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New Jersey man to get attorney fees, interest in failed real estate deal

May 10, 2017

After affirming the denial of summary judgment to northern Indiana landowners who misrepresented a property zoning to a potential buyer, the Indiana Court of Appeals also reversed the denial of attorney fees and prejudgment and post-judgment interest to the buyer.

In 1998, Thomas and Theresa Iatarola purchased 34 acres of land zoned for agricultural use that was used to warehouse equipment and inventory from his telecommunications and classic car sales business. However, when the couple decided to sell part of their land, their real estate agent provided them with a form that showed the property zoned as I-2 industrial.

Theresa Iatarola discovered the zoning error, and her husband assured her that he had asked the real estate agent to correct the problem. But when the agent began advertising the real estate online in September 2010, the advertisements showed an I-2 industrial zoning.

New Jersey resident Cheng Song saw the advertisement and he met with the Iatarolas and their real estate agent. He signed a contract called “Purchase Agreement Commercial – Industrial Real Estate” to buy 10 acres of their property. However, after learning of an adjacent airport’s plans to impose a runway protection zone on the property, Song exercised his right to terminate the purchase agreement.

A new agreement, also called “Purchase Agreement Commercial – Industrial Real Estate,” was signed in 2011 for the purchase of 16 acres. The agreement required $150,000 in earnest money, which Song deposited in the bank, and included a provision for liquidated damages of $150,000 if either party breached the contract.

A few months after the contract was signed, Thomas Iatarola and the real estate agent discovered the zoning error was still in the advertisement and corrected it, but failed to inform Song of the error for another two months. When Song learned the property was zoned agricultural, his attorney advised the real estate agent Song would not continue with the purchase unless the property was rezoned and he was given a price reduction.

The Iatarolas refused both requests, so Song exercised his rights to terminate the purchase agreement within an 180-day due diligence period. He also demanded the return of his $150,000 earnest money, which was being held in escrow at Horizon bank, but the Iatarolas once again refused.

Song then filed a complaint against the Iatarolas, alleging actual and constructive fraud, breach of contract and contract rescission. The Iatarolas filed a counterclaim, and both parties moved for summary judgment, which the Porter Superior Court denied.

After a jury trial in May 2016, Song filed a motion for judgment on the evidence, which was denied. The jury returned a verdict in his favor, and the trial court entered judgment in Song’s favor for $150,000.

The Iatarolas then filed a motion to correct errors and Song moved for an award of attorney fees and prejudgment and post-judgment interest, as well as post-trial attorney fees. The trial court denied those motions, and both parties filed cross-appeals in Cheng Song v. Thomas Iatarola and Theresa Iatarola, 64A03-1609-PL-2094.

The Iatarolas argued the trial court erred in denying their motion for summary judgment because the second purchase agreement did not permit Song to terminate the agreement because the land was zoned differently than he had expected. But Judge John Baker, writing for a unanimous panel of the Indiana Court of Appeals, wrote Wednesday the Iatarolas had failed to present a cogent argument on that issue to the trial court and, thus, had waived appellate review of that argument.

Further, waiver notwithstanding, Baker wrote the Iatarolas’ argument failed.

The appellate panel affirmed the denial of summary judgment to the Iatarolas on Song’s actual fraud claim because Song “had a right to rely on the Iatarolas’ representations regarding the zoning of the property and did, in fact, rely on them.” Similarly, the panel affirmed the denial of summary judgment on the constructive fraud charges because the fact that the zoning information was public record is not sufficient to preclude a constructive fraud claim, and because the Iatarolas did not present evidence to negate an element of Song’s constructive fraud claim.

Finally, the Iatarolas did not present a cogent argument or legal authority to support their claim that Song had caused a breach of contract, Baker said, so the trial court correctly denied their motion for summary judgment on that issue. However, Baker said the trial court did err in declining to consider Song’s petition for attorney fees, so judgment on that issue was reversed and remanded for the court to consider the issue of attorney fees, as provided for in the purchase agreement.

Similarly, the appellate court found that prejudgment interest was warranted because the trial court was not required to defer to the jury on that motion. Thus, judgment on the issue of prejudgment interest was reversed and remanded with instruction to calculate both prejudgment and post-judgment interest owed to Song.
 

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