Indiana Law Review


Recent Developments in Property Law

Walter W. Krieger*

I. Adverse Possession

A. Background

To defeat the title of an owner of record, an adverse claimant's
possession must be actual, visible, notorious, exclusive, under a claim

of ownership, hostile to the true owner, and continuous for the ten-

year statutory period.' Additionally, Indiana Code section 32-1-20-1

requires that the adverse claimant pay all taxes and special assessments

on the land during the statutory period of his adverse possession.^

B. Hostile and Under Claim of Right

In Estate of Mark v. H.H. Smith Co.,^ two brothers, Jeffrey and
Martin Mark, formed a partnership, H.H. Smith Company, to sell
barber and beauty shop equipment. In 1956, Martin purchased the real

estate at issue. The same year, H.H. Smith moved into the building
located on the property and Jeffrey, the sole acting partner, had the
locks changed. Martin was not given a key. Jeffrey has been in pos-

session of the building since 1957 and has made significant improve-
ments. Title to the real estate was still in Martin's name at the time
of his death in 1983. H.H. Smith and Jeffrey Mark brought this action
to determine the interest of Martin Mark's estate in the property and

the improvements. After a trial, the court ruled that the estate had

* Associate Professor of Law, Indiana University School of Law-Indianapolis. A.B.,

Bellarmine College, 1959; J.D., University of Louisville, 1962; LL.M., George Washington

University, 1969.

1. Estate of Mark v. H.H. Smith Co., 547 N.E.2d 796, 799 (Ind. 1989); Smith v.
Brown, 126 Ind. App. 545, 552, 134 N.E.2d 823, 826 (1956). The Indiana courts frequently

vary the wording slightly in describing the elements of adverse possession. See, e.g., McCarty

V. Sheets, 423 N.E.2d 297, 300 (Ind. 1981) (open, continuous, exclusive, adverse, and notorious);

Worthley v. Burbank, 146 Ind. 534, 539, 45 N.E. 779, 781 (1897) (hostile and under claim

of right, actual, open and notorious, exclusive and continuous).

2. Ind. Code § 32-1-20-1 (1988). In boundary line disputes, however, Indiana courts
have held that the statutory requirement that the claimant pay taxes is inapplicable because

both parties believe they are paying taxes on the disputed portion. See, e.g., Echerling v.

Kalvatis, 235 Ind. 141, 146, 126 N.E.2d 573, 575 (1955); Kline v. Kramer, 179 Ind. App.

592, 386 N.E.2d 982 (1979).

3. 547 N.E.2d 796 (Ind. 1989).



1066 INDIANA LAW REVIEW [Vol. 24:1065

no interest in the property and that Jeffrey had acquired title by adverse

possession/ The court of appeals affirmed the judgment, holding that
the trial court's findings of fact were sufficient to establish that Jeffrey's

possession was hostile and exclusive.^

On petition to transfer, the Indiana Supreme Court observed that
record title is the highest evidence of ownership, and that mere pos-

session, regardless of the length of time, will not defeat the title. ^ In

order for possession to defeat record title, a plaintiff must prove every

element of adverse possession.^

In discussing the requirement that adverse possession must be hostile

and under a claim of ownership the court remarked:

Possession must be accompanied by a claim of ownership ad-

verse to the true owner. It is not enough that the occupier

feels or thinks he is the owner or even declares he is the owner.

His claim of ownership must be based on some groundjustifying
that conclusion and it must be communicated to the true owner

that the occupier makes such a claim that is adverse or hostile

to his ownership.*

The court also indicated that the possession must be of such a
nature that a reasonable owner would be aware that a claim is being

made against his title. **It must be proven that adverse possession,
that is, possession with a claim of ownership exclusive of everyone

including the true owner is open and notorious to the extent that the

true owner is, or should be aware of it."^ When the entry upon the

4. Id. at 797-98.

5. Id. at 799.

6. Id. at 800. Indiana courts have often remarked that "record title is the highest

form of ownership," whereas "mere possession is the lowest evidence of ownership." McCarty

V. Sheets, 423 N.E.2d 297, 300 (Ind. 1981); Carter v. Malone, 545 N.E.2d 5, 6 (Ind. Ct.

App. 1989); Philbin v. Carr, 75 Ind. App. 560, 582, 129 N.E. 19, 27 (1920).

7. Estate of Mark, 547 N.E.2d at 799-800.

8. Id. at 800 (emphasis added). This language appears to require that the claimant's

possession be based on a good faith belief that he or she is the owner of the land. Most

Indiana decisions have not inquired as to the claimant's state of mind and several decisions

have concluded that the terms "under claim of right" or "under claim of ownership" mean

only that the possession must be hostile or adverse and do not create an additional element

of adverse possession. Poole v. Corwin, 447 N.E.2d 1150, 1152 n.l (Ind. Ct. App. 1983);

Kline v. Kramer, 179 Ind. App. 592, 599, 386 N.E.2d 982, 988 (1979). The few cases addressing

the issue of good faith are not in agreement. Compare Pennington v. Flock, 93 Ind. 378,
382-83 (1883) (in making his entry upon the land the claimant must act bona fide, believing

that the land is his and that he has title) with May v. Dobbins, 166 Ind. 331, 333, 77 N.E.
353, 354 (1905) (title by adverse possession is predicated upon the statute of limitations without

reference to the good or bad faith of the adverse claimant; good faith may accord with
good morals but it is not the law).

9. Estate of Mark, 547 N.E.2d at 800.



1991] PROPERTY LAW 1067

land is permissive and subordinate to the title of the record owner,

the statutory period does not begin to run until the occupant clearly

and unequivocally disclaims and disavows the title of the true owner. '°

The supreme court disagreed with the court of appeals and found

that the trial court's findings of fact were not sufficient to establish

that Jeffrey's possession was hostile and exclusive. Instead, the court

found that the findings of the trial court were both contradictory and

in conflict with the evidence. •' In Finding 4, the trial court found that

the insurance, taxes, and depreciation on the building were taken as

expenses and deductions on the partnership tax returns, while in Find-

ings 13 and 14 the trial court indicated that Jeffrey had insured the

building since 1956 and had paid all taxes since 1970.'^ The trial court's
Finding 10 stated that the partnership tax returns reflected a 100<7o

ownership of H.H. Smith by Jeffrey.'^ However, the returns actually
reflected that Martin and Jeffrey were still partners, but that Jeffrey

was entitled to 100<7o of the profits."* Finding 12 stated that after the

locks were changed, Martin never possessed a key and **thereby was

denied access to the building."'^ In the court's opinion this conclusion

was unwarranted.'^ The evidence simply indicated that the locks were
changed because there was a problem with the locks, and that after

they were changed Jeffrey did not give Martin a key. No evidence
suggested that the locks were changed with an intent to exclude Martin

or that Jeffrey's occupancy had changed from permissive to adverse. '^

Furthermore, the supreme court found no evidence to support the

conclusion in Finding 16 that Jeffrey considered himself the owner of

the building. Instead, Jeffrey testified that he never told his brother

that he was the owner of the property or that he was making a claim

to the title.'* Jeffrey admitted that his possession in 1956 was permissive.

10. Id. (citing Poole v. Corwin, 447 N.E.2d 1150 (Ind. Ct. App. 1983)).

11. Id.

12. Id.

13. Id.

14. Id. at 800-01. Although the court did not believe the fact that Jeffrey was entitled

to 100% of the profits prevented the existence of a partnership, numerous cases have held

that the sharing of profits and losses is an essential element of a partnership. E.g., Watson

V. Watson, 331 Ind. 893, 108 N.E.2d 893 (1952) (a partnership is a community of interests

in both the property and profits of a common business); Kopka v. Yockey, 76 Ind. App.
218, 131 N.E. 828 (1921) (the ultimate test of a partnership is the co-ownership of the profits

of a business); Breinig v. Sparrow, 39 Ind. App. 455, 80 N.E. 37 (1907) (a partnership is

the sharing, as common owners, of the profits of a business).
15. Estate of Mark, 547 N.E.2d at 801.

16. Id.

17. Id.

18. Id.



1068 INDIANA LAW REVIEW [Vol. 24:1065

and he attempted to introduce evidence that he was purchasing the

building from Martin under an oral contract; however, the trial court

excluded this testimony under the Dead Man's Statute.'^
The opinion of the court of appeals was vacated, and the judgment

of the trial court reversed with directions to enter judgment for the

estate.
^^

C. Exclusive

In Marathon Petroleum Co. v. Colonial Motel Properties, Inc.y^^

the Colonial Corporation conveyed a .867 acre tract of land to Marathon

Petroleum Company's predecessor, the Ohio Oil Company. Six years
later, in 1968, the Colonial Corporation conveyed an adjacent 7.746

acre tract to the Perrys, who then operated a motel on the property.
In 1977, the Perrys transferred the title to the property to their newly

formed corporation, United Family Properties, Inc., and in 1986, the

Perrys formed Colonial Motel Properties, Inc. (Colonial), which ac-

quired the title to the property from United.^^

At the time the Perrys purchased the land, they decided to expand

their motel business by appealing to trailer truck drivers. To accom-
modate the trucks, the Perrys constructed a parking lot on the southern

portion of their property, by filling a .27 acre portion of Marathon's

property (the disputed area) with rock and dirt. A sign, visible from
the Marathon property, read: *Tree Parking for Colonial Inn Motel

Guests Only. All Others $20.00 per night. Violators impounded at
owner's expense! All vehicles must register. "^^

The Perrys employed a security guard to protect the trucks and
to insure that all trucks were properly registered. On occasion, truck
drivers using a nearby motel would park in the lot, and when it was
discovered that they were not registered they were asked to leave. ^^^

In April 1986, the Perry's attorney wrote a letter to Marathon

stating that Colonial was not claiming title to the disputed area and

wished to continue the use of the land with Marathon's permission."

In September 1987, Marathon initiated an action to quiet title to the

disputed area and for ejectment. The court denied Marathon's motions

19. Id.

20. Id. at 802.

21. 550 N.E.2d 778 (Ind. Ct. App. 1990)

22. Id. at 780.

23. Id.

24. Id.

25. Id.



1991] PROPERTY LAW 1069

for a summary judgment and directed verdict. ^^ The jury found in
favor of Colonial and Marathon appealed. ^^

On appeal, Marathon argued that its motion for summary judgment
should have been granted because the use of the disputed area by

Colonial customers was insufficient as a matter of law to establish

title by adverse possession. As authority for its position, Marathon

cited Greenco, Inc. v. May.^^ In Greenco, customers of May's restau-

rant, located adjacent to the Greenco parking lot, and members of the

general public had used the lot for parking for more than thirty years.

May leveled and graded the lot but did not claim an exclusive right
for her customers to park in the lot. The court in Greenco found that

routine and regular use by members of the general public cannot create

a prescriptive easement.^^ In distinguishing Greenco, the court of appeals

noted that neither May nor the prior owners of the restaurant had
ever claimed an exclusive right to use the lot, and that Greenco cus-

tomers and members of the general public also used the lot.^° On the
other hand. Colonial claimed an exclusive right to use the lot and

posted signs indicating the parking lot was for use by its customers

only.^' In addition, it employed a security guard to ensure that all

trucks using the lot were registered. These acts of ownership clearly

distinguished this case from Greenco .^^ Thus, the trial court properly

refused to give Marathon's tendered instruction that *'[m]embers of

the general public cannot, by routine and regular use, confer adverse

possession rights on Colonial.""

Marathon also claimed that the standard of proof required to
demonstrate title by adverse possession is higher when a grantor or
one in privity with a grantor claims title by adverse possession against

a grantee. The court acknowledged the general rule that when a grantor
or one in privity with a grantor remains in possession of land, the

law will presume it is with the grantee's permission. ^"^ But, the court

noted that in this case the deeds from the Colonial Corporation did

not convey the same tract of land to Marathon and the Perrys. In

26. Id.

27. Id.

28. Id. at 782 (citing Greenco Inc. v. May, 506 N.E.2d 42 (Ind. Ct. App. 1987)).

29. Although Greenco involved a prescriptive easement, the court found that the

elements required to establish a prescriptive easement are essentially the same as those needed

to estabhsh adverse possession. Marathon, 550 N.E.2d at 782 n.2.

30. Id.

31. Id.

32. Id.

33. Id. at 784.

34. Id. at 782-83.



1070 INDIANA LAW REVIEW [Vol. 24:1065

fact, the Perrys' deed explicitly excluded from the conveyance the .867

acre tract previously conveyed to Marathon. ^^

Finally, Marathon contended that the letter written by the Perrys'

attorney, admitting that the use of the property was with Marathon's

permission, estopped the Perrys' adverse possession claim. In rejecting

this argument, the court noted that once the Perrys had satisfied the

elements of adverse possession for the statutory period, title to the

disputed tract vested in them by operation of law, and any subsequent

admission or offer to purchase the land from the record owner could

not divest them of the title. ^^

The court concluded that Colonial had presented sufficient evidence

of adverse use for the statutory period to submit the case to the jury

and that the trial court had properly denied Marathon's motions for

summary judgment and for a directed verdict. ^^

D. Periodic or Sporadic Acts of Ownership:

Requirement of Established Use Line

In Beaver v. VandalIy^^ William and Darlene Beaver owned a five-
acre tract of land. In February 1974, they sold a house and a lot to

John and Elaine Vandall (the Vandalls). After the sale, the Vandalls

asked William Beaver to clear the strip along the northern boundary

of their lot. Beaver claimed he cleared the trees and brush some distance
beyond the northern boundary of the lot to make the boundary line
clear to both parties. The Vandalls contended that by clearing the area
beyond the boundary line in the deed he indicated an intent for them

to have the entire area cleared. ^^

John Vandall leveled and seeded the cleared area. He also replaced
a propane gas tank located on the disputed area and built a fence

around it. Later, after natural gas service was provided to the house,

the tank was removed, and in the summer of 1977, Vandall built a
small utility shed on the site where the tank had stood. The parties
did not consider the propane gas tank nor the utility shed to be

permanent improvements. Evidence existed that at one time, a fence

35. Id.

36. Id. at 783 (citing Kline v. Kramer, 179 Ind. App. 592, 597, 386 N.E.2d 982, 987

(1979)). There was conflicting evidence as to whether the attorney in fact had either actual

or implied authority to write the letter, but the court found this issue was not dispositive

because once title had vested in the occupant at the conclusion of the statutory period for

adverse possession, title could not be lost by an admission or an offer to buy the property.

