Indiana Law Review


XII. Property

Walter W. Krieger*

A. Adverse Possession

The requirement that the possession necessary to acquire title by

adverse possession' be "hostile"^ was at issue in Poole v. Corwin? In

Poole the Indiana Court of Appeals interpreted a provision in a deed,

declaring that the deed would be void and the property would revert

to the grantor or his heirs if the grantee railroad should ever fail to

maintain a passenger depot on the adjoining tract of land, to create a

fee simple determinable in the railroad with a possibility of reverter/

A passenger depot had not been maintained on the adjoining tract of
land since 1957; and in 1980, the Penn Central Railroad Corporation,

the grantee's successor in interest, sold the property to Poole. Poole

brought an action to quiet title based on adverse possession, but the

trial court granted summary judgment for Corwin's descendants. On
appeal, Corwin argued that the possession by Penn Central after the

depot was closed on the adjoining property, and, therefore, the possession

of Poole, was not ''hostile" since the initial entry was subservient to

Corwin's possibility of reverter, and that the possession could not become

hostile until Corwin was given actual notice that the possession was no

*Associate Professor of Law, Indiana University School of Law—Indianapolis. A.B.,
Bellarmine College, 1959; J.D., University of Louisville, 1962; L.L.M., George Washington

University, 1969. The author wishes to extend his appreciation to Thomas Beeman for

his assistance in the preparation of this Article.

'To acquire title by adverse possession the possession must be: (1) actual, (2) visible,

(3) open, (4) notorious, (5) exclusive, (6) under a claim of ownership, (7) hostile, and

(8) continuous for the statutory period of limitations. Piel v. Dewitt, 170 Ind. App. 63,

69, 351 N.E.2d 48, 53 (1976). In Indiana, the statutory period necessary to acquire title

by adverse possession is 10 years. Ind. Code § 34-1-2-2 (1982). The adverse possessor
must also pay all taxes on the property. Ind. Code § 32-1-20-1 (1982). However, in

boundary line disputes where the payment of taxes will not serve as notice to the record

titleholder, the statute requiring the payment of taxes is not a supplementary element of

adverse possession. Echterling v. Kalvaitis, 235 Ind. 141, 126 N.E.2d 573 (1955); Klein

V. Kramer, 179 Ind. App. 592, 386 N.E.2d 982 (1979).

^Where a life tenant, co-owner, tenant, purchaser under contract, or member of
the owner's family takes possession of the property, such possession is not inconsistent

with or adverse to the title of the remainderman, co-owner, landlord, vendor, or owner.

See 3 American Law^ of Property § 15.4a (Supp. 1976). In order to make such possession
hostile, and thus begin the running of the statute of limitations, the possessor must give

notice to the owner that he is acting adversely. Piel v. DeWitt, 170 Ind. App. 63, 351

N.E.2d 48 (1976).

M47 N.E.2d 1150 (Ind. Ct. App. 1983).
'Id. at 1151.

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348 INDIANA LAW REVIEW [Vol. 18:347

longer subservient to his title. ^ The court agreed that "where entry upon

the land [is subordinate] to the title of another, the statutory period

for adverse possession does not begin to run until the occupant clearly

disclaims and disavows the title of the true owner. "^ The court did not

agree, however, that "actual notice" to the owner was required, finding

that "constructive notice" is sufficient "[w]hen hostile acts are so mani-

fest and notorious that a reasonable owner should have been aware of
them."^ The court concluded that because it was common knowledge
that the railroad no longer maintained a passenger depot on the adjoining

land, the railroad and Poole's possession was hostile, and Poole acquired

title by adverse possession.^

Although the court did not cite Piel v. DeWitf which held that
actual notice was required to begin the period of adverse possession

running against a remainderman, had it done so, it could have easily

distinguished the Piel notice requirement. In Piel, the life tenant, believing

herself to be the owner of the fee, executed a warranty deed to the

grantee purporting to convey a fee simple absolute title. The deed,

together with an affidavit of transfer, was properly recorded, and the

grantee took possession and paid the taxes on the property for the

period of time necessary to acquire title by adverse possession. Never-

theless, the court held that the possession was not adverse to the re-

mainderman since "[a]bsent actual notice, the life tenant cannot possess

the land adverse to the remainderman."'^ A remainderman would have
no reason to suspect that a life tenant was acting adverse to his interest,

and in Piel the court held that the remainderman had no duty to search

the public records to see if the life tenant had attempted to wrongfully

convey his interest." One could make a strong argument that the pos-
session by the holder of a fee simple determinable is less subservient to

the title of the holder of the possibility of reverter than is the possession

of a life tenant to the interest of the remainderman, and therefore, the

holder of the possibility of reverter should be required to inspect the

land to ensure the condition (special limitation) has not been violated.

The scant authority on point supports the position taken by the court,

requiring "constructive notice" to the holder of the possibility of rev-

erter.'^ Since the court concluded that an "open and notorious" act can

'Id. at 1152.

^Id. (citation omitted).

'Id.

'Id. at 1152-53.

"170 Ind. App. 63, 351 N.E.2d 48 (1976).
'"Id. at 67, 351 N.E.2d at 52.
''Id. at 72-73, 351 N.E.2d at 55. A similar result would follow in the case of co-

tenants. See Hare v. Chisman, 230 Ind. 333, 342, 101 N.E.2d 268, 279 (1951).
'^School Dist. Township of Richland v. Hanson, 186 Iowa 1314, 173 N.W. 873

(1919).



1985] SURVEY—PROPERTY 349

constitute constructive notice, however, the notice requirement in such

cases does not appear to place an undue burden on the party claiming

title by adverse possession.

B. Concurrent Estates and Partition

Generally speaking, a tenant in common or a joint tenant can force
a partition of the land.'^ Traditionally, however, the party seeking the

partition must have a present possessory interest, either actual possession

or the right to immediate possession of the property.'^ Today, a number

of states have enacted statutes which permit partition by co-owners of

future interests.'^

Whether a present possessory interest is required to partition land

in Indiana was raised in Bronson v. Bronson.^^ In Bronson the decree

dissolving the marriage of Eleanor and Stephen Bronson provided that

the family home was to be owned by the parties as tenants in common,
but that Eleanor was to have exclusive possession of the home '"until
she remarries or does not occupy same as her principal residence, or

until both parties agree to sell.'"'^ Subsequently, Stephen sought to

partition the home. The trial court dismissed the petition and the plaintiff

appealed.

On appeal, the court noted that while it is often stated that joint
tenants and tenants in common have the right to partition property,
either actual possession or the right to immediate possession is required.'^

The Indiana statute governing the right to partition states only: "Any
person holding lands as joint tenant or tenant in common, whether in
his own right or as executor or trustee, may compel partition thereof
. . .

.'"^ The cases interpreting this statute, however, have held that it

was not intended to change the common law requirement that the party
seeking the partition must have a possessory interest.^" There is, however.

'^J. Cribbet, Principles of the Law of Property 96 (2d ed. 1975); 4 G. Thompson,
Real Property § 1822 (1979 Replacement). A tenancy by the entirety cannot be partitioned
without the consent of both parties since neither owns an individual share.

'^2 R. Powell, Real Property § 289 n.8 (P. Rohan rev. ed. 1968); 4 G. Thompson,
supra note 13, at § 1823.

"2 R. Powell, supra note 14, at § 290.

'H48 N.E.2d 1231 (Ind. Ct. App. 1983).

'"M at 1232 (quoting the property settlement agreement).

'^Id. at 1233.

'^Ind. Code § 32-4-5-1 (1982).
^Schori V. Stephens, 62 Ind. 441 (1878); Godfrey v. Godfrey, 17 Ind. 6 (1861);

Hurwich v. Zoss, 170 Ind. App. 542, 353 N.E.2d 549 (1976); Brunner v. Tevman, 150
Ind. App. 139, 275 N.E.2d 553 (1971). Cases decided both prior and subsequent to the

adoption of this statute have held that in order to sustain an action for partition, either

legal or equitable title and the right to possession must be in the party maintaining the

action. Mclure v. Raber, 106 Ind. App. 359, 19 N.E.2d 891 (1939); Weaver v. Gray, 37
Ind. App. 35, 76 N.E. 795 (1906).



350 INDIANA LAW REVIEW [Vol. 18:347

as the court noted, one exception to the rule. Indiana Code, section 32-

4-6-1 provides that a remainderman may force a partition of the land
where one of the remaindermen also has a life estate in this land. If

the decree were interpreted as giving Eleanor a life estate and Eleanor

and Stephen the remainder, then a partition might have been possible.

In his brief, however, Stephen conceded that the decree did not create

a life estate in Eleanor.^' Perhaps the appellants were too quick to

concede that Eleanor's interest was not a life estate. While it is difficult

to put a label on the estate created by the divorce decree, the language

that Eleanor can Hve in the house "until she remarries or does not

occupy same as her principal residence" is not unlike the language used

to create a life estate determinable.^^ Another point which the court

failed to consider is that if the interest is not a life estate, then the

only alternative under traditional property law is a nonfreehold estate.

In such a case, there is considerable authority that the co-owners of the

reversionary interest following a nonfreehold estate may in fact partition
their interest subject to the nonfreehold interest because seizing is in the

reversion.-^ Yet even if the court had considered the issue and determined

that the divorce decree created a life estate determinable in Eleanor, the

court still might have refused to apply the statute allowing partition

where one tenant in common also owns a life estate. Most likely, the
court would have concluded from the language requiring both parties

to agree to a sale prior to the happening of one of the conditions

terminating Eleanor's right to possession that the property settlement

incorporated into the divorce decree created an agreement not to partition.

While co-tenants generally have the right to partition, courts recognize

the right of the parties to agree not to partition, provided the agreement

is reasonable.^"* Thus the court might well have reached the same result

even if they had found Eleanor's interest to be a life estate.

C. Deeds

1. Deed in Escrow to be Delivered at Grantor's Death.—One of the
essential elements necessary to convey property by deed is a valid delivery.

It is very common in gifts of land to deliver the deed to a third party
with instructions to deliver the deed to the grantee at some future time,

often the death of the grantor. ^^ Such a delivery is valid and effective

^'Appellants' Brief at 15, Bronson, 448 N.E.2d at 1233 n.l.
^^R. Cunningham, W. Stoebuch, & D. Whitman, The Law of Property 73 (1984)

[hereinafter cited as R. Cunningham]. Clearly, the interest of Eleanor could potentially
have lasted for her lifetime if she did not remarry or cease to use the house as her
principal residence.

"4 G. Thompson, supra note 13, § 1826.
^J. Cribbet, supra note 13, at 106; R. Cunningham, supra note 22, at 231-32.
'^Practically all states recognize that an effective delivery may be made to a third

party with directions to hold the deed and deliver it to the grantee at the grantor's death.
23 Am. Jur. 2d Deeds § 144 (1983).

%



1985] SURVEY—PROPERTY 351

to transfer title to the grantee, provided the grantor intends the physical

transfer of the deed to the third party to pass title to the grantee

immediately'^ and the grantor retains no dominion and control over the

deed or any right to recall it.^^ The fact that the deed is held by the

agent until after the grantor's death does not affect the vahdity of the

deed.^^ The courts treat the deed as passing a present interest when the

deed is delivered to the escrow with the enjoyment postponed until the

death of the grantor. ^^ The use of the donative escrow in Indiana has

been somewhat complicated by the use of the "relation doctrine. "^^ This

doctrine has been used extensively in commercial escrows where the deed

is not delivered to the grantee until the conditions of the escrow agreement

have been complied with. Until such compliance, title remains in the

grantor and the escrow has no authority to deliver the deed to the

grantee.^' If circumstances change during the escrow period it is often

necessary to resort to the use of the relation back theory to pass title

to the grantee. For example, if the grantor dies before the escrow

conditions are met, it may be necessary to use the doctrine of relation
back for two reasons: (1) to avoid the grantor's spouse's claim to a

dower interest or statutory share of the property, which would be the

situation if the grantor still owned the property at the date of death;

and (2) because there could be no delivery by the grantor after his

death. ^^ Many courts do not use relation back in the case of a valid
donative escrow because the grantor must relinquish all dominion and

control over the deed at the time of deUvery to the escrow agent, and

the escrow agent becomes the agent of the grantee." Thus, title passes

at once to the grantee in the donative escrow, and there is no need to

-'E.g., Klingaman v. Burch, 216 Ind. 695, 25 N.E.2d 996 (1940); Spencer v. Robbins,

106 Ind. 580, 5 N.E. 726 (1886); Stevenson v. Nams, 124 Ind. App. 358, 118 N.E.2d
368 (1954).

-'E.g., Dickason v. Dickason, 219 Ind. 683, 40 N.E.2d 965 (1942); St. Clair v.

Marquell, 161 Ind. 56, 67 N.E. 693 (1903); Osborne v. Eslinger, 155 Ind. 351, 58 N.E.

439 (1900); Scott v. Scott, 126 Ind. App. 3, 127 N.E.2d 110 (1955).
'^'See, e.g., 23 Am. Jur. 2d Deeds § 139 (1983); Osborne v. Eslinger, 155 Ind. 351,

58 N.E. 439 (1900); Scott v. Scott, 126 Ind. App. 3, 127 N.E.2d 110 (1955).
'"^J. Cribbet, Principles of the Law of Property, 124-25 (2d ed. 1975); R.

Cunningham, supra note 22, at 743; 8 G. Thompson, Real Property § 4232 (1979

Replacement).

-°The doctrine is more commonly referred to as the doctrine of "relation back."
Where the delivery is not completed when the deed is placed in the hands of the escrow,
problems are presented when the escrow subsequently delivers to the grantee, since the
grantor may have died or become incompetent before the second delivery. To avoid these
and other problems the courts treat the delivery as relating back to the time of the first

delivery from the grantor to the escrow. For an excellent discussion of the doctrine, see

J. Cribbet, supra note 29, at 185-86.

''Id. at 184-85; R. Cunnningham, supra note 22, at 738-42.

"J. Cribbet, supra note 29, at 185 (citing Bucher v. Young, 94 Ind. App. 586, 158

N.E. 581 (1927)).

"23 Am. Jur. 2d Deeds § 149 (1983).



