Indiana Law Review


Recent Developments in Indiana Contract Law

Timothy A. Ogden*

Introduction

Indiana courts addressed a number of significant contract law issues during
the review period, both in the common-law context and in the context ofthe sale
of goods under Article 2 of the Uniform Commercial Code. Several of those

decisions addressed questions of first impression in Indiana, while others

provided useful reminders of important issues to Indiana attorneys.

I. The Discovery Rule and the Statute of Limitations in
Contract Actions

mm
Meisenhelder v. Zipp Express, Inc.^ involved the question of whether the Lb

discovery rule applied to the statute of limitations in a contract action. In that If"**

case, the plaintiff entered into an employment contract on September 1 , 1 986, and wm
he did not dispute that any claim he had for breach of contract had to be initiated JS"
"within ten years after the cause of action accrued."^ He disagreed with his |P
employer, however, about when the cause of action accrued and, thus, when the ^
statute of limitations began to run. ^

The Indiana Court of Appeals began its analysis by carefully reviewing IL
Habig V. Bruning? It noted that it was not entirely clear in Habig whether the 7'

court was treating the claims there (for breach of contract, breach of warranty of
IP»

habitability, and breach of warranty of workmanship) as contract claims or tort Lj

claims.'' In reaching its conclusion that the discovery rule applied to the statute >
of limitations governing those claims,^ the court in Habig relied on three cases C
that involved torts,^ suggesting that the court viewed the case before it as a tort m

* Partner, Ogden & Ogden LLP, Warsaw. Professor of Business, Manchester College.
B.A., with distinction, 1987, Manchester College; M.B.A., 1989, Peter F. Druckerand Masatoshi

Ito Graduate School of Management, Claremont Graduate University; J.D., summa cum laude,
1996, Indiana University School of Law—Indianapolis. The author expresses thanks to Lynn M.
Hefner, B.S., cum laude, Manchester College, 2004, for her research and editorial assistance in
preparing this Article. Ms. Hefner will enroll at Valparaiso University School of Law in the fall
of 2004.

1. 788 N.E.2d 924 (Ind. Ct. App. 2003).

2. Meisenhelder, 788 N.E.2d at 927. The relevant statute of limitations provides as follows:

"An action upon contracts in writing . . . must be commenced within ten (10) years after the cause

of action accrues." Ind. Code § 34-1 1-2-11 (1998).

3. 613 N.E.2d 61 (Ind. Ct. App. 1993).

4. Meisenhelder, ISSr^.E.ld at 929.

5. The applicable statute of limitations in Habig covered "(
I
) accounts and contracts not in

writing, (2) use, rents, and profits of real property, (3) for injuries to property other than personal

property, and (4) relief against frauds." Id. (citing former iND. CODE § 34-1-2-1). This code
section is now codified at Indiana Code section 34-1 1-2-7 (1998).

6. See Wehling v. Citizens NatT Bank, 586 N.E.2d 840 (Ind. 1992); Burks v. Rushmore,

534 N.E.2d 1 101 (Ind. 1989); Barnes v. A.H. Robins Co., Inc., 476 N.E.2d 84 (Ind. 1985). The



976 INDIANA LAW REVIEW [Vol. 37:975

claim/ Arguably then, its holding regarding the applicability of the discovery
rule could have been "limited to tort claims for injuries to real property."^ But the
court in Habig went on to say that "[i]t would be wholly incongruous to interpret
IC 34-1-2-1 as requiring the discovery rule in tort cases but not in other cases
covered by the particular statute of limitations."^

The court in Meisenhelder extended this line of thought to the statute of
limitations at issue there.

If it was incongruous to apply the discovery rule only to tort claims under
I.e. § 34-1-2-1, now I.C. § 34-1 1-2-7, it would be just as incongruous to
apply the discovery rule to tort claims formerly covered by I.C. § 34- 1 -2-

2(1), but not the other claims . . . covered by . . . the statute of limitations
at issue before us today.

'°

The court went on to cite New Welton Homes v. Eckman^^ and concluded:
"the discovery rule is applicable to actions for breach of a written contract under

I.C. § 34-1 1-2-1 1, and . . . Meisenhelder' s cause ofaction accrued when he knew,
or in the exercise of ordinary diligence, could have discovered, that his

employment contract had been breached.'"^ The court found, however, that the
plaintiff knew about the breach in 1987, and thus his lawsuit was still time
barred.'^

II. Violation OF CoNTRACTED-FOR Arbitration Clauses: Stay of
Proceedings or Dismissal

Indiana CPA Society, Inc. v. GoMembers, Inc. ^^ presented an issue of first

relevant statute of limitations in these cases was the former Indiana Code section 34-1-2-2.

Meisenhelder, 788 N.E.2d at 928. The limitations periods contained in that section ofthe code are

now codified at Indiana Code sections 34-1 1-2-4 to -6, -8 to -9, -1 1 (1998). Meisenhelder, 788

N.E.2d at 928 n.4.

7. Meisenhelder, 788 N.E.2d at 929.

8. Id

9. Habig v. Bruning, 613 N.E.2d 61, 64 (Ind. Ct. App. 1993) (citation omitted).

10. Meisenhelder, ISS^.E.ld at 929.

11. 786 N.E.2d 1 1 72 (Ind. Ct. App. 2003), vacated by 2003 Ind. LEXIS 742 (Ind. Sept. 4,

2003). The court in New Welton stated,
Since we have applied the discovery rule to breach of contract cases where the statute

of limitations operates to foreclose untimely claims, then it follows that the discovery

rule should also be applied to breach ofcontract cases where the parties have shortened

by contract the time within which suit may be brought and the time of breach is not

fixed or readily ascertainable.

Id. at 1 1 77. It will be interesting to see whether the Indiana Supreme Court upholds this decision.

