Indiana Law Review


Survey of Indiana Property Law

Walter W. Krieger*

I. Brokers

Craig V. ERA Mark Five Realtors^ involves the liability of a real
estate broker for listing property as a '* multi-family" apartment building

when such use was in violation of the applicable zoning ordinance.

The seller listed a two-story structure, which had been converted into

a multi-family dwelling, with ERA Mark Five Realtors (ERA). ERA
showed the property to Hugh Craig, who agreed to purchase the
property subject to an existing land contract containing a balloon

payment clause.^ No one at ERA was aware of the specific zoning of
the property at the time of the closing. More than two years after the
closing, the City of Indianapolis informed Craig that the use of the

property as a multi-family dwelling violated the local zoning ordinance.

Craig filed suit against ERA.^

* 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 express his appreciation to Thomas
A. Brodnik for his assistance in the preparation of this Article.

1. 509 N.E.2d 1144 (Ind. Ct. App. 1987).

2. /cf. at 1145. The purchaser also alleged that ERA had misrepresented the
terms of the installment land contract. The evidence indicated, however, that the seller

had failed to mention the balloon payment clause to ERA at the time he listed the
property and that when ERA discovered the terms of the contract, shortly before the
closing, it immediately informed Craig of the balloon payment clause and offered to

rescind the contract. Because Craig was given the opportunity to back out of the deal

and chose instead to go ahead with the closing, the court concluded that one of the

essential elements of fraud, detrimental reliance, was missing. Id. at 1145-47.

3. Id. at 1146. Craig did not sue the seller nor did he attempt to rescind the

original land contract which contained a representation that there were no existing zoning

violations. A zoning ordinance does not affect the marketability of title and buyer takes
subject to zoning regulations. However, existing violations of zoning ordinances are

often held to make title unmarketable and would allow rescission of the contract for
sale. H. Cunningham, W. Stoebuck & D. Whitman, The Law Of Property § 10.12,
at 694 (1984) [hereinafter Cunningham]; Dunham, Effect on Title of Violations of
Building Covenants and Zoning Ordinances, 11 Rocky Mtn. L. Rev. 255 (1955);
Freyfogle, Real Estate Sales and the New Implied Warranty of Lawful Use, 71 Cornell
L. Rev. 1 (1985). Where the sale has been completed and the contract has merged into
the deed, courts occasionally have found the existing breach of a zoning ordinance to

be an encumbrance under the covenants of title. Freyfogle, supra, at 4 n.ll; Dunham,
supra, at 258 n.9.

369



370 INDIANA LAW REVIEW [Vol. 22:369

Craig alleged that ERA committed actual fraud by misrepresenting
the zoning status of the property. ERA made no representation con-
cerning the specific zoning classification of the property, but the listing

agreement and the multiple-listing worksheet described the property as
*

'multi-family."^ The court, however, reasoned that: '*The mere fact

that the defendants represented the property as an apartment building

does not rise to the level of an affirmative representation that the use

of the property was permissible under the applicable zoning ordinance."^

Craig also argued that ERA had agreed to act as his agent in the
transaction, and that as such it was under a duty to check the zoning

status of the property. The court, however, concluded that assuming

arguendo a fiduciary relationship existed, ERA had no duty to determine
the zoning status of the property. Where information regarding zoning
is readily available and easily accessible to all the parties in the public

records, the purchaser can not attack the validity of the contract for

fraud, misrepresentation or concealment of the problem.^ The court
noted that Craig and his wife were not inexperienced amateurs in the

real estate business. Both Craigs have been licensed to sell real estate

in Indiana since the mid- 1 970' s. Prior to this transaction the Craigs

owned a duplex and a commercial building which Mr. Craig managed.
In addition, Mr. Craig is or was president of Adobe Realty, and at
one time owned and operated a real estate school. Thus, the court
found that "although the Craigs were not represented by an attorney

at the closing, they certainly possessed the skill and knowledge about

ascertaining the property's zoning."^

II. Concurrent Owt^ership: Tenancy by the Entirety

At common law any conveyance of real property to a husband
and wife was deemed to create a tenancy by the entirety because of
the unity of marriage.^ Marriage was said to create a "oneness" in

the husband and wife so that neither had an individual interest in the

property apart from the single entity. They held title per tout et non

4. Craig, 509 N.E.2d at 1147.

5. Id.

6. Id. at 1148 (citing Winstead v. First National Bank N.A., 709 S.W.2d 627,
631 (Tenn. App. 1986)).

7. Id. The court also determined that the two year statute of limitations, Ind.

Code § 34-1-2-2(1) (1988), applied to the count alleging negligence on the part of ERA
in not discovering the zoning problem, that damages accrued on the date of closing,

and that the trial court was not in error in granting a partial summary judgment. Id.
at 1149-50.

8. Cunningham, supra note 3, § 5.5, at 210-11.



1988] PROPERTY LAW 371

per my (by the whole but not by the part).^ One of the most important
attributes of this type of co-ownership was the right of survivorship

and, since neither spouse alone had a separate interest which could be

conveyed to a third person, this right of survivorship was indestructible

without the consent of both spouses. ^° Likewise, since neither spouse

had a separate interest apart from the whole, it was held that a creditor

of only one spouse could not reach tenancy by the entirety property

to satisfy the claim against the debtor-spouse.^^ After the enactment

of the Married Woman's Property Act,*^ which removed the disabilities
of married women, many states abolished tenancy by the entirety.'^
While this type of co-ownership has been abolished in over half the

states, a substantial minority of states, including Indiana, still allow

this form of co-tenancy between husband and wife.''* At common law
the personal property of a married woman was owned by the husband'^
and, as a result, tenancy by the entirety was not applied to personalty.'^

However, after enactment of the Married Woman's Property Act, those
states which still recognized tenancy by the entirety had to decide

whether or not to permit this type of co-ownership in personal property.

A number of these states, including Indiana, chose not to apply it in

9. Id.; C MoYNiHAN, Introduction to the Law of Real Property 218-19
(2d ed. 1988).

10. C. MoYNiHAN, supra note 9, at 219.

11. At common law the husband's creditors appear to have had a right to attach
the entirety property for and during the husband's Ufe because of his right to exercise

control over the land. However, this position is in conflict with the Married Women's
Property Act and the modern view of the husband and wife relationship. See Chandler

V. Cheney, 37 Ind. 391, 404-14 (1871); Davis v. Clark, 26 Ind. 424, 428-29 (1866). In

a substantial majority of the states still recognizing tenancy by the entirety, creditors

of only one spouse cannot attach entirety property. Phipps, Tenancy by Entireties, 25

Temple L. Q. 24 (1951). Indiana follows the rule that the creditor of only one spouse

cannot attach entirety property. E.g., Mercer v. Coomler, 32 Ind. App. 533, 69 N.E.

202 (1903); Patton v. Rankin, 68 Ind. 245 (1879).

12. In the 19th century most states enacted what is commonly known as Married
Women's Property Acts, which removed the common law disabilities of married women
to own property. See Ind. Code § 31-1-9-2 (1988). For a brief history and discussion
of the feme sole acts in Indiana, see 2A G. Henry, Henry's Probate Law and
Practice of the State of Indiana, Ch. 27, § 2, at 299-319 (J. Grimes 7th ed. 1979)

[hereinafter Henry's].

13. C. MoYNiHAN, supra note 9, at 220.
14. For a list of states still recognizing the tenancy by the entirety see Cunningham,

supra note 3, § 5.5, at 211 n.3. For a brief history and discussion of the Indiana law

of tenancy by the entirety see Henry's, supra note 12, ch. 34, § 3, at 339-73.

15. Henry's, supra note 12, ch. 27, § 2, at 299.

16. Cunningham, supra note 3, § 5.5, at 215; Henry's, supra note 12, ch. 34,

§ 3, at 351-52.



372 INDIANA LAW REVIEW [Vol. 22:369

general to ownership of personal property. ^^ The Indiana law governing
the tenancy by the entirety is discussed in the three cases under review.

A, Proceeds from Sale of Crops

As a general rule, Indiana does not recognize tenancy by the entirety
in personal property, ^^ but Indiana has made an exception with regard
to the proceeds from the sale of land held by the entirety,'^ and with

regard to crops grown on tenancy by the entirety property. ^^ In a case
of first impression, Schoon v. Van Diest Supply Co.,^^ the Indiana

Court of Appeals held that the proceeds from the sale of crops grown

on tenancy by the entirety property can be attached by the creditor

of one of the spouses. While the court recognized that personal property

"derived directly from real estate held by the entirety, such as crops

on the land or proceeds arising from the sale of land held by the

entirety" can not be attached by such creditors, the court determined

that the proceeds from the sale of crops amounted to "proceeds from

proceeds" and that the trial court was correct in not enlarging the law

authorizing estates by entirety to include such proceeds. ^^

B. Bankruptcy: Release of Interest in Entirety Property

by Debtor-Spouse

In In re Agnew, ^^ the United States Court of Appeals for the
Seventh Circuit concluded that under Indiana law the release of an

interest in the proceeds from the sale of tenancy by the entirety property

by one spouse to the other was not a transfer of property and that

no "division" of proceeds occurred. In Agnew the husband filed for

17. C. MoYNiHAN, supra note 9, at 220 n.l; Henry's, supra note 12, ch. 34,

§ 3, at 351-52.

18. E.g., Koehring v. Bowman, 194 Ind. 433, 142 N.E. 117 (1924); Abshire v.
State, 53 Ind. 64 (1876); Schoon v. Van Diest Supply Co., 511 N.E.2d 12 (Ind. Ct.
App. 1987).