352 INDIANA LAW REVIEW [Vol. 18:347

use relation back.^'* Nevertheless, the Indiana courts do use the doctrine

of relation back in the donative escrow situation, under the theory that

the gift is not complete until accepted by the donee and thus relation

back is necessary to pass title at the time of the delivery to the escrow

agent. ^^ Russell v. Walz^^ is a classic example of why this area of the
law is a source of confusion and litigation.

In Russell, Anton Walz (Anton) made an antenuptial agreement in

which his second wife, Dorothy, agreed to accept one-third of Anton's

net estate in full settlement of all claims against his estate. Five years

after this marriage took place, Anton conveyed a one seventy-fifth interest

in one of his farms, known as "Coldwater Farm," to each of his seven
children. He repeated this action three months later, and six months
after that, while in the Mayo Clinic and under some apprehension of
death, he conveyed a one-seventh of his remaining interest in the farm

to each of his seven children. At this point Dorothy became concerned

that Anton might continue transferring his property to his children and

"intimated" the possibihty of a divorce unless some suitable agreement

could be reached. The Walzes met with an attorney, and made a com-
promise whereby Anton conveyed to Dorothy a one-third interest in
another farm. The deed was left in escrow with the attorney, to be

delivered to Dorothy upon the first of two events: written authorization
from Anton's attorney, or Anton's death. ^^

At this meeting Anton learned, to his surprise, that his children
could evict him from the farm he had conveyed to them. A short time
later, four of his children executed quitclaim deeds conveying back to

Anton most of their interest in the farm. Shortly after that, Anton
deposited with his attorney a warranty deed conveying all his interest

in the farm to the four children who had conveyed back their interest.
The attorney was authorized to deliver the deed to the children upon

the first of the following two events: written authorization from Anton
to his attorney, or upon the death of Anton.^^ On the same day Anton
signed his will which made reference to this deed. The will stated that
'"in no event shall any portion of my said Coldwater Road farm go
to satisfy [Dorothy's 1/3 interest in the estate]'" and expressed his

'"intent to give said above described farm on Coldwater Road near Fort

^^J. Cribbet, supra note 29, at 124-25; R. Cunningham, supra note 22, at 743; 8
G. Thompson, supra note 29, at § 4232.

''See, e.g., Osborne v. Eslinger, 155 Ind. 351, 58 N.E. 439 (1900); Scott v. Scott,
126 Ind. App. 3, 127 N.E.2d 110 (1955); Kokomo Trust Co. v. Hiler, 67 Ind. App 611
116 N.E. 332 (1917).

^M58 N.E.2d 1172 (Ind. Ct. App. 1984). For a further discussion of this case, see
Falender & Fruehwald, Trusts and Decedents' Estates, 1984 Survey of Recent Developments
in Indiana Law, 18 Ind. L. Rev. 435, 438-40 (1984).

''Id. at 1175.

'The provision actually reads, '"upon the first of the following two events to occur:
written authorization from my attorney, John H. Logan, ... or on my death.'" Id. at



1985] SURVEY—PROPERTY 353

Wayne, Indiana to my children. '"^^ After Anton's death, two of his
children were appointed coexecutors of his estate. The estate received

two offers to purchase the Coldwater Farm. Norbert, "[ajcting for the

estate," agreed to sell the farm to Russell, who deposited $20,000 earnest
money. "^^ The contract for sale, made with the seven adult children of

Anton Walz, contained a provision that the seller was to furnish an

abstract of title showing marketable title in the seller. When Russell's
attorney examined the abstract, he became concerned due to the "tes-

tamentary nature" of the escrow letter from Anton to his attorney and

the reference in the will to the antenuptial agreement with Dorothy.

Russell's attorney requested a quitclaim deed and other documents from

Dorothy and the personal representative of Anton's estate. Because

Dorothy refused to sign an affidavit declaring that she had no interest

in the property, Russell declined to go through with the closing and

requested a return of her earnest money deposit. When the money was
not returned, Russell filed suit for the return of the money with interest,

claiming the children did not have marketable title to the Coldwater

Farm. The trial court found for the children, and Russell appealed."*'

The issue presented on appeal was whether or not Dorothy had a

potential claim to the Coldwater Farm which would render the children's

title unmarketable. ''^ The court noted that to be marketable

a title must be free from reasonable doubt, and such that a

reasonably prudent person, with full knowledge of the facts and

their legal bearings, willing and anxious to perform his contract,

would, in the exercise of that prudence which business men
ordinarily bring to bear upon such transactions, be willing to

accept and ought to accept. "^^

1176 (quoting the escrow letter). The wording appears to have been taken from the letter
to Miller creating the escrow for Dorothy, which contains the identical language. Id. In

the Miller letter the written authorization from Anton's attorney would in fact be au-

thorization from Anton himself, but in the letter to Logan establishing the escrow for
the children, why would Logan need written authorization from himself? It reads as if
Logan can accelerate the delivery. The court, however, concluded that "[Anton] Walz

retained the capacity to accelerate delivery by instructing his attorney to deliver the deed

before Walz' death." Id. at 1182.

^""Id. at 1176 (quoting Anton Walz' will).

*°Id. at 1177. The fact that the co-executor of Anton's estate was negotiating the

sale of the Coldwater Farm indicates that some, if not all, of the children were treating
the portion of the farm reconveyed to Anton as an asset of the estate. If the September

5, 1980 deed was effective as an inter vivos transfer, the farm would not be part of the

estate and Nobert Walz should not have entered into the agreement to sell the farm in
his capacity as executor of the estate.

''Id. at 1177-78.

"^^Id. at 1178. The only other issue raised was whether or not there were Indiana
inheritance and federal estate tax liens which rendered the title unmarketable. Because the

court reversed on the first issue, it did not address this issue. Id. at 1178 n.l.

«M at 1178 (quoting Kenefick v. Schumaker, 64 Ind. App. 552, 563, 116 N.E.
319, 323 (1917)).



354 INDIANA LAW REVIEW [Vol. 18:347

The court observed that Dorothy's potential claim must be based upon

her antenuptial agreement, since she had surrendered her statutory election

to take against the will/"^ In order for such a claim to be a cloud on

the title, the court concluded, the "farm must have been either a part

of Anton Walz' net estate or the object of a fraudulent inter vivos

transfer designed to remove the farm from that estate and evade Dorothy

Walz' rights under the antenuptial agreement.
"^"^

The court first sought to determine whether or not the farm was

still part of the estate. If the deed passed no interest until the death

of the grantor, it would be testamentary and part of Anton's estate.

If, on the other hand, the deed passed an interest to the grantee during

the grantor's lifetime, it was effective as an inter vivos conveyance and

the property was removed "from Anton Walz' net estate, leaving Dorothy

Walz with no claim to the farm under the terms of the antenuptial

agreement."'*^ In discussing this point, the court gave considerable weight

to the fact that Anton, after discovering that his children could evict

him from the Coldwater Farm after he had conveyed it to them, had
four of the children reconvey a portion of their interest back to him.

This, the court suggested, created "a reasonable inference" that Anton
did not intend to divest himself of control over the property: "else why
require that this interest be returned to be re-assigned?"'^^ The answer

seems rather obvious. In the earlier conveyance to his children, Anton

had not retained a life estate which would have allowed him to remain

on the property and collect the rents. No doubt the establishment of
the escrow, whereby an undivided one-third interest in Anton's other

farm would be held for Dorothy until Anton's death, suggested to Anton

a way in which he could convey his interest in his Coldwater Farm to
his children and still retain the use and enjoyment of the property until

his death. It is not surprising, then, that a short time later he had the

children reconvey their interests so that he might set up a similar escrow

arrangement for the Coldwater Farm. The fact that the deed was not

to be delivered to the children until Anton's death did not make the
transfer testamentary. Placing a deed in escrow to be delivered at the

grantor's death has the effect of creating a life estate in the grantor

and immediately passing the remainder to the grantee."*^

^M58 N.E.2d at 1179.

''Id. at 1180 (citation omitted).

''Id. at 1181.

''Id. at 1182.

^«23 Am. Jur. 2d Deeds § 149 (1983); J. Cribbet, supra note 29, at 124-25. For
simplicity, scholars and jurists often describe the interest retained by the grantor as a life
estate. Technically, it is more correct to say that the deed creates an executory limitation
in the grantee and that the fee remains in the grantor until his death, at which time title
springs up in the grantee by operation of the deed. R. Cunningham, supra note 22, at
743; 8 G. Thompson, supra note 29, at § 4232.



1985] SURVEY—PROPERTY 355

The court also found that the use of Anton's own attorney as the
escrow agent was an indication that he had not rehnquished dominion

and control over the deed/** In order to be an effective delivery, the

donative escrow must be the agent of the grantee and not the agent of

the grantor. 5° If the agent is in fact the agent of the grantor, his authority

ends with the grantor's death and there can be no subsequent delivery. 5'

Courts have found, on occasion, that there was no delivery where the

deed was placed in the hands of the grantor's attorney as the escrow

agent." Where there was no right to recall the deed, however, most

courts allow the grantor's own attorney to act as an escrow agent for
the donee since the grantor has no control over the deed.^^ In the case

at bar the court implied that the grantor retained control over the deed

because "the question arises as to whether the deed might have been

recalled had Walz so chosen. "^^ There is nothing in the facts to suggest

that the grantor had an express right to recall the deed. Nevertheless,

the court seems to have believed that because the grantor retained the right

to accelerate delivery of the deed, he had not relinquished all dominion and

control over the deed.^^

A final factor which the court found indicated that the deed was
not intended to pass any interest in the Coldwater Farm until after
Anton's death was the wording of Anton's will, executed on the same

day that the deed to the Coldwater Farm was deposited with Anton's
attorney. The will, after mentioning the antenuptial agreement with

Dorothy, declared: '"but in no event shall any portion of my said
Coldwater Farm go to satisfy said obligation.'"-^ If Anton had already
conveyed the property to his children by deed, then the property was

no longer part of the estate, and there was no need for the directive

^'^458 N.E.2d at 1182-83.

^"23 Am. Jur. 2d Deeds § 146 (1983).
^'Grant Trust & Sav. Co. v. Tucker, 49 Ind. App. 345, 96 N.E. 487 (1911).
'^^E.g., Bickford v. Mattocks, 95 Me. 547, 50 A. 894 (1901); Gilmer v. Anderson,

34 Mich. App. 6, 190 N.W.2d 708 (1971); Bull v. Fenich, 34 Wash. App. 435, 661 P. 2d
1012 (1983).

''E.g., Hodges V. Lockhead, 217 Gal. App. 2d 199, 31 Gal. Rptr. 879 (1963); Van
Epps V. Arbuckle, 332 111. 551, 164 N.E. 1 (1928); Huxley v. Liess, 226 Iowa 819, 285

N.W. 216 (1939); Osten-Sacken v. Steiner, 356 Mich. 468, 97 N.W.2d 37 (1959); Cappozzella
V. Gappozzella, 213 Va. 820, 19'6 S.E.2d 67 (1973).

^M58 N.E.2d at 1183.

"The court seems to imply that because "Walz retained the capacity to accelerate
delivery by instructing his attorney to deliver the deed before Walz' death . . . ''id. at

1182, the directive was somehow less certain than the directive contained in the Loesch
case that the bank "shall deliver" the deeds at the grantor's death. Id. at 1183. In reality,

the delivery was not uncertain, because if the grantor had not authorized the agent to

deliver before his death, the second event under which the attorney was to deliver the

deed, the death of the grantor, would have occurred.

'''Id. at 1183 (quoting Anton Walz' will).



356 INDIANA LAW REVIEW [Vol. 18:347

in the will. The court went to great lengths to distinguish Wheeler v.

Loesch.'^ In Loesch, the court found that two deeds delivered to the

bank to hold until the grantor's death effectively passed title to the

property to the grantor's children. The deeds were delivered to the bank

on the same day that the grantor executed his will, and the will referred

to the deeds. ^^ The Russell court found that Loesch was not controlling

since the words in Loesch's will, "T have this day deeded to my son
Peter . . . and to my son, John, two tracts of land'" expressed a fait
accompli, whereas the words in Anton's will are ambiguous. ^^ In light

of the above, and the fact that Dorothy refused to sign the release, the

court concluded that there was "a threat of litigation sufficient to render

title to Coldwater Farm unmarketable."^^
The Walz children argued that the deed should be considered a valid

intervivos transfer because of the doctrine of relation back. The court

responded to this argument by pointing out that "relation back" can

only be used where there is a vaHd delivery of the deed, and here there

was a litigable issue concerning delivery.^' At this point the court could

have, and perhaps should have, stopped. Instead, the court went on to

indicate a second reason why the doctrine of relation back might not
apply. The court observed that the doctrine of relation back has been

held not to apply so as to affect the claims of creditors, and that

Dorothy might be a creditor of her husband's estate. ^^ The court then

elaborated on the status of the spouse as a creditor in its creation of

a subissue as to whether, assuming arguendo that the deed was effective

as an inter vivos transfer, the "transfer was voidable as a fraudulent

transfer designed to remove property from Anton Walz' net estate and

"51 Ind. App. 262, 99 N.E. 502 (1912).

^^The court in Loesch noted:

Where a will and deeds are executed at the same time, it may be requisite
to look at all the instruments in order to ascertain the testator's intention, but

this alone will not prevent the deeds from passing title to the property described

therein, or make them a part of the will.
Id. at 265, 99 N.E. at 502 (citation omitted).

"^458 N.E.2d at 1182 (quoting Wheeler v. Loesch, 51 Ind. App. 262, 263, 99 N.E.

502, 502 (1912) (quoting Jacob Loesch's will)).

^"458 N.E.2d at 1183.

''Id. at 1183-84.

'^Id. at 1184. It is clear from the authorities cited by the court that the doctrine

of relation back will not be used to defeat the claims of creditors. Nevertheless, it is a

major leap to conclude that Dorothy might be a creditor. There are several older decisions

suggesting that relation back can be used to defeat the wife's claim to a dower interest

in property conveyed by donative escrow. Smiley v. Smiley, 114 Ind. 258, 16 N.E. 585

(1887); Bucher v. Young, 94 Ind. App. 586, 158 N.E. 581 (1927). Presently, the surviving

spouse to an elective share of the estate of the deceased spouse is dependent upon the
property being part of the estate and is not a vested interest in the property as was

dower. See infra notes 69-71 and accompanying text.