Marathon, 550 N.E.2d at 783 n.4.

37. Id. at 783-84.

38. 547 N.E.2d 802 (Ind. 1989).

39. Id. at 802-03.



1991] PROPERTY LAW 1071

on the Vandalls' property encroached upon the disputed area but it

did not extend to or from the northern boundary of the disputed area/°

The Beavers testified that between 1979 and 1981, they noticed the

Vandalls were encroaching further and further onto their property. A
survey conducted by the Beavers located the northern boundary of the

Vandalls' lot, and stakes were placed evidencing the boundaries. The

stakes were subsequently removed. In 1985, the Beavers brought an

action to quiet title to the disputed area.'*^ The trial court found that

the Vandalls had acquired title to the disputed strip by adverse pos-

session."*^ The court of appeals affirmed. "^^ However, in a dissenting

opinion, Judge Hoffman concluded that plowing, grading, seeding,
mowing, fertilizing, planting a small tree, and placing a water meter

in the disputed area was not sufficient to establish adverse possession. "*"*

No fence was ever built or maintained on the disputed area, no per-
manent structures were erected, and no temporary structure existed on

the disputed area for the required ten-year period. "^^

The Indiana Supreme Court granted transfer and indicated its

agreement with Judge Hoffman's dissent."*^ The court cited McCarty
V. Sheets^"^ and Greene v. Jones^^ as authority for the position that

casual maintenance activities in a residential area, standing alone, are

insufficient to support a claim of adverse possession.

The court was concerned that sporadic and casual acts of possession

might fail to inform the record owner that a claim was being made:
* 'Where there has been no actual notice, the possession must have

been so notorious as to warrant the inference that the owner ought

to have known that a stranger was asserting dominion over his land.""*^
The Beavers admitted that in 1979 they became aware that an adverse

claim was being made, but that because this action was brought in

40. Id. at 803.

41. Id.

42. Id. at 802.

43. Beaver v. Vandall, 532 N.E.2d 627 (Ind. Ct. App. 1988) (unpublished opinion).

44. Beaver, 547 N.E.2d at 803.

45. Id.

46. Id.

47. 423 N.E.2d 297 (Ind. 1981). In McCarty, a unanimous court concluded that

mowing, weeding, and fertilizing a strip of land was not sufficient to establish title by adverse

possession and that only the area actually encroached upon by a garage had been acquired

by adverse possession. Id. at 300. To adversely establish possession, a plaintiff must show
"palpable and continuing" acts of ownership claimed for the statutory period. Id.

48. 490 N.E.2d 776 (Ind. Ct. App. 1986). In Greene, the court of appeals held that

casual maintenance involving maintenance tasks are not sufficient to establish title by adverse

possession. Id. at 779.

49. Beaver, 547 N.E.2d at 804 (citing Philbin v. Carr, 75 Ind. App. 560, 584-85, 129

N.E. 19, 28 (1920)).



1072 INDIANA LAW REVIEW [Vol. 24:1065

1985, it was well within the statutory ten-year period for the recovery

of possession of property. The case was remanded with directions that

the trial court enter judgment for the Beavers. ^^

The question of sporadic acts of ownership was also presented in

Carter v. Malone.^^ In 1971, the Malones built a garage that encroached

1.2 feet onto an adjoining vacant lot. In 1981, the Carters purchased

the adjoining vacant lot. Before surveying their lot in 1984, the Carters

offered to purchase a four foot strip of the disputed area from the

Malones. In refusing the Carters' offer to purchase, Edward Malone
stated, *'No, because we own out to the hedges and we have been
taking care of *em."" The subsequent survey revealed the encroachment
of the Malones' garage and that the Malones' house was less than

four feet from their property line."

In 1987, the Malones filed a complaint for adverse possession of

a seven-foot-wide strip of property on the Carters' lot.^'* The evidence
showed a row of trees and bushes existed on the Carters' lot and that

since 1970 the Malones had trimmed the trees and hedges and mowed
the grass around the trees. The trial court awarded the Malones title
to the mid-line of the tree and hedge row, concluding that there were

sufficient acts of adverse possession in the disputed area since 1970.^^

The trial court also indicated that the plaintiffs' claim was substantiated

by the Carters' offer to purchase a portion of the disputed area and

by the encroachment of the Malones' garage. ^^

On appeal the court observed that the adverse possessor's claim
must be limited to that portion over which he exercises palpable and

continuing acts of ownership.^'' The court rehed on McCarty. In McCarty^

the court remarked that ** where the quantity of land involved is small,

the rule as to the location of the line is exacting; possession to the

line during all the (statutory) period must be definitely shown. "'^

Here, the court found that the activities in the disputed area were

not sufficient to establish adverse possession:

The Malones' claim to the strip of land was based on sporadic

acts of maintenance and a verbal response to the Carters'

50. Id. at 805.

51. 545 N.E.2d 5 (Ind. Ct. App. 1989).

52. Id. at 7.

53. Id. at 6-7.

54. Id. at 6.

55. Id.

56. Id.

57. Id

58. McCarty, 423 N.E.2d at 300 (citing Baxter v. Girard Trust Co., 288 Pa 256, 260,
135 A. 620, 621 (1927)).



1991] PROPERTY LAW 1073

mistaken offer to purchase. Periodic acts of yard-work and a

verbal claim in response to a mistaken offer to purchase do

not establish palpable, continuing or exacting acts of ownership

sufficient to constitute adverse possession. ^^

The Malones argued that the row of trees and bushes established

a possession or use line that supported their claim of open and con-

tinuous use of the disputed strip. The court acknowledged that a
possession or a use line is a factor in determining adverse possession,^

citing Oswald v. Paston.^^ In Oswald, a surveyor testified that he

noticed a use line and that there was evidence that the adverse possessor

had mowed, fertilized, and planted flowers and a tree in the disputed
strip. In addition, in Oswald the adverse possessor had trucks drive

onto the disputed area to deliver fill dirt, maintained a seawall in the

disputed area, and ordered a worker for the record titleholder off the

disputed land. The court in Carter went to some length to distinguish
Oswald:

In contrast, the Malones did not have a surveyor testify that

a use or possession line existed. The row of trees and bushes
grew wild, were noncontinuous and had gaps where people

could walk back and forth. When the Carters cut down trees,
planted grass, trimmed bushes, built a partial fence and cement

stoop in the disputed area the Malones did not protest. ^^

The Indiana Supreme Court reversed the trial court and held that
there was sufficient evidence of adverse possession of the area occupied

by the garage, but that the trial court erred in awarding the Malones

more land than was actually occupied by the garage.^^

II. Concurrent Estates

In Indiana, a conveyance of real property to a husband and wife,

without indication of a contrary intent, creates a tenancy by the en-

tirety.^ A tenancy by the entirety, unlike a joint tenancy or a tenancy
in common, is owned by a husband and wife as one (pur tout et non
pur my) and neither spouse has an individual interest in the property

59. Carter, 545 N.E.2d at 7.

60. Id.

61. 509 N.E.2d 217. 220 (Ind. Ct. App. 1987). .

62. Carter, 545 N.E.2d at 7.

63. Id.

64. See Dotson v. Faulkenburg, 186 Ind. 417, 116 N.E. 577 (1917); Arnold v. Arnold,

30 Ind. 305 (1868); Richards v. Richards, 60 Ind. App. 34, 110 N.E. 103 (1915).



1074 INDIANA LAW REVIEW [Vol. 24:1065

that a creditor of only one of the spouses may attach.^^ In general,
Indiana does not recognize tenancy by the entirety as to personalty,^^

but Indiana has made an exception with the proceeds from the sale
of land held by the entirety.^^ During this survey period, two cases

touched upon the nature of the tenancy by the entirety. In In re

Guardianship of Bramblett,^^ the court held that the surviving spouse

was entitled to the proceeds from the sale of entirety property sold

by court order; and in Rhodes v. Indiana National Bank,^^ the court

held that a creditor of the husband could reach one-half the rental

income received from property held by the entirety.

Prior to enactment of the multiple-party account statute, ^° survi-

vorship rights in joint bank accounts were complicated by the law of

gifts. Often the circumstances suggested that the person placing the

property into a joint account intended only to part with dominion and

control of the property at death and failed to meet the requirement

of present transfer necessary to establish an inter vivos gift.^' Although

this problem has been eliminated in multiple-party bank accounts by

the statute, which creates a contractual right of survivorship, the prob-

lem may still arise in other types of jointly owned property. In In re
Estate of Langley,^^ the Indiana Court of Appeals, using a contractual

theory, found a right of survivorship in the contents of a jointly owned
safe deposit box.

A. Proceeds From Sale of Entirety Property Sold
Under Court Order in Guardianship Proceeding

In In re Guardianship of Bramblett,^^ James and Mary Bramblett
owned real estate in tenancy by the entirety. In 1988, James's health
began to fail and before he entered a nursing home in the spring of
that year, James and Mary signed a listing agreement to sell their real

65. See Patton v. Rankin, 68 Ind. 245 (1879); Mercer v. Coomler, 32 Ind. App. 533,

69 N.E. 202 (1903).

66. See Koehring v. Bowman, 194 Ind. 433, 142 N.E. 117 (1924); Schoon v. Van

Diest Supply Co., 511 N.E.2d 12 (Ind. Ct. App. 1987).

67. See Whitlock v. Public Service Co., 239 Ind. 680, 159 N.E.2d 280 (1959), reh'g

denied, 239 Ind. 694, 161 N.E.2d 169 (1959); Abshire v. State, 53 Ind. 64 (1876); Anuszkiewicz

V. Anuszkiewicz, 172 Ind. App. 279, 360 N.E.2d 230 (1977).

68. 549 N.E.2d 56 (Ind. Ct. App. 1990).

69. 544 N.E.2d 179 (Ind. Ct. App. 1989).

70. Ind. Code §§ 32-4-1.5-1 to -15 (1988).
71. Poland, 1975 Indiana Survey of Trusts and Decedents' Estates, 10 Ind. L. Rev.

392, 399-400 (1976).

72. 546 N.E.2d 1287 (Ind. Ct. App. 1989).

73. 549 N.E.2d 56 (Ind. Ct. App. 1990).



1991] PROPERTY LAW 1075

estate.^'' In May 1988, Mary was appointed guardian of the person and
estate of James, and she petitioned the court for permission to complete

the sale of the real estate. The court approved the sale and, upon the

filing of a *Tetition to Withhold and Disburse Funds" by Mary, the

court directed that the proceeds of the sale be distributed to Mary in
her individual capacity as the spouse of the ward, subject to monthly

disbursements to the guardianship account for James's care and main-

tenance.^^ James died intestate one month later, survived by Mary and
three children from a prior marriage. One of the children, Mark, was
appointed administrator of the estate. Mary filed a guardian's final
report and a petition to terminate the guardianship. The court approved

the final accounting and terminated the guardianship ex parteP^ No
formal notice was given to Mark or the other children. On petition
by the children to reconsider its order approving the final report, the

court vacated its order and directed that the proceeds from the sale

of the real estate be allocated one-half to the guardianship estate and

one-half to Mary.^'' The court specifically held that the proceeds from

the sale of the entirety property were not imprinted with the same

right of survivorship as was the real estate itself.''*

On appeal, the Indiana Court of Appeals observed that in Whitlock
V. Public Service Company of Indiana^^ the Indiana Supreme Court
held that '* Indiana law impresses the proceeds from property held by

the entireties with the rights of survivorship, the same as the original

property from which it came."*^ Whitlock indicated, however, that the

proceeds will be considered held by the entirety

only so long as the proceeds are intact and have not been

divided or disbursed. Once the proceeds have lost their identity

as a separate res held by the entireties, certainly the principles

of tenancy by entireties can no longer apply, any more than
they can apply to the real estate which has been sold or

transferred.**

The children argued*^ that one-half of the proceeds should be

74. Id. at 57.

75. Id. at 57-58.

76. Id. at 58.

77. Id.

78. Id.

79. 239 Ind. 680, 159 N.E.2cl 280 (1959).

80. Bramblett, 549 N.E.2d at 59 (quoting Whitlock, 239 Ind. at 690, 159 N.E.2d at

285).