1 2. Meisenhelder, 788 N.E.2d at 930. It is not clear whether the lawsuit was filed in 1 999

or 2000, but in any case, Meisenhelder missed the ten-year deadline. Id. at 926, 931

.

13. Id at 930-31.

1 4. 777 N.E.2d 747 (Ind. Ct. App. 2002).



ijiriui"

2004] CONTRACT LAW 977

impression in Indiana in the arbitration context: whether, in a situation where

parties have contracted to arbitrate their disputes, and despite that agreement, one

of the parties initiates a lawsuit, the court should dismiss the case or stay the

proceedings pending the outcome of the arbitration. The Indiana CPA Society
("Society") entered into a contract requiring GoMembers to perform some work
on Society's web site. The contract contained a clause requiring disputes to be
submitted to arbitration,'^ but when a problem arose. Society filed a breach of
contract claim in Marion County Superior Court rather than seeking arbitration.

GoMembers filed a motion to dismiss, which the trial court granted.
The court of appeals analyzed cases from other jurisdictions to assist it in

deciding this issue. For example, in Shribman v. Miller^^ the court concluded that

if the clause in the contract that required arbitration was phrased as a condition

precedent to a lawsuit, then it would be appropriate for a court to dismiss an

action brought before the parties had arbitrated the dispute.'^ However, if the

contractual language did not make arbitration a condition precedent to a claim in \w*
court, then it would be appropriate for the court to stay the proceedings pending

the outcome of the arbitration.'^

Other jurisdictions have held that where a plaintiff ignored the arbitration

clause in the contract and proceeded directly to the courts, the defendant could

seek summary judgment (on the theory that the plaintiff failed to exhaust his or
her administrative remedies), or the defendant could seek to stay the proceedings

pending arbitration.'^ One court also suggested that ifthe premature lawsuit were
dismissed without prejudice, the practical effect would be the same as staying the

proceedings, and apparently either approach would be acceptable.^^ Y
The Indiana Court of Appeals recognized that when faced with these factual J

circumstances, some courts in Indiana have stayed the proceedings, and others ]&
have dismissed the lawsuits; however, the courts have not clarified why their
chosen actions were appropriate.^' After considering the numerous alternatives, ^
the court of appeals concluded that the best course of action was to allow the

jj

courts to "exercise their discretion to either stay or dismiss litigation based on the i
nature of the contested issues that should first be submitted to arbitration."^^ It «|

. 4

1 5. "Disputes under this Agreement shall be submitted to binding arbitration in accordance

with the procedures ofthe American Arbitration Association." Id. at 749 (quoting Appellant's App.

at 12).

16. 158 A.2d 432 (N.J. Super. Ct. Ch. Div. 1960).

1 7. Ind. CPA Soc 'y. 111 N.E.2d at 75 1 (citing Shribman, 1 58 A.2d at 438).

1 8. Id. The court in Shribman stated that arbitration would be a condition precedent to

bringing a lawsuit in court if the clause in the contract stated that "the parties may not resort to the

courts for the resolution of [their] disputes, unless and until" the disputes have been submitted to

arbitration and a determination has been made. Id. (quoting Shribman, 1 58 A.2d at 438).

19. Id. (citing Charles J. Rounds Co. v. Joint Council of Teamsters, 484 P.2d 1397, 1404

(Cal. 1971)).

20. Id. at 752 (citing Pine Gravel, Inc. v. Cianchette, 514 A.2d 1282 (N.H. 1986)).

21

.

Id. (citations omitted).

22. Id.



978 INDIANA LAW REVIEW [Vol. 37:975

added that in reaching their conclusions, courts might consider the following
factors: whether the court would need to intervene to compel discovery; whether
the court would be asked to enforce the arbitration award; whether the entire
dispute would be submitted to arbitration; which state's law would control the
parties' disputes; and where the parties and the evidence were located.^^

Here, it did not appear that the court would have to oversee the arbitration
proceeding, and the contractual choice of law provision stated that Illinois law

would control disputes between the parties. It was, therefore, not an abuse of
discretion for the trial court to dismiss the lawsuit."^"^

III. A Question of Privity

Young V. Tri-Etch, Inc}^ involved the question ofwho was party to a contract
and thus was subject to its stipulated statute of limitations. Tri-Etch sold and
installed a security alarm system at Muncie Liquors, and Tri-Etch and MLS (the
owner of Muncie Liquors) entered a written contract whereby Tri-Etch would
monitor that system. Apparently, if the alarm had not been set within a certain

length of time following the store's regular closing time, Tri-Etch would call the

store, and if nobody answered, Tri-Etch would contact the general manager, as
well as the police. ^^ The contract included a clause that provided a one-year

statute of limitations for bringing a claim.

In August 1 997, Michael Young, a store employee, was working the late shift

at the store. Shortly before midnight (and before Young set the alarm), a man
robbed the store, kidnapped Young, and took him to a park where he beat him
and tied him to a tree. Young was found, still alive, at approximately 6:00 a.m.,
but he later died of his injuries. His "estate presented some evidence that had
Young been found earlier, he might have survived."^^ Tri-Etch, however, had not
contacted the store or the general manager until approximately 3:15 a.m.

regarding the fact that the alarm had not been set. Consequently, Young's estate

filed a wrongful death claim against Tri-Etch in August 1999, and Tri-Etch filed

a motion for summary judgment, arguing that the one-year statute of limitations
contained in the contract barred the action. The trial court granted the motion,
finding that the time for bringing the wrongful death claim was governed by the
limitation period established in the contract, and the court of appeals affirmed.^*

Upon transfer, the Indiana Supreme Court reversed the judgment. The
supreme court stated that the lower courts had erroneously relied upon Orkin

23. Id.

24. Id.

25. 790 N.E.2d 456 (Ind. 2003).