1985] SURVEY—PROPERTY 357

thereby defeat Dorothy Walz' rights under her antenuptial agreement.""

To support this approach, the court cited Dubin v. Wise,^"^ an IlHnois
decision which held that the husband could not intentionally dissipate

his assets in order to defeat the wife's antenuptial rights.

According to Dubin, the inter vivos transaction can be attacked on

two grounds: (1) actual intent to subvert the antenuptial agreement; or

(2) fraud implied from the disproportionate and unreasonable amount

of the assets transferred in relation to the balance of the promisor's

property. ^^ The court concluded that an argument based on Dubin would

raise a litigable issue as to the validity of the inter vivos transaction.^^

By raising the issue of the spouse's status as a creditor for purposes

of relation back and by suggesting that the deed could be set aside even

if it were effective to convey the property inter vivos, the court has

opened Pandora's box. This portion of the decision appears to be in

conflict with the spirit if not the letter of Leazenby v. Clinton County

Bank.^^ In Leazenby, the spouse transferred most of her assets into an

inter vivos trust over which she retained the right to the income for life,

control over the actions of the trustee, and a power to revoke or amend
the trust. ^^ In rejecting the claim of the surviving spouse to any share

of the trust property, the Indiana Court of Appeals remarked: "This

election interest is not absolutely vested as was the ancient dower interest;

it is only an expectant interest, determined at the time of death, and

dependent upon the contingency that the property to which the interest

attaches becomes part of the decedent's estate. "^^ In rejecting the view

that it was a fraud on the marital rights of the spouse, the court in

Leazenby observed that because the spouse "had no right or interest in
the property of his deceased wife during her lifetime, a valid trust

agreement could not be fraudulent, actually or constructively, as to her.

'One cannot be defrauded of that to which he has no right. "'^° The

Leazenby court emphasized the public policy considerations favoring free

alienability of property inter vivos: "It is no argument that because one

cannot by testamentary disposition exclude a spouse's elective share, that

one cannot accompUsh the same result by a valid trust agreement."^'

It is true that in Leazenby there was no antenuptial agreement, only

the right of a spouse to an elective share of the estate. Nevertheless, it

"458 N.E.2d at 1184.

'^41 111. App. 3cl 132, 354 N.E.2d 403 (1976).

^'Id. at 138, 354 N.E.2d at 408-09.

''^458 N.E.2d at 1185.

'^^71 Ind. App. 243, 355 N.E.2d 861 (1976).

''Id. at 245, 355 N.E.2d at 862.

"'M at 247, 355 N.E.2d at 863 (citations omitted).

™M at 251, 355 N.E.2d at 865 (quoting in part Cherniack v. Home National Bank
«& Trust Company of Meriden, 151 Conn. 367, 369, 198 A.2d 58, 60 (1964)).

^'171 Ind. App. at 254, 355 N.E.2d at 867 (citation omitted).



358 INDIANA LAW REVIEW [Vol. 18:347

is hard to see how a "waiver" of the elective share and an agreement
to take a different share of the estate could give the spouse a greater

right than the elective share itself. In Russell, the court has reopened

the question of the rights of a surviving spouse to the assets of the

deceased spouse transferred by inter vivos conveyances.^^

In light of this decision, there may be two alternatives to the use
of the donative escrow to transfer property. The first alternative would

be to place the condition in the deed rather than in the dehvery by

reserving a Hfe estate property in the deed or stating in the deed that

it is not to operate as a conveyance until the death of the grantor, and

deliver the deed directly and at once to the grantee. ^^ Thus, the grantor

has the life estate or right to the rents and profits froni ]the land, and

the grantee has the remainder. There is no need for an escrow agent

or use of the doctrine of relation back. The second alternative is the

use of an inter vivos trust. Under the Indiana trust code, the settlor

(grantor) can retain the right to the rents and profits or use of the

property for Hfe, as well as the power to revoke or amend the trust
without the trust being considered testamentary. ^"^ There appears to be

no reason, other than historical, why the grantor-donor cannot exercise
any control over the property or recall the deed in a donative escrow,

but the settlor of a modern inter vivos trust can exercise control over

the operation of the trust and reserve the power to revoke or amend

the trust. Nevertheless, the trust seems to avoid many of the problems
encountered by the use of the donative escrow and should be given

serious consideration as an alternative method of transferring property.

2. Construction of Deed's Language: Conveyance of Right of Way
as Easement.—In Richard S. Brunt Trust v. Plantz,'^^ the Indiana Court

of Appeals determined that certain deeds granting a right of way over

five parcels of land to the Terre Haute and Logansport Railroad (railroad)

^-For an excellent discussion of the rights of the surviving spouse in the property

of the deceased spouse and the impact of the Leazenby decision, see Falender, Protective

Provisions for Surviving Spouses in Indiana: Consideration for a Legislative Response to

Leazenby, 11 Ind. L. Rev. 755 (1978).

''See, e.g., Kelley v. Simer, 152 Ind. 290, 53 N.E. 233 (1899) (deed valid even
though grantor reserved life estate); Wilson v. Carrico, 140 Ind. 533, 40 N.E. 50 (1895)
(executed and recorded deed containing provision that "above obligation to be of none
effect until after the death" of grantor held valid to pass future interest immediately to

grantee even though enjoyment postponed until death of grantor); Gates v. Gates, 135
Ind. 272, 34 N.E. 957 (1893) (deed held valid even though grantor expressly reserved and
excepted from the grant the use, occupation, rents, and proceeds to himself during his

natural life).

^'The Indiana Probate Gode provides that inter vivos trusts need not be executed
with the formalities of a testamentary instrument even though the settlor retains the power

to revoke or amend the power to control investments, or the power to consume the
principal. Ind. Gode § 29-1-5-9 (1982). See also Leazenby v. Ghnton Gounty Bank, 171
Ind. App. 243, 252, 355 N.E.2d 861, 864 (1976).

^H58 N.E.2d 251 (Ind. Gt. App. 1983).



1985] SURVEY—PROPERTY 359

in the late 1800's conveyed an easement only and not a fee to the right

of way area. The right of way was subsequently conveyed to the Penn
Central Corporation who, after it had abandoned railroad operations

over the right of way, sold the right of way to the Richard S. Brunt

Trust (Brunt). Brunt filed this action to recover damages and to enjoin

neighboring landowners from cutting trees on the right of way. The

landowners counterclaimed that the abandonment of railroad operations

extinguished the easement and gave them the unrestricted fee simple title

to the right of way area abutting their land. The trial court found for
the landowners. ^^

On appeal, Brunt contended that the deeds conveyed the fee to the
right of way area and that the title was not lost by the abandonment
of railroad operations. All but one of the conveyances were on a

preprinted form supplied by the railroad entitled "Release of Right of

Way." The form deeds provided that the grantors released and quit-
claimed '"the right of way, for railroad purposes only, ... [a] strip
of ground'" through the grantors' property. ^^ Brunt argued that the

phrase "the right of way for railroad purposes only" was a covenant
which was satisfied by the use of the property for railroad purposes for

ninety years. ^^ The court did not agree, stating that a conveyance of a

"right" usually conveys an easement, whereas a conveyance of the land

without any statement as to the use or purpose for which it is conveyed

passes the fee to the land.^^

The court noted that in the past it had looked to a railroad's charter

to determine whether a fee simple or a lesser estate was conveyed by

the deeds, but observed that in this case the railroad's charter did not

provide for the nature of the estate to be conveyed. ^^ The court then

examined the railroad's statutory authority to acquire land in 1881 and

found that the corporation could purchase land "in fee simple or oth-

erwise, as the parties may agree. "^^ EarHer decisions interpreting this
language found that just because they could have acquired a fee does

not mean that they took such an estate since the parties could have
contracted for a lesser estate than the law allowed. Here, the granting

clause clearly stated a right of way was conveyed, which under Indiana
law passes an easement and not the fee. The court also noted that
nominal consideration or consideration which is simply the benefit to

be derived by the grantor from the construction of the railroad suggests

an easement. The consideration for the right of way stated in the

''Id. at 252.

"M at 253 (quoting the Release of Right of Way agreement).
'^Id. at 252.

'""Id. at 253.

''Td. at 252 n.2.

"^^Id. at 254 (quoting the authorizing statute) (court's emphasis omitted).



360 INDIANA LAW REVIEW [Vol. 18:347

preprinted form was '"the advantages which will accrue to me in par-
ticular and the public generally by the construction of a railroad. "'*^^

Perhaps as important as any other rationale for the decision was the

court's remark that "we do not wish to encourage parceling of land in
narrow strips which runs [sic] randomly over Indiana land by reaching

any other conclusion. "^^

Finally, the court addressed the one conveyance which was not on

a preprinted form. This handwritten conveyance read much more like
a conveyance of the land itself than a right of way: "[the grantors]

convey and quit claim . . . for railroad purposes . . . the following

real estate .... "^"^ In rejecting the argument that a fee was conveyed,
the court noted that there would have been no reason to state the

purpose for which the land was to be used in the deed if it were

conveying a fee simple. The court also observed that the surrounding

circumstances demonstrated that the parties did not intend to convey a

fee. The railroad had earlier acquired an easement over another section

of the grantors' land; there was no reason to beheve a greater interest

was desired in the second transaction, and the grantors would have had

no reason to believe a different interest was being conveyed. ^^ Having

concluded that only an easement was conveyed to the railroad by the

right of way deeds, the court held the unrestricted fee simple reverted

to the present landowners when Penn Central abandoned the railroad

operations. ^^

D. Easements and Restrictive Covenants

I. Easements.^^—Easements, like other interests in land, can be owned
in common by two or more persons. The rights and obligations of such
co-owners were discussed in Litzelswope v. Mitchell. ^^ The Litzelswopes,

Andersons, and Mitchells each acquired a common right of way easement
for ingress and egress to and from their lots to a public roadway. While

"M at 252-53 (quoting the Release of Right of Way agreement).
^'Id. at 255 n.3.

^'Id. at 255.

*'Id. at 256. In a concurring opinion, Judge Garrard agreed that the preprinted form
deeds conveyed only an easement, but found it unnecessary to determine the estate conveyed
by the handwritten deed because the appellant waived the issue by presenting only one
argument on the deeds. Id. (Garrard, J., concurring).

"""-Id.

"In this survey period there were two cases dealing with easements which are not
discussed in this Article: Hagemeir v. Indiana & Michigan Elec. Co., 457 N.E.2d 590
(Ind. Ct. App. 1983) (power company's complaint for an easement insufficient to comply
with Indiana's eminent domain statute. Ind. Code § 32-11-1-2 (1982)); Rees v. Panhandle
Eastern Pipe Line Co., 452 N.E.2d 405 (Ind. Ct. App. 1983) (court upheld a trial court's
determination of the width of a pipeline easement).

M51 N.E.2d 366 (Ind. Ct. App. 1983).



1985] SURVEY—PROPERTY 361

the easement was sixty feet wide, only a portion approximately twenty

feet wide was used as a roadway. In order to construct a driveway

across an open ditch running along the side of the easement, the Mitchells

placed a culvert in the ditch and covered it with dirt; they also installed

a railroad tie retaining wall east of the open ditch. Two years later, the
Mitchells built a garage on their property, poured excess concrete into

the bottom of the open ditch, and built wooden steps from their property
to the driveway. The following year they installed bricks in the steps,

extended the culvert to a catch basin which they installed in the untraveled

portion of the roadway, covered the ditch with dirt, and seeded it. The

driveway, retaining wall, steps, culvert and ditch were all within the

easement, but outside the traveled portion. ^^

After these improvements were made, the Litzelswopes and Mitchells

jointly commissioned a survey, which revealed that the improvements

extended into the easement. The Litzelswopes and Andersons filed suit

to compel the Mitchells to remove their encroachments from the ease-

ment. ^° The trial court enjoined the Mitchells from making any additional

encroachments or from changing the character of the existing encroach-

ments, such as by paving the driveway, but allowed them to keep the

existing encroachments and to repair and maintain them.^' The judgment

further provided that the Mitchells should not acquire any prescriptive

rights to the encroachments, and that if the easement should later be

accepted as a public roadway and the appropriate agency so required,

the Mitchells must remove the encroachments at their own expense. ^^

The court of appeals observed that the owner of an easement pos-

sesses all rights necessary and incidental to the use and enjoyment of

the easement, and may make the repairs, improvements, and alterations
reasonably necessary to make the grant of the easement effectual. While
noting that the controversy in such situations normally arose between

the dominant and servient owners, the court saw no reason why the
same rules should not apply in disputes between co-owners of the ease-

ment. Where there are several owners, however, each owner may exercise
such rights only so long as they do not hurt the rights of co-owners. ^^

In other words, the owner in common of an easement "may not alter
the land in such a manner as to render the easement appreciably less

convenient and useful for one of his co-owners. "^"^

The court examined the encroachments made by the Mitchells to
see if they were reasonably necessary to their use of the easement. The

«'/flf. at 368.

"^Id. at 367.

"'Id. at 368-69.

^Vof. at 369.

'''Id.

"^Id. at 370 (citations omitted).