81. Whitlock, 239 Ind. at 691, 159 N.E.2d at 285.

82. The children cited Anuszkiewicz v. Anuszkiewicz, 172 Ind. App. 279, 360 N.E.2d



1076 INDIANA LAW REVIEW [Vol. 24:1065

allocated to James's estate. ^^ In reversing the trial court, the court held

that the children were not entitled to one-half of the proceeds because

Mary had kept the funds intact for the care and maintenance of James
and herself.^"^ Thus, Mary was entitled to all of the proceeds. ^^

B. Rental Income From Entirety Property: Creditors* Rights

In Rhodes v. Indiana National Bank,^^ Harold and Betty Rhodes
owned rental property as tenants by the entirety. A judgment creditor
of the husband sought to garnish his half of the rental income due

both spouses from the tenancy by the entirety real estate. The trial
court held that one-half of the rent could be attached for the individual

debt of the husband.^''

On appeal, the Rhodeses argued that the rent retained the char-
acteristic of the entirety property and could not be attached by a

creditor of only one of the spouses. The Court of Appeals, however,
refused to extend the entirety exemption to rental income from the

real property. ^^ The court recognized:

Estates by entireties do not exist as to personal property except

when such property is directly derived from real estate held
by that title, as crops produced by the cultivation of lands

owned by the entireties or proceeds arising from the sale of
property [i.e., real estate] so held.^^

The court also noted that the recent decision of Schoon v. Van

Diest Supply Co.,^^ held that proceeds from the sale of crops grown

on entirety real estate were not protected from the claims of a creditor

of one of the spouses.^' In affirming the lower court, the Rhodes court
concluded that profits derived from the ownership of entirety property

are subject to the claims of a creditor of either spouse.^^

230 (1977), to support their position. In Anuszkiewicz, the husband deposited one-half of

the proceeds from the sale of the entirety property into a joint account with his son. The

court held that this action changed the character of the proceed from entirety property to

personalty and that, at her husband's death, the wife was not entitled to the one-half of the

proceeds in the joint account. Id. at 283, 360 N.E.2d at 233.

83. Bramblett, 549 N.E.2d at 59-60.

84. Id. at 60.

85. Id.

86. 544 N.E.2d 179 (Ind. Ct. App. 1989).

87. Id. at 180.

88. Id.

89. Id. (quoting Koehring v. Bowman, 194 Ind. 433, 437, 142 N.E. 117, 118 (1924)).
90. 511 N.E.2d 12 (Ind. Ct. App. 1987).

91. Rhodes, 544 N.E.2d at 180.

92. Id.



1991] PROPERTY LAW 1077

C. Joint Rental of Safe-Deposit Box:

Right of Survivorship

In In re Estate of Langley,^^ Cecilia Highman, the surviving co-

lessee of a safe deposit box sued the estate of the deceased co-lessee,

Bessie Langley, to recover the contents of the box at the time of

Langley's death. In 1974, Highman and Langley, who had been friends
for nearly forty years, jointly rented a safe deposit box at a bank.

Both parties signed a contract that contained the following language:

[S]aid Safe and its contents during their joint lives shall be

held and owned by them jointly and severally, and either of
them without the other may have access to, and may surrender
said Safe, and upon the death of either, the Safe, its entire

contents, and all right of access thereto, shall belong exclusively

to the survivor or survivorsJ^^

Langley entered the box nineteen times before her death in 1986.

She placed various items in the box including abstracts, deeds, and

$7,500 in cash. Highman entered the box only twice during Langley's
lifetime, once when the box was originally opened and once when she
placed $2,500 in the box. Langley died on October 26, 1988, and Sherry

Schafer, the personal representative of Langley' s estate, obtained a

restraining order against Highman, preventing her from removing the

contents of the safe deposit box. Highman filed a motion to compel
Schafer to surrender the funds, but the trial court held that Highman
was entitled only to $2,500 and that the estate was entitled to the

other items in the box.^^

On appeal, Highman claimed the right to the contents of the box
under a contractual theory, although prior Indiana decisions had used

a gift theory to decide the right of a surviving co-lessee to the contents

of a safe deposit box. Finding no Indiana decisions addressing a

contractual theory of survivorship rights, the Indiana Court of Appeals

turned to authority from other jurisdictions. The court observed that
the majority of jurisdictions has held that a joint lease of a safe deposit

box does not create a per se right of survivorship in the contents of

the box unless the lease agreement contains specific language indicating

joint tenancy or right of survivorship.^^ Here, the parties signed a lease

agreement specifically stating that the safe and its entire contents shall

93. 546 N.E.2d 1287 (Ind. Ct. App. 1989).

94. Id. at 1288 (emphasis added).

95. Id. at 1288-89.

%. Id. (citing Annotation, Survivor's Rights to Contents of Safe-Deposit Box Leased
or Used Jointly with Another, 14 A.L.R.2D 948, 954 (1950)).



1078 INDIANA LAW REVIEW [Vol. 24:1065

belong to the survivor. The court found that the agreement sufficiently

established intent to create a joint tenancy with right of survivorship,

and thus passed the contents of the safe to Highman at Langley's
death.^^

III. Covenants of Title

In McClaskey v. Bumb & Mueller Farms, Inc.,^^ the Hudsons
conveyed a tract of land to McClaskey by warranty deed. The State
of Indiana had acquired a 125-foot highway easement over the tract

of land. Subsequently, as part of a project to make U.S. 41 a limited
access highway, the State began proceedings to condemn the portion
of McClaskey's real estate that abutted U.S. 41, excluding the easement.

Upon discovery of the exclusion of the easement, McClaskey cross-
claimed against the Hudsons for breach of their warranty of title in

the deed. Both parties moved for summary judgment, and the trial
court granted the Hudsons' motion.^^ McClaskey appealed. '°*^

In an unusual argument, the Hudsons contended they had not

breached their warranty of title because they had produced a
*

'mar-

ketable record title" under the Indiana Marketable Title Act.^^' The

Act provides as follows:

Any person who has an unbroken chain of title of record to
any interest in land for fifty [50] years or more shall be deemed

to have a marketable record title to such interest as defined

in section 8 [32-1-5-8], subject only to the matters stated in

section 2 [32-1-5-2] hereof. '"""^

Even a cursory glance at the interests exempted by Indiana Code
section 32-1-5-2 from the operation of the Marketable Title Act indicates

that a "marketable record title" is not the equivalent of a
*

'marketable

title" guaranteed by a warranty deed. The ability to trace an unbroken

chain of title back to a title transaction at least fifty years old does

97. Langley, 546 N.E.2d at 1290. One unanticipated problem that might arise from

this decision is when a husband and wife place their separately owned property in a jointly

owned safe deposit box. The individual property of each might be intended for inclusion in

a by-pass or shelter trust but, under the ruling in this case, it would pass to the surviving

spouse under the contract unless a different intent could be established.

98. 547 N.E.2d 302 (Ind. Ct. App. 1989).

99. Id. at 303.

100. Id.

101. Id. at 304 (citing Ind. Code §§ 32-1-5-1 to -10 (1988)).
102. iND. Code § 32-1-5-1 (1988) (emphasis added).



1991] PROPERTY LAW 1079

not insure that the title is free and clear of all claims and interests. '^^

In order to harmonize the Marketable Title Act with the warranties

contained in the statutory form warranty deed,'°^ the court concluded

that "the Marketable Title Act relieves the covenants imposed by a

warranty deed only to the extent that a claim or interest is extinguished

by the Marketable Title Act.'''^^

Finally, the Hudsons claimed that because U.S. 41 was in existence

at the time of the conveyance, McClaskey had an obligation to make
a reasonable inquiry concerning the extent of the easement before he

purchased the property. '°^ The court did not directly address the issue

of inquiry notice, but instead observed that "McClaskey did not have

actual knowledge of the easement and the existence of the easement

was not disclosed in his abstract of title. "'^'^ Even if McClaskey was

charged with inquiry notice of the easement, Indiana courts have held

that knowledge of an existing defect in the title at the time of purchase

does not estop the grantee from suing under a covenant against en-

cumbrances contained in the warranty deed.'°^

The court of appeals indicated that the transferor under a warranty

deed guarantees that the property is "free from all encumbrances and

that he will warrant and defend the title to the same against all lawful

claims. "'°^ An existing highway easement is a breach of the covenant
against encumbrances. ''° Thus, the court reversed the trial court with

instructions to enter summary judgment for McClaskey. ••'

IV. Damages to Real Estate

In Neal v. Bullock, ^^"^ Edward Bullock owned two mature apple
trees in his backyard, which provided shade and fruit, and which were

aesthetically pleasing to him. The trees died after Bullock's neighbor,

Eddie Neal, burned some trash in his own backyard. Bullock brought
suit in a small claims court for the replacement value of the trees.

103. Arguably, under the Marketable Title Act an easement of record, even though

recorded prior to the root of title, would not be destroyed.

104. IND. Code § 32-1-2-12 (1988).
105. McClaskey, 547 N.E.2d at 304.

106. Id.

107. Id. at 304-05.

108. E.g., Watts V. Fletcher, 107 Ind. 391, 8 N.E. Ill (1886); Burk v. Hill, 48 Ind.

52 (1874); Whittern v. Kirck, 31 Ind. App. 577, 68 N.E. 694 (1903); league v. Whaley, 20

Ind. App. 26, 50 N.E. 41 (1898).

109. McClaskey, 547 N.E.2d at 304. The court took this language from the statutory

form warranty deed contained in Ind. Code § 32-1-2-12.

110. McClaskey, 547 N.E.2d at 304 (citing Burke v. Hill, 48 Ind. 52 (1874)).

111. Id. at 305.

112. 538 N.E.2d 308 (Ind. Ct. App. 1989).



1080 INDIANA LAW REVIEW [Vol. 24:1065

After a hearing, in which evidence was introduced as to the cost of

replacing the trees, the court awarded Bullock $3000, the jurisdictional

limit of the small claims court at that time, plus costs J '^

On appeal, Neal argued that the proper measure of damages was
the difference between the market value of the real estate before and

after the injury, not the replacement value of the trees. The court of

appeals agreed that after trees are planted, they are part of the real

estate and are not personal."'* However, the court observed that in

General Outdoor Advertising Co. v. La Salle Realty Corp.,^^^ the court
of appeals held that the measure of damages for an injury to real

estate depends upon a determination of whether the injury is permanent
or temporary.'*^ The court in Neal stated that **[a] permanent injury

is one in which the cost of restoration of the property to its pre-injury

condition exceeds the market value of the real estate prior to injury.

A temporary injury is one which is not permanent. '*'*^ The court
reasoned that because the owner in this case sought to recover the

replacement value of the trees, the owner did not consider the damages

permanent."* The burden of establishing that the damage is permanent
is on the party seeking to invoke a market value formulation of

damages."' Because Neal did not introduce any evidence of market

values, he failed to carry his burden of proof; therefore, the court

affirmed the trial court's judgment for Bullock. '^°

V. Landlord and Tenant

A. Percentage Rental Agreement

In Casa D'Angelo, Inc. v. A & R Realty Co.,^^^ Casa D'Angelo,
Inc., an Italian restaurant business, sublet a building owned by A &
R Realty Company (A & R) in Fort Wayne, Indiana. The sublease
provided for a base rent of $825 per month and an additional rent in
the amount of five percent of the gross sales over $200,000 a year.
In 1978, Casa D*Angelo agreed to lease the building directly from A
& R. The new lease was from July 5, 1978 to November 1, 1982, with

113. Id. at 308-09.

114. Id. at 309.

115. 141 Ind. App. 247, 218 N.E.2d 141 (1966).

116. Neal, 538 N.E.2d at 309.

117. Id.

118. Id.

119. Id.

120. Id.

121. 553 N.E.2d 515 (Ind. Ct. App. 1990).



1991] PROPERTY LAW 1081

an option to renew for an additional five-year term. Although the

owners of Casa D'Angelo had no experience in the restaurant business,

they exceeded $200,000 in gross sales every year from 1978 through

1986 and paid approximately $161,000 in percentage rent to A & R.'^^
In 1982, Casa D'Angelo opened a second restaurant in Fort Wayne.

In 1985, the owners of Casa D'Angelo agreed to take over a third

restaurant operated by the son of one of the partners of A & R. This
restaurant, located within one mile of the A & R facility, re-opened
under the name T.J. Pasta's. In August 1986, Casa D'Angelo entered
into a lease for a fourth restaurant, also located within one mile of

the A & R facility. The fourth restaurant was larger and had better
parking facilities than the A & R facility. When the new restaurant
was opened in December 1986, Casa D'Angelo changed its operations

at the A & R facility. Casa D'Angelo moved its banquet and carry-
out service, which constituted only a small part of its business, to the

A & R facility, and ceased offering a full dinner menu to walk in
customers. Those who came to the A & R facility seeking a full meal
were directed to one of the other Casa D'Angelo restaurants. •" Both

the business hours and staff at the A & R facility were reduced. As
a result of these changes, gross sales at the A & R facility decreased
dramatically. '^'^ Casa D'Angelo continued to phase out its business at

the A & R facility and permanently closed the restaurant in July 1987.
In 1987, the A & R facility gross sales did not exceed $200,000, and
no percentage rent was paid by Casa D'Angelo, although it did continue

to pay the base rent of $825 per month until the lease terminated on
November 1, 1987.^25

On July 1, 1987, A & R filed suit claiming that Casa D'Angelo
had breached the express terms of the lease as well as an implied

covenant of good faith to continue operating the restaurant in the

same manner and during the same business hours as it had during the
earlier years of the lease. Casa D'Angelo moved for summary judgment
claiming that the undisputed facts failed to show any breach of an
express or implied covenant in the lease. '^^ The trial court denied the
motion and the jury returned a verdict for A & R.'^^

On appeal, Casa D'Angelo claimed that as a matter of law it did
not violate any express or implied covenant in the lease and that the

122. Id. at 516-17.

123. /(Cf. at 517. The menu to the walk-in customers at the A & R facility was limited
to soup, salads, sandwiches, and full bar service. Id.