19. E.g., Whitlock v. Public Service Co., 239 Ind. 680, 159 N.E.2d 280, reh'g

denied, 239 Ind. 694, 161 N.E.2d 169 (1959); Abshire v. State, ex rel. Wilson, 53 Ind.

64 (1876); Anuszkiewicz v. Anuszkiewicz, 172 Ind. App. 279, 360 N.E.2d 230, 232

(1977).

20. E.g., Koehring v. Bowman, 194 Ind. 433, 142 N.E. 117 (1924); Patton v.
Rankin, 68 Ind. 245 (1879); Mercer v. Coomler, 32 Ind. App. 533, 69 N.E. 202 (1903).

21. 511 N.E.2d 12 (Ind. Ct. App. 1987).

22. Id. at 13-14 (emphasis in original). The court relied heavily on the language

of Koehring v. Bowman, 194 Ind. 433, 142 N.E. 117 (1923), that tenancies by the
entirety "are not in harmony with any other part of the law of Indiana governing the

legal rights of husband and wife and the law authorizing their creation will not be

enlarged by construction.''' Koehring, 194 Ind. at 437, 142 N.E. at 118 (emphasis added).

23. 818 F.2d 1284 (7th Cir. 1987).



1988] PROPERTY LAW 373

Chapter 7 bankruptcy because of certain business debts incurred as

part owner of a plumbing business. Lee Supply Corporation, a creditor,

objected to the discharge of the husband's debts because the husband

had released to his wife his interest in the proceeds from the sale of

property owned by them as tenants by the entirety. The wife subse-

quently used the funds from the sale to build another house on land

which she individually owned. The release of the husband's interest

occurred within one year of the date the husband filed his petition in

bankruptcy and the creditor's complaint objecting to the discharge

alleged "defendant with the intent to hinder, delay or defraud a creditor

of the estate transferred property of the debtor to another [in violation

of 11 U.S.C. 727(a)(2)]. "2^ The bankruptcy judge and the district court

both found in favor of the debtor and the creditor appealed.

On appeal, the creditor argued that the release of his interest by
the husband caused a momentary division of the proceeds which caused
the interest to lose its exempt status and made it subject to his individual
debts. ^^ While the court could find no Indiana case directly on point,

it noted with interest the language in Enyeart v. Kepler^^ where the

husband, after his wife's death, claimed his earlier deed transferring

his interest to his wife was void because entirety property can only be

conveyed by both parties. In sustaining a demurrer to the husband's

claim by the devisees of the property under the wife's will, the court

held that the conveyance by the husband to his wife operated as "a
rehnquishment of the husband's right as survivor. "^^ From this language
the court concluded that under Indiana law Agnew did nothing more
than relinquish his survivorship right to the proceeds from the sale

24. Id. at 1286. The bankruptcy judge appears to have based his decision more

on the failure to prove fraudulent intent rather than the question of whether the release

was a transfer of property. The bankruptcy judge found that there were several valid

reasons why the husband released his interest in the proceeds of the sale to his wife.
First, a second mortgage on the house had been taken out to finance the start up of

the husband's failed business venture, and the repayment of the mortgage out of the

proceeds could be viewed as a repayment of a debt of the husband. Second, after the

business failed, the wife began making monthly payments to Lee Supply Corporation

on the husband's business debts from her own funds. Finally, the facts established that
the wife had contributed most of the funds for the purchase of the house. Id. at 1285-

86. Thus, the husband may have felt morally obligated to release his interest in the
proceeds from the sale to his wife. The bankruptcy judge found that the creditor had
failed to prove that the husband had made a transfer of assets with the intent to defraud
his creditors, that he had concealed information or that he had made a false oath or
account. Id. at 1286.

25. Id. at 1288.

26. 118 Ind. 34, 20 N.E. 539 (1889).

27. Id. at 38, 20 N.E. at 541.



374 INDIANA LAW REVIEW [Vol. 22:369

and that no separate interest ever vested in the husband which could

be reached by his creditor. ^^

The decision seems to be in accord with the common law concept
that neither spouse really has an interest apart from the oneness of

husband and wife. Thus, a
*

'release" by one of the parties would

simply leave the entire interest in the remaining tenant and nothing

would pass from one party to the other. ^^

C Contract For Sale by One Spouse: Enforceability

In Lafray v. Lafray,^^ a son entered into an oral contract with his

father agreeing to perform services in exchange for his father's promise

to convey the family farm to him at the death of the surviving tenant

by the entirety. After the father's death, the mother brought this action

to evict the son and his wife. The trial court ordered their eviction

and the son appealed. ^^ On appeal, the son argued that the court had
improperly excluded evidence of the oral contract. The court, however,

concluded that the real issue was not whether the contract with his

father existed, but rather whether the mother would be bound by the
contract. ^^ The court found the agreement void because the husband
had no separate interest in the farm which he could contract away."

There was no evidence that the mother had authorized the contract

or that she had ratified the agreement by accepting the services with

knowledge of the agreement.^"* Alternatively, the son sought to recover

in quantum meruit for the value of improvements made and services
performed, but the court found that the son, who had resided rent
and tax free on the land for ten years, had acted on his own rather
than his mother's behalf in making the improvements and performing

the services. ^^ The court also concluded that the son was a tenant at

28. Agnew, 818 F.2d at 1289.

29. By analogy, Indiana has consistently held that at the death of one of the

spouses the interest of the deceased spouse disappears and no interest passes from the

deceased spouse to the survivor. E.g., Anuszkiewicz v. Anuszkiewicz, 172 Ind. App.

279, 360 N.E.2d 230 (1977); Department of Revenue v. Weinstein, 141 Ind. App. 395,

228 N.E.2d 23, reh'g denied, 141 Ind. App. 399, 229 N.E.2d 741 (1967); Vonville v.

Dexter, 118 Ind. App. 187, 76 N.E.2d 856 (1948).

30. 522 N.E.2d 916 (Ind. Ct. App. 1988).

31. Id. at 917.

32. Id.

33. Id. at 918.

34. Id. The mother testified that her son had moved onto the farm for personal
reasons and that she did not know that he was performing these services as consideration
for the alleged contract. Id.

35. Id. at 919.



1988] PROPERTY LAW 375

im-sufferance, and that a tenant may not charge his landlord for
provements to the property absent an express contract. ^^

III. Covenants

In Rasp V. Hidden Valley Lake, Inc.,^^ the developer of Hidden

Valley Lake subdivision, Hidden Valley Lake, Inc. (HVL Developer),
spread of record and placed in the deeds to the subdivision lots a

covenant providing for the payment of a $5.00 a month water and

$3.00 a month sewer "availability" fee, payable annually and in ad-
vance, by lot owners choosing not to connect to the water and sewer

Hnes adjacent to their lots.^^ HVL Developer then transferred the sewer
and water lines to HVL Services, Inc. and HVL Utilities, Inc., two
wholly-owned public utilities subject to regulation by the Public Service

Commission of Indiana. Both utilities operated at a loss but HVL
Developer paid any deficits out of the "availability" fee fund. De-

fendants (Rasps) were not hooked up to the utilities and had refused

to pay the availability fees. HVL Developer filed suit to recover de-
linquent availability fees, late charges, interest and attorney fees. The

Rasps appealed from a judgment in favor of HVL Developer. Three
issues were raised: (1) whether the fees were void as against pubUc

policy; (2) whether the covenant ran with the land and bound subsequent

purchasers of the lots; and (3) whether the fees should be paid to

HVL Developer or to the two public utility corporations as the assignees
of the sewer and water lines. ^^

With regard to the first issue. Rasps claimed that the covenant

was unconscionable because it forced them to subsidize public utility

companies from whom they received no benefit and was a windfall to
HVL Developer who could then expend the funds to promote further
sales of its lots. The court disagreed finding that this "mildly coercive

incentive" to connect to existing sewer and water is in the public

interest as it will promote a more healthful environment in the sub-
division and broaden the rate base and reduce the rates charged for

the utility services. "^^ The court eliminated the second part of the Rasps
first argument by finding that the installation of water and sewer lines

by a private developer impresses that portion of the business with a

"public interest" which would prevent him from profiting from the
providing of such services. "*' Once the developer has recovered the costs

36. Id.

37. 519 N.E.2d 153 (Ind. Ct. App. 1988)
38. Id. at 155.

39. Id. at 154.

40. Id. at 156.

4L Id. at 156-57.



376 INDIANA LAW REVIEW [Vol. 22:369

of installation and a reasonable profit for his efforts, he became a

trustee of the funds received from that portion of the business and

had to account for their use."^^

Rasps next argued that the covenant was a personal covenant

between HVL Developer and the original lot owners which did not
run with the land and bind subsequent purchasers who were not parties
to the agreement. The court disagreed pointing out that "the purpose

of the restrictive covenant was to assure that sewer and water services

would be available to all the lots in the subdivision/^ A covenant is
capable of running with the land: (1) when the grantor intends it to
run; (2) when there is '^privity of estate between the subsequent grantees
of the original covenantor and covenantee [; and (3)] when the covenant
touches and concerns the land.""*"* Without further discussion, the court

concluded that ''[t]he covenant here at issue meets all these require-

ments."^^

On the final issue, however, the court did agree with the Rasps
that they should not be forced to pay the fee to HVL Developer once
the sewer and water lines had been transferred to the utility corpo-

rations. In the court's opinion, the wording of the covenant indicates

that an assignment was contemplated by the parties from the use of

the phrase "grantor, its successors or assigns." An assignment transfers
to the assignee all the rights, title, and interest of the assignor in the

property assigned. Thus, the judgment was reversed and the case re-

manded to the trial court for a new trial to ascertain the date and
terms of the transfer to the utility corporations in order to determine

the real party in interest.'*^

In another case involving restrictive covenants, Rajski v. Tezich,"^^

the Rajskis purchased a house in a subdivision, and began construction

of a two car unattached garage. They were informed by neighbors of

the potential violation of restrictive covenants, and the architectural

committee of the Homeowners Association made suggestions to bring
the building closer to conformity with the covenants. Despite these

warnings and without the approval of the architectural committee, the

Rajskis continued construction of the garage. The relevant provision

42. Id.

43. Id. at 157.

44. Id.

45. Id. One might question whether the assignment of the water and sewer lines
to the utility corporations gave them a property interest and whether the benefit touched

and concerned the land. Collection of the availability fees benefits the utility corporations

directly and only indirectly benefits lot owners by lowering the sewer and water rates.