362 INDIANA LAW REVIEW [Vol. 18:347

court found the driveway was necessary to their use of the easement

so as to provide access to and from the garage to the traveled portion

of the easement, and that the culvert was necessary to construct the

driveway across the open ditch. Likewise, the steps were necessary to

provide ingress to and egress from their property. Finally, the court

found that the railroad tie retaining wall, the culvert, drain pipe, catch

basin, and concrete poured into the ditch were all necessary to alleviate

an erosion problem which had been worsening. Having found that the

encroachments were reasonably necessary for the use and enjoyment of

the easement, the court then considered whether or not they were an

unreasonable interference with the Litzelswopes' use and enjoyment of

the easement. The only claim of interference made by the Litzelswopes
was that the catch basin required them to veer slightly to the left when
approaching the easement from the roadway, a question of fact which

the trial court decided against the defendants. ^^

2. Restrictive Covenants.—Unlike easements, restrictive convenants
are enforced in equity, and a court of equity will not enforce a restrictive

covenant where conditions in the restricted area have changed to such

an extent that they have significantly reduced or eliminated any benefits

sought to be realized by enforcement of the covenant. '^^ The issue of

what constitutes "changed conditions" sufficient to deny enforcement

of a restrictive covenant was raised in Burnett v. Heckelman.^^ In 1955,

the plaintiff, Mary Heckelman, her husband, and his parents purchased
five lots in a subdivision, intending to build houses on them. Restrictive

convenants prohibited the owners of any of the subdivision lots from

using them for commercial purposes. Since 1955, the area surrounding
the subdivision had become commercialized. There were some fifty com-

mercial establishments in the immediate area, but within the subdivision

there were neither commercial activities nor commercial structures. ^*^

In 1969, in order to widen a state highway, the state condemned

as much as fifty feet of the nine lots facing the highway, including the
five lots owned by the plaintiff. The four houses built on the other lots

'^Id. Another issue raised on appeal by the Mitchells was acquiescence. Mr. Litzelswope

was aware of the construction of the driveway, gave advice to Mr. Mitchell concerning

the construction of the steps, furnished the railroad ties for the retaining wall, and

suggested that Mitchell pour the concrete into the bottom of the ditch to prevent further

erosion. From these facts, the court concluded that the trial court might have determined
that the failure to object to the encroachments amounted to an implied consent or

acquiescence, but that, since the trial court had also found the acts of the Mitchells did

not exceed their rights to the use of the easement, it was not necessary to decide this

issue.

^"Bob Layne Contractor, Inc. v. Buennagel, 158 Ind. App. 43, 301 N.E.2d 671

(1973); 2 American Law of Property § 9.39 (Supp. 1976). See also Krieger, Property,
1981 Survey of Recent Developments in Indiana Law, 14 Ind. L. Rev. 459, 473 (1981).

^^^56 N.E.2d 1094 (Ind. Ct. App. 1983).

'''Id. at 1096.



1985] SURVEY—PROPERTY 363

facing the highway had deteriorated. The plaintiff argued that these

changes within the subdivision and the commerciahzation of the sur-

rounding area had defeated the purpose of the covenant, making its

enforcement inequitable.'^'^ Based on this evidence, the trial court modified

the restrictive covenants pertaining to Heckelman's lots to permit her

to use them for commercial activities, but ordered her to grant all the

landowners in the subdivision a twenty foot easement across the rear

portion of the lots, and to erect a fence and plant trees along the entire

length of the easement so as to create a barrier between her property

and the remainder of the subdivision. Dissatisfied with this arrangement,

the remaining property owners were granted a stay of execution pending

this appeal. '°"

The court of appeals noted that, in order to declare the restrictive

covenant unenforceable, the change in the subdivision and the surround-

ing area must be so great that the purpose of the covenants can no

longer be attained. While no hard and fast rule can be developed to

cover all situations, the court concluded that more weight should be

given to changes within the subdivision itself. '"'

In refusing to give as much weight to changes in the area immediately
outside the subdivision, the court was attempting to avoid a "domino
effect." As the court observed, there will always be a line where com-
mercial and residential areas meet, and the residential property at this

boundary line will be less valuable for residential purposes. '^^ But to

allow the lots along the line to become commercial would in turn create

a new line where, once again, the owners of the lots along the line

could make the argument that the property is less suited for residential
purposes and more valuable for commercial activities. Thus, the line

would continue moving into the interior of the residential area until all

of the lots were affected. '^^ In order to avoid this result, restrictive

covenants should be enforced so long as they are still of benefit to the

interior lots.'""^ In this case, the court found that "there is no evidence

[the] diminution in value [of the lots facing the highway] has altered

the 'residential nature of hfe within' the subdivision. "'°^ The court noted

^'Id. at 1098. She also argued that the lots facing the highway would be more
valuable if put to commercial use.

'""/c^. at 1096.

""/flf. at 1098 (citing Cunningham v. Hiles, 182 Ind. App. 511, 517, 395 N.E.2d 851,
855 (1979)).

'"M56 N.E.2d at 1098.

'"The trial court attempted to avoid this effect by the creation of a buffer zone.

456 N.E.2d at 1096.
'"^5 R. Powell, The Law of Real Property 684 (1980); 2 Amerian Law of Property,

supra note 96, at § 9.39.

"M56 N.E.2d at 1099 (quoting in part Cunningham v. Hiles, 182 Ind. App. 511,
518, 395 N.E.2d 851, 1979)) {Cunningham court's emphasis omitted).



364 INDIANA LAW REVIEW [Vol. 18:347

the similarity of the issues raised in this case and those in Cunningham

V. Hiles,^^^^ where a landowner in a residential subdivision was attempting

to build a commercial structure on his lot.'"^ In Cunningham, traffic

had increased around the subdivision, commercial activities were in the

immediate area, lots near the major thoroughfare failed to attract resi-

dential buyers, and an office building erected on adjoining land actually

protruded more than 100 feet into the subdivision. Nevertheless, the

Cunningham court concluded that these changes had not affected the
residential nature of life within the subdivision, and enforced the re-

strictive covenants against the landowner. '°^

In reversing the trial court's decision, the court of appeals was

unsympathetic to the plaintiffs plight. She purchased with full knowledge

of these restrictions, and to allow her now to disregard these covenants
would be detrimental to the other owners who purchased their lots in
reliance upon the restrictive coventant.'"^ The Burnett decision points

out once again that changed conditions sufficient to make a restrictive
covenant unenforceable must be so radical in nature as to destroy the

purpose of the restriction and neutralize its benefits.

E. Landlord-Tenant

During this survey period there were a number of interesting landlord-

tenant cases. In Keystone Square v. Marsh Supermarkets, Inc.,^^^ the

court examined the rights and obligations of an "anchor tenant" under

the provision of a shopping center lease. In this case. Marsh Supermarkets

(Marsh) entered into a lease with the Keystone Shopping Center Company
(Keystone) to operate a store in the Keystone Shopping Center. The
lease provided for an annual rent plus one percent of the gross sales

exceeding ten times the rent. Becuase of the store's success, Marsh

attempted to renegotiate the lease and obtain additional floor space.

These negotiations failed, and Marsh moved its store out of the shopping
center to a new location near Keystone. The leased space in the shopping
center was temporarily vacant and then reopened by Marsh as a Green

Basket discount supermarket. Marsh filed for a declaratory judgment

as to its rights and liabilities under the lease, and Keystone counter-

claimed, alleging Marsh was in violation of the lease and guilty of fraud.

The trial court entered a judgment for Marsh from which Keystone
appealed. "°

"^182 Ind. App. 511, 395 N.E.2d 851 (1979); see also Krieger, supra note 96, at 473
(extensively discussing the Cunningham case).

"'M82 Ind. App. at 518-59, 395 N.E.2d at 855-56.
"M56 N.E.2d at 1099.
"M59 N.E.2d 420 (Ind. Ct. App. 1984).
""/c^. at 423.



1985] SURVEY—PROPERTY 365

The court of appeals, following the trend of decisions in other

jurisdictions, found that there was no implied covenant requiring Marsh

to continue operating a supermarket on the leased premises.'" It is

difficult to see how Keystone could have made this argument when the
lease itself specifically permitted Marsh to assign or sublet the leased

premises."^ Keystone also argued that Marsh had underpaid the rent by

understating the amount of sales, and by taking certain setoffs and

deductions from the rent not allowed under the lease. As to the setoffs

and deductions, the court found that they were allowed under the

language of the lease. Keystone argued, however, that the court should

also consider "lease data summaries" which were in direct conflict with

the clear and unambiguous language in the lease. The court rejected

this position, concluding that while generally the courts should consider

separate writings executed at the same time as a whole, this rule should

not be applied arbitrarily without regard for the realities of each case."^

With regard to the understatement of the sales for 1976, the court noted

that the lease provided that Keystone had to challenge any sales report

within 120 days after it was submitted, and Keystone did not notify

Marsh of its challenge until 1978.'"* Keystone also argued that the trial

court judgment should not be enforced because of changed circumstances.

The court noted that a declaratory judgment only fixes the rights and

obligations of the parties at the time of the trial, and that while the

changed circumstances might give rise to another cause of action, they

did not affect the trial court's judgment."^

In another shopping center case, Tucker v. Richey,^^^ the Indiana

Court of Appeals and the Indiana Supreme Court both agreed that the

provisions in a shopping center lease were clear and unambiguous, but

reached opposite conclusions as to the meaning of the clear and un-

ambiguous language."^ The lease between the landlord of a shopping

'"M at 423 (citing Bastian v. Albertson's Inc., 102 Idaho 909, 643 P. 2d 1079 (1982);
Williams v. Safeway Stores, Inc., 198 Kan. 331, 424 P. 2d 541 (1967); Stop & Shop, Inc.
V. Gourm, 347 Mass. 697, 200 N.E.2d 248 (1964); Fuller Market Basket, Inc., v. Gillingham

& Jones, Inc., 14 Wash. App. 128, 539 P.2d 868 (1975)).
"M59 N.E.2d at 423.
'''Id. at 425.

'''Id.

'"Id. at 425-26.

""448 N.E.2d 1206 (Ind. Ct. App. 1983), vacated, 460 N.E.2d 964 (Ind. 1984).

"^The pertinent lease provisions are contained in paragraphs (1) and (15) of the lease.

Paragraph (1) provides in part: "Landlord expressly reserves the right to change or modify

the plans and facilities of the Shopping Center without the consent of the Tenant, but

neither the Leased Premises nor the general character of the Shopping Center shall be

changed without such consent." Id. at 1210-11 (quoting the lease agreement). Paragraph

(15) reads in part:

Tenants shall not use the Mall Common Area or the Open Common Area for
any display or storage of merchandise or use such areas in any way which



366 INDIANA LAW REVIEW [Vol. 18:347

mall and the subtenants who operated an ice cream shop in the mall
provided that the landlord reserved the right '"to permit advertising

displays, entertainment and educational displays, and events, and kiosks

. .
.'""8 in the mall common area. The landlord allowed two kiosks to

be erected in the mall common area near the ice cream store, and the
subtenants complained. When the landlord did not have the kiosks
removed, the subtenants filed suit for breach of the lease, and vacated

the store. "9

The trial court granted summary judgment for the subtenants without

written findings of fact or conclusions of law.'^^ The Indiana Court of

Appeals found that the language in the lease was clear and unambiguous,

and applied the "four corners rule": the express language found within

the four corners of the lease, if unambiguous, determines the intent of

the parties. '2' The landlord argued that the lease provision clearly reserved

the right to erect kiosks in the mall. The court of appeals did not agree,

pointing out that words should "be construed consistently with reference

to the whole clause in which they are used and that the clause in which

"kiosks" is used refers to things which are all of a temporary nature. '^^

In addition, the court noted that the intent of the parties is determined

from the language in the entire instrument. After examining the language

in the lease, the court concluded that the trial court reasonably ascertained

would interfere with the use of such areas by other tenants, their employees

and invitees, without the express written consent of Landlord and shall comply

with all reasonable rules and regulations of Landlord with respect thereto.

Landlord reserves the right to make charges (sic), additions, deletions, alterations,
and improvements in and to such areas, and to permit advertising displays,

entertainment, and educational displays and events, and kiosks thereon.

Id. at 1210.

"H60 N.E.2d at 966 (quoting the lease agreement). "Kiosk" is defined as: "1. in

Turkey and Persia, a summerhouse or paviHon of open construction 2. a somewhat similar

small structure open at one or more sides, used as a newsstand, bandstand, entrance
to a subway, etc." Webster's New World Dictionary 777 (2d college ed. 1982), quoted
in, Jucker v. Richey, 460 N.E.2d 964, 966 (Ind. 1984). The court also cited City and

County of Honolulu v. Ambler, 1 Hawaii App. 589, 590, 623 P.2d 92, 93 (1981) for a

judicial definition of "kiosk." That case defined "kiosk" "as a small structure used as

a newsstand, entertainment booth or the Hke." 460 N.E.2d at 966 (citing the Ambler

decision).

"''The lease defined "mall common area" as being "'the enclosed common area as
shown on the plot plan . . . with heated and air conditioned mall areas, corridors, fixtures

and restrooms . . . ."' 460 N.E.2d at 965-66 (quoting the lease agreement).

'^°/af. at 966. The Indiana Supreme Court concluded that, evidently, the judgment

was based on a conclusion that (1) the lease only permitted temporary advertising,

entertainment, and educational kiosks, or (2) the erection of permanent retail kiosks in

the common mall area changed the general character of the mall. Id. at 966-67.
'^'448 N.E.2d at 1209.

'"/c^. at 1210. Noscitur a sociis (one is known by his associates) is a rule of construction
which limits or restricts the general meaning of a word by consideration of the accompanying

words.



1985] SURVEY—PROPERTY 367

that the mall common area was to be open to all tenants, customers
and invitees, and that the erection of a permanent kiosk would be

prohibited. The court further concluded that "the general character" of

a shopping mall is where retail stores face out onto an enclosed walkway

system, containing rest benches, interior landscaping, and that erecting

a retail kiosk would be altering this "general character" in violation of

the lease without the consent of the tenant. ^^^ Judge Ratliff dissented,

concluding that the language gave the landlord the right to erect kiosks

subject only to the limitation that the general character of the mall not

be changed. He concluded that anyone familiar with shopping malls was
well aware that kiosks are not an unusual usage and are common
attributes of such malls. Their construction would not change the "general

character" of the mall.'^^

The Indiana Supreme Court vacated the decision of the court of

appeals, incorporating Judge Ratliff's dissenting opinion verbatim into

the majority opinion. '^^ The court noted that the word "temporary"

was not contained in the clause allowing the landlord to erect kiosks,

and the word "kiosk" contemplates a structure of a permanent or at

least semipermanent nature used for retail sales. ''^ In a dissenting opinion.

Justice DeBruler observed that the lease reserved the right of the landlord

"to permit" the erection of kiosks and that the synonym for "permit"

most favorable to the position of the landlord would be "license."

Clearly, a lease is more than a license. A license could not permit the
landlord to take exclusive possession of a part of the mall common area
"and received consideration from retailers in return for their exclusive

occupancy. "'^^

In Lafayette Realty Corp. v. Vonnegut's Inc.,^^^ Vonnegut's Inc.