124. Id. Gross sales dropped from $88,547.17 in November 1986 to $15,355.77 in

December 1986 and continued to decline in 1987. Id. at 517-18.

125. Id. at 518.

126. Id.

m. Id. at 516, 518.



1082 INDIANA LAW REVIEW [Vol. 24:1065

substance of A & R's complaint was an alleged violation of an implied-
in-fact covenant to generate a percentage rent. A & R argued that its
complaint alleged a violation of an implied-in-law covenant of good

faith. The court agreed with Casa D'Angelo and held that damages

could be awarded only if Casa D^Angelo had a duty to operate the

business in a manner so as to generate a percentage rent. Casa D'Angelo

had continued to pay the base rent for the term of the lease. The

only other tenant on the A & R property was a fabric store that
competed with Casa D'Angelo for parking space and whose business

was not enhanced by the continued operation of the restaurant. '^^

The court observed that although a breach of an implied covenant
of good faith may occur without the violation of an implied-in-fact
covenant or express covenant, the breach of such a covenant requires

**bad faith. "'2^ The court defined **bad faith'' as the conscious doing

of a wrong that '^contemplates a state of mind affirmatively operating
with furtive design or ill will."*^° No evidence existed that Casa D'An-
gelo changed its operation for a dishonest purpose or attempted to

damage A & R by depriving it of its percentage rent.'^*
The court compared F.W. Woolworth Co. v. Plaza North, Inc.^^^

with Casa D*Angelo, Inc. In F.W. Woolworth, Plaza North claimed
that the lessee had impliedly agreed to act in good faith not to deprive

the lessor of its percentage rent. The court agreed, but found that
Woolworth's decision to close its Woolco stores was based on economic
considerations and was not done to deprive Plaza North of its percentage

rent.'" In Casa D'Angelo, Inc., the court found that the operation

was changed because Casa D'Angelo lacked sufficiently trained per-

sonnel and resources to continue operating the restaurant.'^"* Casa D'An-

gelo did nothing more than exercise sound business judgment. '^^

Before discussing the alleged breach of an implied covenant to

generate percentage rent, the court first addressed A & R's claim that
Casa D'Angelo had violated two express covenants in the lease. The

provision read:

128. /(t/. at 518. The court seemed to suggest that if Casa D'Angelo had been an

anchor or magnet tenant in a shopping center whose continuous operation was necessary to

attract customers to other A & R tenants, then perhaps a duty to continue the business for
the benefit of the other tenants could be implied. Id. at 521-22.

129. Id. at 519.

130. Id. (quoting Vickers v. Motte, 109 Ga. App. 615, 137 S.E.2d 77 (1964)).

131. Id.

132. 493 N.E.2d 1304 (Ind. Ct. App. 1986).

133. Id. at 1311.

134. Casa D'Angelo, Inc., 553 N.E.2d at 519.

135. Id.



1991] PROPERTY LAW 1083

Use. Lessee shall use the premises for the operation of a

restaurant facility and for no other purpose without first ob-

taining the written consent of Lessor thereof ....

Business Hours. Lessee shall keep the leased premises open for

business during normal business hours for a restaurant.

A & R argued that the two provisions when read together required
Casa D'Angelo to continuously operate the restaurant during normal

business hours through the term of the lease. Casa D'Angelo contended

that the use provision merely restricted the use of the premises and

did not require it to operate a restaurant on the premises. The court

agreed with Casa D'Angelo, concluding that generally a provision in

a lease restricting the use of the premises to certain prescribed purposes

does not create an affirmative duty to use the premises for such

purposes. ^^^ The court further noted that the provision requiring the

lessee to keep the premises open during
*

'normal business hours" was

not defined in the lease and that restaurants observe a wide variety

of business hours. '^"^ Finally, the court concluded that even if the two

provisions read together could be construed as creating an implied duty

to continue to operate the restaurant throughout the term of the lease,

damages would not exist unless Casa D'Angelo also had a duty to

generate a percentage rent.^^^

The court, having determined that no breach of an express provision
existed, questioned whether there was an implied-in-fact covenant to

generate a percentage rent.'^^ The court remarked that covenants im-
plied-in-fact are not favored by the law,'^° and quoted with approval

the Oklahoma Supreme Court in Mercury Investment Co. v. F. W.
Woolworth Co.:'*'

(1) [T]he obligation must arise from the presumed intention of

the parties as gathered from the language used in the written

instrument itself or it must appear from the contract as a whole

that the obligation is indispensable in order to give effect to

136. Id. at 520.

137. Id. at 520 n.5.

138. Id. at 520.

139. Id. The court observed that a distinction exists between covenants implied-in-fact

and those implied-in-law. The latter are implied from the relation of the parties and the

objective of the agreement. Covenants implied-in-law are founded on public policy without

regard to the intent of the parties. Covenants implied-in-fact are raised by inference from

the words used in the agreement and are based on the intent of the parties. Id. at 520-21

(citing Mercury Investment Co. v. F.W. Woolworth Co., 706 P.2d 523, 529 n.l4 (Okla.

1985)).

140. Casa D'Angelo, Inc., 553 N.E.2d at 521.

141. 706 P.2d 523 (Okla. 1985).



1084 INDIANA LAW REVIEW [Vol. 24:1065

the intent of the parties; and (2) it must have been so clear

with the contemplation of the parties that they deemed it

unnecessary to express it.**^

The court examined decisions from other jurisdictions and concluded

that generally when the base rent is substantial, courts have refused

to find an implied covenant to generate percentage rent or to contin-

uously operate a business.''*^ Here, no evidence suggested that the base

rent was not substantial.'"^

A & R agreed that the base rent was substantial, but argued that
the percentage rent was also substantial. The court acknowledged that:

[A] few courts have found an implied covenant to generate a

percentage rent or to continue operation, even when the base
rent is substantial, where the provisions of the lease and the

surrounding circumstances at the time of its execution show

that the parties intended the payment of a percentage rent or

the continuous operation of the tenant's business to have been

a substantial consideration for the lease. '"^^

However, the court found that Casa D'Angelo was a new venture and
that the owners had no experience in operating a restaurant. '"^^ A good
chance existed that the venture might fail and there was no reasonable

basis for an expectation of a percentage rent. The substantial percentage
rent generated by Casa D'Angelo was nothing more than a windfall
to A & R. Likewise, no evidence showed that A & R relied upon the
continued operation of the restaurant to enhance the operation of its

surrounding property. The restaurant was not a magnet tenant in an
integrated shopping center; it did not draw customers to A & R's other
tenant nor did it encourage other tenants to lease the property. Thus,

the provision for a percentage rent was not a substantial consideration

of the lease agreement. '"^^ The court of appeals reversed the trial court
and entered summary judgment in favor of Casa D'Angelo.'"*^

142. Casa D'Angelo, Inc., 553 N.E.2d at 521 (quoting Mercury Investment Co., 706

F.2d at 530).

143. Id.

144. Id. The court remarked that the current trend is to define substantial rent as a

fair rental value. Id.

145. Id. The cited cases involved magnet tenants in shopping centers, economic inter-

dependence between lessor's and lessee's business operations, and cases in which the base

rent was determined in part on past performance of business operation. Id.

146. Id. at 522.

147. Id.

148. Id.



1991] PROPERTY LAW 1085

B, Landlord's Liability for Personal Injuries Caused

by Defective Conditions on Leased Premises

Traditionally, the landlord has not been held liable for personal

injuries caused by defective conditions on the leased premises. '"^^ Al-

though the landlord's tort immunity is still generally recognized in

Indiana, a number of exceptions have developed over the years. Indiana
decisions have held the landlord liable for personal injuries resulting

from defective conditions on the leased premises when (1) the condition
is a latent defect known to the landlord but unknown to the tenant,
and the landlord has failed to disclose the condition to the tenant; '^^

(2) the premises are leased for admission of the public; '^* (3) there is

an express covenant to repair and the landlord either fails to repair

or does so in a negligent manner;'" (4) the landlord voluntarily makes

repairs and does so in a negligent manner;'" (5) the defective condition

is in an area under the control of the landlord and used in common
by the tenants;'^"* or (6) there is an unexcused or unjustified violation

of a duty prescribed by an applicable statute or ordinance. '^^ Two
decisions decided during the survey period raised two of the exceptions

to the landlord's general tort immunity.

149. See generally R. Schoshinski, American Law of Landlord and Tenant § 4:1,
at 186-87 (1980); Browder, The Taming of a Duty—The Tort Liability of Landlords, 81
Mich. L. Rev. 99, 101-02 (1982).

150. See, e.g., Eggers v. Wright, 143 Ind. App. 275, 240 N.E.2d 79 (1968); Guenther

V. Jackson, 79 Ind. App. 127, 137 N.E. 528 (1922).

151. See, e.g., Chrysler Corp. v. M. Present Co., 491 F.2d 320, 323 (7th Cir. 1974)
(when property is leased for a "public purpose," lessor is under duty to use reasonable care

to inspect and repair the premises before transferring possession); Walker v. Ellis, 126 Ind.

App. 353, 129 N.E.2d 65 (1955) O^ssor liable when he leases premises known to be unfit

and dangerous for a public purpose).

152. See, e.g., Childress v. Bowser, 546 N.E.2d 1221, 1222-23 (Ind. 1989) Oessor Uable

for negligence in failing to make repairs as promised); Hunter v. Cook, 149 Ind. App. 657,
662, 274 N.E.2d 550, 552 (1971); Stover v. Fechtman, 140 Ind. App. 62, 64-65, 222 N.E.2d

281, 283 (1966); Robertson Music House, Inc. v. Wm H. Armstrong Co., 90 Ind. App. 413,
416-18, 63 N.E. 839, 840 (1928).

153. See, e.g., Hunter v. Cook, 149 Ind. App. 657, 274 N.E.2d 550 (1971); Robertson

Music House v. Wm H. Armstrong Co., 90 Ind. App. 413, 63 N.E. 839 (1928).
154. See, e.g., Flott v. Cates, 528 N.E.2d 847, 848 (Ind. Ct. App. 1988); Slusher v.

State, 437 N.E.2d 97, 99 (Ind. Ct. App. 1982); Coleman v. DeMoss, 144 Ind. App. 408,

416, 246 N.E.2d 483, 489 (1969). Arguably, this is not really an exception to the landlord's

general immunity from liability for injuries caused by conditions on the leased premises,

because the common areas are still under the control of the landlord and are not part of
the demised premises occupied by the tenant.

155. See, e.g., Hodge v. Nor-Cen, Inc., 527 N.E.2d 1157, 1160 (Ind. Q. App. 1988);
Zimmerman v. Moore, 441 N.E.2d 690, 6% (Ind. Ct. App. 1982); Rimco Realty & Invest.
Corp V. La Vigne, 114 Ind. App. 211, 218-19, 50 N.E.2d 953, 956 (1943).



1086 INDIANA LAW REVIEW [Vol. 24:1065

1. Common areas.—In Frost v. Phenix,^^^ Bruce and Susan Phenix
orally leased an apartment under a month-to-month agreement from

the Frosts. The apartment was on the upper floor of a house that had

been divided into three units. At the front of the house was a large

porch that extended around the sides of the house. Two sets of concrete
steps led to the porch, one on the south side and the main set of

steps on the west side. The tenants had to cross the porch to reach

the entryway leading to their apartments. After ascending the west
steps leading to the porch, Susan stepped on the wood floor and the
porch collapsed, throwing her forward and injuring to her elbow and

leg.'5^

The Phenixes knew that a portion of the cement steps had crumbled,
that the wood floor creaked in places, and that there was a small hole
in the floor to the left of where Susan fell. Several weeks before the

injury, Bruce had stepped through a portion of the porch without

injury. The Phenixes did not consider the porch hazardous. Rather,
they considered the portion of the porch where Susan fell to be strong

because it was just above the concrete steps and there were no signs

of rotting or decayed wood in that area. At the time of the injury,
a carpenter hired by the Frosts was repairing damage to the concrete
steps and the wooden floor of the porch on the south side of the
house, which had been caused by standing water from a leaky dete-

riorated gutter.*^*

The Phenixes sued the Frosts for Susan's injuries. After granting
the Frosts' motion for summary judgment, the trial court granted the
Phenixes' motion to correct errors, and the Frosts appealed. The Frosts
raised the following three issues on appeal: (1) did the Frosts owe any
duty to the Phenixes; (2) was there a material question of fact regarding

whether the Frosts had breached a duty of care; and (3) was there a

material issue of fact as to whether Susan Phenix was contributorily

negligent. '^^

In addressing the first issue of duty, the court observed:

[C]aselaw supports Frosts' theory that a landlord is not liable

where he is without knowledge of a latent defect, and is not

liable for a tenant's personal injuries stemming from defective

premises unless he expressly agrees to repair and is negligent

in doing so.'^<^

156. 539 N.E.2d 45 (Ind. Ct. App. 1989).

