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Sale to trust creates first impression

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A sale of a home to a trust that included disputed errors in a sales disclosure form presented an issue of first impression for the Indiana Court of Appeals Monday.

Indiana Code Section 32-21-5 spells out when an owner isn’t liable for any errors, inaccuracies, or omissions of information in the disclosure form. It also states when Chapter 1 of the statute doesn’t apply, and that includes transfers to a living trust.

Rebecca Hoffmeister-Repp sold her lake-front home to Rex Breeden, who bought the home through his revocable trust. When she was preparing the home for sale, she signed a seller’s residential real-estate sales disclosure form saying that there weren’t any moisture or water problems in the basement, crawl space area, or any other area.

More than 10 years before she sold the home, Hoffmeister-Repp saw water in a floor vent and heating duct. She and her husband had a sump pump installed and after that, she never noticed water in the ducts and assumed the issue was fixed.

Breeden saw the sales disclosure form, saw issues with the roof and siding, and got the home at a reduced priced to cover the costs of repairs. Breeden also hired an inspector, who advised Breeden to hire someone else to determine if there was actual water penetration in some decayed wood trim in the house. Breeden didn’t follow through with that recommendation and purchased the home.

He later discovered damage to some structural walls and defective conditions of the duct work. On behalf the trust, he sued Hoffmeister-Repp alleging her statements on the form constituted fraud to allow for damages or rescission, and there was a mutual mistake in the contract which entitled the trust to rescission of the purchase agreement.

The trial court granted summary judgment for Hoffmeister-Repp, which the Indiana Court of Appeals affirmed. The suit brought up for the first time what liability a seller to a trust would have for errors contained in the form.

Both sides argued the statute was not ambiguous, but both interpreted it differently. The trust claimed it wasn’t required to establish that any error was within actual knowledge of Hoffmeister-Repp because of the exception involving trusts. She claimed application of the exception to include selling to trusts would allow buyers to avoid the terms of the statute by creating a living trust and having the trust act as the purchaser of record for residential real estate.

In Rex E. Breeden Revocable Trust v. Rebecca Jane Hoffmeister-Repp, No. 03A04-1003-CT-185, the judges found the statute to be ambiguous and ruled in favor of Hoffmeister-Repp. They noted that exceptions to the requirement of a disclosure form are based on a special relationship between the buyer and seller, and some exceptions take into account that the seller is unlikely to have actually lived in the home such that knowledge of the home’s components can’t be assumed.

“Because I.C. § 32-21-5-10 requires this Disclosure Form to be completed and signed prior to an offer for the sale of the residence is accepted, the ninth exception—transfer to a living trust—can necessarily only come into play if the residence is purchased by the seller’s own living trust,” wrote Judge Patricia Riley. “If the sale is occasioned between a seller and a non-related living trust, the seller will always include a Disclosure Form as he is unaware as to the identity of the prospective buyer.”

The judges also held the trust failed to show Hoffmeister-Repp had actual knowledge of the moisture problems in the duct work at the moment she completed the disclosure form, and that there was insufficient designated evidence to support a finding of mutual mistake.

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  1. I grew up on a farm and live in the county and it's interesting that the big industrial farmers like Jeff Shoaf don't live next to their industrial operations...

  2. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  3. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  4. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  5. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

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