46. Id. at 157-58.

47. 514 N.E.2d 347 (Ind. Ct. App. 1987).



1988] PROPERTY LAW 377

of the covenant provided that unless a violation was corrected within

thirty days after notice to cure or terminate was given by certified

mail by any person having a right to enforce the covenants, the violator

would be liable for liquidated damages in the amount of $10 (payable

to the Homeowners Association) for each day the violation continued,
together with attorney fees and court costs /^

George Tezich, a homeowner in the subdivision and president of
the Homeowners Association, sent the Rajskis notice by certified mail
demanding the removal of the garage within thirty days and invoking

the liquidated damages provision contained in the restrictive covenants.

Subsequently Tezich, James Hall (another homeowner), and the Home-
owners Association filed suit demanding removal of the structure,

liquidated damages, and attorney fees. The trial court ordered that the

garage either be attached or removed, awarded liquidated damages in

the amount of $2,930 to the date of judgment, and awarded attorney

fees of $3,750."^^ On appeal, the court found that the liquidated damages
provision was unenforceable as a penalty. ^^ The provision had no
relation to actual damages as it provided the same sum for a violation
of any of the numerous restrictions, some substantial and some trivial,
that ranged from the size, design, and locations of structures down to
the type of garbage cans that could be used by lot owners. In addition,

the court noted that the damages were payable to the Homeowners
Association and not the property owners, "at odds with the notion

of providing compensation to interested parties for actual injuries. "^*

The Rajskis also argued that the notice of violations sent by Tezich
was defective because it was sent by Tezich in his capacity as president

of the Homeowners Association. Prior to trial, the lower court had
ruled that the Homeowners Association lacked standing to act as a
party because the covenant provided that the restrictions were enforce-

able only by a "property owner. "^^ Since this ruling was not challenged,

the Rajskis argued they were never notified as required by the language

of the covenant. In rejecting this argument, the court noted that Tezich

was in fact a lot owner entitled to bring suit and give notice. The
words "President, Meadowview Third Addition Homeowners Associ-
ation" following his signature on the notice were merely deschptio
personae and did not prevent the inference that he was acting in an

48. Id. at 348.

49. Id.

50. Id. at 349.

51. Id.

52. Id. at 348 n.l.



378 INDIANA LAW REVIEW [Vol. 22:369

individual capacity." The court vacated the award denominated asli-

quidated damages and otherwise affirmed the judgment. ^"^

IV. Deeds

A. Easement vs. Fee

In Brown v. Penn Central Corp.,^^ owners of lots contiguous to
abandoned railroad right-of-way sought to quiet title to the land in

themselves. The trial court found that the portion of an 1871 deed

conveying a 100-foot wide right-of-way to the grantee-railroad created

nothing more than an easement which was extinguished when the
railroad ceased to use the property for railroad purposes and quieted

title in the lot owners. However, the trial court found the portion of

the deed conveying a strip of land adjacent to the right-of-way 200

feet wide and 1000 feet in length "for Depot and Rail Road purposes"
conveyed fee simple title to the strip of land in the railroad company. ^^

The court of appeals affirmed the trial court's determination and the

lot owners petitioned for transfer. ^^

On petition to transfer, the Indiana Supreme Court set forth certain
rules of construction to be used when construing the meaning of a
deed: (1) The object is to determine the intent of the parties; (2) where

the deed is unambiguous, the intent must be determined from the

language of the deed alone; (3) where the grantee prepares the in-

strument of conveyance, the grantee will be construed in the light most

favorable to the grantor; (4) a deed conveying a "right" usually conveys

only an easement; and (5) a conveyance of a strip of land without

additional language as to the use or purpose for which the land is to

be used is construed as passing an estate in fee.^^ Examining the deed

in question under these rules of construction, the court observed that

the language of the deed provided that the strip of land was to be

used "for Depot and Rail Road purposes," and the granting clause
in the pre-printed portion of the deed expressly stated that the grantors

were conveying a right of way.^^ The court of appeals in affirming

53. Id. at 349.

54. An additional issue involving whether an award in the amount of $3,750 in
attorney fees was excessive is not discussed.

55. 510 N.E.2d 641 (Ind. 1987).

56. Id. at 642.

57. Id.

58. Id. at 643-44. These rules of construction are discussed and authority cited

in the opinion. Id.

59. Id. at 644.



1988] PROPERTY LAW 379

the decision of the trial court found the deed ambiguous because the

portion of the deed conveying the depot property was hand-written

into the pre-printed form. However, the supreme court noted that the

hand-written portion was merely a description of the boundaries of

the railroad right of way, which included the depot property. Fur-

thermore, since the hand-written portion stated that the conveyance

was "for Depot and Rail Road purposes," there was no need to
speculate as to the intent of the parties in 1871.^° The railroad company
chose to use the pre-printed form and the language will be construed

against it. Finally, the court noted that "[pjublic policy does not favor

the conveyance of strips of land by [fee] simple titles to railroad

companies for right-of-way purposes, either by deed or condemna-

tion."^' Ownership of the land in fee is not necessary for the purpose

for which the land was acquired and the severance of the strips from

the parent bodies of land "operates adversely to the normal and best

use of the property involved."" The court concluded that the railroad

acquired only an easement to the land for depot and railroad purposes

which was extinguished upon the abandonment of the right of way.

B. Strip of Land Excluded from Deed

In Maxwell v. Hahn,^^ the Redmonds created two subdivisions on
an 8.5-acre tract of land on Dewert Lake in Kosciusko County. They

first platted and recorded "Redmond's Second Addition," consisting
of thirteen lots. A strip of land between the thirteen lots and the lake
was not included in the deeds to the lots. The recorded subdivision
plat provided that "[t]he area between the lake and the lots is common
ground for the use of the owners of these lots or future lots that may
be laid out west of this addition. "^"^ Subsequently, the Redmonds platted
and recorded the "Third Addition to Redmond Park," consisting of
nineteen lots to the west of the Second Addition. The owners of the
"Third Addition" lots claimed the right to use the common ground
on the lake shore for purposes of swimming, fishing, and the erection

of piers to dock their boats. The trial court recognized an easement
on behalf of the owners of lots in the Third Addition to swim and
fish in the lake, but held that the developers had vested fee simple
title to the common area in the owners of the lots in the Second

60. Id.

61. Id. (quoting Ross, Inc. v. Legler, 245 Ind. 655, 659, 199 N.E.2d 346, 347-

48 (1964)).

62. 510 N.E.2d at 644.

63. 508 N.E.2d 555 (Ind. Ct. App. 1987).
64. Id. at 556.



380 INDIANA LAW REVIEW [Vol. 22:369

Addition/^ As owners of the fee, the Second Addition lot owners had

exclusive riparian rights to erect piers or docks on the lake shore. ^^

On appeal, the Second Addition landowners cited to the court
several Indiana Supreme Court decisions holding that the fee to strips

of land abutting against highways and bodies of water should vest in

the adjacent landowners. ^^ The court noted, however, that where lands

are granted according to a plat, the plat becomes a part of the deed

with regard to the limit of the land being conveyed.^ Here, the language

in the plat of the Second Addition clearly indicated that the strip was

common ground for the use of both the Second and Third Addition
lot owners. This language rebutted the standard presumption that the

fee in the strip of land abutting a body of water should be vested in

the adjacent landowners. ^^ As co-owners of an easement, all the lot

owners had the right to construct, alter, or improve the easement so

long as their actions do not unreasonably interfere with the rights of

the other co-owners to enjoy the easement. In dictum, the court noted

that the owners of the Second Addition had maintained the common
area and paid the taxes on the land. They might have acquired title

to the common areas by adverse possession but the point was never
argued.^°

C. Delivery

In ITT Industrial Credit Co. v. R.T.M. Development Co., Inc.,^^
R.T.M. Development Co., Inc. (RTM) approached the Zimmers and
offered to purchase their property for $100,000. The Zimmers executed
a warranty deed to the property to RTM but, on the advice of their
attorney and a banker, they inserted the words "Not valid until receipt
of full payment" across the top of the deed.^^ The Zimmers handed
the deed to RTM's agent but advised him that the deed was not to
be delivered until the purchase price was paid in full (subsequently,

the agent surrendered the deed to RTM even though full payment had
not been made). On November 7, 1980, RTM executed a mortgage on

65. Id. at 557.

66. Id.

67. Id. at 558.

68. Id. (citing Gary Land Co. v. Griesel, 179 Ind. 204, 209, 100 N.E. 673, 675

(1913)).

69. "There was no evidence presented to the trial court to support the finding

that the conveyance by the plat owners . . . included the land contiguous to Dewart

Lake and the lake approaches." Maxwell, 508 N.E.2d at 558.

70. Id. at n.l.

71. 512 N.E.2d 201 (Ind. Ct. App. 1987).