157. Id. at 46.

158. Id. at 46-47.

159. Id. at 47.

160. Id.



1991] PROPERTY LAW 1087

However, the court stated that this general immunity applies only when
the tenant leases the entire premises, such as a single family dwelling,

and the injury occurs on the demised premises.'^' Because Susan's

injury occurred in a common area, a different rule applied. A landlord
has a duty to use reasonable care to inspect and repair common areas,
such as the porch used by all the tenants to reach their apartments,

for the protection of the lessees.'" The Frosts had a duty to maintain
the porch in a reasonably fit and safe condition for the benefit of the

Phenixes.*" The court concluded that the testimony of the Phenixes

and the Frosts raised a material factual issue as to whether the Frosts

breached their duty of care.'^'*

The Frosts had observed the decay on the south side of the porch

at the time they purchased the house and had hired the carpenter to

repair it. William Frost had visited the property about a week before

the Phenixes moved in but denied seeing any holes or other damage
in the wooden floor. Thus, a material question of fact existed which
precluded the granting of the summary judgment. '^^

The Frosts also argued that Susan's knowledge of the weak areas
of the porch was equal or superior to their own and thus she was
contributorily negligent as a matter of law. Some earlier cases held
that equal or superior knowledge of a dangerous condition constituted

contributory negligence as a matter of law. However, the court con-

cluded that in this case a jury could reasonably find that although

Susan knew of weaknesses elsewhere on the porch, she was not aware
of the weakness in the area where she fell.'^^ In addition, the court

noted that **a reasonable jury could find that Susan did not fail to

exercise reasonable care for her own safety under the circumstances
because she had to transverse the porch in order to enter her apart-
ment:'^^'^

Although the court did not elaborate on this observation, two of

the cases cited by the court concerning the duty of a landlord with

respect to common areas, Coleman v. DeMoss^^^ and Rossow v. Jones, ^^'^

161. Id.

162. Id. (citing W. Prosser & W. Keeton, The Law on Torts § 63, at 441-442 (5th
ed. 1984)).

163. Id. at 48.

164. Id.

165. Id. This obligation, however, is one of reasonable care only, and the landlord

will not be liable for conditions not discoverable by reasonable inspection. W. Prosser and
W. Keeton, The Law on Torts § 63, at 442 (5th ed. 1984).

166. Frost, 539 N.E.2d at 48.

167. Id. at 49 (emphasis added).

168. 144 Ind. App. 408, 246 N.E.2d 483 (1%9).

169. 404 N.E.2d 12 (Ind. Ct. App. 1980).



1088 INDIANA LAW REVIEW [Vol. 24:1065

indicate that the landlord has a duty to provide the tenant with a safe

means to and from the leased premises. If the landlord fails to do so,
the tenant would not be required to abandon the premises in order to
avoid the defense of contributory negligence. Otherwise, the landlord

would be permitted to constructively evict the tenant by breaching his

duty to provide a safe means of ingress and egress.

2, Violation of Statute or Ordinance.—In Dawson v. Long,^''^
Almedia McLayea took her one-month old nephew, Garfield Dawson,
to visit a friend, Marvin Tardy, who rented a second story duplex
apartment in a building owned by William Long. Tardy leased the
apartment on a month-to-month basis with no agreement regarding

repairs. During the first months of the lease. Tardy informed Long
that there was no handrail along the stairway and that the wooden
stairs were slippery and needed rubber or other nonslip material on
them. However, Long took no action to correct these conditions until
after the injury to Dawson had occurred.'^'

As McLayea left the apartment, carrying her nephew in an infant
seat, she slipped and fell down a stairway. The stairway was not a
common area but was part of the premises leased to Tardy. *^^ Because
there was no handrail along the stairway, McLayea could not break
her fall. Her shoulder struck a window on the landing, breaking the
window and its screen. The infant fell through the opening to the
ground below, suffering severe and permanent injuries, including brain

damage. The window was unprotected by a guard rail. Tanya Dawson,
the infant's mother, brought suit against Long claiming negligence and
breach of an impHed warranty of habitability.'^^ After a hearing, the
trial court granted Long's motion for summary judgement and Dawson
appealed. ^^"^

Dawson claimed that Long had violated several provisions of the
Marion County Health Code,'^^ and introduced into evidence copies
of notices sent to Long by the Marion County Health Department
indicating violations of the Health Code, including one pertaining to

Tardy's dwelling. ^^^ The court noted that a non-excused or non-justified

170. 546 N.E.2cl 1265 (Ind. Ct. App. 1989).

171. Id. at 1266. Long denied that any complaints had been made by Teirdy before
the date of Dawson's injury. Id. at 1267.

172. Id. at 1266.

173. Id. at 1265-66.

174. Id. at 1266.

175. Marion County, Ind., The Health and Hospftal Corp. Gen. Ordinance No.
2-1980, ch. 10, art 1, § 10-102 (1982).

176. Dawson, 546 N.E.2d at 1266-68.



1991] PROPERTY LAW 1089

violation of a duty imposed by statute or ordinance is negligence per

se/^^ but that

[i]n order for the violation of a statute or ordinance to be

held as negligence per se, a trier of fact must determine whether

the statute is applicable. It must decide whether the statute was

designed to protect the class of persons in which the plaintiff

is included against the risk of the type of harm which has
occurred as a result of its violation. '^^

The court then observed that the Health Code officially announced
that it was enacted **to protect, preserve and promote the physical and

mental health and social well-being of the people" and to * insure that

the quality of housing is adequate for protection of public health,

safety and general welfare.*' '^^ Thus, the plaintiff Dawson was clearly
within the class of persons intended to be protected by the ordinance.'*^

Having determined that the Health Code applied, the court next
addressed the question of whether the Code was violated and whether
the violation was the proximate cause of the plaintiff's injury.'^' The

Health Code specifically imposed duties to provide handrails on any
steps containing at least four risers, to install uniform risers and treads

on all inside or outside stairs or steps, and to maintain windows in

sound condition and good repair. '^^ The undisputed evidence demon-
strated that there was no handrail along the top four stairs leading to

Tardy's apartment; there were no treads on the wood stairs; the window
was loose; the screen outside the window was rotten; and there was
no guard rail in front of the large window on the landing. Sufficient
evidence existed from which a fact finder could conclude that Long
had violated one or more provisions of the Health Code and that these
violations were the proximate cause of the injury. Therefore, the court

reversed the trial court's grant of the motion for summary judgment
on the issue of Long's negligence.'"

177. Id. at 1266-67 (citing Ray v. Goldsmith, 400 N.E.2d 176 (Ind. Ct. App. 1980)).

See also Hodge v. Nor-Cen, Inc., 527 N.E.2d 1157 and. Ct. App. 1988).
178. Dawson, 546 N.E.2d at 1268 (citing Ray v. Goldsmith, 400 N.E.2d 176 (Ind. Q

App 1980); and W. Prosser & W. Keeton, The Law on Torts § 36, at 229-30 (5th ed.
1984)).

179. Id. (citing Marion County, Ind., The Health and Hospital Corp. Gen. Or-
dinance No. 2-1980, ch. 10, art 1, § 10-102).

180. Id. at 1269.

181. Id. For a fact finder to determine there was negligence per se, there must be

evidence that there was a violation of the statute or ordinance, and that the violation proximately

caused the injury complained of. Id. at 1268.

182. Id. (citing Marion County, Ind., The Health and Hospital Corp. Gen. Or-
dinance No. 2-1980, ch. 10, art 1, § 10-301).

183. Dawson, 546 N.E.2d at 1269.



1090 INDIANA LAW REVIEW [Vol. 24:1065

Finally, Dawson alleged that a material issue of fact existed re-
garding Long's liability under breach of an implied warranty of hab-

itabilityJ^'* Although Indiana has recognized an action by tenants for

economic damages resulting from breach of the implied warranty,

Indiana courts have never allowed recovery for personal injuries to

tenants or their guests. Dawson cited Zimmerman v. Moore^^^ for the
proposition that a tenant may recover for personal injuries under an
implied warranty of habitability theory.'*^ The court, however, distin-
guished Zimmerman, which denied recovery to the tenant under a
warranty of habitability theory because Zimmerman was not a pro-
fessional landlord. Here, Dawson attempted to extend the landlord's
duty to the tenant under an implied warranty to an injured guest. The
court refused to extend the landlord's duty under the warranty beyond

the tenant.
•^^

C. Warehouseman's Liens on Tenant's Property Placed in

Storage Following Eviction

In Moore v. Republic Moving and Storage, Inc.,^^^ the landlord,
Braeburn Apartments, obtained a default judgment for $457 plus court

costs in a Marion County small claims court against Ronald Moore
and Rita Green because they failed to make rental payments. '^^ The
court issued a writ of restitution and order of eviction, and on December

10, 1985, the constable removed the tenants' property from their apart-
ment and placed it in storage at Republic Moving and Storage, Inc.
(Republic). The writ of restitution advised the tenants that their property
would be removed, placed in storage, and levied upon for the judgment,
plus costs and interests. '^°

On March 27, 1986, Republic published a notice in the Indianapolis
Commercial newspaper claiming that Moore and Green were liable for
$580 to satisfy a warehouseman's lien and that an auction would take

place in Indianapolis after April 10, 1986. In July 1986, Moore and
Green filed a complaint against Republic seeking the return of their

property or damages if the property had been sold. In September 1986,
Republic filed a motion to dismiss. Republic sold the property, valued

at $2000, at a public auction in November 1986 to satisfy their handling.

184. Id.

185. 441 N.E.2d 690 (Ind. Ct. App. 1982).

186. Dawson, 546 N.E.2d at 1269.

187. Id. at 1269-70.

188. 548 N.E.2d 1211 (Ind. Ct. App. 1990)

189. Id. at 1212.

190. Id.



1991] PROPERTY LAW 1091

Storage, and newspaper advertising charges totaling $980. The tenants

did not receive notice of the sale nor did the company make a specific
demand on them for payment. Republic's motion to dismiss was granted
in February 1987. '^^

Indiana law provides that **a warehouseman has a Hen against the

bailor on goods covered by a warehouse receipt or on the proceeds

thereof in his possession for charges for storage or transporta-

tion . . . .'*^^^ Furthermore, a warehouseman's lien is effective only
*

'against any person who so entrusted the bailor with possession of
the goods that a pledge of them by him to a good faith purchaser

for value would have been valid. "'^^ Thus, a lien is created against

the owner only if he acts as a bailor or authorizes another to act as

a bailor. Therefore, the tenants argued that Republic did not possess

a valid warehouseman's lien because a small claims court constable is

not a bailor and because they did not authorize or consent to the

storage of their property with Republic. '^"^

The court was unable to find any Indiana authority directly on

point, but decisions from other jurisdictions held that a warehouseman

does not have a lien on property turned over to it by a constable who
had removed property pursuant to an order of restitution.'^^ Although

the court concluded that RepubHc did not have a valid lien, it recognized
Republic's right to terminate the storage when the agreed storage period
ended or, if no period was fixed, within a stated period not less than

thirty days after notification to interested parties. '^^ Also, unless the

goods have been removed by the owner before the end of the stated

period, the warehouseman could sell the goods under the provisions

of Indiana law.'^'^ However, the court found the sale of the tenants'

191. Id.

192. IND. Code § 26-1-7-209(1) (1988), cited in Moore, 548 N.E.2d at 1212.
193. Moore, 548 N.E.2d at 1212.

194. Id. at 1213.

195. Id.

196. Id. at 1214-15. See also Ind. Code § 26-1-7-206 (1988), which provides:

A warehouseman may, on notifying the person on whose account the goods are
held and any other person known to claim an interest in the goods require payment

of any charges and removal of the goods from the warehouse at the termination

of the period . . ., or, if no period is fixed, within a stated period not less than

thirty (30) days after the notification. If the goods are not removed before the

date specified in the notification, the warehouseman may sell them in accordance
with the provisions of the section on enforcement of a warehouseman's lien.

Id.

197. See Ind. Code § 26-1-7-210 (1988), which requires that notification be given to
all persons known to claim an interest in the goods and that the notification include a
description of the goods, a statement of the amount due, a demand for payment, the nature

of the proposed sale, and the time and place of any public sale.



1092 INDIANA LAW REVIEW [Vol. 24:1065

property was improper because the notice of sale did not comply with

the provisions of Indiana Code section 26-1-7-210.^^^

The court also rejected Republic's claim that a lien arose by op-

eration of law and that a warehouseman's lien was not necessary to

sell the tenants' property to satisfy the storage fees.*^^ Republic argued

that it had acquired a lien under Indiana Code section 32-7-3-6 which
provides:

The justice shall issue a writ, directed to some constable of
the county, commanding him to deliver said premises to said
plaintiff, by removing the defendant and his goods therefrom,

or otherwise, so that the plaintiff has complete possession

thereof, and also to levy such damages and costs, of the goods

of said defendant as might be done by virtue of a writ of fieri

facias.^^

The court observed that the statute was clearly designed for the benefit
of the party awarded the judgment, the landlord. ^^^ RepubHc was not

a party to the action nor had it established that it was acting as an

agent for the landlord. Rather, Republic was acting solely on its own
behalf. In addition, the statute indicates that the sheriff, not the

landlord, is to levy upon the goods and chattels of the judgment

debtor.^°2 Because Republic did not have a warehouseman's lien, the

court determined that the sale of tenant's property was improper and

that their complaint should not have been dismissed. ^^^

Several interesting issues were only indirectly addressed by the court

because Republic never sought payment of the storage or transportation

charges from Moore and Green. Had Moore or Green attempted to
remove their goods from storage could they have done so without

payment of the storage fees? One of the cases the court cited with
apparent approval, Young v. Warehouse No. 2, Inc.y^^ held that when

198. Moore, 548 N.E.2d at 1215. The published notice did not contain the exact date

of the sale nor did it provide Moore or Green with notice of the date or time of the sale.