(Vonnegut's) leased the premises it used as a hardware store from

Lafayette Realty Corporation (Lafayette). The lease provided that Von-

negut's should keep the heating system in repair, but that Lafayette

should make any necessary capital replacements. The lease further pro-
vided that if Lafayette should default in the performance of any con-

ditions in the lease, Vonnegut's, at its option and after giving Lafayette

thirty days written notice of such default, could make the repairs and
deduct the cost of performance from the rent.'^'^ Another provision in

the lease stated that its option remedies should not preclude either party

from invoking any other remedy available to them by law.'^°

'-'Id. at 1211. •
''-'Id. at 1212 (Ratliff, J., dissenting).

•-'460 N.E.2d at 967.

'^Vcf. at 966.

'-'Id. at 967 (DeBruler, J., dissenting).

'^*'458 N.E.2d 689 (Ind. Ct. App. 1984).

'-'/of. at 690-91.

''°M at 691.



368 INDIANA LAW REVIEW [Vol. 18:347

A routine inspection of the store's heating plant led to the discovery
that the heat exchanger had deteriorated, and Vonnegut's was advised

not to use the system until the heat exchanger was replaced. Vonnegut's

immediately notified Lafayette. Lafayette's maintenance employee and

a private contractor inspected the heating plant at Lafayette's request;

they advised Lafayette that the entire heating plant needed to be re-

placed. '^^ After several attempts to contact Lafayette's president, Von-

negut's reached Lafayette's vice president, who proposed that Lafayette
would pay half of the cost if Vonnegut's agreed to pay the other half.

Vonnegut's general manager verbally rejected this offer and confirmed

the rejection by letter. There was no further communication between

the parties until Vonnegut's notified Lafayette that it had vacated the

premises a little over a month later. After installing a new heating

system, Lafayette advised Vonnegut's that it would be expected to comply

with the terms of the lease. When Vonnegut's refused to resume pos-
session of the store, Lafayette sued for breach of the lease. Vonnegut's

raised the affirmative defense of constructive eviction, and the trial court

rendered judgment for Vonnegut's. Lafayette appealed. '^^

The court of appeals concluded that Vonnegut's had been construc-

tively evicted, based on evidence that temperatures in the store were at

or near freezing for most of the month, forcing employees to wear

winter clothing while at work, and that on several occasions the cold

forced the store to close. The court found that this breach by the lessor

was '"so substantial and permanent in character' as to effectively exclude

the lessee from [the] beneficial use of the property.'"" The court noted

that in order to assert the defense of constructive eviction the lessee

must vacate the premises within a reasonable time or waive the defense,

and what is a reasonable time can "only be made upon a consideration
of the surrounding circumstances.'"^"* Under these circumstances, the

court could not say the trial court was erroneous in determining that

Vonnegut's had been constructively evicted. '^^

Lafayette argued that because Vonnegut's had the right (option) to

make capital replacements when Lafayette refused to make them, and
the lease did not state what was to happen if Vonnegut's refused to

'"Id. at 692 (citation omitted). Not every minor breach of the lease will constitute
a constructive eviction. The act or omission of the lessor must materially deprive the
lessee of the beneficial use or enjoyment of the leased property before the lessee may
elect to abandon the property and avoid further obhgations under the lease. Talbott v.
Citizens National Bank of Evansville, 389 F.2d 207 (7th Cir. 1968); Talbott v. English,
156 Ind. 299, 59 N.E. 857 (1901); Sigsbee v. Swathwood, 419 N.E.2d 789 (Ind. Ct.
App. 1981).

'M58 N.E.2d at 693 (citation omitted).
'''Id. at 694.



1985] SURVEY—PROPERTY 369

make the replacements, there was an ambiguity in the lease and Von-
negut's was therefore required to give Lafayette thirty days notice if it

chose not to make the capital replacement. The court found this argument

absurd. '^^ Vonnegut's had, in fact, exercised its option in the past and

made major repairs to the store's air conditioning system and then

deducted the cost from the rent, but the court reasoned that a prior

exercise of its option did not require its exercise in all cases. The lease

expressly stated that the specified option remedies did not preclude the

invocation of any other remedy available to them by law. Since Von-

negut's could treat the failure to replace the heating system as a con-

structive eviction, the court of appeals affirmed the trial court's judgment. '^^

In Waxman Industries v. Trustco Development Co. ,'^^ the court
addressed a number of interesting and important issues, including miti-

gation of damages following abandonment by the tenant, acceptance

of surrender by the landlord, and the determination of "reasonable

attorney fees" which the tenant agreed to pay in the event of his default. '^^

Trustco Development Company (Trustco) leased a storeroom in a shop-
ping center to Handi-Fix Stores of Indiana, Inc. (Handi-Fix), and Wax-

'''Id. at 693.

'"M at 694.
'^H55 N.E.2d 376 (Ind. Ct. App. 1983).

"^The issue of attorneys fees involved the lease provision that "upon default, 'Lessee
shall pay all costs and reasonable attorney fees . . . . '" M at 379 (quoting the lease).
Trustco's attorney testified that there was a contingent fee agreement between himself and

his client, and that in such cases it is normal to receive one third of the amount collected,

and where he might be forced to go to Ohio to enforce the judgment, as here, the fee

should be 40% of the judgment. The issue on appeal was whether or not the obligor,
who under the terms of an instrument has agreed to pay reasonable attorney fees, is
bound by the contingent fee contract between the obligee and his attorney. After concluding

that this was a case of first impression in Indiana, the court examined contingent fee

contracts in general. The court found that such arrangements are generally binding between

the attorney and his client, although they must be carefully scrutinized by the courts to

ensure that no improper advantage is taken by the attorney. The court also concluded

that while no Indiana authority exists, a contingent fee can never be implied but must

be a matter expressly contracted for between the attorney and client. It followed, said

the court, that the contingent fee contract of the obligee on the instrument with his

attorney could not be enforced against the obligor who had merely agreed to pay a
reasonable attorney fee in the instrument. Id. at 381 (citing with approval Olson v. Carter,

175 Mont. 105, 572 P.2d 1238 (1977) (holding that the agreement between an attorney

and his client is not controlling in fixing the reasonable attorney fee to assess against the

opposing party); Engebretson v. Putnam, 174 Mont. 409, 571 P.2d 368 (1977). The

Engebretson court suggested that a reasonable fee be determined in accordance with the
guidelines enumerated in the Code of Professional Responsibility DR 2- 106(B). 174 Mont,
at 413, 571 P. 2d at 372. The Waxman court reversed as to the attorney fees, and directed
the trial court to fix a reasonable attorney fee which did not take into consideration the

contingent fee contract between the attorney and his client. 455 N.E.2d at 382. As the
court noted, the contingent fee would normally be a much higher fixed fee to the obligor
and such an arrangement is susceptible to abuse. Id.



370 INDIANA LAW REVIEW [Vol. 18:347

man Industries, Inc. (Waxman) guaranteed the lease. For some unexplained
reason, Handi-Fix vacated the premises a little over a year after entering

the lease. Handi-Fix's attempts to sublet the storeroom were unsuccessful

and its last rental payment was made nine months later. A year and a
half after that, and a little over a year before Handi-Fix's five year

lease expired, Trustco found a new tenant and relet the premises for a

term of three years, at a monthly rental $325 over Handi-Fix's rent.

Trustco then terminated Handi-Fix's lease, under a provision which

provided that if the lessee defaulted in the payment of the rent, '"Lessor

may thereupon take possession . . . and re-let the same without such
action being deemed an acceptance of a surrender of this lease ... or
the Lessor at its own option may . . . terminate this lease. ""^° Trustco
then brought suit against Handi-Fix for breach of the lease, seeking the

unpaid rent, damages, and attorney fees. Handi-Fix counterclaimed,

seeking credit for a shortage in the square footage of the lease premises'^'

and a credit for the additional rent per month from the new tenant for

the remainder of the lease term.'^^

With regard to the shortage in the square footage, the court noted

that it was "de minimus" and Handi-Fix failed to show how it was
damaged by this insignificant difference in the dimensions. In addition,

the court found that Handi-Fix had waived any breach by accepting the

defective performance.''^^ A more complex issue was raised by Handi-
Fix's argument that the additional rent received by Trustco from the

new tenant for the remainder of the term of the original lease should

be credited to it. When a tenant abandons the leased premises this does
not automatically terminate the tenant's obligations under the lease. The
landlord can treat the lease as continuing, in which case he may relet
the premises and hold the tenant liable for the difference between the

rent received from the new tenant and the rent due under the lease. "^^

Where the rent from the new tenant is less than the rent reserved under

the lease, the landlord must be careful not to do anything which might

'^455 N.E.2d at 378 (quoting the lease).

"•'Two months after the beginning of the lease, Handi-Fix informed Trustco of eight

defects in the leased premises, including a very minor shortage in the size of the premises.

The court noted that the lease did not state whether the distances referred to were inside
or outside measurements. There is nothing in the facts to suggest that Handi-Fix was

attempting to treat the minor shortage in space as a constructive eviction. Id. at 377.

''Ud. at 378.

'"Vfl?. at 378-79. One month after making a complaint about the shortage, Handi-
Fix executed a document entitled "Acceptance of the Premises," which waived any defects
in the premises.

"^In Indiana, if the landlord wants to treat the lease as continuing and hold the

tenant liable for the rent for the remainder of the term, he must mitigate his damages
by making reasonable efforts to relet the premises. Sigsbee v. Swathwood, 419 N.E. 2d
789 (Ind. Ct. App. 1981); State v. Boyle, 168 Ind. App. 643, 344 N.E.2d 302 (1976);
Hirsch v. Merchants National Bank Co. 166 Ind. App. 497, 336 N.E.2d 833 (1975).



1985] SURVEY—PROPERTY 371

suggest he is accepting the offer of surrender by the tenant.''*'^ Where

the new rent is greater than the rent reserved under the lease, the

landlord, as in this case, may decide to terminate the lease. "^^

Handi-Fix apparently made two separate arguments on this issue.
First, Handi-Fix contended that, although it had abandoned the premises,

it had not surrendered the premises and that it never consented to the

termination of the lease. The court found this argument made little sense
in view of Handi-Fix's nonpayment of rent and the clause in the lease

granting the lessor the option to terminate upon default. "^^ Second,

Handi-Fix argued that because the landlord did not elect to terminate

the lease prior to reletting the premises, Trustco had elected not to

terminate the lease. "^^ Thus, Trustco could not hold Handi-Fix Hable

for the full rent for the months the premises were vacant and then

exercise its option to terminate the lease when it was able to relet for

a higher rent. Unfortunately for Handi-Fix, there is an earlier Indiana

decision directly on point. In Trick v. Eckhouse,^"^^ the court stated:

"The fact that the appellee tlessor] was able to rent the property at an

increased rental is no reason why she should not recover the rent for
the two months the building was vacant . . . . "'^° Under this decision

the landlord has the best of both worlds. If the tenant abandons the

premises and the landlord, using reasonable efforts, is unable to relet

the premises, or rents them for an amount less than the rent reserved

in the lease, he may treat the lease as continuing, and hold the tenant
liable for the difference between the rent received from the new tenant
and the rent due under the lease. If, on the other hand, he is able to

relet for a higher rent, he can terminate the lease upon reletting, and

sue the tenant for the rent due and owing up to the time of the reletting

'*^If the landlord accepts the offer to surrender, the lease comes to an end and, with

it, the tenant's obligation to pay rent ends. Paxton Realty Corp. v. Peaker, 212 Ind. 480,

9 N.E.2d 96 (1937); Grueninger Travel Service, Inc., v. Lake County Trust Co., 413

N.E.2d 1034 (Ind. App. 1980); Donahoe v. Rich, 2 Ind. App. 540, 28 N.E. 1001 (1891).

''^There appears to be general agreement that a tenant who abandons the premises
is entitled to a rent credit for any proceeds gained by the landlord from reletting during

the period of the original lease. Wanderer v. Plainfield Carton Corp., 40 111. App. 3d

552, 351 N.E.2d 630 (1976). The court in Waxman at least impHed that if this company
had not terminated the lease, Handi-Fix would have been entitled to a credit for the

excess rent received from the new tenant. 455 N.E.2d at 379. However, even if the landlord

had not terminated the lease, it is very unlikely that a court would require the landlord

to return any of the excess rent over and above unpaid rent and damages to the tenant.

Wanderer v. Plainfield Carton Corp., 40 111. App. 3d 552, 351 N.E.2d 630 (1976); Whitcomb
V. Brant, 90 N.J.L. 245, 100 A. 175 (N.J. 1917). But see Restatement (Second) of

Property §12.1 comment i, at 391 (1977).
'^^455 N.E.2d at 379.

'''Id.

'^"82 Ind. App. 196, 145 N.E. 2d 587 (1924).
''''Id. at 198, 145 N.E. at 588. The court in Waxman noted that this result was

reached without any clause in the lease. 455 N.E.2d at 379.



372 INDIANA LAW REVIEW [Vol. 18:347

with no duty to account for the excess rent. The decisions do not seem

to find anything unjust or inequitable with this result.

In Tippmann Refrigeration Construction v. Erie-Haven, Inc.,^^^ Tipp-

man Refrigeration Construction (Tippmann) leased, with an option to
purchase, a garage from Erie-Haven, Inc. and France Stone Co. (Erie-

Haven). The lease required Erie-Haven '"to maintain fire and extended

coverage insurance on the building being leased herein,' '"^^ and allowed

for the application of fifty percent of the rent paid to the purchase

price if within twelve months from the effective date of the agreement

Tippmann exercised its option to purchase. If Erie-Haven terminated

the agreement before it expired, Tippmann was to recover a certain

amount for some of the improvements made—other improvements were
to be made at Tippmann's own risk.'"