26. This service was not included in the written contract, but evidence existed that it was a

part of the agreement. The regular closing time was midnight, and generally Tri-Etch contacted

the store or, if no one answered, the general manager by 12:30 a.m. if the alarm had not been set.

Id. at 457.

27. Id

28. Id.



2004] CONTRACT LAW 979

Exterminating Co. v. Walters,^'^ a tort case between two parties who, by entering

into the contract giving rise to the suit, had agreed to the contractual provision

limiting liability. Unlike Orkin, the case at issue was a tort lawsuit between one

party to the relevant contract and another person who "never agreed to the terms
of the contract."^" The court looked to a case from Illinois^^ and a case from

Tennessee^^ for guidance, and then reached the following conclusion: "Since

Young was not a party to the contract, and thus never consented to the terms of
the contract, the contract simply does not impose any obligations or limitations

on him."" Thus the one-year statute of limitations established by the contract

between Tri-Etch and MLS did not bar the wrongful death claim by Young's
estate.

IV. Covenants NOT TO Compete IT
|irfj}n

Several important cases decided during the review period dealt with j*

covenants not to compete. In Robert 's Hair Designers, Inc. v. Pearson,^* hair mm

stylists Pearson and Walsh had signed non-compete agreements which provided, 3
among other things, that upon leaving Robert's Hair Designers ("Robert's"), the I5
hair stylists would not perform the same or similar services as they had provided

ii,J

to Robert's for any competitor within an eight-mile radius for a period of one ,*

year. Moreover, the agreement included a provision precluding the hair stylists L
from soliciting clients from Robert's.^^ 7*

After becoming dissatisfied with their employment at Robert's, Pearson and mi
Walsh arranged for new employment as hair stylists at Design Lines Hair Salon kt
("Design Lines"), which was located approximately one-halfmile from Robert's. %
Before they left Robert's, they contacted customers to tell them they would be m
leaving and that they would be pleased if the customers would follow them to |p
Design Lines.^^ They left Robert's on July 20, 2002, and began working at m
Design Lines the following week. Both Pearson and Walsh had customers Ip

scheduled for their first day of work at Design Lines, and Walsh stated that most "J
of her customers there had also been her clients at Robert's.^^ Robert's sought a P
preliminary injunction, ^^ but the trial court denied that request following a JC

29. 466 N.E.2d 55 (Ind. Ct. App. 1 984), abrogated by Mitchell v. Mitchell, 695 N.E.2d 920,

922 (Ind. 1998).

30. yoMwg, 790N.E.2dat458.

31. Scott & Fetzer Co. v. Montgomery Ward & Co., 493 N.E.2d 1022 (111. 1986).
32. Lovell V. Sonitrol of Chattanooga, Inc., 674 S.W.2d 728 (Tenn. Ct. App. 1983).

33. KoMwg, 790N.E.2dat459.

34. 780 N.E.2d 858 (Ind. Ct. App. 2002).

35. /^. at 861.

36. Mat 862.
37. Id.

38. In order to obtain a preliminary injunction, the movant must satisfy each ofthe following

requirements: I) the movant does not have an adequate remedy at law and thus will suffer

irreparable harm; 2) the movant has a reasonable likelihood of succeeding at trial; 3) the potential



980 INDIANA LAW REVIEW [Vol. 37:975

hearing.^^

On appeal, Pearson and Walsh did not dispute the enforceability of the
agreement. They did not argue that the covenant not to compete was
unreasonable as to time, geography, or the scope of the prohibited activity, and

they did not dispute that there was a reasonable likelihood that Robert's would
prevail at trial. The focus ofthe appeal was whether a preliminary injunction was
appropriate. Robert's argued that the trial court erred when it concluded that
Robert's failed to show irreparable harm when it decided that the potential harm
to Pearson and Walsh outweighed the threatened harm to Robert's and when it
determined that granting the injunction would do a disservice to the public
interest.^^

The trial court found that Robert's failed "to demonstrate any economic loss
or loss of goodwill" as a result of the breaches,'*' and it appears that the primary

basis for its conclusion was that Robert's experienced an increase in business
revenues in the week following Pearson and Walsh's departure. The court of
appeals, however, disagreed with the lower court. Pearson and Walsh's actions

were a direct cause of the loss of customers that Robert's experienced. "Simply

looking at the Salon's increase in revenues after Pearson and Walsh left is not
sufficient. Had Pearson and Walsh not left, . . . and not taken customers that they
served, Robert's Salon's increase in revenues would have been even greater.'"*^

Moreover, the loss of goodwill that Robert's experienced because ofthe two hair

stylists' current and future violations of the agreement justified finding that it

would suffer irreparable harm."*"^

In short, "[t]his is exactly the type of breach for which injunctive relief is

particularly well suited. Without an injunction, [Robert's] would be forced to

amend [its] complaint repeatedly to include every successive violation (possibly
every day that [Design Lines] remains open) after filing [its]original complaint."^"*

If post-trial damages are not sufficient to satisfy an economic injury, then the

party suffering the damages is entitled to receive injunctive relief*^ The court of
appeals consequently reversed the trial court's decision."*^

injury to the movant outweighs potential harm to the non-movant that would result from granting

the motion; and 4) granting the motion would not disserve the public interest. Id. at 863 (citation

omitted).

39. /^. at 864.

40. Id.

41. Id at 863.

42. /^. at 865.

43. Id.

44. Id. at 866 (quoting Washel v. Bryant, 770 N.E.2d 902, 907 (Ind. Ct. App. 2002)).

45. Id.

46. Regarding the third and fourth requirements that the movant must establish in order to

be entitled to injunctive relief (.yee supra note 38), the court ofappeals stated that the trial court's

findings failed to address how granting the request for an injunction would harm Pearson and

Walsh. Id. at 868. Moreover, it found no evidence to support the lower court's determination that

granting the requested relief would disserve the public interest. Id. at 869.