In addition, Republic did not make a specific demand for payment. Id.

199. Id. at 1215-16.

200. Id. at 1215. All of chapter 3 of title 32, article 7 of the Indiana Code was

repealed by the Indiana Legislature in 1990. This chapter included not only the provision for

the issuance of a writ of restitution, but also Indiana's forcible detainer and unlawful entry

statute. Ind. Code § 32-7-3-12 (1988). The legislature did not enact any laws to replace the

repealed chapter.

201. Moore, 548 N.E.2d at 1216.

202. Id. at 1215-16. See also Schuler v. Langdon, 433 N.E.2d 841, 845-46 (Ind. Ct.

App. 1982) (Staton, J., dissenting). The sale of the judgment debtors' goods under a writ

of execution is governed by Ind. Code §§ 34-1-36-1 to -12 and 34-1-37-1 to -12.

203. Moore, 548 N.E.2d at 1217.

204. 540 N.Y.S.2d 654 (1989).



1991] PROPERTY LAW 1093

a landlord delivers a tenant's goods to a warehouseman for storage,

the tenant may recover possession of the goods from the warehouse
at any time without payment of the storage fee.^^^ If the tenant does

claim the goods within the thirty-day period, the goods may be sold
under U.C.C. § 7-210. However, the warehouseman must hold the

proceeds for the benefit of the tenant and must look to the landlord

for payment of the storage charges.^^

The court also appeared to question whether the owners of the

goods were liable for the contract amount of the storage charges. The
court suggested that Republic might have pursued an action against

the owners in quantum meruit, obtained judgment, then executed upon
the judgment.2°^ This suggestion implies that the warehouseman could

not withhold the goods from the owner, nor could he convert any of

the proceeds from the sale of the goods for payment of the storage

charges.

VI. Occupying Claimant Statute

In 1970, the City of Gary purchased property for $30,000 but

failed to record the deed in the Lake County Recorder's office. Three

years later, the city constructed Fire Station 7 on the property at a
cost of $300,000. Because the deed was not recorded, the county

continued to bill the former owner for the taxes on the land. Feeling
no obligation to continue paying taxes on the property, the former
owner allowed the assessed taxes to become delinquent and the property
was sold at a tax sale in 1984 for $2,272. The purchasers, Joseph and
Bernice Belovich, obtained a tax deed and brought an action to evict

the City from the property, now estimated to be worth $600,000.^^^

In a prior appeal, the court had determined that the Beloviches had

acquired title to the property as a result of the tax deed.^^ After

remand, the city recorded its deed and continued to use the property

as a fire station.

In City of Gary v. Belovich ^^^^ the court concluded that the city's
continued use of the property as a fire station constituted inverse

condemnation and issued an order appointing appraisers.^' • The court
dismissed the City's counterclaim that it was entitled to the value of

205. Id. at 655-56.

206. Id.

ion. Moore, 548 N.E.2d at 1217 n.6.

208. Dirt Cheap: Fire Station Bought for $2,272, Thanks to Blunder, Indianapolis Star,

Aug. 28, 1986, at A2.

209. City of Gary v. Belovich, 504 N.E.2d 286 (Ind. Ct. App. 1987).

210. 544 N.E.2d 178 (Ind. Q. App. 1989).
211. Id. at 178-79.



1094 INDIANA LAW REVIEW [Vol. 24:1065

the improvements made to the property under the Occupying Claimant
Statute.2'2

On appeal, the court of appeals affirmed the trial court's granting
of summary judgment on the issue of inverse condemnation and the
trial court's dismissal of the city's counterclaim. ^^^ The court concluded

that the Occupying Claimant Statute was designed to afford relief to

an occupant who made improvements on the land in good faith and
under color of title. The Statute was never intended to apply when
the true owner makes improvements to his property and then loses his

title through operation of law.^'^ When the city lost its title to the
Beloviches as the result of the tax sale, the city lost title to both the

real estate and the improvements.^'^

VII. Recording Act: The Chain of Title

During the last survey period, the court of appeals extended the

search of the public records required to determine the title to real

estate. The court held that a purchaser has constructive notice of
interests recorded outside the chain of title. ^'^ In Szakaly v. Smith,^^^

Sherrill and Isabelle Arvin, owners of a 195-acre tract of land, conveyed

a 190-acre portion of the tract in 1956 to the Ransburgs, the Szakalys'

predecessor in title. The deed, which was not recorded until 1965,
granted a right-of-way easement over the five-acre tract retained by

the Arvins. In 1957, the Arvins conveyed the five-acre tract to a trustee

who, on the same day, reconveyed the land to Isabelle Arvin alone.

Both deeds were promptly recorded and neither deed referred to the

easement granted in the 1956 deed. In 1979, the five-acre tract was

conveyed to Ronald Smith. Ronald and Linda Smith are the current

212. Id. at 178 (citing Ind. Code § 34-1-49-1) (1988)).
213. Id. at 178-79.

214. Id. at 179. A similar claim was made in Kolley v, Harris, 553 N.E.2d 164 (Ind.
Ct. App. 1990). The Harrises defaulted on a conditional sales contract after making substantial

improvements to the property. In an action for damages by the vendors, the Harrises

counterclaimed for the value of improvements made to the property under the Occupying

Claimant Act. On an appeal by the vendors from a summary judgment awarding the Harrises
$16,040 on their counterclaim, the court concluded that the Occupying Claimant Act was

intended to protect an occupant "found not to be the rightful owner" who had made
improvements to the land of another in good faith and under color of title. Id. The act was

not intended to compensate an equitable owner who made improvements to the land under
a contract for sale and who subsequently loses the land by failure to perform the terms of
the contract. Id.

215. Belovich, 544 N.E.2d at 179.

216. Szakaly v. Smith, 525 N.E.2d 343, 346 (Ind. Ct. App. 1988), superceded by

Szakaly v. Smith, 544 N.E.2d 490 (Ind. 1989).

217. Id.



1991] PROPERTY LAW 1095

owners of the five-acre tract. The Szakalys, the owners of the 190-

acre tract, claimed a right of way easement across the Smiths' property. ^'^

The single issue raised was whether the recording of the 1956 deed

in 1965 operated as record notice of the easement at the time Ronald

Smith purchased the property in 1979, and thus prevented him from

taking the title free and clear of the easement as a bona fide purchaser

in good faith and for value. ^^^ The Smiths argued that once the deed
from the Arvins to the trustee and the deed back to Isabelle Arvin

were recorded, the easement was outside the chain of title. ^^° To
understand this argument, it is necessary to first briefly explain the

chain of title concept.

In most states, the public records affecting title to real property

are indexed under the names of the parties involved. This name index
is commonly referred to as the grantor-grantee index system. ^^^ In
examining the title to property, the title searcher begins with the present

owner in the grantee index and works backward until he finds a

conveyance to the present owner from his grantor. He then searches
under the name of his grantor in the grantee index until he finds a
conveyance to him, and so on, until he traces the title back to a patent

from the state or federal government. The title searcher then turns to

the grantor index and begins his search forward, starting with the name
of the party who acquired title from the state or federal government.
He continues to search under the name of this party from the date
he acquired title until he finds a recorded deed out from that party

conveying the land in question to another. He then stops his search
under the name of the former owner and continues the search under
the name of the new owner (the grantee in the deed out) from the
date he acquired title until a deed out from him is recorded. He
continues the search under the new owner. A title searcher would have
no reason to continue his search under the name of the former owner
once his deed out is recorded. This search in the grantor index is

continued to the present time. The documents discovered by this method
of searching the public records are referred to as **the chain of title. "^^^

218. Id. at 344.

219. Id.

220. Id. at 344-45.

221. The term "grantor-grantee" index system is a misnomer. Although the index to

the deed books is eilphabetized under the names of grantors and grantees, the indexes to

other records such as the lis pendens notice, probate docket, judgment docket, and mortgage

books, while containing the name of the persons involved are not truly grantor-grantee indexes.

Because these transactions may affect title to the property, they must also be examined by
the title searcher under the name of each owner during the ownership period.

222. For a more detailed discussion of the chain of title concept, see generally R.

Cunningham, W. Stoebuck & D. Whtteman, The Law of Property § 11, at 796-802
(1984); and Cross, The Record "Chain of Title" Hypocrisy, 57 Col. L. Rev. 787 (1957).



1096 INDIANA LAW REVIEW [Vol. 24:1065

The court of appeals rejected the Smiths' argument that once the

1957 conveyance from the Arvins to the trustee for reconveyance was

recorded, the easement was outside the chain of title. ^^^ Instead, the

court concluded that a subsequent purchaser is charged with notice of

an interest contained in any instrument from a common grantor even
if the instrument is recorded after the recording of the deed out from

the common grantor.^^'*
Thus, the court, relying heavily on Hazlett v. Sinclair,^^^ held that

Indiana
*

'recognizes an exception to the rule that the record of a

conveyance out of the line of title does not give constructive notice

of its contents to innocent purchasers for value without notice. "^^^ The

court reached this holding by reading Hazlett as
*

'charging grantees

of servient tenements with knowledge of all the information supplied

by the recorded conveyances of the common grantor. "^^^

However, as was suggested in last year's survey, the court may
have read too much into the Hazlett decision. ^^s i^ f^^^t, the Hazlett
court may have been addressing an entirely different issue. In some
states, the title searcher examining the instruments within the chain of

title is not required to examine deeds out from the common grantor
involving other tracts of land that were recorded during the time the

common grantor held title to the land in question. ^^^ In Indiana, the
title searcher is required to examine all deeds out from the common
grantor, even deeds to other tracts of land.^^^ These deeds would be

discovered during the title search because they were recorded during

the period of time the searcher is searching the title to the land under

the name of the common grantor.
The Indiana rule is equitable because a deed to one tract of land

often contains an easement or restrictive covenant burdening another

tract of land owned by the common grantor. If the title searcher could
safely ignore such instruments, the purchaser would not be protected

unless he recorded the deed under the legal descriptions of all the

lands burdened by the conveyance. It is far different, however, to

require the title searcher to continue searching the record under the

223. Szakaly, 525 N.E.2d at 344.

224. Id. at 346.

225. 76 Ind. 488 (1881).

226. Szakaly, 525 N.E.2d at 346.

227. Id.

228. See Krieger, Survey of Recent Developments in Indiana Property Law, 23 Ind.

Rev. 485, 509 (1989).

229. See 4 American Law of Property § 17.24, at 602 (Casner ed. 1952).
230. E.g., Hazlett v. Sinclair, 76 Ind. 488, 493-494 (1881); Howard D. Johnson Co.

Parkside Dev. Corp., 169 Ind. App. 379, 385-86, 348 N.E.2d 656, 661 (1976).



1991] PROPERTY LAW 1097

name of the common grantor after the deed out to the land whose
title is being searched has been recorded.

In Hazletty it was unclear whether the grantor still owned the land
when the deed conveying the other tract of land was recorded. If the
grantor still owned the land, the recording of the instrument was within

the chain of title and the decision was not as far reaching as the court

of appeals concluded. By interpreting Hazlett so broadly, the court of

appeals's opinion charges a subsequent purchaser with constructive

notice of all claims and interests in a recorded deed from a common
grantor regardless of when the instrument was recorded, provided it
is recorded before the purchaser's deed. This holding would require

the title searcher to continue to search the records under the name of
every grantor of the property in the grantor-grantee index from the

date the grantor acquired the title to the present. ^^' Such a task would

greatly increase the time and expense of a title search. ^^^

During this survey period, the Indiana Supreme Court granted

transfer of Szakely.^^^ The supreme court agreed with the court of

appeals that the subsequent purchasers in this case had notice of the

easement across their property."'* However, in a well-reasoned opinion

by Justice Dickson, the court narrowly restricted the rationale of the

lower court decision. The court observed that there was no need for
the court of appeals to discuss the effect of a late recording outside

the chain of title because the recording was in fact within the chain

of title. "^ When the deed to the dominant estate was recorded in 1965,
Isabelle Arvin, Smith's predecessor in title, was still the record owner

of the servient estate.^^^ A title searcher examining Smith's chain of
title during the 1965 period would have searched the grantor-grantee

index under the name of Isabelle Arvin and would have found the
recorded deed from Sherrill and Isabelle Arvin to the Ransburgs. An
examination of this deed would have revealed the existence of the

easement across the property being purchased by Smith.

Although finding the recording in this case was within the chain

of title, the court chose **to discuss and clarify the extent to which

belatedly recorded conveyances of a common grantor provide construc-

231. Some courts do require such an extended search of the record. See, e.g.. Woods
V. Garnett, 72 Miss 78, 16 So. 390 (1894).

232. See J. Cmbbet and C. Johnson, Principles of the Law of Property 321-22
(3d ed. 1989) [hereinafter Cribbet].

233. Szakaly v. Smith, 544 N.E.2d 490 (Ind. 1989).

234. Id. at 492.

235. Id.

236. Id. This fact was not revealed in the court of appeals opinion, making it impossible

to determine whether or not the recording was within the chain of title.