72. Id. at 202.



1988]
^

PROPERTY LAW 381

the property as security for a loan obtained from ITT Industrial Credit

Corp. (ITT). Sometime before the closing between the Zimmers and

RTM on November 12, 1980, the words at the top of the deed were
crossed out and the Zimmers initials were written nearby (subsequently,

the trial court found that the Zimmers had not crossed out the words

at the top of the deed or written their initials on it).^^ At the closing,

the Zimmers received $30,000 but claimed they were told that it was

merely a down payment and that the full price would be forthcoming
in three months (this was disputed by RTM who claimed they were
told they would receive a promissory note for the additional $70,000

secured by a second mortgage). ^"^

In a subsequent action by ITT to foreclose the mortgage on the
property, the trial court found that the Zimmers' deed was never

delivered and that no right, title or interest ever passed to RTM or
jyj 75 Qj^ appeal, ITT presented two arguments: (1) that the words
at the top of the deed created only an equitable lien on the property

for the purchase price; and (2) in any event, the Zimmers were estopped

by not returning any of the benefits received in exchange for the

property. ^^ With regard to the first argument the court agreed that an

express reservation in a conveyed deed only creates an equitable interest,

but pointed out that this rule applies only when the deed has been
delivered. ^^ Delivery is a question of intent and here the intent of the

grantors is clear. The Zimmers did not intend the deed to operate as
a conveyance until all the consideration had been paid, and where the

intent of the grantor is clear it must be given effect. ^^ With regard to

the second argument, the court observed that the Zimmers were not
estopped because they were unaware of all the facts when they accepted
the down payment. ^^ In dictum, the court noted that RTM might have
an action against the Zimmers for the return of the down payment
money but that this issue was not before the court. ^^

V. Easements and Licenses

A. Revocability of Licenses and Damages for Revocation

Although licenses and easements often involve similar types of land

use, they are different in several important respects. An easement,

73. Id. at 203.

74. Id. at 204.

75. Id.

76. Id. at 203-04

77. Id. at 204. .

78. Id.

79. Id.

80. Id. at 205.



382 INDIANA LAW REVIEW [Vol. 22:369

being viewed as a conveyance of an interest in land, comes within the

Statute of Frauds; whereas, a Hcense, being viewed as a mere privilege

to use the land of another, can be created orally. The easement, being

a conveyance of an interest in land, is perpetual unless the terms of

the grant expressly or by implication indicate the estate is determinable;

whereas, the license, being a mere privilege to use the land, is revocable

by the licensor at any time.^' Although an easement comes within the

Statute of Frauds, it can be acquired by prescriptive use just as title

to land can be acquired by adverse possession. ^^ Likewise, the courts

have generally recognized that an easement, like other interests in land,

can be created by estoppel or part performance.^^

Where a licensee relies to his detriment on the oral promise of a
licensor by expending funds or making improvements to the land,

courts often find the license has become "irrevocable" or an *'oral

easement."^ The question of the revocability of a license is raised in

Closson Lumber Co. v. Wiseman .^^ In 1948 the Closson Lumber Co.
(Closson) orally agreed to allow Wiseman to use its unimproved tract
of land for ingress and egress to Wiseman's warehouse. Based upon
this gratuitous promise, Wiseman installed an overhead door in the
north wall of the warehouse, blacktopped Closson's land, and erected

a fence on Closson's north property line. In 1981, Closson notified

Wiseman that he could no longer use its land to reach the warehouse.
Wiseman filed for a declaratory judgment, and the trial court found
that he had nothing more than a revocable Hcense. ^^ On appeal, in a
memorandum opinion {Closson /), the court of appeals found that the
license had ripened into an oral easement, but concluded that the

easement could be revoked if Wiseman was compensated.^^ On remand,

81. Cunningham, supra note 3, § 8.1, at 437; Richter v. Irwin, 28 Ind. 26 (1867)
(easement is an interest in land).

82. Cunningham, supra note 3, § 8.7, at 450-56. In Indiana an easement by
prescription can be acquired by open, continuous, adverse use for twenty years. Ind.

Code. § 32-5-1-1 (1988).

83. Cunningham, supra note 3, § 8.8 at 456-58; Dubois County Machine Co.
V. Blessinger, 149 Ind. App. 594, 274 N.E.2d 279 (1971) (recognizing an oral easement

under the doctrine of part performance).

84. E.g., Stoner v. Zucker, 148 Cal. 516, 83 P. 808 (1906); Mueller v. Keller,

18 111. 2d 334, 164 N.E.2d 28 (1960); Holbrook v. Taylor, 532 S.W.2d 763 (Ky. 1976);

Maxwell v. Bay City Bridge Co., 41 Mich. 453, 2 N.W. 639 (1879); Ricenbaw v. Kraus,
157 Neb. 723, 61 N.W.2d 350 (1953); Shepard v. Purvine, 196 Or. 348, 248 P.2d 352
(1952); Rerick v. Kern, 14 Serg. & Rawle 267 (Pa. 1826).

85. 507 N.E.2d 974 (Ind. 1987).

86. Id. at 975.

87. Id. It is interesting to speculate why the court did not conclude the license
had become an irrevocable easement. See Cunningham, supra note 3, § 8.8, at 456-



1988] PROPERTY LAW 383

the trial court found the proper measure of damages to be the difference

between the value of the Wiseman property with the easement and the

value of the property without the easement, and that "any lost profits

and future earnings, proposed alterations and appraisals might be

relevant in arriving at those values. "^^ The trial court then concluded

that the decrease in the market value of Wiseman's property was

$45,000—the cost of extending the warehouse to the west to provide
an alternate means of ingress and egress to the business. ^^ The Court

of Appeals in a second memorandum opinion {Closson II) affirmed.

On petition for transfer, the Indiana Supreme Court disagreed with
the court of appeals' characterization of the interest as a "revocable

easement," noting that if the interest is revocable it is more properly

termed a license. ^° While the court agreed that compensation could be

awarded upon revocation of the license, the court disagreed with the

court of appeals on the measure of damages. Noting with approval

the dissenting opinion by Judge Sullivan in Closson II, the court

concluded that the award of damages should be limited to the amounts

expended upon the disputed parcel, and that consequential damages

such as the prospective expenditures to remodel appellee's warehouse

should not be considered.^' Thus, the trial court's award of damages

was excessive, the opinion of the court of appeals was vacated, and

the case was remanded to the trial court. ^^

In a dissenting opinion, Justice DeBruler observed that the license

was to last so long as Wiseman might need it, and that in reliance

58. Interestingly enough, the position taken by the court is similar to that recommended

by the Restatement of Property. Restatement of Property § 519(4) (1944). The

Restatement would allow the license to become an easement, but instead of becoming

irrevocable, the easement would last only as long as necessary for the grantee to recover

any loss resulting from the detrimental reliance. Here, the court is awarding damages

directly instead of granting specific performance for a time period sufficient to accomplish

the same purpose, a return to the status quo.

88. Closson, 507 N.E.2d at 975.

89. Id. at 976.

90. Id. at 977.

91. Id. It is not clear why the court believed plaintiff's recovery was limited to
expenditures on the defendant's land. This might be based upon an assumption that

expenditures made upon the plaintiff's property will be retained by the plaintiff and
therefore there is no reason for him to be compensated. In reality, the facts suggest

that plaintiff will be left with an overhead door of little or no value without the license

or additional expenditures. Clearly the improvements were made for use with the license
and without the license the improvements would not have been made.

92. The court observed that the appellee paid no consideration for the oral

agreement, never paid the real estate taxes or other assessments on the land, and never

compensated appellant for the use of the property. Id.



384 INDIANA LAW REVIEW [Vol. 22:369

on this promise he expended capital and labor on both the dominant

and servient tenements. ^^ These facts led the court of appeals to conclude

in Closson I that compensation was due Wiseman for the revocation
and this becam.e the law of the case.^'^ Restitution is intended to restore

the parties to an equivalent position. In Justice DeBruler's view, the

majority opinion does not do this because it fails to take into con-

sideration improvements made on the dominant estate in reliance on
the promised Hcense.^^ Justice DeBruler stresses the point with an

example of a farmer who allows his neighbor to cross his land to
reach the neighbor's field. The farmer then watches his neighbor plow

and plant the field and when the work is done, the farmer revokes
the license before his neighbor can. harvest his crops. How can the
neighbor be restored to the status quo without recovery of his in-

vestments on his own land?^^

B. Statute of Frauds: Easement Created by Grantee in Deed Poll

In Chase v. Nelson, "^^ a 1921 deed from WiUiam and Fannie Led-
better (the Chases' predecessors in title) to Lenore Alspaugh (the Nel-

sons' predecessor in title) provided that the grantors and the grantee

each agreed to furnish three feet and five inches of land for the use

of a common driveway between their lots. The three feet and five
inches was to be taken off the east side of the grantors' lot and off

the west side of the grantee's lot and was to extend for a distance of

seventy-eight feet.^^ The Chases filed this action alleging the Nelsons
had interfered with the use of the common driveway by continuously
parking cars on it. The trial court found the Chases had no easement

over the Nelsons' property because (1) the 1921 deed failed to identify

the dominant and servient tenements and (2) it was not signed by

Alspaugh, the Nelsons' predecessor in interest. ^^

On appeal, the court found that the wording in the 1921 deed
adequately described the dominant and servient tenements by the res-

ervation of an easement in favor of the grantors on the three-foot

five-inch strip on the west side of the property conveyed to Alspaugh

and by the grant to Alspaugh of an easement over the three-foot five-

93. Id. at 978 (DeBruler, J., dissenting).

94. Id. The majority opinion held that the court of appeals reversal in Closson

I did not decide the scope of damages to be awarded upon revocation of the license.