I



2004] CONTRACT LAW 981

Pathfinder Communications Corp. v. Macy^^ also involved a non-compete

agreement, this time entered into by Dave Macy, a radio personality, with his

employer. Pathfinder Communications ("WOWO"). WOWO hired Macy to
bring his "Macy in the Morning" show format, a talk radio program known for
its conservative, opinionated commentary, to its morning radio show. The
covenant not to compete stated that for twelve months following his termination

of employment with WOWO, Macy would "not engage in activities or be
employed as an on-air personality, either directly or indirectly" with certain radio

stations, including WGL/^
Approximately four years later, WOWO decided to change the format ofthe

show, focusing more on news and local events and avoiding discussion of
controversial issues. WOWO also changed the name ofthe show to "Fort Wayne
Morning News with Dave Macy."'*^ Subsequently, Macy's employment with
WOWO ended following Macy's falsification ofprogram logs. Two months after
that, Macy joined WGL and brought the former "Macy in the Morning" show
format to his new employer.^^ In the ensuing lawsuit, the trial court concluded
that WOWO had no protectible interest in the "Macy in the Morning" program
or in Dave Macy and that the non-compete agreement was not enforceable
because the scope of the prohibited activities was overbroad. Consequently, it

denied WOWO's request for a preliminary injunction.^"
WOWO argued on appeal that it did have a protectible "interest in Dave

Macy, the on-air personality WOWO cultivated . . . regardless of the content of
Macy's radio show . . . ."^^ The court noted that it did not find any case law in
Indiana that addressed this issue, so it looked to the law of other jurisdictions for

help. Relying on decisions from Virginia, Florida, and Alabama," the court

concluded that WOWO did, in fact, maintain a protectible interest in its former
on-air personality:

WOWO invested substantial resources in Macy to promote him in the Ft.
Wayne market. While on the air at WOWO, Macy acted as WOWO's
representative to its listening audience. Also, Macy obtained
employment at WGL, a direct competitor of WOWO with a similar
format, and he is hosting the morning drive time slot, the same slot he
hosted at WOWO. Although WOWO changed the format of Macy's
show, it did so solely in an attempt to expand Macy's listening audience,

which did not, as Macy argues, have the effect of dissipating the

47. 795 N.E.2d 1 103 (Ind. Ct. App. 2003).

48. /^y. at 1107.

49. Id.

50. /of. at 1107-08.

51. /^. at 1108.

52. Id. at .1 1 10 (quoting Appellant's Brief 10).

53. See Cullman Broad. Co. v. Bosley, 373 So.2d 830 (Ala. 1979); TK. Communications,

Inc. V. Herman, 505 So.2d 484 (Fla. Dist. Ct. App. 1987); New River Media Group, Inc. v.
Knighton, 429 S.E.2d 25 (Va. 1993).



982 INDIANA LAW REVIEW [Vol. 37:975

goodwill it had fostered in him.^'*

The court then turned to the scope of the activities proscribed in the
agreement. Focusing on the clause "engage in activities," Macy argued that the
prohibition was overbroad and thus prevented him from being employed by any
competing radio station in any capacity—even if the work was completely
unrelated to the on-air services he had provided to WOWO.^^ The court of
appeals looked to Burk v. Heritage Food Service Equipment, Inc.^^ and
concluded that Macy was correct. It determined that the scope of the proscribed
activities "extend[ed] far beyond WOWO's legitimate interests in Macy, as an
on-air personality," and therefore, this portion of the agreement was
unreasonable.^^

Finally, the court in Pathfinder examined whether the trial court erred in

denying the motion for a preliminary injunction. The court relied heavily on its
analysis of this issue in Robert's Hair Designers, Inc. v. Pearson.^^ The court
distinguished the facts in the case before it from Robert's^ noting that WOWO
had not demonstrated that a single advertiser had defected to WGL as a
consequence of Macy's move to the competitor and that the record did not
indicate whether a significant number of listeners were listening to Macy
following his departure from WOWO.^^ It concluded that WOWO failed to show
that its remedies at law were inadequate, and therefore, the trial court did not

abuse its discretion in denying the motion for a preliminary injunction.^°

One last case decided during the review period that dealt with an interesting
non-compete issue was Vukovich v. Coleman.^^ Vukovich was employed by
International Magnaproducts, Inc. ("IMI"), which was owned by Coleman and
which sold magnets. Vukovich entered into a non-compete agreement with IMI

providing that Vukovich would not "directly or indirectly compete with the

business of the Company . . . during the period of Employment and for a period
of 5 (Five) years following termination of employment . . . ."^^ In cooperation

54. Pathfinder, 795 N.E.2d at 1

1

13.

55. Mat 11 14.
56. 737 N.E.2d 803 (Ind. Ct. App. 2000).

57. Pathfinder, 795 N. E.2d at 1 1 1 4. The court noted, however, that because the contract was

divisible, it could "blue pencil" the agreement, striking the unreasonable language, and leaving

intact the language that was reasonable (i.e., employee will not engage in activities or be employed

as an on-air personality).

58. 780 N.E.2d 858 (Ind. Ct. App. 2003); see supra notes.34-46 and accompanying text.

59. Pathfinder, 795 N.E.2d at 1 1 1 7.

60. Id

61. 789N.E.2d 520 (Ind. Ct. App. 2003).