The building was destroyed by fire, and Erie-Haven terminated the

lease "[p]ursuant to the lease-option provision on destruction of the

premises. '"^"^ When Tippmann then tried to exercise the option to pur-
chase, Erie-Haven refused either to sell or to share the fire insurance

proceeds, and Tippmann filed suit. The trial court granted summary
judgment for Erie-Haven. '^-

The court of appeals examined the insurance clause and concluded

that the provision was intended for the benefit of both parties.'''^ Since

the lessor is always free to carry insurance on the leased premises, the

provision would be mere surplusage unless it was intended to benefit

both parties. The court distinguished Haney v. Denny, ^^^ which held
that the lessee with an unexercised option to purchase was not entitled

to the condemnation proceeds. The court noted that in Haney there was
no provision requiring the landlord to insure the premises. Thus, the

trial court erred in granting summary judgment and the court remanded
for a "determination of an appropriate division of insurance proceeds. "'^^

Tippmann argued that the option to purchase was separate and
divisible from the lease, and that it survived the termination of the lease.

In support of this position, Tippmann argued that the provisions allowing
credit for the rent and credit for the improvements against the purchase

price constituted separate consideration. The court agreed that the usual

'"459 N.E.2d 407 (Ind. Ct. App. 1984). For a further discussion of this case, see
Arthur, Insurance, 1984 Survey of Recent Developments in Indiana Law, 18 Ind. L. Rev.
265, 273-74 (1985).

"M59 N.E.2d at 409 (quoting the lease-option agreement).

'''Id. at 410.

'''Id. at 409.

''""Id. (citing South Tippecanoe School Building Corp. v. Shambaugh & Son, Inc.,
182 Ind. App. 350, 395 N.E.2d 320 (1979); Morsches Lumber, Inc. v. Probst, 180 Ind.
App. 202, 204, 206, 388 N.E.2d 284, 286-87 (1979); Woodruff v. Wilson Oil Company,
Inc., 178 Ind. App. 428, 431, 382 N.E.2d 1009, 1011 (1978)).

'^M35 Ind. App. 317, 193 N.E.2d 648 (1963).
"M59 N.E.2d at 410.



1985] SURVEY—PROPERTY 373

test of the severability of a contract is the divisibihty of the consideration,

but said that the wording of the contract did not support an interpretation

that the consideration was separate but, rather, suggested that the agree-

ment was entire and not severable. '^^ While conceding that "[a] contract

is not entire and indivisible simply because it is embraced in one in-

strument . . ."'^° and executed by the same parties, the court did consider

this fact when it concluded, "We agree with Erie-Haven, further noting
the option and lease are embraced in the same instrument, executed by

the same parties on the same date.'"^'

Tippmann also argued that Erie-Haven would be unjustly enriched
because the value of the building which was destroyed was $12,000 and

Erie-Haven had received approximately $75,000 in insurance proceeds,

claiming this was an "independent equity" which supported extending

the option beyond the termination of the lease. The court found that,

although Indiana law did not preserve options when independent equities
exist, '^^ it need not address this issue since any alleged inequity would

be removed by the division of the insurance proceeds. '^^ The decision

did not discuss how Tippmann would benefit from the exercise of the
option since the building had been destroyed. Presumably, he would

have argued that the seller now holds the insurance proceeds in trust
for the purchaser. '^"^

F. Real Estate Transactions

1. Real Estate Brokers.—In Panos v. Prentiss,^^^ James Prentiss, a
real estate broker, recovered a broker's commission for negotiating a

'''Id. at 410-11.

"^"/of. at 410.

"''/Gf. (citation omitted).

'"M at 411.
'"M. The court of appeals did not provide any guidance to the trial court as to

how the proceeds were to be divided between the parties. Because the lease was terminated
and the option could not be exercised, the lessee does not appear to have had any

"interest" in the property. The court suggested, however, that the lease-option provision

requiring the lessor to insure the building gave the lessee an "interest" in the insurance

proceeds. The appellate court stated that the trial court could make "an appropriate

division of insurance proceeds." Id. at 410.

'^In the case of an enforceable contract for the sale of real estate, most courts have

concluded that the seller holds any insurance proceeds in trust for the buyer. See J.

Cribbet, Principles of the Law of Property 159 (2d ed. 1975); Annot., 64 A.L.R.2D
1402, 1406-12 (1959). Tippmann's exercise of the option would have turned the instrument

into a contract for sale. However, without the insurance provision giving Tippmann an

"interest" in the insurance, the general rule that the seller holds any insurance proceeds

in trust for the buyer may not have applied, as the destruction occurred before Tippmann
attempted to exercise the option. There is authority for the proposition that the lessee is

not entitled to the proceeds from insurance carried by the owner where the loss occurs

before the option is exercised. See Annot., 65 A.L.R.2d 989 (1959).

'^H60 N.E.2d 1014 (Ind. Ct. App. 1984).



374 INDIANA LAW REVIEW [Vol. 18:347

purchase of certain property, despite the absence of a written contract.

The defendant, Panos, had approached James' father and employee,

Richard Prentiss, seeking assistance in acquiring certain property. Panos

agreed to pay Richard a commission of three percent of the total purchase

price. Richard met with the owner and Panos, but the initial meetings

were unsuccessful. A few months later, Panos requested that Richard
resume negotiations. Richard convinced the owner to lower his price to

$200,000, but Panos was then willing to pay $195,000. At a meeting

between the parties, Richard negotiated a mutually satisfactory sales price

of $197,500 and a $5,000 commission. James drafted the contract for

sale according to the agreement, but Panos' attorney changed the terms,

and the owner refused to accept them. At a second meeting, the parties

reached an agreement, but when it was reduced to writing, Panos'
attorney once again changed the terms. Panos then refused to complete

the transaction because he was interested in another property. James

later discovered that Panos had purchased the property for $202,500.'^^

In his appeal of the trial court's judgment for Prentiss, Panos

contended that the agreement was to pay Richard $5,000 if Richard

could convince the owner to sell the property for $197,500 or less, and

that the sale at this price was a condition precedent to the recovery of

the commission. The court disagreed. The agreement was to pay Richard

three percent of the purchase price, and no specific purchase price was

stated in the agreement. The sales price of $197,500 and the commission

figure of $5,000 were frist determined several months later as part of

a negotiated agreement for the sale of the property. '^^

The court noted that the broker's agreement between Richard and

Panos was oral, but observed that the provision of the statute of frauds

requiring a writing for all employment contracts for the sale of real

estate between the owners and their brokers does not apply to contracts

between real estate purchasers and their brokers. '^^ Likewise, the court

observed that the parties never consummated the contract for sale,'^^

^^Id. at 1015-16. While Panos' subsequent purchase of the property from Dalton

may have been what motivated James to file suit to recover his commission, the subsequent
purchase of the property is not relevant to the issue of the broker's right to recover his

commission. See infra text accompanying notes 169, 170.

"-^60 N.E.2d at 1016. Even if the court had found the purchase price of $197,500

to have been a condition precedent, Richard had convinced Dalton to sell the property

for this amount and, as the court later remarked, "Panos's [sic] repeated refusals to

complete the transaction . . . will not serve to relieve him from his duty to pay the

Premisses their broker's commission." Id. at 1016-17 (citations omitted).

^^^Id. at 1016. Had the parol contract been between the broker and the owner of
the real estate for the sale of the property, the broker could not have recovered his

commission or even the value of his services in quantum meruit. Zimmerman v. Zehendner,
164 Ind. 466, 73 N.E. 920 (1905); Gerardot v. Emenhiser, 173 Ind. App. 353, 363 N.E.2d

1072 (1977).

'^'460 N.E.2d at 1016. The Indiana statute of frauds provides that no action shall



1985] SURVEY—PROPERTY 375

but concluded that the broker's commission was not dependent upon

the consummation of the sales contract: "a broker's right to compensation

accrues upon completion of negotiations and upon the meeting of the

minds of the principal and the customer procured . . . ."''° Once Panos
and the owner had agreed to all the terms, Richard was entitled to his

commission:

Where no purchase agreement has been consummated, a broker

is entitled to his commission if he proves that he had secured

a customer who was ready, willing, and able to sell or purchase
the property upon the terms listed by the principal and the

principal refused to complete the transaction.'^'

The fact that Panos refused to complete the transaction could not affect

the broker's right to his commission.

2. Vendor and Purchaser.—In Bond v. Peabody Coal Co.,^^^ Peabody
Coal Co. (Peabody) obtained a four year option to purchase the coal

beneath land owned by Richard and Janet Bond (the Bonds). The option

contract provided that Peabody could renew the option each year for

four years by paying one fourth of the balance due the Bonds under

the option, and that all payments made under the option would be
credited to the purchase price. Peabody made renewal payments for the
first three years, and in the fourth gave notice that it was exercising

its option. The agreement provided that when Peabody gave notice of

its election to purchase the coal, the Bonds had thirty days to deliver

an abstract of title. Peabody then would have a reasonable time to

examine the abstract, and if it showed marketable title of record in the

Bonds, Peabody must '"forthwith pay the purchase price. ""^^ Upon
payment, the Bonds were required to deliver a warranty deed conveying

the coal to Peabody.'^"*

The Bonds claimed that payment was too long delayed, and therefore

the option was void, both because Peabody had not comphed with their
request for payment by a specific date and because Peabody did not

tender payment until seventy-six days after the abstract of title was

delivered to its agent. The trial court found that Peabody did not comply

be brought upon a contract or agreement for the sale of land unless it or some memorandum
thereof shall be in writing and signed by the party to be charged. Ind. Code § 32-2-1-

1 (1982). Since it does not appear that either party signed a written purchase agreement,

the contract was unenforceable. But since it was the defendant who changed the terms
orally agreed upon by the parties, and the seller appeared ready and willing to enter into

a written agreement based upon the mutually agreed terms, the court found this sufficient
to award the broker his commission. 460 N.E.2d at 1016.

'M60 N.E.2d at 1016.
'^7flf. (citations omitted).

'^'450 N.E.2d 542 (Ind. Ct. App. 1983).

'"/c?. at 547 (quoting the real estate contract).

'''Id.



376 INDIANA LAW REVIEW [Vol. 18:347

with the contract's requirement that time be "of the essence," and

granted summary judgment for the Bonds. The court also found, how-
ever, that because Peabody had paid seventy-five percent of the purchase

price, the appropriate remedy shoud be foreclosure instead of forfeiture. '^^

The court of appeals found that it was apparent from the trial

court's conclusions of law "that its holding as to reasonableness of the

time period involved was based on its acceptance of Bonds' argument

that the parties intended that time would be of the essence in the payment

of the purchase price, which would be due on January 24, 1979."'^^

Both the Bonds and the trial court seemed to have believed that the

provision requiring the last option payment to be paid on or before

January 24, 1979 also required the purchase price to have been paid

on or before that date.'^^ The court of appeals pointed out that there

was nothing in the agreement which suggested that the payment of the

purchase price was a condition precedent to the exercise of the option,

and that the notice by Peabody to the Bonds of its election to purchase

was the stipulated act constituting the exercise of the option. '^^ Once

the plaintiff exercised the option, it was turned into a contract for sale,

and the subsequent performance of the contract would be governed by

the law of vendor-purchaser. The court then looked to see if there were

any terms in the instrument or evidence indicating that the parties intended

time to be of the essence in the performance of the contract. The only

provision in the agreement which the court discovered regarding the time

of performance was the one that after an examination of the abstract

shows marketable title in the Bonds, '"(Peabody) shall forthwith pay

the purchase price to the (Bonds) . . . ."'»79 xj^e court found that the

word "forthwith," when used in a contract or statute, was not as nearly

equivalent to "time is of the essence" as the trial court had found, but

it means only that the act referred to should be performed within such

convenient time as is reasonably requisite. '^'^ But, the court concluded,

even if there had been a "time is of the essence" clause, such a contract

provision is ineffective when no date for performance is specified in the

contract.'^' In such a case, the sellers, after waiting what they consider

to be a reasonable time for performance, can fix a date for performance

'''Id. at 545.

'''Id. at 546.

'"Some courts do require that the purchase price be paid within the option period.
See Annot., 71 A.L.R.3d 1201 (1976) (citing Kritz v. Moon, 88 Ind. App. 5, 163 N.E.
112 (1928), for the proposition that payment of the purchase price is not a condition
precedent to the exercise of the option. 71 A.L.R.3d at 1220).

'M50 N.E.2d at 547 n.2.
'"^Id. at 547 (quoting the real estate contract).

'"'Id.

'"Id. at 548.



1985] SURVEY—PROPERTY 7,11

and thereby limit the time of their HabiUty under the contract, but they

cannot unilaterally fix an unreasonable time for performance.'^^

Having concluded that Peabody had a reasonable time to perform

the contract after the exercise of the option to purchase, the court

observed that there were in fact two periods of time to consider: a

reasonable period of time for Peabody's attorney to examine the abstract

of title to see if the Bonds had marketable title of record, and a reasonable

period of time after a favorable opinion to "forthwith pay the purchase

price." Since Peabody offered to close only eight days after receiving

the favorable title opinion, the court found that the only issue was

whether or not the examination of the abstract was completed within

a reasonable time. There was evidence by the Bonds that thirty or forty

days was a reasonable time, but Peabody's attorney pointed out that

the period of time at issue included the Christmas and New Year's
holidays, and during this time Peabody's attorney was sick for a period

of ten days, relocated his law offices, and was busy performing additional

legal tasks. The court found that the question of whether or not the

examination was performed within a reasonable time was a question of

fact which precluded summary judgment on the issue. '^^

Finally, the court addressed the issue of the appropriate remedy,

making it clear that it found a foreclosure action to be inappropriate.

The court concluded that if the trial court found that the examination

of the abstract was not performed within a reasonable time it should

still "grant specific performance to Peabody, but provide additional

relief, e.g. interest, to the Bonds in order to 'equalize any losses oc-

casioned by the delay . . . ."'i84 j\^\^ decision to reject "forfeiture"

as an appropriate remedy seems well within the power of a court of

equity.

G. Water Law

1. Surface Water. ^^-—In 1982, the Indiana Supreme Court, in Ar-
gyelan v. Haviland,^^^ reaffirmed Indiana's adherence to the "common

'''Id. at 549.

'•'Vcf. at 548-49.

'''Id. at 500 (quoting North v. Newlin, 435 N.E.2d 314, 319 (Ind. Ct. App. 1982)

(quoting Greenstone v. Claretian Theological Seminary, 173 Cal. App. 2d 21, 29, 343 P.2d

161, 165 (1959))).