Id. at 977.

95. Id. at 978 (DeBruler, J., dissenting).

96. Id.

97. 507 N.E.2d 640 (Ind. Ct. App. 1987).

98. Id. at 641.

99. Id. at 641-42.



1988] PROPERTY LAW 385

inch strip of land on the east side of the land retained by the Led-

betters.^^^ With regard to the Statute of Frauds requirement that the

conveyance of an interest in land must be signed by the party to be

charged, '°^ the court concluded that this requirement does not apply

when an interest is conveyed by the grantee in a deed.'°^ Acceptance

of the deed by the grantee brings the easement into existence without

any further act on the part of the grantee. Acceptance of the deed is

acceptance of the express easement created in the deedJ^^ Having found

the easement valid, the court remanded the case for further findings

of fact as to whether the Nelsons' interference, if any, justified the

granting of injunctive relief. '^'^

C. Prescriptive Easement: Quiet Title Action as Res Judicata

In Popp V. Hardy, ^^^ Louis Popp, now deceased, brought an action
to enjoin interference with an alleged twenty-foot prescriptive right-of-

way across the land of Claude and Rose Hardy (Hardys).'^^ The trial
court granted the Hardys' motion for a summary judgment. '^^ In so
doing, the trial court found that (1) a 1966 quiet title decree quieting

title to the disputed strip of land in Carl and Myrtle Elrod (the Elrods),

the Hardys' predecessors in title, operated to foreclose Popp's claim

to a prescriptive easement, and that (2) Popp's use of the right-of-

way was permissive and not adverse. ^°^ Popp appealed.

100. Id. at 642-43.

101. IND. Code § 32-2-1-1 (1988) provides:
No action shall be brought . . . [u]pon any contract for the sale of lands . . .
[u]nless the promise, contract or agreement upon which such action shall be

brought, or some memorandum or note thereof, shall be in writing, and signed
by the party to be charged therewith.

102. Chase, 507 N.E.2d at 643.

103. Id. While the court could find no Indiana cases directly on point, it did

find two cases which could be used by analogy as authority. In Thiebaud v. Union

Furniture Co., 143 Ind. 340, 42 N.E. 741 (1895), the court found a contract written

in a deed with the knowledge and consent of the grantee was equivalent to a signature

on the contract. Similarly, in Brendonwood Common v. Franklin, 403 N.E.2d 1136
(Ind. Ct. App. 1980), the court held that a covenant running with the land was binding

on the grantee of a deed poll because the acceptance of the deed satisfies the statute

of frauds and imposes the undertakings in the deed upon the grantee.

104. Chase, 507 N.E.2d at 644.

105. 508 N.E. 2d 1282 (Ind. Ct. App. 1987).

106. After Louis' death, his two children, James Popp and Ruth Sipes (James
and Ruth), as co-executors of their father's estate, were substituted as party plaintiffs.

Id. at 1284.

107. Id.

108. Id. The trial court also found that the alleged easement was not sufficiently
described. Id. However, on appeal, the court summarily concluded that the easement

was sufficiently described for purposes of creating an issue in a summary judgment
proceeding. Id. at 1287.



386 INDIANA LAW REVIEW [Vol. 22:369

The first issue addressed on appeal was the trial court's finding

that the quiet title decree of October 18, 1966, was res judicata with

regard to Popp's claim. If the 1966 decree was res judicata, it would

foreclose Popp's claim to a prescriptive easement, because acquisition

of a prescriptive easement requires actual, hostile, open, notorious,

continuous, uninterrupted, and adverse use for twenty years under a

claim of right with the knowledge and acquiescence of the owner, '^^

and twenty years had not elapsed between the date of the decree and

Popp's action. In finding the decree was not res judicata, the court

noted that while the complaint in the quiet title action filed by Bertha

Earl is styled ''Complaint To Quiet Title Against The World," it named
specific defendants, including the Elrods, and listed specific defects in

the title from 1850 to 1954 by book and page number.'*^ Popp was
not named as a party in the action nor was his prescriptive easement
listed as a defect in title.^'^ The Hardys argued that Popp was included
within the complaint by the words "as well as all persons who might
assert any title, claim, or interest in and to the real estate, all of whom
are unknown to the plaintiff. "^^^ The court rejected this argument
pointing out that it was difficult to see how a person openly using
the plaintiff's land could be "unknown. "^'^ The court observed that

Before res judicata operates to bar a subsequent action it must

be shown: (1) that the prior court had jurisdiction; (2) the

matter now in issue was or might have been determined in the
prior suit; (3) that the former controversy was between the

same parties or their privies; and (4) that the prior judgment

was issued on the merits. ^^"^

In this case, Popp was not named as a party nor did the suit by
Earl against the Elrods to determine fee simple title to the twenty-foot

strip encompass Popp's claim to an easement over the same land. Since

Popp's claim was adverse to the Elrods' interest, he was not represented

in the suit nor was a judgment entered on the merits. ^^^ Thus, the

quiet title action was not res judicata.

On the issue of whether Popp's use of the land was permissive
and not adverse, the Hardys argued that the admission in the deposition

109. Id. at 1288 (citing Ind. Code § 32-5-1-1 (West 1982); Searcy v. LaGrottee,
175 Ind. App. 498, 372 N.E.2d 755 (1978)).

110. Popp, 508 N.E.2d at 1285.

111. Id. ax 1285-86.

112. Id. at 1285.

113. Id. at 1287.

114. Id. at 1286 (citing American National Bank & Trust Co. v. Hines 143 Ind.
App. 217, 239 N.E.2d 589 (1968)).

115. Popp, 508 N.E.2d at 1286.



1988] PROPERTY LAW 387

of James Popp, Louis Popp's son, that after 1959 he and his father

had asked permission from the Elrods and the Hardys to use the

roadway is fatal to the claim of a prescriptive easement.^ '^ The Hardys

argued that James should not be able to create an issue of fact with

regard to the nature of the use by submitting an affidavit contradicting

his own prior testimony. The court agreed with this general principle,
but observed that in this case there is evidence corroborating James'

affidavit, including the testimony of independent witnesses, some of

whom were members of the families of predecessors in the Hardy's
title. In addition, there was evidence that the prescriptive easement

may have already existed by 1959.''^ The court concluded that a material
question of fact existed and directed the trial court to overrule both

motions for summary judgment and set the cause for trial on the
merits. '^^

VL Landlord and Tenant

A. Breach of Lease: Termination

Under traditional landlord-tenant law, the breach of a lease pro-

vision by one of the parties does not permit the other party to terminate

the lease absent a statute or an express provision in the lease so

providing.''^ Leases, however, often contain a "forfeiture" provision

giving one party, usually the landlord, the power to elect to treat the

breach of a material lease provision by the other as a termination of

the lease. '^^ In such a case, the leasehold comes to an end and the

116. Id. at 1287. A prescriptive easement is acquired by actual, hostile, open,
notorious, continuous, uninterrupted, and adverse use for twenty years under a claim

of right. IND. Code § 32-5-1-1 (1988).
117. Popp, 508 N,E.2d at 1288. Since 1928, Louis and his son James had used

the roadway across Hardy's property to reach an adjoining fifteen-acre tract of land

which Popp owned. Neither the Hardys nor their predecessors in title had ever complained
of or objected to Popp's use of the right of way. Id. at 1284.

118. Id. at 1289.

119. Cunningham, supra note 3, § 6.76, at 393-95. As a general rule, a breach
of a covenant in the lease does not work a forfeiture unless the lease so provides.

Churchwell v. Coller & Stoner Bldg. Co., 179 Ind. App. 357, 385 N.E.2d 492 (1979)
(citing 49 AM. JUR. 2d, Landlord and Tenant § 1021 (1970)).

Ind. Code § 32-7-1-5 (1988) provides that the failure of the tenant to pay the rent
when due shall terminate the lease upon ten-day notice to quit. Notice to quit is not
required where the rent is payable in advance; where the term of the lease has expired;

where a tenant at will has committed waste; in the case of a tenant at sufferance; or

where the relation of landlord or tenant does not exist. Ind. Code § 32-7-1-7 (1988).
120. Cunningham, supra note 3, § 6.76, at 393-95. A forfeiture term will not

be enforced, however, unless the breach goes to the heart of the contract. Ogle v.

Wright, 172 Ind. App. 309, 360 N.E.2d 240, 244 (1977).



388 INDIANA LAW REVIEW [Vol. 22:369

landlord can evict the tenant without any further notice. ^^^ The right

of the landlord to terminate the lease and evict the tenant upon his
breach of a lease provision was raised in two cases under review. In

Halliday v. Auburn Mobile Homes, ^^^ tenant violated park rules pro-
hibiting the keeping of dogs. Tenant was given a pamphlet containing

the park rules and regulations and the rules and regulations were posted

in the park. Landlord, upon discovering that tenant had a dog in his
mobile home gave him ten-day notice to quit, and when he failed to
do so filed an action for ejectment. The trial court ordered the tenant

to vacate. ^^^

On appeal, tenant argued he was entitled to one-month notice. ^^^

In rejecting this argument, the court observed that tenant had agreed

in the contract that he could be ejected from the park for violation

of any rules or regulations of the park which were properly posted. '^^

Thus, the tenancy was terminated upon violation of the posted rules
and the tenant was no longer entitled to notice. '^^ The fact that he

had found a home for the dog and that it would be expensive to move
the double-wide mobile home did not impress the court. He who seeks
equity must do so with clean hands. ^^^

In Page Two, Inc. v. P.C. Management, Inc.,^^^ the court addressed

two issues which frequently arise in termination actions for breach of

lease: (1) whether the breach is material; and (2) whether the landlord

has waived the remedy of termination by his subsequent actions. Through

a series of assignments, a group of corporations and individuals, referred

to collectively as Page Two, acquired the principle lease on a building

in Indianapolis. Prior to the assignment, the second floor of the building

121. Since the termination ends the lease, the tenant becomes a tenant at sufferance

and the landlord may proceed to evict the tenant pursuant to Ind. Code § 32-7-3-1

(1988). No notice is required to evict a tenant at sufferance. Ind. Code § 32-7-1-7
(1988).