62. Id. at 522. It is interesting to note that the term "not compete," as used in the agreement,

was defined as follows: "the Employee shall not own, manage, operate, consult to or be employed

in a business substantially similar to or competitive with the present business of the

Company . . . ." Id. (emphasis added). The prohibition against being employed, apparently in any

capacity, is arguably comparable to the language that was "blue penciled" by the court in



2004] CONTRACT LAW 983

with IMI, Vukovich formed and began to operate Alliance Motors LLC, a
company that was supposed to sell motors. In addition, the parties apparently
agreed that Vukovich would start a company called Alliance, LLC. This
company was supposed to service certain clients of IMI "as sales
representative."" Coleman contended, however, that Vukovich violated the non-
compete agreement by selling magnets to people other than those that Vukovich

and Coleman had agreed Alliance, LLC would service. IMI sued, and the trial
court subsequently granted its motion for a temporary injunction.^"^

On appeal, the court noted that in order for a non-compete agreement to be
enforceable, the employer must have a legitimate interest that the covenant is

designed to protect, and the agreement must be reasonable with regard to the time

period covered, the scope of activities proscribed, and the geographic region to

which the non-compete applies.^^ The court concluded that this covenant was

invalid because it contained no limitation with respect to geography: "A covenant
not to compete that contains no geographic limitation is presumptively void."^^

What makes this case interesting is that this issue apparently has not been directly «3
addressed in Indiana for some time because in reaching its conclusion, the court
relied primarily on a case decided in 1973.^^ The court concluded that because

the covenant "as written 'could apply to the entire world,'"^^ and because nothing

in the agreement otherwise limited its geographic scope, it was not valid. The

trial court thus should not have granted the temporary injunction.

V. "Collapse" in an Insurance Contract

In the insurance contract context, the court in Monroe Guaranty Insurance
Co. V. Magwerks Corp.^^ defined the term "collapse" for the first time.^^
Magwerks was a one-story factory with a flat roof that was damaged by
accumulated rain and snow. Roof panels fell to the floor, and water damaged the
company's machinery, inventory, and other materials. Magwerks filed a claim
with its insurer, Monroe Guaranty Insurance Company ("Monroe"), which
Monroe ultimately denied because the "damage did not satisfy the definition of
a 'collapse.'"^' Magwerks sued. The trial court concluded as a matter of law that

Pathfinder, 795 N.E.2d at II 14 as overbroad. See supra note 57 and accompanying text. The

court, however, did not address this issue in Vukovich.

63. Vukovich, 789 N.E.2d at 523.

64. Id.

65. /^. at 525.

66. Id.

67. Id (quoting Struever v. Monitor Coach Co., 294 N.E.2d 654, 655 (Ind. Ct. App. 1973)

("It has long been the law in Indiana that a covenant not to compete containing no spatial

limitations is void and unenforceable.")).

68. Id at 526 (quoting Struever, 294 N.E.2d at 656).

69. 796 N.E.2d 326 (Ind. Ct. App. 2003).

70. Id. Sit 332.

71

.

Id. at 329. The insurance contract provided coverage for "collapse" in some instances.

i
Mill



984 INDIANA LAW REVIEW [Vol. 37:975

Monroe had breached its contractual obligations "because the damage constituted
a 'collapse' under the policy."^^ A jury subsequently awarded Magwerks $1.1
million in compensatory damages and $4 million in punitive damages.^^

On appeal, Monroe argued that "collapse" referred to a situation that "occurs
suddenly and results in complete disintegration."^'* This traditional definition is

narrower, the court noted, than the modern definition of the word, which is used

by the majority ofjurisdictions today. The majority position is that a collapse

occurs when "significant damage to the structural integrity is present,"^^ and some
courts following this line of thinking do not even require parts of the building to

fall. At least fifteen states have chosen to adopt this broader, more modem
definition, and a number of those have done so as recently as 1995.^^

Accordingly, the Indiana Court of Appeals chose to join this group of

jurisdictions.

Magwerks contended that under this definition, there clearly was a collapse
at its factory. The company had to use more than one hundred buckets to catch

water that was leaking into the building, it had to place tarps over the equipment,

and "numerous ceiling panels . . . crashed through the floor."^^ However, Monroe
countered that the roof was poorly designed and that this was part of the reason

for the damage. Moreover, Monroe contended that the fact that its adjuster was

able to walk on the roof without the roof falling in was a strong indication that

there was no collapse. The court of appeals ultimately concluded that neither
party had presented enough evidence for the trial court to determine whether a

collapse had occurred under the modern definition of the word, and it remanded

the case.^^

but the term was not defined in the contract. Instead, the agreement listed scenarios that did not

amount to a collapse. Id. at 332.

72. /flf. at330.

73. Id. The jury concluded that Monroe had handled the claim in bad faith—hence the
punitive damages award. Id.

74. Id. at 332 (citing Dominick v. Statesman Ins. Co., 692 A.2d 188, 191-92 (Pa. 1997)). "A

partial collapse of a part is entirely outside the contemplation of the parties to the insurance

contract." Id. (quoting Williams v. State Farm Fire & Cas. Co., 514 S.W.2d 856, 860 (Mo. Ct
App. 1974)).

75. Id. at 333 (citing Guyther v. Nationwide Mut. Fire Ins. Co., 428 S.E.2d 238, 240 (N.C.

Ct. App. 1993)).

76. Only nine states use the traditional definition of "collapse," and no jurisdiction has

adopted the traditional definition since 1 970. Id. (citing What Constitutes "Collapse " ofa Building

Within Coverage ofProperty Insurance Policy, 71 A.L.R.3d 1072 §§ 3, 4 (1976 & Supp. 2002)).
77. Id.

78. /flf. at334.



79. 792 N.E.2d 893 (Ind. Ct. App. 2003).

80. /c^. at 896.

81. "A party seeking specific performance of a real estate contract must prove that he has

substantially performed his contract obligations or offered to do so." Id.

82. "Our courts generally will not exercise equitable powers when an adequate remedy at law

exists." Id. at 897 (citations omitted).

