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COA: Contract can be rescinded after land misrepresented

March 29, 2016

The Indiana Court of Appeals found a rental company could rescind its purchasing contract for a tract of land after the company that owned the land misrepresented it to the buyer.

3155 Development Way owned three tracts of land in Sellersburg. APM Rental Properties reached an agreement to buy tract 3 from Development in 2011, as APM’s sole member had leased had leased the building on the property since 2010 for another company. The property was advertised as having easy access to Highway 31 and I-65.

When APM went to get a loan for the property, it noticed that there was no public access to tract 3. The only road was a private access road, and when it contacted the businesses who owned the property the access road was on, they refused to let APM use it. APM then filed an amended complaint which alleged fraud and sought rescission of the contract and damages. The trial court granted partial summary judgment in the case, saying Development did not have a marketable title to the tract because of its lack of a public access road. Development appealed.

Development brought four issues on appeal. The COA said the trial court did not err in rescinding the contract because Development misrepresented the property as having easy access when it obviously did not.

Development also argued APM breached its contract when it did not make any payments between February 2014 and the closing date of the purchase. When APM discovered there was no public access in February, it told Development it would make the payments into an escrow account, and if the problem was solved Development would receive all the payments. This resulted in a good faith request for assurances, the COA said, and was not a breach of contract.

Development also argued APM was not a real party to the contract, but since Development did not raise the issue in its pleadings, the issue is waived on appeal.

Development asserted there was a purchase agreement regarding tract 3 between APM and Development, and in that purchase agreement APM’s sole member Al Miller was required to conduct any land surveys and defects and report them before the purchase. However, the agreement was not entered into evidence, so the COA could not rule on it.

The COA said the court did not err in scheduling a hearing on the issue of whether APM was damaged and how much in damages it should receive as its standard procedure in rescission cases is for APM to be returned to the status quo.

The case is 3155 Development Way, LLC v. APM Rental Properties, LLC, 10A01-1508-PL-1235.
 

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