122. 511 N.E.2d 1086 (Ind. Ct. App. 1987).

123. Id. at 1087.

124. Where the tenancy is from month to month, the tenant is entitled to one

month's notice. Ind. Code § 32-7-1-3 (1988).
125. Halliday, 511 N.E.2d at 1087-88. In a footnote the court cited the statute

specifically regulating mobile home parks, Ind. Code § 13-1-7-34 (1988), which provides,
"The owner, operator, or caretaker of any mobile home park may eject any person
from the premises . . . for the violation of any rule of the park which is publicly posted

within the park." Id. at 1088 n.2

126. In effect the tenant becomes a tenant at sufferance when he remains in

possession after the tenancy has expired. A tenant at sufferance can be evicted by the
owner of the premises pursuant to Ind. Code § 32-7-3-1 (1988). No notice is required
to evict a tenant at sufferance. Ind. Code § 32-7-1-7 (1988).

127. Halliday, 511 N.E.2d at 1089.

128. 517 N.E.2d 103 (Ind. Ct. App. 1987).



1988] PROPERTY LAW 389

had been sublet to P.C. Management, Inc, who operated a comedy
club on the sublet premises. Upon the assignment, Page Two became
the sublessor. Subsequently, P.C. Management closed its comedy club

in May 1986, but continued to use the subleased premises for storage.
On September 8, 1986, P.C. Management sent a letter notifying Page
Two that it intended to exercise the first two-year renewal option under
the sublease for a term commencing on November 15, 1986. By letter

dated October 29, 1986, Page Two notified P.C. Management that it
was in default under the terms of the sublease, and by letter dated

November 13, 1986, Page Two declared the lease terminated and de-
manded possession. Page Two subsequently refused to accept the monthly
rental payment tendered by P. C. Management. '^^

Page Two alleged violations of paragraphs 7 and 8 of the sublease.
Paragraph 7 provided that "Sublessee shall pay for utilities used as

determined on the basis of the square footage of the sublet premises

to the square footage of the premises, wherein such utilities are used."'^°

When Page Two became sublessor, P.C. Management's portion of the
utilities, based on the square footage computation, was determined to

be 20 percent (20*^0). A few days after the comedy club moved in May
1986, Page Two had the air conditioning and heating duct work dis-
connected from the sublet premises. Nevertheless, in July 1986, P.C.

Management received a statement for electricity from June 5, to July

7, 1986, computed on the 20% basis even though its actual use for
this period was limited to one exit light, an alarm system, and an

occasional use of lights. P.C. Management protested the charges as
excessive and refused payment. In August and September 1986, Page

Two again submitted 2097o billings which P.C. Management again
protested and refused to pay. Page Two did not respond to these
protests or send further statements, but it did continue to accept the

monthly rental payments. ^^'

Paragraph 8 provided that "Sublessee shall maintain fire, casualty

and personal injury insurance. . . ."'^^ P.C. Management cancelled its
general liability insurance coverage in June 1986, after it had closed

the comedy club. The court noted that Page Two had never inquired
about or requested proof of insurance coverage until the letter dated

October 29, 1986, advising P.C. Management that it was in default
of the sublease agreement. On November 18, 1986, P.C. Management
made a conditional offer to reinstate the general liability insurance
which Page Two refused.'"

129. Id. at 104-05.

130. Id. at 105.

131. Id. at 104.

132. Id. at 105.

133. Id. at 104-05.



390 INDIANA LAW REVIEW [Vol. 22:369

In an action by Page Two for a declaratory judgment, the court
awarded possession to P.C. Management on the theory that the sublessor
had waived the right to terminate the sublease. ^^'^ With regard to the

utility dispute, the trial court found that by accepting the rent after

each of the three protests, it had waived the utility dispute as a basis

for termination. In addition, Page Two took no steps to resolve the
issue and its stonewalling was not a mere delay in the exercise of its

right of termination, but was delay coupled with knowledge that pay-

ment was not forthcoming.'^^

On appeal. Page Two argued that it could not have waived the
right to terminate the lease for the nonpayment of utilities because the
right to declare a default had not yet become fixed at the time it
accepted the rent, and there can be no waiver based on the acceptance

of a rental payment before the time the landlord has the right to

forfeit the lease. Page Two appeared to be arguing that it had no
right to declare a forfeiture under paragraph 18 of the sublease until

it had given ten-day notice of default or unless the utilities had not

been paid for thirty days.'^^ The court rejected this argument pointing
out that the statement from P.C. Management that the utilities would
not be paid was an anticipatory breach of the utility provision which

allowed the other party to treat the lease as terminated. Thus, the

court found that Page Two's acceptance of the rent after the protest

statement, constituted a waiver of the contractual right to terminate

the sublease. '^^

With regard to the breach of the covenant to insure, the trial court

likewise found that Page Two had waived the insurance default, but
in addition concluded that " '[t]he matter of insurance was a minor

default . . . which does not justify the forfeiture of the Sublease

Agreement. . . ,' "i^s on appeal, the court affirmed the trial court
decision on the alternative ground of lack of material breach. *^^ A
provision in a lease allowing the breach of a covenant to work a
forfeiture will be enforced only if the breach is material. To determine
whether or not the breach is material the court turned to the Restatement

of Contracts 275, cited with approval in Goff v. Graham .^"^^ Factors
to be considered are:

134. Id. at 105-07.

135. Id. at 107.

136. Id. at 105.

137. Id. at 107.

138. Id. (quoting Record at 163).

139. Id. at 107-08.

140. 159 Ind. App. 324, 306 N.E.2d 758 (1974).



1988] PROPERTY LAW 391

(a) The extent to which the injured party will obtain the sub-

stantial benefit which he could have reasonably anticipated;

(b) The extent to which the injured party may be adequately
compensated in damages for lack of complete performance;

(c) The extent to which the party failing to perform has already

partly performed or made preparations for performance;
(d) The greater or lesser hardship on the party failing to perform

in terminating the contract;

(e) The wilful, negligent, or innocent behavior of the party

failing to perform;

(f) The greater or lesser uncertainty that the party failing to

perform will perform the remainder of the contract. ^"^^

In examining the alleged breach under the Restatement standards, the

court concluded that the evidence did not lead to a conclusion contrary

to that reached by the trial court. Page Two suffered no loss as a
result of the omitted insurance coverage, the use of the premises by

the sublessee after termination of the insurance coverage did not present

a significant risk of loss to Page Two; Page Two never concerned
itself with the question of insurance and P.C. Management offered to
reinstate the coverage.''*^ The decision of the trial court was affirmed.

B, Crops as Rent

In Indiana, the landlord-tenant relationship itself does not create

a lien on the personal property of the tenant for the payment of rent

apart from a statute or agreement providing otherwise.'"*^ Indiana Code
section 32-7-1-18, however, provides that the landlord may acquire a
lien on crops grown by the tenant where the tenant has agreed to pay

as rent a part of the crops grown. •'*'' The nature of the lien and the

141. Page Two, 517 N.E,2d at 107-08 (quoting Restatement of Contracts §
275) (1979)).

142. Page Two, 517 N.E.2d at 108.

143. E.g., Cowles v. Bick, 191 Ind. 243, 131 N.E. 36 (1921); Schuler v. Langdon,

433 N.E.2d 841, 845 n.4 (Ind. Ct. App. 1982); Cannon v. Northside Transfer Co.,
Inc., 427 N.E.2d 712 (Ind. Ct. App. 1981); Highland Realty, Inc. v. Indianapolis Morris

Plan, Corp., 136 Ind. App. 208, 216, 199 N.E. 2d 110, 114 (1969).
There are at least two statutory provisions which give a landlord a lien on the

tenant's property for the nonpayment of rent. Ind Code § 32-7-1-18 (1988) provides
that the landlord may acquire a lien on crops grown on the leased premises where the
tenant has agreed to pay a part of the crop as rent. Ind. Code § 13-1-7-33 (1988)
provides that the owner, operator or caretaker of a mobile home park shall have an
innkeeper's lien upon the property of the the person renting the lot for the nonpayment
of rent. See Nicholson's Mobile Home Sales, Inc. v. Schramm, 164 Ind. App. 598, 330
N.E.2d 598 (1975).