'**-Surface water has been judicially defined as "[w]ater from falling rains or melting

snows which is diffused over the surface of the ground or which temporarily flow [sic]

upon or over the surface as the natural elevations and depressions of the land may guide
it but which has no definite banks or channel." Capes v. Barger, 123 Ind. App. 212,

214-15, 109 N.E.2d 725, 726 (1953) (citations omitted).

'«H35 N.E.2d 973 (Ind. 1982). In April of 1981, the Second District Indiana Court

of Appeals, in Argyelan v. Haviland, 418 N.E.2d 569 (Ind. Ct. App. 1981), vacated, 435

N.E.2d 973 (Ind. 1982), applied the "common enemy" rule to a surface water case. In



378 INDIANA LAW REVIEW [Vol. 18:347

enemy doctrine. "'*^^ Surface water is a common enemy and "each land-
owner may deal with it in such manner as best suits his own conven-
ience.'"^^ Generally, he will not be liable for any injury caused to his

neighbor's land by such action. '^^'^ While suggesting that Indiana would

not permit a "malicious or wanton employment of one's drainage rights, "''^^

the court recognized only one exception to the landowner's right to

combat surface water: "one may not collect or concentrate surface water
and cast it, in a body, upon his neighbor.'"^'

During this survey period there were two surface water cases. In

Earth Construction & Engineering, Inc. v. DeMille,^'^^ Earth Construction,
during construction of a sanitary sewer line, cleared the vegetation and

eliminated a small ditch from a field across the street from a house

owned by the plaintiff (DeMille). As a result, the surface water which

accumulated after a rainstorm damaged the plaintiff's house. The trial
court awarded damages to the plaintiff, and Earth Construction appealed.

The court of appeals concluded that the common enemy rule set forth
in the Argyelan decision precluded recovery by the plaintiff. '^^ Earth

Construction, as the contractor, was entitled to stand in the shoes of

its employer, the city of Fort Wayne, who would not be liable for
damage caused by the alteration of the surface water drainage under

the common enemy rule. The court did not appear to see any problem
in extending to the city the landowner's right to change the flow of

surface water, apparently reasoning that since the city would not be

held to have made an unconstitutional taking of land if its grading of
an area caused damage, it should not be held liable for consequential

damages resulting from the alteration in the flow of surface water. '^"^

December of 1981, however, the Third District Indiana Court of Appeals, in Rounds v.

Hoelscher, 428 N.E.2d 1308 (Ind. Ct. App. 1981), rejected the "common enemy" rule
in favor of a "reasonable use" test. The Indiana Supreme Court granted transfer in the

Argyelan case to settle the conflict. 435 N.E.2d at 974.

"*The court in Argyelan reaffirmed the statement in Taylor v. Fickas, 64 Ind. 167

(1878):

"The right of an owner of land to occupy and improve it in such manner and
• for such purposes as he may see fit . . . by changing the surface ... is not
restricted ... by the fact that ... it will cause water, which may accumulate
thereon by rains ... to stand in unusual quantities on other adjacent lands,
or pass into or over the same ....

The obstruction of surface water or an alteration in the flow of it affords

no cause of action . . . ."

Id. at 173 (quoting Gannon v. Hargadon, 92 Mass. 106 (1865)).
"^H35 N.E.2d at 975.

'^•"Id. at 977.

'"^Id. at 976.

'^'/fi^. (citations omitted).

'''H60 N.E.2d 984 (Ind. Ct. App. 1984).

'"'M at 985.

^^^Id. at 986. In a footnote, the court indicated that the trees and shrubs were removed



1985] SURVEY—PROPERTY 379

In Bell V. Northside Finance Corp.,^'^^ the Indiana Supreme Court

continued to follow the common enemy doctrine, but reversed a summary
judgment in favor of the landowners who had changed the flow of
surface water on the basis that the appellant had raised several material

factual issues. This case applied the exception recognized in Argyelan,

that a party may not collect surface water "and cast it, in a body,
upon his neighbor, "'^^ to a situation where the drainage system con-

structed by a corporation's plant discharged the water to an area with

an elevation slightly higher than the neighboring property. The neigh-

boring landowners introduced evidence at the hearing that the corporation

had cut a trench through a natural ridge. According to the court, this

evidence raised a material factual issue as to whether or not such a

trench existed, making the trial court's grant of summary judgment
improper. The court also reversed on another issue. There was evidence

that an artificial drain existed on the Bell property, and that an artificial

underground tile ran across the corporation's property and into adjacent

property. This drain was excavated and obstructed. The court found

that if a landowner collects surface water into an artificial channel and

discharges it across the land of his neighbor for a sufficient length of

time, he can acquire a prescriptive easement. '^^ Similarly, if a person is

given a license and expends money on the faith of the license, the license
cannot be revoked until the licensee can be placed in status quo, and

may impose a servitude upon one estate in favor of another. '^^ Thus,
the court seems to have recognized another exception to the common
enemy rule: a landowner may combat surface water, but may not do
so in such a manner as to interfere with another's easement or license

to drain surface water.

2. Ground Water. ^^'^—In 1982, there were two conflicting court of
appeals decisions involving the use of ground water. In Wiggins v. Brazil

Coal and Clay Corp.,^^^ the Indiana Court of Appeals, First District,

held the owner of a strip mining pit liable for the loss of water in a

lake caused by the pumping of ground water from the pit in order to

continue mining operations. In doing so, the court adopted a "reasonable

from the field at the request of the landowner. Id. at 986 n.3. The court did not indicate

or suggest that this fact played any role in the decision.

"^H52 N.E.2d 951 (Ind. 1983).

'M35 N.E.2d at 976 (citations omitted).
"^'452 N.E.2d at 954.

'^'Ground water has been defined as "lost water that percolates the soil below the

surface of the earth, in hidden recesses, without a known channel or course." Taylor v.

Fickas, 64 Ind. 167, 172 (1878). Water which flows in an underground stream with a

definite channel is not considered ground water, and is governed by the same laws that

apply to surface streams. Gagnon v. French Lick Springs Hotel Co., 163 Ind. 687, 696,

72 N.E. 849, 852 (1904).

200440 N.E.2d 495 (Ind. Ct. App. 1982).



380 INDIANA LAW REVIEW [Vol. 18:347

use" test advocated by the Restatement (Second) of Torts section 858.^"'

The opinion discussed the two traditional positions regarding ground

water, the EngHsh rule and the American rule. Under the English, or

"absolute ownership," rule, the owner of the land has an absolute right

to use water beneath his land for any purpose. ^°^ The English rule has

been rejected in most states and replaced with the American, or "rea-

sonable use," rule, which allows the owner of the surface to appropriate

underground water for any use which is reasonably necessary for some

beneficial purpose relating to the land.^^^ If the use meets this test,

however, the adjacent landowners' rights and interests are not consid-

ered.'^'* Recently, courts in a few states have adopted the California, or

"correlative rights," rule, which "holds that the rights of all landowners

over a common aquifer are coequal" and that the "landowner cannot
extract more than his share of the water even for use on his own land
where others' rights are thereby injured. "^^^ In rejecting the American

rule, the Wiggins court did not apply the apportionment concept of the

California rule, a rule which is better adapted to the needs of areas

where water is scarce. Instead, the court recognized the "reasonable

use" test formulated in the Restatement (Second) of Torts section 858

as a "logical answer to this problem, "^^^ despite the fact that the Indiana

Supreme Court had just rejected the "reasonable use" rule with regard

to surface water in Argyelan v. Haviland.^^^ The court distinguished
Argyelan on the basis that the opinion applied to surface water rather

^"'M at 500-01. Section 858 provides:

Liability for Use of Ground Water

(1) A proprietor of land or his grantee who withdraws ground water from the
land and uses it for a beneficial purpose is not subject to liability for interference

with the use of water by another, unless

(a) the withdrawal of ground water unreasonably causes harm to a pro-

prietor of neighboring land through lowering the water table or reducing artesian

pressure,

(b) the withdrawal of ground water exceeds the proprietor's reasonable

share of the annual supply or total store of ground water, or

(c) the withdrawal of the ground water has a direct and substantial effect

upon a watercourse or lake and unreasonably causes harm to a person entitled

to the use of its water.

(2) The determination of liability under clauses (a), (b) and (c) of Subsection

(1) is governed by the principles stated in §§ 850 to 857.

Restatement (Second) of Torts § 858 (1979).
2»M40 N.E.2d at 497 (citing Finley v. Teeter Stone, 251 Md. 554, 559, 248 A.2d 106,

110 (1968)).

203440 N.E.2d at 497 (citing Metropolitan Utils. Dist. v. Merritt Beach Co., 179 Neb.

783, 796, 140 N.W.2d 626, 637 (1966)).
2<>4440 N.E.2d at 499; R. Cunningham, W. Stoebuck, & D. Whitman, The Law

OF Property 428 (1984).
^°H40 N.E.2d at 497 (citation omitted).

^""/cf. at 500.

^°^See supra text accompanying notes 186-91.



1985] SURVEY—PROPERTY 381

than ground water problems. ^^^ The appellate court went on to apply

the Restatement position rather than the common law and held the
mining company could be liable for the damage caused by its pumping
operation, reasoning that the company could not shift the cost of doing
business to neighbors, but must pass on the burdens and expenses of

its operation to the consumer. ^^^

The Indiana Court of Appeals, Second District, reached a conflicting

conclusion in Irving Materials, Inc. v. Carmody,^^^ holding that the

owner of a gravel pit was not liable for injury to his neighbors when

the pumping of water from the pit into a nearby stream caused several

wells in the area to go dry. The trial court had awarded damages for

the neighboring landowners' well digging expenses. In reversing the trial

court's judgment, the court of appeals applied the American rule, 2' • and

held that the injury was not the result of a legal wrong; so long as the

owner is making a reasonable use of the land, he has every right to

use the ground water beneath his land without regard to its effect upon

his neighbors. ^'^

During this survey period, the Indiana Supreme Court resolved the

conflict in its affirmance of the trial court's judgment in favor of Brazil

Coal in Wiggins}^^ The court of appeals had relied in part upon the

Federal Surface Mining Control and Reclamation Act of 1977 (Surface

Mining Act)^'^ in reaching its decision to reject the common law rules
governing the use of ground water. 2' ^ The Indiana Supreme Court rather

quickly disposed of the Surface Mining Act by noting that the statute

did not directly govern the case.^'^ In a somewhat confusing paragraph,

2'M40 N.E.2d at 501.

^'0436 N.E.2d 1163 (Ind. Ct. App. 1982).

^"5ee supra text accomanying notes 229-30.
^'^436 N.E.2d at 1164.

''H52 N.E.2d 958 (Ind. 1983). The court's opinion does not mention the Irving

decision, presumably because it adheres to existing Indiana law.
^'^30 U.S.C. §§ 1201-1328 (1977).

2'H40 N.E.2d at 498-99.

-'^452 N.E.2d at 962. Justice Hunter, however, in his dissenting opinion, noted that

the Surface Mining Act did not become effective until after the plaintiff's cause of action

arose, and that the interim portion of the Act did not include the section which the court

of appeals invoked. Nevertheless, Justice Hunter pointed out that Indiana had subsequently

enacted the regulatory programs required by the Surface Mining Act, Ind. Code § 13-
4.1-8-1 (1982), and that the decision would have been decided differently had the defendant's

action occurred in Indiana today. 452 N.E.2d at 965 (Hunter, J., dissenting). Ind. Code

§ 13-4.1-8-1(25) (1982) would require the coal company to replace the water of an owner
of land who obtains all or part of his supply of water for domestic, agricultural, industrial,
or other legitimate use from an underground or surface source which has been contaminated

or interrupted by coal mining and reclamation operations. Justice Hunter seems to have

assumed the statute would govern the loss of the water from the lake, but the facts

indicate that the Wigginses had developed the land along the lake for recreational,



382 INDIANA LAW REVIEW [Vol. 18:347

the court noted that the appellants cited "Indiana statutes relating to

water resources" which "do not directly govern the issue presented" in

an attempt "to persuade this tribunal that the public policy of the State

is moving in the direction of recognizing that property in water should

not be absolute in the owner of land where it is found. "^'^ The court

concluded: "In light of their aforementioned use in this appeal, we have

no cause to undertake that task here."^'^ This is confusing because the

only statute cited in the court of appeals decision was the Surface Mining

Act; the court did not indicate which Indiana statutes the appellants

cited, and the only "aforementioned use" of any statute in the majority

opinion is the sentence stating: "The statutes cited to do not directly
govern the issue presented. "^'^ Presumably, the supreme court was in-

dicating that it was not going to examine the Indiana statutes relating

to water law since none of them were directly controlling and that it

was not going to use this occasion to formulate a public policy on the

use of ground water.

The court cited four cases, ^^° three more than one hundred years

old and one more than eighty years old, for the rule that ground water

belongs to the owner of the land beneath which it is found:

The property in the lost water that percolates the soil below the

surface of the earth . . . and property in the wild water that

lies upon the surface . . . but without a channel . . . fall within

the maxim that a man's land extends to the centre of the earth
below the surface, and to the skies above, and are absolute in

the owner of the land, as being a part of the land itself. ^^'

The only exception to this rule recognized by the court was that "this

right does not extend to causing injury gratuitously or maliciously to

residential, and retirement homes and that the Stevenson tract was mainly soil bank land.
There is no suggestion they were using the lake as a water supply, unless you interpret

"other legitimate use" to include recreational use of the waters.

^'M52 N.E.2d at 962.

^''M While the "statutes" referred to are unclear, it would appear from the court

of appeals decision and the dissenting opinion that the court is referring only to the

Federal Surface Mining Act, 30 U.S.C. §§ 1201-1328 (1977), and the Indiana Surface

Coal Mining and Reclamation Act, Ind. Code § 13-4.1-1-1 to -6 (1982). On the other
hand, the court might be referring to a very substantial body of statutory law contained

in Title 13 governing water conservation. Article 2, section 2 regulates the use of ground

water. Ind. Code § 13-2-2-2 (1982) provides: "It is hereby declared a public policy of
this state in the interest of the economy, health and welfare of the state and its citizens,
to conserve and protect the ground water resources of the state. . . ." Id. However,

many of the enforcement provisions of this section were added after the plaintiffs' cause
of action arose. See infra note 233.