83. Id

84. Id. The court cited cases from Maine, North Dakota, Illinois, Pennsylvania, and

Colorado, primarily for the proposition that specific performance is only appropriate if the party

does not have an adequate remedy at law. Id.

85. 789 N.E.2d 1025 (Ind. Ct. App. 2003).

2004] CONTRACT LAW 985

VI. Remedies

A. Specific Performancefor Sellers ofReal Property

Two recent decisions addressed the issue of awarding specific performance
to the seller in a transaction for the sale of real property. In Kesler v. Marshall,

^"^

Kesler entered into an agreement to purchase Marshall's property, but Marshall

was required, as a condition precedent to Kesler' s obligation, to show in writing

"that the property could be used in any manner under M-1 zoning."*° The court

of appeals concluded that there was insufficient evidence presented in the trial
court to show that Marshall had satisfied this condition, and thus, the lower court
erred in granting Marshall specific performance.^'

The court went on, however, to analyze the general appropriateness of
granting specific performance to sellers in real estate transactions, and it focused

on whether Marshall would have had an adequate remedy at law.^^ The court
noted that Marshall held Kesler's earnest money, which he could have kept upon [S
termination of the agreement, and that he then could have sold the property to

«»f

someone else. If, upon selling the property, he had not received the full benefit U
of his original bargain with Kesler, he could have sought the difference in money mm
damages. This would have made him whole.^^ Finally, the court stated that "the m^
traditional rationale underlying the grant of specific performance in real estate //)
transactions, i.e., that each piece of property is unique, does not apply here to the •'

party seeking specific performance, Marshall, because he is not obtaining the
I"*

property in the transaction, but rather only money."*'* If Marshall had been P
entitled to a remedy, his remedy at law would have been adequate, and thus he i€j

should not have been awarded specific performance. *•

In Humphries v. Ables^^ the same panel of the court of appeals that decided f"
Kesler reached the opposite conclusion with regard to the appropriateness of !£

awarding specific performance to the seller in the real estate transaction at issue J£
there. Max and Betty Abies owned a liquor store that Marc and Kelle Humphries C
wished to purchase. The parties entered into a contract for sale of the property, ||2
but the Humphries ultimately failed to perform their obligations under the ^
agreement. The Abies sued for breach of contract and prevailed, and the trial

*^



986 INDIANA LAW REVIEW [Vol. 37:975

court awarded them, as sellers, specific performance of the contract.^^

The court of appeals stated, "It is a matter ofcourse for the trial court to grant
specific performance of a valid contract for the sale of real estate,"^^ and it
essentially ignored whether the seller had an adequate remedy at law. Instead, the
majority turned to Migatz v. Stieglit^^ where the Indiana Supreme Court awarded
specific performance to the seller in a real estate transaction:

The equitable doctrine is that the enforcement of contracts must be
mutual, and, the vendee being entitled to specific performance, his

vendor must likewise be permitted in equity to compel the acceptance of

his deed and the payment of the stipulated consideration. This remedy
is available, although the vendor may have an action at law for the
purchase money.^^

The court in Humphries noted that it had found no authority that changed "this
time honored principle,"^^ and it went on to say that "vendors traditionally have

qualified for the remedy of specific performance of a real estate contract after a
purchaser's breach."^"

An important distinction between this case and Kesler is that the contract
between the Humphries and the Abies explicitly provided the remedies that the

sellers could pursue following the buyers' breach. Specifically, the agreement

stated that upon breach, the Abies could "declare the entire unpaid balance ofthis

contract immediately due and payable, and in such event. Sellers may pursue
whatever remedies, legal or equitable, are available to collect the entire unpaid

balance of the purchase price. "^^ The court stated that it would not "invalidate a
remedy for which the Sellers contracted."^^ The parties agreed, oftheir own free
will, that specific performance was an appropriate remedy, and the courts will

enforce contracts that are "entered into freely and voluntarily."^"^

This difference in facts between Kesler and Humphries and the assertion

made by the Indiana Supreme Court in Migatz do not seem to be enough, though,

86. Id. at 1029.

87. /^. at 1034.

88. 77 N.E. 400 (Ind. 1906).

89. Id. at 401 . It is interesting to note that Judge Sullivan, in his concurring opinion in Kesler

V. Marshall, cited this same passage from Migatz, but still concluded that Marshall, the seller, was

not entitled to specific performance. Kesler, 792 N.E.2d at 898 (Sullivan, J., concurring).

90. Humphries, 789 N.E.2d at 1035.

91. Id. (citing 14 JAMES H. Backman, Powell ON Real Property § 81.04[l][a] (2003)).

Aside from the omission of any discussion ofwhether the sellers' remedy at law was adequate, this

assertion is even more curious given that the court also stated that the number of cases in Indiana

awarding specific performance of a real estate contract to a seller was "rather small," and that the

reasons for doing so are "less compelling than the reasons for awarding specific performance to

purchasers following a vendor's breach . . . ." Id.

92. Id. (quoting Appendix at 16-17).

93. /^. at 1036.