144. Ind. Code § 32-7-1-18 (1988).



392 INDIANA LAW REVIEW [Vol. 22:369

requirements for its perfection were raised in Farm Bureau Co-Op v.
Deseret Title Holding Corp}'''' Tenant leased 1030 acres of land from

Deseret Title Holding Corporation (Deseret) and agreed to pay as annual

rent for 1983 "50 bushels of #2 yellow grade corn per acre."^"*^ The
lease also provided that in the event of a crop disaster from natural

causes, defined "as a year in which the county average production as

reported by USDA falls 3097o below the most recent 5 year (sic) USDA
average for the county for the grain being produced," the tenant could

deliver 50% of the crop in lieu of the bushel rent stated in the lease. •'^^

The Montgomery County Farm Bureau Cooperative Association (Co-
Op) agreed to supply fertilizers and chemicals to the tenant to put the

crops out in exchange for a security interest on the crops to be grown

in 1983, which it would hold until tenant paid for the materials. The

crop yield was much lower than expected and when payment was not
forthcoming, Co-Op filed suit to foreclose its security interest, naming
Deseret and others who might have an interest in the crop. Deseret
filed an answer claiming a 50% interest in the crop. The trial court
agreed and Co-Op appealed. ^'^^

The court began by pointing out that a lease of farmland which

provides that the tenant is to pay as rent a certain number of bushels

of grain per acre is a "crop paid as rent" agreement which does not

vest any title to the crops in the landlord. ^'^^ Whereas an agreement

by the tenant to pay the landlord a percentage of the crop to be grown
is a "crop share" arrangement which places the landlord and tenant

in the position of tenants in common of the grain and gives the landlord
a right to his share of the property "as soon as the grain was put

into sacks. "'^^ Reviewing the lease in this case, the court concluded

that it was a crop paid as rent agreement and not a crop share

agreement. ^^' In dictum, the court stated that even if Deseret had

proven the existence of crop disaster conditions allowing the tenant to

pay 50 percent of the crop in Heu of the bushel rent, the bushel

provision in the lease would still have prevented it from being construed

a crop share agreement. ^^^ Thus, to acquire a lien on the crop the

landlord must comply with the provisions of Indiana Code section 32-
7-1 -18(b) and file in the recorder's office in the county in which the

145. 513 N.E.2d 193 (Ind. Ct. App. 1987)

146. Id. at 194.

147. Id. at 195-96 n.l

148. Id. at 194-95.

149. Id. at 195.

150. Id.

151. Id. at 195-96.

152. Id. at 196.



1988] PROPERTY LAW 393

lease premises is located, at least thirty days prior to the maturity of

the crop and during the year in which the crop is grown, notice of

his intent to hold a Hen upon the crop in the amount of the rent.

Since this was not done, the landlord had no lien on the crops and

the judgment of the trial court was reversed and remanded.'"

C. Holdover Tenants

When a tenant holds over beyond the term of a lease, the landlord
has three options: (1) the landlord can treat the tenant as wrongfully

holding over; (2) the landlord can offer the tenant a new lease; or (3)
the landlord can treat the lease as continuing, in which case the expired

lease continues to operate for a new term equal to the length of the
original term, except that where the term of the original lease was for

more than a year, the holdover term is from year to year.'^"^ Where
the landlord takes no action to evict the tenant and continues to accept

the rent when it is tendered, it is presumed that the landlord has
chosen option (3). In such a case, the terms and conditions of the

original lease will continue to operate during the hold-over term.'^^

This latter point was dramatically illustrated in Penmanta Corp. v.
Mollis. ^^^ Edward Mollis and his wife operated a business known as
the Toy Chest in Nashville, Indiana. In addition to selling toys, crafts
and collectibles, the business included a miniature circus exhibit which

Hollis had hand carved in quarter-inch scale portraying the Hagenbeck-

Wallace Circus as it appeared in 1934. Hollis charged a small fee to

view the exhibit.'"

The business was located in a building owned by the Penmanta
Corporation (Penmanta). The three-year written lease between Hollis

and Penmanta expired on December 31, 1982, but Hollis remained in
possession and continued to operate the business. On August 13, 1983,
the hand-carved miniature circus was damaged in a fire caused by the
failure of the landlord to maintain the premises. The expired lease
contained an exculpatory clause which barred any claim against Pen-

manta for damage or injury to Hollis or his property resulting from
the failure of Penmanta to keep the premises in repair. '^^ In reversing
a jury verdict and judgment in favor of Hollis, the court concluded

153. Id.

154. City of Bloomington v. Kurzuzovich, 517 N.E.2d 408, 411 (Ind. Ct. App.

1987).

155. Id.

156. 520 N.E.2d 120 (Ind. Ct. App. 1988).
157. Id. at 121.

158. Id.



394 INDIANA LAW REVIEW [Vol. 22:369

that "when a tenant holds over [at the end of the term], and the lessor
does not treat the tenant as a trespasser by evicting him," absent an

agreement to the contrary, "the parties are deemed to have continued

the tenancy under the terms of the expired lease. "^^^ The court rejected

Hollis' argument that because a provision in the lease required the

written consent of Penmanta to hold over under the lease and this
was not done, this rebutted the legal presumption that the parties

intended to continue under the terms of the expired lease. The court

found that the waiver of this provision by the landlord did not show

a contrary intention. '^° Penmanta unconditionally accepted the rent and

allowed Hollis to continue in possession some eight and a half months

after the lease had expired before the fire occurred. Thus, the general

rule applied that when a tenant holds over beyond the term of the
lease, the lease is renewed under the same terms and subject to the

same conditions as the original lease, including the exculpatory clause.

The only change being that if the original lease is for a term of more

than one year, the holdover term is from year to year. The court

concluded the trial court was in error in not granting Penmanta's

motion for summary judgment and reversed and remanded the case.^^'
In a concurring opinion. Judge Sullivan noted that perhaps "contractual

provisions particularly unfavored in the law, such as an exculpatory

provision, might be excluded from the terms and conditions of a

holdover tenancy" but that such a determination should come from
the General Assembly or the Indiana Supreme Court. '^^

VII. Recording: Constructive Notice

Traditionally, the recording of an instrument not entitled to be

recorded is not constructive notice of the interest created in the in-

strument. Thus, a subsequent purchaser for value without actual knowl-

edge of the instrument (b.f.p.) will take the property free of the

interest. ^^^ This rule has been criticized for protecting those who neg-
ligently fail to search the public records while charging those who
diligently search the public records with actual notice of anything they

discover as a result of the search. '^"^ The question of whether the

159. Id. at 122 (quoting Mooney-Mueller-Ward, Inc. v. Woods, 175 Ind. App.

302, 305 n.l., 371 N.E.2d 400, 403 n.l. (1978)).

160. Penmanta, 520 N.E.2d at 122.

161. Id. at 122-23.

162. Id. at 123 (Sullivan, J., concurring).

163. J. Cribbet, Principles of the Law of Property 219 (1962). In Indiana,
to defeat the prior interest, the b.f.p. must also properly record his interest first under

Indiana's race-notice recording act. Ind. Code § 32-1-2-16 (1988).
164. J. Cribbet, supra note 163, at 220.



1988] PROPERTY LAW 395

recording of an instrument not entitled to be recorded should operate

as constructive notice was raised in In Re Sandy Ridge Oil Co., IncJ^^
Sandy Ridge Oil Company (Sandy Ridge) executed mortgages on

its oil and gas leases on six oil wells (only one mortgage is in issue)

as security for the payment of the note to Halliburton Services. (Hal-

liburton). In a subsequent Chapter 11 bankruptcy proceeding, the debtor

in possession sought to avoid the mortgage under 544(a)(3) of the

Bankruptcy Code,'^^ which permits a trustee to avoid any transfer

voidable by a b.f.p. Sandy Ridge argues that the mortgage was voidable

because the name of the person who prepared the instrument was not
included as required by Indiana Code section 36-2-1 l-15(b), and thus
its recording did not provide constructive notice. ^^^ The United States

Court of Appeals for the Seventh Circuit certified the question of

constructive notice to the Indiana Supreme Court under Rule 15(0)
of the Indiana Rules of Appellate Procedure:

Does a recorded instrument conveying ... or otherwise dis-

posing of an interest in or Hen on property that does not

disclose the name of the preparer as required by Ind. Code
36-2-1 1-1 5(b) nevertheless impart constructive notice to a bona
fide purchaser? ^^^

The Indiana Supreme Court began by noting that while there are

no Indiana cases specifically addressing the effect of the recording of

an instrument without the name of the preparer as required by the
statute, the general rule is that the recording of an instrument not

entitled to be recorded does not afford constructive notice, citing

numerous cases in support of this principle. ^^^ But the court also noted

that the cases offered no supporting rationale for the rule. '^° Halliburton

argued that the legislature did not intend a strict interpretation of

Indiana Code section 36-2-1 1-1 5(b) (Section 15) and offered as support
for this position the curative provision of Indiana Code section 36-2-
11-16 (Section 16) which provides that the receiving and recording of

an instrument by the county recorder is conclusive proof of compliance

with Section 16.^^^ Appellee argued that the existence of the curative

provision in Section 16 but not in Section 15 shows an intent to exclude

the curative provision from Section 15. The court observed that the

165. 510 N.E.2d 667 (Ind. 1987).

166. 11 U.S.C. § 544(a)(3) (1982).