1098 INDIANA LAW REVIEW [Vol. 24:1065

live knowledge to subsequent grantees.'*"'' In examining Hazlett, the

court observed that the decision did not disclose the dates of recording

of the deeds, and thus it was impossible to determine whether the deed

creating the easement was recorded within the subsequent purchaser's

chain of title. After examining several Indiana decisions, the court

concluded that the recording of an instrument outside the chain of

title does not provide notice to a bona fide purchaser for value."^

Because in this case, however, the easement was recorded within the

chain of title, the court held that the Smiths had constructive notice

of the encumbrance and reversed the trial court's judgment."^

VIII. Warranty of Habitability in Sale of Home

A. Background

Until the 1960s, the law governing the purchase of a new home
was caveat emptor?^^ Today, the overwhelming majority of jurisdictions

imposes an implied warranty of habitability on the builder-vendor in

the sale of a new home.^"*' In 1972, the Indiana Supreme Court first

recognized an implied warranty of habitability in the sale of a new

home by the builder vendor. ^"^^ In 1976, the court extended the builder-
vendor's implied warranty to a second or subsequent purchaser of the

home, allowing the subsequent purchaser to bring an action against

the original builder-vendor for latent defects in the design or construc-

tion of the house. 2"^^

237. Id. at 491.

238. Id. at 492. The court stated:

Hazlett does not establish that a grantor is charged with constructive knowledge

of conveyances from a remote grantor that are outside of his chain of title. In

light of Rogers v. Evansville, 437 N.E.2d 1019 (Ind. Ct. App. 1982) and Residents

of Green Springs Valley Subdivision v. Town of Newburgh, 168 Ind. App. 621,

344 N.E.2d 312 (1976) I view the language in Hazlett as limited by the chain of

title requirement.

Id.

239. Id.

240. See generally Cribbet, supra note 232, at 282. For a discussion of the rationale

and the historical development of the implied warranty of habitability in the sale of a new

home by a builder-vendor, see generally Roberts, The Case of the Unwary Home Buyer:
The Housing Merchant Did It, 52 Cornell L.Q. 835 (1967).

241. See generally Shedd, The Implied Warranty of Habitability: New Implications,
New Applications, 8 Real Est. L.J. 291, 302 (1980). By 1980, 36 states and the District of
Columbia had recognized implied warranty of habitability in the sale of a new home by a

builder-vendor. See id. at 303-06. See also Conklin v. Hurley, 428 So. 2d 654, 656 n.2 (Fla.

1983) (citing 33 decisions recognizing the implied warranty of habitabiUty).

242. Theis v. Heuer, 264 Ind. 1, 12, 280 N.E.2d 300, 306 (1972).

243. Barnes v. Mac Brown and Co., 264 Ind. 227, 230, 342 N.E.2d 619, 621 (1976).



1991] PROPERTY LAW 1099

Later, however, the Indiana Court of Appeals refused to recognize

an implied warranty of habitability in the sale of a used home by a
non-builder vendor.^^ The purchaser's sole remedy against his im-

mediate seller would be under the tort theories of misrepresentation

or fraudulent concealment.^^ Indiana does not currently view the mere

failure to disclose hidden defects known to the seller and unknown to
the buyer as fraudulent concealment.^^^^

In 1986, the Indiana legislature enacted a statute establishing express

statutory warranties that a builder may provide to the initial purchaser
of a new home.^'*^ Upon providing these warranties to the initial buyer,
the builder-vendor may disclaim any implied warranties. However, the
statute requires that certain conditions be met before the builder can

disclaim the implied warranties: (1) the performance of the warranty

obligations must be backed by an insurance policy at least equal to

the purchase price; (2) the builder must carry completed operations

product liability insurance to cover any reasonably foreseeable con-

sequential damages arising from a defect covered by the warranties;

(3) the disclaimer of any implied warranties must be printed in a

minimum size of ten-point and in bold face type; and (4) the buyer
must acknowledge the disclaimer of any implied warranties by signing

a separate one-page notice containing specific statutory language at the

time of the contract's execution.^'**

During this survey period, there were four decisions touching upon

one or more aspects of the implied warranty of habitability. These

decisions continue to define the scope of the implied warranty in

Indiana.

B. Statute of Limitations

In Lechner v. Reutepohler^^*^ the Reutepohlers purchased a new
home from the Lechners in November 1981. While moving into the
house, the Reutepohlers noticed small cracks in a basement wall. They

also noticed that small puddles of water appeared on the basement

floor after every rain.^^^ The Reutepohlers observed that the slope of
the yard away from the house failed to prevent puddles from forming
in front of the house. The Reutepohlers attempted to increase the

244. Vetor v. Shockey, 414 N.E.2d 575, 577 (Ind. Ct. App. 1980).

245. Id. at 577; Lyons v. McDonald, 501 N.E.2d 1079, 1081 (Ind. Ct. App. 1986).

246. Indiana Bank & Trust Co. v. Perry, 467 N.E.2d 428 (Ind. Q. App. 1984).
247. Ind. Code § 34-4-20.5-1 (1988).
248. Id. § 34-4-20.5-9.

249. 545 N.E.2d 1144 (Ind. Ct. App. 1989).

250. Id. at 1145-46.



1100 INDIANA LAW REVIEW [Vol. 24:1065

slope, but water continued to run against the house and the basement

continued to flood. In April 1985, the Reutepohlers called Gene Giehl
of G & S Homes, who advised them that the cracks in the wall needed
repair. 2^' G & S Homes attempted to correct the water problem in
April 1985 but additional repairs were required, and the work was not

completed until July 1986. In 1987, the Reutepohlers contacted Lechner

and requested that he pay for the repairs. When he refused, the
Reutepohlers filed suit in small claims court for breach of an implied

warranty of habitability.^" The trial court awarded the Reutepohlers

$3,000 (the jurisdictional limit) plus costs, and the Lechners appealed.^"

Two issues were raised on appeal: (1) was the action barred by
the statute of limitations; and (2) was the action barred by the release

provision contained in the purchase agrcement. ^^^^ Regarding the first

issue, the court observed that the Lechners were not required to plead

the statute of limitations as an affirmative defense because the action

was filed in a small claims court. ^" Nevertheless, the party claiming

the statute of limitations as an affirmative defense must litigate the

issue at trial, and the Lechners did not raise the statute of limitations. ^^^

Although the issue had been waived, the court nevertheless stated that

the statute of limitations for breach of the implied warranty of hab-

itability was six years.^^

The Reutepohlers had argued that Indiana Code section 34-4-20-2

should apply. This provision states that an action to recover damages

to property arising out of a deficiency in the construction of an

improvement to real property must be brought within ten years of the

completion of the improvement."^ The court rejected this argument
holding that this statute was a statute of repose, not a statute of

limitations."^ Read together with Indiana Code section 34-1-2-1, which

251. Id.

252. Id. at 1146. The court appeared to have presumed Lechner's status as a builder-

vendor. The facts indicate that Virgil Lechner provided the blueprints and hired subcontractors

to do the actual construction. Id. at 1145. Furthermore, because he sold 12 other houses

using a similar method it appears that he was in the business of selling houses to the general

public. Perhaps the court did not find it necessary to discuss this point. The court subsequently

found Lechner not liable for breach of an implied warranty of habitability because of the

release clause in the purchase agreement. Id. at 1147-48.

253. Id. at 1146.

254. Id.

255. Id.

256. Id.

257. Id. at 1147 n.l (citing Ind. Code § 34-1-2-1 (1988)).
258. Id. The cited statute also provides that an action may be brought within 12 years

after the completion and submission of plans and specifications to the owner if the action

is for design deficiency. Ind. Code § 34-4-20-2 (1988).
259. Lechner, 545 N.E.2d at 1147 n.l.



1991] PROPERTY LAW 1101

requires that an action for injury to property other than personal

property be commenced within six years after the cause of action has
accrued, these statutes indicate that a party has six years to bring an

action for breach of an implied warranty of habitability after the harm

occurs. Thus, if the cause of action began when the Reutepohlers

discovered the water problem in 1981, their suit in 1988 would have

been barred by the six-year statute of limitations even though the

statute of repose had not yet expired. ^^^

C Waiver of the Implied Warranty of Habitability
In Lechner, the Lechners listed the house for sale with Century

21 Realty while it was still under construction. ^^^ All negotiations and

transactions connected with the sale were conducted through Century

21. The Lechners had sold twelve other homes using a similar method.^"

The purchase agreement contained a provision releasing the seller from

all liability relating to any defect in the house.^^^

Although the Reutepohlers contended that the release provision

failed for lack of adequate consideration, the court found that the

mutual promises of the Reutepohlers to buy and the Lechners to sell

the house for $65,000 were adequate consideration to support the

purchase agreement.^^ The court likewise rejected the Reutepohlers'

argument that the provision should be considered void as against public

policy. The court stated that **no public policy prevents parties from

agreeing in advance that one is under no obligation of care for the

benefit of the other," even if the conduct would otherwise be negli-

gent. ^^^

However, the court, in a footnote, emphasized that the purchase

of the house occurred in 1981, before the enactment of Indiana Code
section 34-4-20.5-9. This section sets forth specific requirements that

a builder-vendor must comply with before disclaiming the implied

warranties of habitability in the sale of a new home.^^^

260. Id.

261. Id. at 1145.

262. Id.

263. Id. at 1148. The purchase agreement stated:

Inspection of the real estate and improvements thereon is hereby waived by Purchaser

who is relying entirely for its condition upon Purchaser's own examination and
Purchaser hereby releases the Seller, Broker, and their sales agents from any and

all liability relating to any defect or deficiency affecting the real estate and im-

provements which release shall survive the closing of this transaction.

Id.

264. Id.

265. Id.

266. Id. at 1148 n.3.



1102 INDIANA LAW REVIEW [Vol. 24:1065

An identical release provision was involved in Callander v. Sher-
idan. ^^^ In Callander, the purchasers, the Sheridans, filed suit against

the builder-vendor, Callander, alleging a breach of the implied warranty

of habitability.2^^ The trial court awarded the Sheridans $11,000 in

damages.^^^

On appeal, Callander argued that the release clause in the purchase
agreement barred any recovery against him. The court observed that

the release clause was contained in a section of the purchase agreement

entitled ** Inspection'' and that a box had been checked with a typed

*'x." ^^^ Based upon the wording of the release clause and its location
in the purchase agreement, the court concluded that the provision only

applied to defects discoverable by a reasonable inspection of the prem-

ises. ^^' The defects were not discoverable by a reasonable inspection;
therefore, the release clause was inapplicable.^^^ The court further noted
that Callander was a **builder-vendor," not just a '^seller" and the

wording of the clause did not explicitly release a builder-vendor from

Hability.2^3

The effect of a release provision in a purchase agreement involving

the sale of a used home by a non-builder vendor was raised in Kaminszky
V. Kukuch.^''^ Kukuch, the owner of rental property, employed a pro-

fessional contractor to install insulation in the house. Kukuch did not
select the type of insulation nor did he inquire as to the type of

insulation, but instead relied upon the contractor to use the best

267. 546 N.E.2d 850 (Ind. Ct. App. 1989).

268. Id.

269. Id. at 851.

270. Id. at 853.

271. Id. Decisions from other jurisdictions have also concluded that "as is" provisions

only w£iive patent defects and do not apply to latent defects not discoverable by a reasonable

inspection. E.g., Wawak v. Stewart, 247 Ark. 1093, 449 S.W.2d 922 (1970) (such provisions
should be construed against the seller).

272. Callander, 546 N.E.2d at 853. The defects were not visible at the time of the

sale, and an expert witness testified that the problem resulted from a lack of footing below

the frost line that could not be determined until after excavations.

273. Id. In a separate dissenting opinion, Chief Judge Ratliff observed that in Lechner

V. Reutepohler, 545 N.E.2d 1144, 1148 (Ind. Ct. App. 1989), an identical provision was

found to bar recovery against the builder-vendor for defects in the foundation of the house.

The language in the releeise provision was clear and unambiguous and released the seller from

all liability arising out of defects in the premises, even latent defects, and at the time the

purchase agreement was entered into there was no public policy prohibiting such a release.

Callander, 546 N.E.2d at 854 (Ratliff, C.J., dissenting). The language "at the time the purchase

agreement was entered into" suggests that Judge Ratliff might not be certain such a clause

would be effective today to release the builder-vendor because of the subsequent enactment

of Indiana Code § 34-4-20.5-9, which now governs the disclaimer of the implied warranty
of habitability by a builder-vender. See Ind. Code § 34-4-20.5-9 (1988).

274. 553 N.E.2d 868 (Ind. Q. App. 1990).



1991] PROPERTY LAW 1103

insulation available. In 1985, the Kaminszkys purchased the house from

Kukuch. They inspected the house three times before purchasing it,

observing insulation similar to the type installed at a previous residence.

The house obviously had been insulated because there were plugs visible

on the outside of the house. After purchasing the house, Judith Ka-

minszky noticed a **different'* taste in her mouth and began to ex-
perience skin irritation and dizziness. Subsequently, the Kaminszkys

found a type of insulation different from the type they observed during

the original inspection. It proved to be urea-formaldehyde foam in-
sulation. The Kaminszkys subsequently filed suit for damages and
rescission, alleging breach of an implied warranty of habitability, failure

to disclose, and mutual mistake. ^''^ After a bench trial, the court found

for Kukuch. ^^^

The Kaminszkys first argued that the formaldehyde insulation was

a latent defect, which constituted a breach of the implied warranty of

habitability. The court did not address this issue because it found that
Kukuch was not a builder-vendor and that Vetor v. Shockey^'^'' limited
the implied warranty of habitability to builder-vendors.^^*

Second, the Kaminszkys argued that Kukuch was under a duty to
disclose the existence of the formaldehyde insulation. In response to

this argument, the court remarked that the trial court had found that

the seller made no fraudulent statements or misrepresentations. ^^^ In
addition, the court noted that Kukuch had relied on the contractor to
use the best insulation available and that he was unaware of the type

of insulation installed.^*°

The court concluded that the inspection clause in the purchase
agreement protected the seller from liability for latent defects.^*' The

court distinguished Callander v. Sheridan ^^^^ which had held a similar

inspection clause did not release a builder-vendor from liability on the

grounds that Kukuch was only a seller and not a builder-vendor.^"

275. Id. at 870. Because the Kaminszky's presented no argument on the issue of mistake,

the court did not address this issue in the opinion. See id. at 870 n.l.