94. Id.



2004] CONTRACT LAW 987

to justify ignoring the requirement that the non-breaching party show an
inadequate remedy at law before being granted an equitable remedy. In addition,

the court in Robert 's Hair Designers, Inc. v. Pearsor^^ noted that wiiile the non-

compete agreement there provided that the hair salon could seek injunctive relief

upon breach, "such contract provisions requiring the issuance ofan injunction are

not binding upon the trial court. "^^ Arguably, the same principle would apply in

this situation where a party contracted for and later sought another form of

equitable relief—specific performance. However, only one judge raised the issue
ofan adequate legal remedy. Judge Kirsch dissented from the majority's position

on specific performance, asserting that typically "the seller's remedy at law . . .

for money damages will be sufficient to fully compensate the plaintiff. "^^ Judge
Kirsch concluded that there were no facts in the case at issue supporting a

conclusion that there was no adequate remedy at law available to the sellers, and

thus specific performance should not have been granted.^^
\

mm
ilflBI"

ifl

B. Fraudulent Inducement and Benefit ofthe Bargain Damages ^^^
on »*P

Lightning Litho, Inc. v. Danka Industries, Inc. presented an interesting f*«
damages question in a case involving a contract entered into as a result of U
fraudulent misrepresentations. In that case, Linn, a salesperson for Danka, tried m

repeatedly to convince Haab, the owner of Lightning Litho ("Litho"), to lease a *

high-volume copier. Haab continued to reject Linn's overtures until Linn told i
Haab that he had a client Linn could bring to Haab that would justify Haab's «•

leasing the machine. When Haab asked who the client was, Linn replied that he
|

would not reveal the name until Haab signed the lease. Linn later returned with
J

a manager from Danka who provided further assurances that the client would
accompany the copier. Haab signed the lease agreement, and predictably, the
client never material ized.'°° |*"

Litho eventually brought a fraudulent inducement claim against Danka,'°' and S
after a couple of false starts, affirmed the contract^^^ and requested both contract JS
and tort damages. '^^ Danka argued that Litho d id not present evidence supporting

jg|

its damages request, and the trial court granted Danka' s motion for judgment on ]S
the evidence. Litho appealed, and the court of appeals reversed. M

95. 780 N.E.2d 858 (Ind. Ct. App. 2003) (citation omitted).

96. Id. at862n.l.

97. Humphries, 789 N.E.2d at 1036-37 (Kirsch, .F., dissenting).

98. Id. at 1037 (Kirsch, J., dissenting).

99. 776 N.E.2d 1 238 (Ind. Ct. App. 2002).

100. /(/.at 1039-41.

101. Id. dX 1240. Fraudulent inducement exists when a person enters into a contract as the

result of fraudulent misrepresentations. When this occurs, the plaintiff must choose to seek either
to rescind the contract (in which case the parties would return to their respective positions prior to

entering the agreement) or to affirm the contract and seek damages. Id. at 1241 (citations omitted).

102. Id.

103. Mat 1240.



988 INDIANA LAW REVIEW [Vol. 37:975

The court ofappeals cited cases from approximately twenty-fourjurisdictions
for the proposition that the damages available in a fraudulent inducement case
where the plaintiff has affirmed the contract are measured by the benefit of the
bargain rule.'^"* "Although the benefit of the bargain rule is traditionally used to

measure damages in breach of contract cases, it is also used to measure damages
in fraudulent inducement cases because fraudulent inducement is a 'hybrid' of

tort and contract."'^^ While some Indiana cases have held that tort law does not
protect a buyer's interest in "the benefit of his bargain,'"^^ those cases are

distinguishable because the theory of recovery in those lawsuits was negligence
(a tort), not fraudulent inducement (a cross between tort and contract claims).

'^^

Consequently, the court concluded that Indiana should join otherjurisdictions in

measuring the damages in fraudulent inducement claims using the benefit ofthe
bargain rule.

'°*

C. Breach ofContract and Tortious Conduct—But Only One Recovery
INS Investigations Bureau, Inc. v. Lee^^^ involved tort and contract claims,

and after concluding that the damages awarded at trial amounted to a double

recovery, the court of appeals had to decide whether to vacate the tort award or

the damages awarded for the contract claim. The fire caused significant damage
to a factory that manufactured modular units for Lees Inns motels. The Home
Indemnity Company ("Home Indemnity"), which insured the factory, hired INS
Investigations Bureau, Inc. ("INS") to investigate the origin of the fire. Lester

Lee and Bill Lee ("the Lees"), who founded Lees Inns and were the majority
stockholders, hired their own investigator, who concluded that airflow to a
furnace had been blocked by sawdust and that when parts of the furnace
overheated, the sawdust ignited. Home Indemnity disagreed and denied the Lees'
claim, finding that the fire was intentionally set and that the Lees were somehow
connected to that act."^

The Lees sued Home Indemnity, but eventually the parties settled the dispute.
The settlement included not only a $3.5 million payment to the Lees and a letter
of apology from Home Indemnity, but also an assignment from Home Indemnity
of "any claims it had against INS to the Lees . . . .'"'' The Lees subsequently
sued INS, and it made the following claims:

1 04. Id. at 1 24 1 n.4. Damages awarded under the benefit ofthe bargain rule place the parties

in the positions they would have been in if the contract had been performed as promised. Id. at

1242.

105. Id.

106. See., e.g, Choung v. lemma, 708 N.E.2d 7, 14 (Ind. Ct. App. 1999).

107. Lightning, 176 N.E.2dai\242.

108. /^. at 1243.

109. 784 N.E.2d 566 (Ind. Ct. App. 2003).

1 10. Id. at 571-74. The insurance policy allowed for the denial of a claim "if the Lees or

someone at their direction committed arson" at the factory. Id. at 571.