22°The court cited Gagnon v. French Lick Springs Hotel Co., 163 Ind. 687, 72 N.E.
849 (1904); Taylor Admr. v. Fickas, 64 Ind. 167 (1878); City of Greencastle v. Hazelett,
23 Ind. 186 (1864); New Albany & Salem Railroad Co. v. Peterson, 14 Ind. 112 (1860).

^^'Taylor v. Fickas, 64 Ind. 167, 172 (1878) (citations omitted).



1985] SURVEY—PROPERTY 383

nearby lands and their owners. "^^^ Applying these rules to the case at

bar, the court found that the mining was not done with the intent or

purpose to injure the plaintiffs, and that the removal of the water was

in connection with a beneficial use of the land and not done gratui-

tously. ^^3 xhus, the trial court's judgment in favor of the coal company
was affirmed.

In a scholarly dissenting opinion, Justice Hunter noted that the

majority opinion was in conflict with the Surface Mining Act, which,

though not in effect at the time the cause of action arose, expressed

the intent of Congress to protect the public and the environment from

damages resulting from strip mining, and is in conflict with the present

Indiana law.^-'* While recognizing that judicial devotion to the doctrine

of stare decisis is a noble and justifiable tradition. Justice Hunter argued

that departure from the doctrine is necessary when the rationale for the

existing rule of law no longer exists. ^^^ Justice Hunter agreed with the

court of appeals that the rules governing ground water developed at a

time when there was little knowledge of hydrology, ^^^ and that the concept

of absolute ownership of property has diminished now that the landowner
is subject to nuisance, pollution controls, zoning, and other laws affecting

the use of his land.^^^ In an argument similar to the one presented in

his dissenting opinion in Argyelan,^^^ Justice Hunter suggested that dam-

ages caused from the use of water should not be treated any differently

than damages caused by other uses of land, such as noise and pollution.

Under the maxim sic utere tuo ut alienum non laedas (use your property
so as not to cause injury to the rights of others), the owner of land

should be Hable for the unreasonable harm caused to others by the use
of his land.^^*^ There should be no difference between the right of a

riparian owner to use the water in a stream, which is governed by the

doctrine of reasonable use, and the right of an owner of land to use

'^H51 N.E.2d at 964.

'--'Id.

-^^Id. at 965 (Hunter, J., dissenting).

^^'Id. at 966-67 (Hunter, J., dissenting).

^^^Id. at 966. The Governor's Commission on Water Rights defined the problem as

follows:

3) The existing law of water rights (basically the common law) is inadequate
to provide that legal basis and management framework within which human,

social and economic needs for water may be satisfied in a timely and equitable
manner. This conclusion is based on the finding that:

(e) It provides no basis for recognition of the interrelated nature of the

various components of the water resource and of the relative impacts of uses

of the various components.

Governor's Water Rights and Management Commission, State of Indiana, Report
TO Governor Robert D. Orr 3 (1982).

2^M52 N.E.2d at 966 (Hunter, J., dissenting).

^M35 N.E.2d 973, 989 (Hunter, J., dissenting).
^^M52 N.E.2d at 966-68 (Hunter, J., dissenting).



384 INDIANA LAW REVIEW [Vol. 18:347

the water beneath his land.^^^ Justice Hunter's opinion does not preclude

the coal company from dewatering its pits, but it would prevent the

coal company from forcing the plaintiff to pay a portion of its cost of

doing business by denying them recovery for damages caused by the

mining operations. ^^'

The increasing statutory regulation of the use of Indiana water

suggests that a public policy is being developed by the legislature.
^^^

Recently, the legislature responded to the potential harm to adjoining

landowners in Jasper and Newton Counties caused by the use of ground

water for extensive irrigation of farmland by enacting special legislation

addressing the problem."^ The court may have decided not to undertake

the task of determining a public policy on the use of ground water in

light of the legislative developments in this area.

3. Riparian Rights}^^—In Bath v. Courts, ^^^ the court of appeals

discussed the riparian rights of landowners abutting a "public freshwater

23°M at 966-67 (Hunter, J., dissenting).

"'/of. at 965, 967 (Hunter, J., dissenting). See also the court of appeals decision,

440 N.E.2d at 501.

"'5ee supra note 219.

"'After the Prudential Insurance Company of America began irrigation of approx-
imately 7,000 acres of its 23,000 acre Fair Oaks Farm in Jasper and Newton Counties,

farmers in the area complained that their wells were going dry; there was an odor of

hydrogen sulfide in the air and a loss of wildlife in the area. Prohosky v. Prudential

Ins. Co. of America, 584 F. Supp. 1337 (N.D. Ind. 1984). Special legislation was enacted

in 1982 giving the Department of Natural Resources the authority to declare an emergency

in Jasper and Newton Counties when the water level in the aquifer fell below a certain

level and the power to restrict the amount of ground water which can be extracted from

any well with the capacity of producing more than 100,000 gallons of water per day.

Ind. Code § 13-2-2.5-3 (1982). The statute also required the registration of all wells in
Jasper and Newton Counties capable of producing more than 100,000 gallons per day.

Id. § 13-2-2.5-4. In 1983, the legislature passed legislation creating a natural resource

commission to inventory the state's water resources and to determine minimum flows of
streams and minimum safe levels of ground water in aquifers. Ind. Code § 13-2-6.1-1 to
-9 (Supp. 1984). There is also a provision requiring the registration of all facilities capable

of withdrawing more than 100,000 gallons of ground water, surface water, or a combination

thereof in one day. Ind. Code § 13-2-6.1-7 (Supp. 1984).
"""There are certain interests and rights vested in the shore owner which grow out

of his special connection with such waters as an owner. These rights are common
to all riparian owners on the same body of water, and they rest entirely upon

the fact of title in the fee to the shore land."

Thompson v. Enz, 379 Mich. 667, 683-84, 154 N.W.2d 473, 482 (1967); Brown v. Heidersbach,

172 Ind. App. 434, 440, 360 N.E.2d 614, 619 (1977) (quoting Thompson v. Enz, 379
Mich. 667, 683-84, 154 N.W.2d 473, 482 (1967) (The language quoted is originally found
in Sanborn v. Peoples Ice Co., 82 Minn. 43, 50, 84 N.W. 641, 642 (1900)). Historically,
the term "littoral rights" has been used to refer to the rights of the owner of lakeshore

property, but today the term "riparian rights" is being used by most courts to describe

the rights of an owner of land abutting both lakes and streams. Munro, Public v. Private:

The Status of Lakes, 10 Buffalo L. Rev. 459, 467 (1961).

"H59 N.E.2d 72 (Ind. Ct. App. 1984).



1985] SURVEY—PROPERTY 385

lake."^^^ The parties to the case owned adjoining lakefront lots. The

plaintiffs constructed a pier at an angle to avoid interference with a

public pier, and in so doing crossed the defendants' "extended" property

line.^^^ The defendants built a pier parallel to the parties' common
property boundary and so close to the plaintiffs' pier that it interfered

with its use. The trial court granted the plaintiffs' an injunction for the

removal of the defendants' pier, and allowed the plaintiffs to maintain

their pier because it did not unreasonably interfere with either the

defendants' riparian rights or the public's use of the lake.^^^ On appeal,
the defendants maintained that because their property line extended to

the center of the lake, the plaintiffs had to remove their pier.

The court of appeals adopted the Wisconsin rule that "where the

onshore property boundaries are perpendicular to the shore, the bound-

aries are determined by extending the onshore boundaries into the lake.""^

The court refused, however, to extend the onshore boundaries to the

middle of the lake, citing an early Indiana Supreme Court decision which

held that, in the case of a closed lake, as was this lake, the riparian

owner does not own to the middle of the lake, because such a rule
would exclude some owners from title to any of the waterbed.^"^^ The

court observed that the nature of the owner's riparian rights in the early

decisions turned on the status of the waters as navigable or nonna-

vigable,^"^' but the court concluded that the determination of the "na-

vigability" of the lake was unnecessary because the governing statute^"^^

made no distinction between navigable and nonnavigable "public fresh-
water lakes. "^"^^ The court then concluded that riparian owners abutting

"^The statute in effect at the time of the suit defined pubHc freshwater lakes as "all
lakes which have been used by the public with the acquiescence of any or all riparian
owners . . . [excluding Lake Michigan and any lake which lies in whole or in part within
a city of the second class in Lake County]." Ind. Code § 13-2-14-2 (repealed 1982). The
definition of public freshwater lake is now found in Ind. Code § 13-2-11.1-1 (1982).

237459 ]sj.E.2d at 73. The court did not use the word "extended," but the facts clearly
indicate the pier crossed the Baths' property at a point beyond the shore line and thus
was on the Baths' property only if it extended into the lake.

'''Id.

''''Id. (citing Nosek v. Stryker, 103 Wis. 2d 633, 635, 309 N.W.2d 868, 870 (1981)).
^^M59 N.E.2d at 75 (citing Stoner v. Rice, 121 Ind. 51, 53-54, 22 N.E. 968, 969

(1889)).

241459 N,E.2d at 75. It should be noted that the cases cited by the court extending
the onshore boundaries to the lands beneath the superjacent waters were decisions involving
nonnavigable bodies of water. Indiana decisions have always held that the state holds title

to the lands beneath navigable waters. E.g., State v. Kivett, 228 Ind. 623, 95 N.E.2d 145

(1950); Lake Sand Co. v. State, 68 Ind. App. 439, 120 N.E. 714 (1918).
2^Tnd. Code § 13-2-11-1 (repealed 1982) (similar version at Ind. Code §§ 13-2-11.1-

1 to -14 (1982)).

243459 N.E.2d at 75. It is clear from a reading of the statute that public rights are
not made to depend upon the navigability of the lake. See Waite, Public Rights in Indiana
Waters 37 Ind. L.J. 467, 483-85 (1962).



386 INDIANA LAW REVIEW [Vol. 18:347

the lake had the right to build and maintain piers which did not interfere

with others' use of the lake.^"^"*

Although the plaintiffs' pier unlawfully encroached upon the de-

fendants' shorefront property, the court of appeals did not require it

to be removed, but indicated that the pier need only be straightened so

that it no longer encroached upon the neighboring property. The court
of appeals agreed with the trial court that the defendants' only purpose

in building their pier was to interfere with the plaintiffs' use of their

pier, an unlawful purpose contrary to the statute allowing piers to be

"maintained for commerce, navigation, and the owner's enjoyment. "^"^^

When one examines the decision closely, it appears the court of
appeals was struggling in its attempt to determine the rights of riparian

owners of pubHc freshwater lakes. It is true, as the court points out,

that the statute on public freshwater lakes makes no distinction between

navigable and nonnavigable lakes, yet the cases cited by the court for

extending the onshore boundaries into lakes and streams were cases

involving nonnavigable bodies of water. ^"^^ Likewise, the statute cited as

authority for the right of a riparian owner to construct a pier appHes

only to landowners "bordering upon a navigable stream. "^'^^ It is, there-

fore, difficult to comprehend how the court could reach the conclusion
that "our statutory law renders such a determination [of navigabihty]

unnecessary. "^"^^ The statute on public freshwater lakes appears to be

equally silent with regard to the ownership of the land beneath the

public freshwater lakes or the right of the riparian owner to build a

pier on such lakes. The only case which supports the position that the

riparian owner abutting a public freshwater lake may construct a pier
on the lake is Brown v. Heiderbach,^^^ which presumes such a right
without any discussion of the navigability of the lake or any reference

to the pubhc freshwater lake statute. The present statute on public

freshwater lakes raises serious questions as to the rights of the riparian

owners both to the lands beneath the waters and the waters themselves.

While the statute does not directly address the ownership of the bed of

such lakes, it does provide that the "natural resources and the natural

scenic beauty of Indiana are a public right" and that the State of Indiana

"holds and controls all of such lakes in trust for the use of all of its

citizens. "^^" The statute defines "natural resources" as "the water, fish,

plantlife, and minerals in a pubhc freshwater lake," and defines "natural

scenic beauty" as "the natural condition as left by nature without

2^59 N.E.2d at 75-76 (citing Ind. Code § 13-2-4-5 (1982)).
^''Id. at 76 (citing Ind. Code § 13-2-4-5 (1982)).
^^See supra note 241.

^"^nd. Code § 13-2-4-5 (1982).
^^"459 N.E.2d at 75 (footnote omitted).
^^'172 Ind. App. 434, 360 N.E.2d 614 (1977).
^^"Ind. Code § 13-2-1 1.1 -2(a), (b) (1982).



1985] SURVEY—PROPERTY 387

manmade additions or alterations."^^' The landowner cannot change the
water level or shoreline without a permit from the Department of Natural
Resources, ^5' nor will such a permit be issued authorizing the dredging

or mining of a lake without first holding a public hearing. ^53 The statutes
would appear to raise some interesting constitutional issues. If the waters
were nonnavigable before the enactment of the statutes, the landowner
would not only have owned the bed beneath the waters but could have
excluded others from using the superjacent waters. ^^^ Thus, the statute
would appear to be a taking of property without due process of law.^^s

One can see, therefore, why the court might wish, by slight of hand,
to avoid opening this Pandora's box and instead decide the case on
more traditional rules of water law.^^^

^''Id. § 13-2-11.1-1.

^'^Id. § 13-2-11.1-3.

^"M § 13-2-11.1-6.
-'^Sanders v. DeRose, 207 Ind. 90, 191 N.E. 331 (1934); Patton Park Inc. v. Pollak,

115 Ind. App. 32, 55 N.E.2d 328 (1944).

2"C/. Just V. Marinette County, 56 Wis. 2d 7, 201 N.W.2d 761 (1972) (holding that

a zoning ordinance prohibiting a landowner from filling in a nonnavigable wetland on

his property was constitutional and not a taking of property without due process). For

an interesting discussion of whether the freshwater lake statute would permit one of a

group of riparian owners, by inviting a member of the public to use the lake, to change a
private lake into a public lake, and if so whether the statute would be constitutional, see

Waite, supra note 243, at 481-83.

-'^For a discussion of a zoning case decided during this survey period, see the discussion

of Ailes V. Decatur Area Planning Comm'n in Macey, Constitutional Law, 1984 Survey
of Recent Developments in Indiana Law, 18 Ind. L. Rev. 129, 137 (1985).