167. Ind. Code § 36-2-ll-15(b) (1988).
168. Sandy Ridge, 510 N.E.2d at 669-70.

169. Id. at 669.

170. Id.

171. Ind. Code. § 36-2-1 l-15(b) (1988); Ind. Code § 36-2-11-16 (1988).



396 INDIANA LAW REVIEW [Vol. 22:369

two sections were enacted separately and that they have not been

subsequently considered as companion sections. The curative provision

of Section 16 predated the requirement of the preparer's name in
Section 15, and thus, it can not be argued that the curative provision

was drafted either to exclude or apply to the omission of the preparer's

name.^''^

Halliburton also argued that the only reason for the requirement

that the preparer's name be noted on the instrument was to guard
against the unauthorized practice of law, and thus Section 15 should

not be given the strict interpretation urged by the Appellee. The court

agreed, observing that the omission of the name of the preparer does
not affect the validity of the conveyance or encumbrance.'^^ All the

requirements necessary for a valid conveyance or encumbrance appear

on the face of the instrument and the noting of the preparer's name
"does not enhance the protection of any particular identifiable property

interest.
"''''* Also, the legislature failed to indicate the legal consequences

which should flow from a violation of the statute, which in the opinion

of the court suggested that *'[i]f the General Assembly intended to

strip a mortgagee of his rights as against a subsequent purchaser . . .

it chose to express that intention in a very guarded way."'^^ The court

then cited, Bown & Sons v. Honabarger,^^^ an Ohio Supreme Court
decision holding that the purpose of a nearly identical statute was to

prevent the unauthorized practice of law.'^"^ Since enactment of Section

15 "came on the heels of the Ohio statute," the court speculated that
Section 15 "may well have been based in substance and purpose on
the Ohio statute, "'^^ and that the deterrence of the unauthorized practice

of law "bears no relation to the legality of the conveyance or encum-

brance," and "should not invalidate the clear and undoubted notice

which record of the instrument imparts. "'"^^ Having reached this con-

clusion, the court answered the certified question in the affirmative,

that the recordation of an instrument not complying with the require-

ments of Section 15 imparts constructive notice to a subsequent pur-

chaser. '^°

One question left partially unanswered by the court is whether any
of the other statutory requirements for recording will be held to be

172. Sandy Ridge, 510 N.E.2d at 669-70.

173. Id. at 670.

174. Id.

175. Id. at 671.

176. 171 Ohio St. 247, 168 N.E.2d 880 (1960).
177. Id.

178. Sandy Ridge, 510 N.E.2d at 671.

179. Id.

180. Id.



1988] PROPERTY LAW 397

exempt from the general rule. The court did issue a caveat suggesting

that not all defects would be ignored:

We emphasize that the recording requirements which affect the
nature of the interest and the formalities of execution, if absent

from a recorded instrument, will not be excused so as to permit

the improper document to be afforded constructive notice. By

our decision today, we hold only that the omission of the
preparer's name, contrary to the requirements of Section 15,

does not operate to deprive a recorded document of the con-

structive notice to which it would otherwise be entitled. '^^

In a dissenting opinion, in which Justice Givens concurred. Justice

Pivarnik observed that the wording of the statute is clear and un-

ambiguous. A mortgage may be received for recordation only if the
name of the person who prepared the instrument is indicated at the
end of the document. It is presumptuous for the court to attempt to

determine the purpose of the legislation absent any ambiguity in the

statute. '^2

VIII. Rule Against Perpetuities

In Brown v. American Fletcher National Bank,^^^ testator's daughter
Zilpha, the income beneficiary of a testamentary trust, alleged that the

provision dividing the corpus of the trust among the testator's great-
grandchildren violated the rule against perpetuities.

The provisions of the trust required the trustee to pay the income

from the trust to Zilpha so long as she should live. Upon her death,
trustee was to divide the principal of the trust between three named
great-grandchildren (Guy Allen Brown, Danny Jay Brown, and Barry
Jon Brown) and any afterborn children of the marriage of Norman
S. Brown and Nancy Brown. There was also a provision for the issue
of any great-grandchildren not surviving. If any of the great-grand-

children were twenty-five years of age at Zilpha's death, the trustee

was to distribute to said great-grandchild his respective share. Until

each great-grandchild attained the age of twenty-five the trustee was

to *'pay the net income from the respective funds to said grandchild

as the Trustee may deem advisable to provide properly for his wel-
fare. "'^^

181. Id.

182. Id. at 671-73 (Pivarnik, J., dissenting).

183. 519 N.E.2d 166 (Ind. Ct. App. 1988).
184. Id. at 167.



398 INDIANA LAW REVIEW [Vol. 22:369

On appeal from a summary judgment upholding the trust, Zilpha
argued that her father's testamentary scheme violated the rule against

perpetuities because the interest of a great-grandchild might vest more
than twenty-one years after the death of the lives in being at the

testator's death. '^^ Zilpha relied on Merrill v. Wimmer,^^^ as authority

for her position. In Merrill, the provision of a testamentary trust

distributing the corpus to the testator's grandchildren when the youngest
grandchild reached the age of twenty-five was held to violate the rule

and the trust was declared void.^^^

The court observed that while the wording of the trust in Merrill

may at first appear similar, in fact, the two trusts are fundamentally
different. In Merrill the income from the trust was to be paid to the

children and the right to the principal of the trust did not vest in the

grandchildren until the youngest grandchild reached the age of twenty-

five, a period beyond the rule. In this case, upon the death of the
life tenant the trust is to be divided into individual shares and each

great-grandchild is to have an immediate right to the income from his

respective share and an absolute right to receive his respective share

of the corpus upon reaching the age of twenty-five. The immediate

right of a beneficiary to all or a part of the income from the corpus

of the trust is an indication that his interest in the corpus is vested. '^^

Zilpha's final argument dealt with the class gift problem and what

is known as the "all or nothing" rule. In order for a class gift to be
valid, the interest of each member of the class must vest within the
rule. If the interest of even one member of the class can vest beyond
the period of the rule, the entire gift fails. ^^^ Zilpha argued that since

great-grandchildren could be born more than twenty-one years after
the death of the lives in being at the creation of the interest the entire

interest failed. This argument at first appears valid, but, as the court

noted, the gift is to named great-grandchildren and the afterborn
children of the marriage of Norman and Nancy Brown. ^^^ Thus the
wording of the trust limits the class of beneficiaries to a group of

great-grandchildren that are alive (named) or who will be determined
within the lifetime of Norman and Nancy Brown (lives in being). In

185. The rule requires that an interest "must vest, if at all, no later than twenty-

one (21) years after a life or lives in being at the creation of the interest." Ind. Code

§ 32-1-4-1 (1988).

186. 481 N.E.2d 1294 (Ind. 1985).

187. Id.

188. Brown, 519 N.E.2d at 168; see also L, Simes, The Law^ of Future Interests

§ 93, at 192-93 (2d ed. 1966).

189. L. Simes, supra note 188, at § 134, at 289-92.

190. Brown, 519 N.E.2d at 169.



1988] PROPERTY LAW 399

addition, as the trustee argued, the trust is to be divided into shares

at the death of Zilpha and thus, under the "rule of convenience," the

class will close when it becomes reasonably necessary to do so.'^' The

court observed that in either situation, Zilpha' s death, as the trustee

argues, or the death of Norman or Nancy Brown after which time no
new members can be born, the class will close and the interests will

vest within the rule.'^^ The judgment of the trial court was affirmed.

IX. Vendor-Purchaser

In Baker v. Townsend,^^^ a contract for sale with a condition

precedent, the Townsends agreed to purchase a lot in Howard County
from the Bakers

*

'contingent upon obtaining a permit from the Health

Department for the building of a house, well, and septic tank."^^"^ This

provision was inserted into the real estate contract because, without a

subsurface tile drain across land owned by others, the real estate could
not be approved for a subdivision lot on which either a septic system

or a house could be built. '^^ While the wording of the contract made
it contingent upon obtaining a permit from the County Health De-
partment for the building of a house, well, and septic system, it was

later determined that the permit to build a house is issued by the

Howard County Plan Commission, although the permit cannot be issued
unless the County Health Department first issues a permit for a septic

system. Therefore, the court construed the contract as being contingent

only upon the obtaining of a well and septic permit from the Howard
County Board of Health, which would then make it possible to obtain
the building permit. ^^ No permit was ever obtained and the Townsends
brought this action to rescind the contract based on fraud and failure

of a condition precedent. The Bakers counterclaimed for the balance
due under the contract. The trial court entered judgment for the
Townsends rescinding the contract and returning them to the status

On appeal, the Bakers argued the contract created an implied duty
on the part of the Townsends to make a reasonable and good faith

191

.

T. Bergin & P. Haskell, Preface to Estates in Land and Future Interests
141-42 (2d ed. 1984).

192. Brown, 519 N.E.2d at 169. The court concluded that it was unnecessary to
decide between the two interpretations as when the class will close but, if at Zilpha's
death any of the grandchildren is then twenty-five years of age, the trustee will be

forced to close the class in order to determine the amount to distribute. Id.
193. 519 N.E.2d 192 (Ind. Ct. App. 1988).
194. Id. at 193-94.

195. Id. at 193.

196. Id. at 194.

197. Id.



400 INDIANA LAW REVIEW [Vol. 22:369

effort to obtain such permits, citing Billman v. Hensely^^^ which found

such an implied obligation on the part of the buyer under a clause

making the contract conditioned upon the ability of the purchasers to
secure a conventional mortgage for not less than $35,000 within thirty

days. The court disagreed, pointing out that in Billman the financing

clause was based upon the buyer's "ability" to acquire the loan. The
condition in Billman created a covenant requiring the buyer to act;

whereas in Baker the condition was silent as to the duty of either party

to act.^^^ The court also rejected the Bakers' argument that the Town-
sends should have been required to obtain the permits because of their

"unique knowledge" concerning the proposed residence, pointing out

that a similar argument could be made with regard to the Bakers
because, as prior owners, their familiarity with the neighborhood placed

them in a better position to approach the neighboring landowners to
obtain the required easements. ^°^ Since the permits were not obtained

within a reasonable time, either party had the right to rescind the

contract and be returned to the status quo?^^ The judgment of the
trial court was affirmed.

198. 181 Ind. App. 272, 391 N.E.2d 671 (1979).

199. Baker, 519 N.E.2d at 195.

200. Id. at 195 n.l.

201. Id. at 195. The contract was executed on March 26, 1983, id. at 193, and
the trial court found the reasonable time in which to fulfill the condition to have been

the period prior to February 24, 1984. Id. at 195 n.2.