276. Id. at 869-70.

277. 414 N.E.2d 575, 577 (Ind. Ct. App. 1980).

278. Kaminszkyy 553 N.E.2d at 870. The Kaminszkys claimed that Kukuch acted as

a general contractor and should be held liable as a builder-vendor. The court, however, found

that Kukuch did not act as a general contractor but instead hired a professional to install

the insulation. Id.

279. Id.

280. Id.

281. Id. at 871.

282. 546 N.E.2d 850 (Ind. Q. App. 1980).
283. Id. at 853.



1104 INDIANA LAW REVIEW [Vol. 24:1065

Although the court did not address the issue, it is unlikely that a

seller would be protected against liability by a release provision when
the sellers made an express misrepresentation.^**

D, Who is a Builder-Vendor?

In Callander v. Sheridan,^^^ Ray Callander employed several sub-
contractors to build a house for his family. Callander subsequently

sold the house to the Sheridans, who brought this action alleging defects
in the foundation and construction of the home. The trial court awarded
the Sheridans $11,000 damages.^^^

Callander contended that he was exempt from an implied warranty

of habitability because he was not in the business of building homes
for resale and lacked the experience and training of those in the building

trade. ^^^ The court responded that Callander had obtained the plans
for the house from a builder, and had modified them.^** Callander

also obtained a building permit in his own name, hired subcontractors,
purchased electrical equipment and lumber for the house, told a sub-

contractor where to put the basement and how deep it should be,
instructed a subcontractor on where and when to backfill, and placed
a motor home on the premises from which to observe the work being
done in the evenings. Callander did most of the electrical wiring, stained

the molding, laid the ceramic floor, and did the landscaping. In his

brief, Callender admitted acting as his own general contractor.^^^ The
court concluded that because he undertook to act as a general con-

tractor, he must assume the responsibility and the liability of a builder-

vendor to a subsequent buyer.^^o Thus, the court refused to limit the

implied warranty to builder-vendors in the business of building homes
for resale to the general public. ^^'

284. See, e.g., Indiana Bank & Trust Co. v. Perry, 467 N.E.2d 428 (Ind. Ct. App.
1984).

285. 546 N.E.2d 850 (Ind. Ct. App. 1989).

286. Id.

287. Id. at 852. Callander lived in the house from 1976 until he sold it to the Sheridans

in August 1979. Id. at 851. The facts did not indicate Callander's reason for selling.

288. Id. at 852.

289. Id.

290. Id.

291. Id. Other jurisdictions have limited the implied warranty of habitability to com-

mercial builders in the business of building homes and have not created an implied warranty

when the vendor is a casual builder. See, e.g., Dryden v. Bell, 158 Ariz. 164, 761 P.2d 1068

(1988) (warranty does not apply to house built for personal use); Siders v. Schloo, 188 Cal.

App. 3d 1217, 233 Cal. Rptr. 906 (1987) (no implied warranty when the sellers were not in

the business of selling houses and built the house for their own use); Dawson Ind. Inc. v.



1991] PROPERTY LAW 1105

In Deckard v. Ratcliff,^'^^ Deckard built a house in 1979 and lived

in it for approximately eight years before selling the house to the

Hendersons, who in turn sold it to the Ratcliffs. The Ratcliffs later
sued Deckard alleging a breach of the implied warranty of habitability.^^^

In reversing a $3000 judgment in favor of the plaintiffs, the court of

appeals questioned whether Deckard was, in fact, a builder-vendor.

He had built the house for his own use and lived in it with his family
for eight years before being forced to sell the house because of a drop

in his income. ^^"^ The majority opinion, however, never reached this

issue because it determined that even if he was a builder-vendor, he

was never provided an opportunity to repair the defect. ^^^

D. Requirement that Builder-Vendor be Notified and

Provided Opportunity to Cure Defect

In Deckard v. Ratcliff,^^^ the court of appeals reversed a $3000
judgment against the builder-vendor for breach of an implied warranty

of habitability because the builder-vendor had not been notified of the

alleged defect or given the opportunity to repair it.^^'' Under Indiana

law, notice to the builder-vendor of the alleged defect and the op-

portunity to repair is a condition precedent to the purchaser's recovery

Godley Constr. Co., 29 N.C. App. 270, 224 S.E.2d 266 (1976) (warranty limited to sale of

new dwellings by a builder-vendor in the business of building homes). It is interesting to

note that the Indiana Court of Appeals has refused to recognize an implied warranty of

habitability in a residential lease by a "non-merchant" landlord. Zimmerman v. Moore, 441
N.E.2d 690, 696 (Ind. Ct. App. 1982).

292. 553 N.E.2d 523 (Ind. Ct. App. 1990).

293. Id. Indiana has extended the builder-vendor's implied warranty of habitability to

subsequent purchasers, thus allowing the Ratcliffs to sue Deckard for an alleged breach of

the implied warranty. Barnes v. Mac Brown, 264 Ind. 227, 342 N.E.2d 619 (1976).
294. Deckard, 553 N.E.2d at 523-24. Several courts have refused to find an implied

warranty of habitability when the builder did not build the house for resale to the public

but was later forced by economic reasons or a job transfer to sell the house. E.g., Dryden

V. Bell, 158 Ariz. 164, 761 P.2d 1068 (1988) (warranty does not apply to house built for

personal use); Siders v. Selco, 188 Cal. App. 3d 1217, 233 Cal. Rptr. 906 (1987) (no implied

warranty when the sellers built the house for their own use but were later forced to sell it).
However, if the builder is a merchant in the business of selling homes to the public, the

fact that the builder lives in the house or rents the house to a tenant prior to offering it

for sale does not prevent the imposition of an implied warranty of habitability in the subsequent

sale. E.g., DeRoche v. Dame, 75 App. Div. 384, 430 N.Y.S.2d 390 (1980); Mazurek v.

Nielsen, 42 Colo. App. 386, 599 P.2d 269 (1979).

295. Deckard, 553 N.E.2d at 523. Judge Staton, in his concurring opinion, considered

Deckard a builder-vendor, even though he was not in the business of selling homes. Deckard

"assumed the attached liability of a builder-vendor to a subsequent buyer" when he sold the

house. Id. at 524 (Staton, J., concurring).

2%. 553 N.E.2d 523 (Ind. Ct. App. 1990).
297. Id.



1106 INDIANA LAW REVIEW [Vol. 24:1065

for breach of the implied warranty of habitability.^^* The court found

that Wagner Construction Co. v. Noonan was dispositive. ^^^ Thus, the
court followed the rule that

before a purchaser of a residence may seek damages from the
builder-vendor for an alleged breach of implied warranty of

fitness for habitation, wherein the damages sought are based

upon the cost of repair or diminution in value of the residence,

the purchaser must, as a condition precedent to recovery, give

notice of the defect and alleged breach of warranty to the

builder-vendor thus affording the builder-vendor an opportunity

to remedy the defect.^^

E. Conditions that Constitute Breach of the

Implied Warranty

In Callander v. Sheridan, ^^^ Callander sold a house to the Sheridans

in August 1979. The Sheridans moved into the house in February 1980.
That summer, they noticed cracks in the concrete porch and sidewalk,

which grew larger over the next few years. They also noticed that four

brick pillars supporting the roof overhang began to bow. The trial

court found that there was a breach of the implied warranty of hab-

itability and awarded damages. ^°^

On appeal, Callander claimed there was no breach of the implied
warranty of habitability because the house was still habitable. ^^^ The

court rejected this argument, finding that a breach of the implied

warranty of habitability is established by proof of a defect that sub-

stantially impairs the enjoyment of the residence.^^ The evidence ad-
mitted at the trial justified the court's finding that the pillars were in

imminent danger of collapse and that the defects interfered with the

Sheridans' use and enjoyment of the house. ^°^ Thus, the defective

298. Id. at 523-24.

299. Id. (citing Wagner Constr. Co., Inc. v. Noonan, 403 N.E.2d 1144 (Ind. Ct. App.

1980)).

300. Id. (quoting Wagner, 403 N.E.2d at 1150).

301. 546 N.E.2d 850 (Ind. Ct. App. 1989).

302. Id. at 851.

303. Id. at 852-53.

304. Id. at 853.

305. Id. at 852-53. There appears to be disagreement concerning the degree to which

the house must be unlivable or uninhabitable before there is a breach of the implied warranty.

A few courts appear to require that the defect render the house uninhabitable. E.g., Aronsohn
V. Mandara, 98 N.J. 92, 103-05, 484 A.2d 675, 681-82 (1984) (the defect must affect habitability);

Stuart V. CaldweU Banker Commercial Group, Inc., 745 P.2d 1284, 1289-90 (Wis. 1987) (the



1991] PROPERTY LAW 1107

condition does not have to render the house totally uninhabitable or

unlivable before there is a breach of the implied warranty. ^°^

In a concurring opinion in Deckard v. Ratcliff,^^'^ Judge Staton

addressed the liability of the builder-vendor under the implied warranty

of habitability in an action by a subsequent purchaser. The alleged

defect was an insect problem caused by an improperly vented sewer

pipe. Although the Ratcliffs were not the immediate purchasers of the

house from Deckard, in Barnes v. Mac Brown and Company, the
Indiana Supreme Court extended the builder-vendor's implied warranty

of habitability to subsequent purchasers. ^°* The supreme court in Barnes

limited the implied warranty to latent defects. ^°^ Assuming that the

defect was latent, ^^° liability does not automatically follow. Rather, the

test is one of reasonableness in light of the surrounding circumstances.

Among the factors to be considered in applying the test are the age
and maintenance of the home, its use, and any other factors that might

aid the fact finder in making this determination.^*'

Judge Staton further observed that the legislature had likewise

recognized the factual nature of the implied warranty when, in a statute

defect must profoundly compromise the essential nature of the property as a dwelling). Other

courts have indicated that the warranty is one of workmanlike quality and if the construction

falls below this standard there is a breach of the warranty. E.g., Gaito v. Auman, 327 S.E.2d

870, 877 O^.C. 1985) O^uilder has a duty to perform work in an ordinarily skillful manner);

Griffin v. Wheeler-Leonard & Co., 225 S.E.2d 557, 567 (N.C. 1976) (quality, not livability,
is the test for breach of warranty); Evans v. J. Stiles, Inc., 689 S.W.2d 399, 400 (Tex. 1985)

(builder-vendor warrants both workmanship and habitability).

306. Callander, 546 N.E.2d at 853. Several courts have also concluded that a condition

need not render the premises unlivable. In Petersen v. Hubschman Constr. Co., Inc., 76 111.

2d 31, 389 N.E.2d 1154 (1979), the court suggested the term habitability may be unfortunate
and that the warranty is more like the warranty of merchantability and fitness of use contained

in the UCC. Id. at 41-42, 389 N.E.2d at 1158-59.
307. 553 N.E.2d 523 (Ind. Ct. App. 1990).

308. 264 Ind. 227, 342 N.E.2d 619 (1976).

309. Id. at 331, 342 N.E.2d at 621.

310. Judge Staton remarked that according to Indiana law there are three components

to a latent defect:

1. It is not discoverable by a purchaser's reasonable inspection;

2. It manifests itself after purchase; and,

3. It substantially impairs enjoyment of the residence.

Deckard, 553 N.E.2d at 524 (Staton, J., concurring).

Judge Staton did not believe that the defect in Deckard was latent because the Ratcliffs

discovered one of the improperly vented sewer pipes when they inspected the house before

the purchase and were on notice that other pipes might be improperly vented. However, for

purposes of discussion, he was willing to assume that the defect was latent. Id.

311. Id. (citing Barnes, 342 N.E.2d at 621). See also Gaito v. Auman, 313 N.C. 243,
327 S.E.2d 870 (1985) (whether there has been a breach of the warranty must be determined

on a case-by-case basis) (citing Barnes v. Mac Brown Co., Inc., 264 Ind. 227, 342 N.E.2d
619 (1976)).



1108 INDIANA LAW REVIEW [Vol. 24:1065

permitting the builder-vendor to disclaim the implied warranties in

exchange for express statutory warranties, it defined the implied war-

ranties as ** unwritten warranties relating to the reasonable expectations

of a homeowner with regard to the construction of the homeowner's

home, as those reasonable expectations are defined by the courts on

a case-by-case basis.
''^^^

Here the insect problem caused by the improperly vented sewer

pipe was discovered almost ten years after the construction of the

house was completed. Under the circumstances. Judge Staton concluded

that Deckard had no duty to repair because he did not breach the

implied warranty of habitability.^'^

312. Deckard, 553 N.E.2d at 525 (quoting Ind. Code § 34-4-20.5-9(b) (1988)).
313. Id. (Staton, J., concurring). Judge Staton indicated that findings of fact by the

trial court would assist the court of appeals in its review of this factual determination. Id.