against the Deasons seeking foreclosure and a judgment

       consisting of “the outstanding unpaid principal balance, together with interest

       from and after the date of the default, late charges, default-related expenses and

       advances, reasonable attorney fees and costs of this action, and all other

       expenses incurred in connection with this cause.” Appellants’ App. Vol. 2 at 28.


[11]   In its order granting judgment to the Trust, the trial court found that the

       Deasons breached the Contract. The trial court then entered judgment for the

       Trust for both forfeiture and a deficiency judgment under foreclosure. In its

       order, the trial court allowed the Trust to retain title to the Property and

       continue possession of the Property and awarded judgment in the amount of

       $153,335.24 as a deficiency judgment. Although the order purported to grant

       the Trust’s request for foreclosure, no sheriff’s sale, or any sale, of the Property

       was ordered.




       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018       Page 7 of 11
[12]   The Deasons do not challenge the trial court’s finding that they breached the

       Contract. They only take issue with the remedies granted by the trial court. In

       contesting the award of both a forfeiture remedy and a foreclosure remedy, the

       Deasons rely on Powers v. Ford, 415 N.E.2d 734 (Ind. Ct. App. 1981), where a

       panel of this court reiterated the general rule that, “one may not forfeit a

       contract and thereafter expect to enforce it.” Id. at 737. Accordingly, pursuant

       to that case, once a land contract seller has taken possession of the subject

       property pursuant to a forfeiture, he has elected his remedy and is no longer

       entitled to seek foreclosure and a deficiency judgment. Id.


[13]   In the present case, although no formalities were taken to initiate a forfeiture at

       the time the Deasons defaulted on the Contract, the actions taken by the Trust

       indicate that a forfeiture did, in fact, occur. When the Deasons defaulted on the

       Contract, they relinquished possession of the Property, and the Trust took

       almost immediate possession of the Property with McWhorter residing on the

       Property consistently until the date of the trial. At the time of the Deasons’

       breach of the Contract, they had paid only about 4% of the total purchase price,

       and after the breach, neither party attempted to perform anything further under

       the Contract, which shows an intent to cancel the Contract. Not until over

       three years after the Deasons’ breach of the Contract, did the Trust seek a

       foreclosure of the Property. Therefore, the record indicates that the Trust

       elected to pursue a forfeiture at the time of the breach of the Contract, which

       cancelled the Contract, and pursuant to Powers, the Trust was no longer entitled




       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018     Page 8 of 11
       to seek a foreclosure and a deficiency judgment, which would hold the Deasons

       further liable on the Contract.


[14]   The language of the Contract further supports this outcome. Paragraph 16

       provided in pertinent part:


               In the event that the BUYERS shall fail to perform any of the
               acts or fail to make any of the payments required by this contract,
               promptly and at the time stipulated, then, after thirty (30) days, if
               the defaults are not completely corrected, including the current
               payments due, and if the BUYERS have not paid twenty-five percent
               (25%) or more of the principal of the original purchase price, all
               payments made hereunder prior to such default shall be retained by the
               SELLERS as and for damages for the use and occupancy of the premises
               to the date of default and SELLERS shall thereupon be relieved from all
               liability hereunder to the BUYERS. Immediately upon such thirty
               (30) day default, and without demand or notice, the BUYERS
               agree that they will surrender to the SELLERS peaceable and
               immediate possession of said premises together with all
               improvements thereon.


       Appellants’ App. Vol. 2 at 62 (emphasis added). Pursuant to this language, when

       the buyers default on any performance under the Contract and do not correct

       the default within thirty days and have paid less than 25% of the principal, the

       Contract is cancelled, and the sellers retain all of the prior payments as damages

       for use and occupancy of the property and the buyers must surrender possession

       of the property. This provision addresses what occurred here. In April 2012,

       the Deasons contacted McWhorter and informed him that they would be

       unable to make the balloon payment that was due under the Contract. Within

       thirty days of this breach of the Contract, the Deasons relinquished possession

       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018        Page 9 of 11
       of the Property, and McWhorter took possession of the Property and began

       residing on the Property shortly thereafter. At no time after the breach did

       either party pursue any further action under the Contract, and both parties

       proceeded as if the Contract had been cancelled. Further, at the time of the

       Deasons’ default under the Contract, they had paid approximately 4% of the

       purchase price of the Property, far less than the 25% threshold. Thus, under the

       Contract’s language, a forfeiture was the proper course where, as here, the

       Deasons had paid less than 25% of the principal when they defaulted.


[15]   Although the trial court found that the Contract allowed the Trust to proceed

       with a foreclosure even when forfeiture may have been an acceptable remedy,

       we do not believe that the Contract actually allows for such a choice. See id. at

       21. The Contract states:


               In the event of such default and the failure of BUYERS to
               surrender possession of said real estate as above provided, the
               SELLERS may proceed in any action at law or in equity for the
               possession of said real estate and for damages for the withholding
               thereof, and for waste or damage done thereto.


       Id. at 62. Pursuant to this language, the seller may only “proceed in any action

       at law or in equity” if the buyers defaulted on the Contract and failed to

       surrender possession of the Property. In the present case, even though the

       Deasons did default on their performance under the Contract, the record does

       not establish that they also failed to surrender possession of the Property.

       Rather, the record shows that within thirty days of their breach of the Contract,

       the Deasons relinquished possession of the Property to McWhorter.

       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018    Page 10 of 11
[16]   We, therefore, conclude that, in the present case, the record established that,

       after the Deasons defaulted, the Trust elected a forfeiture remedy and was no

       longer entitled to pursue a foreclosure remedy and a deficiency judgment as it

       did. Likewise, under the language of the Contract, the forfeiture was the proper

       remedy to pursue as, at the time of their default, the Deasons had only paid 4%

       of the purchase price. The trial court erred when it entered judgment in favor of

       the Trust under a remedy of foreclosure and awarded it a deficiency judgment.

       We reverse and remand for a recalculation of the damages award.


[17]   Reversed and remanded.


       Vaidik, C.J., and Riley, J., concur.




       Court of Appeals of Indiana | Opinion 18A-PL-270 | September 27, 2018   Page 11 of 11