111. Id. 3X512.



2004] CONTRACT LAW 989

(1) that INS breached its contract with Home Indemnity by failing to
perform its obligations in a skillful, careful, diligent, and workmanlike

manner, which caused the denial of the Lees' claim and a subsequent

settlement greatly in excess of the policy limits; (2) that INS and its

employees owed Home Indemnity a duty of care to perform services in
a skillful, careful, diligent, and workmanlike manner, and that INS's

breach of that duty was a proximate cause of the erroneous denial of the

Lees' claim and the subsequent litigation; and (3) that INS and its
employees acted fraudulently, oppressively, maliciously, and

outrageously toward Home Indemnity and the Lees and were thus liable
for punitive damages."^

At the end of the ensuing trial, the jury awarded the Lees more than $2.3 million
in compensatory damages for breach of contract, more than $2.5 million in ^-^^^
compensatory damages for negligence, and $4.6 million in punitive damages."^ %«»»

On appeal, INS argued that the trial court erred in a number of areas, but the
contention relevant here was that the claims for breach ofcontract and negligence «wj

were essentially one in the same and that the damages awarded constituted a

double recovery. '
'"* The court stated that when a party contracts to do work, there

^^'

exists an implied duty to do so with skill, with care, and in a workmanlike

fashion. If one negligently fails to fulfill this duty, the individual has committed

a tort and a breach of contract.''^ However, the non-breaching party "may not

m
mm

mm

9>116 „^ 4.U^ ^^..-*. ^f" ^^^^«1« U^A 4.^ A^^'.A^ *
recover twice for the same wrong," so the court of appeals had to decide

whether to vacate the award for negligence or the award for breach of contract.
|

Apparently, no Indiana decisions previously addressed this question, and S[

there must also have been little case law available from other jurisdictions
Jg

because the court turned to a secondary source for guidance in resolving this

issue. It stated that as a general rule, "a breach ofcontract is not a tort,"' ^^ but the T
contract can provide the backdrop from which the duty of care in a tort action ^
arises. "In such cases, the contract is mere inducement creating the state ofthings

«jg

which furnishes the occasion of the tort. In other words, the contract creates the W
relation out ofwhich grows the duty to use care.'" '^ The court concluded that the lug

heart of the Lees' claim was not that INS had breached its contract with Home '^
Indemnity; rather, the Lees claimed that INS owed Home Indemnity a duty to
fulfill its contractual obligations skillfully and in the manner generally expected
of others in the same line of work."^ Because this claim sounded more in tort
than in contract, the court of appeals vacated the award of $2,303,601 for breach

112. /c/. at 573.

113. Id.

114. Id. 2A 576.

1 15. Id (citing Homer v. Burman, 743 N.E.2d 1144, 1 147 (Ind. Ct. App. 2001)).

116. Id. 2X511.

117. Id

1 18. Id. at 578 (quoting 57A AM. JUR. NEGLIGENCE §§ 1 19-21).

119. Id



990 INDIANA LAW REVIEW [Vol. 37:975

of contract, and affmned the recovery of $2,546,404 for the tort claim.
120

VII. A Reminder TO Clients: The Terms of the Contract
Will Be Enforced

Two cases decided during the review period remind practitioners of the
importance of stressing to their clients the fact that when people enter into
contracts in Indiana, the parties will be bound even if they later conclude that the

deal they made was a bad one. In Zollman v. Geneva Leasing Associates, Inc.,^^^
Wally Zollman ("Wally") and a partnership he controlled borrowed $3.2 million
from Geneva Leasing Associates ("Geneva"), and Wally signed a personal
guaranty. When Wally later requested an extension of the payment period,
Geneva agreed, but only on the condition that Wally's spouse, Brenda Zollman
("Brenda"), execute a personal guaranty. She agreed to do so, and the guaranty

that she signed included a provision that released Geneva "from any and all
claims, liabilities, demands, damages and causes of action which any of the
releasing parties has asserted ... or might now or hereafter assert . . . .'"^^ When
the partnership later defaulted and Geneva accelerated the payments due under

the note, the partnership and Wally declared bankruptcy, and Geneva sued
Brenda.'^^ The trial court granted Geneva's summary judgment motion against
Wally, in rem, and against Brenda, in personam, in an amount exceeding $1.6
million, plus costs and attorney fees.'^'* On appeal, the court agreed "with Geneva
that Brenda . . . contractually waived" the defense she attempted to raise.

'^^

While the court discovered no Indiana case law interpreting a release within

a guaranty, it relied on decisions that addressed releases generally. It noted that

the release clearly stated that Brenda was waiving her rights and that Brenda did

not argue that the release was ambiguous. "Indeed, there is no evidence in the

record before us on appeal that the bargaining between the parties was anything

other than free and open. Moreover, the facts establish that Brenda was a
sophisticated party and was represented by legal counsel during the negotiation

of the guaranty agreement."'^^ Thus, she could not later raise an affirmative

defense.
'^^

120. Id.

121. 780 N.E.2d 387 (Ind. Ct. App. 2002).

1 22. Id. at 389. The release was printed in capital letters and covered numerous contingencies

intended to protect the lender from liability.

123. Id. at 390. Geneva also sued Wally, in rem, "after the bankruptcy court lifted" the

bankruptcy stay for that specific purpose. Id.

124. Id.

125. Mat 391.
126. /c/. at 392-93.

127. Id. at 393. Chief Judge Brook disagreed. "Simply put, Brenda waived her rights to sue

Geneva, file a counterclaim against Geneva, or file a claim against a third party; she did not waive

her right to interpose affirmative defenses " Id. (emphasis in original) (Brook, J., dissenting).



2004] CONTRACT LAW 991

In Grott V. Jim Barna LogSystems—Midwest, Inc. , ' ^^ Mark and Barbara Grott
("the Grotts") entered into a contract to purchase a log home from Jim Barna Log
Systems ("Barna"). Peter Rosi ("Rosi") signed the contract as "owner" of Barna.

The contract included a clause providing that disputes would be decided in the

Tennessee courts and according to Tennessee law.'^^ Approximately nineteen

months later, the Grotts sued for breach of contract (among other things) in
LaPorte Circuit Court in Indiana. Barna and Rosi asked the court to honor the

forum-selection clause and thus to dismiss the lawsuit. The court granted their

request, and the Grotts appealed, arguing that the forum-selection provision "was

not freely negotiated" and that it was unreasonable.
'^°

The court of appeals disagreed with the Grotts. The court pointed out that
there was no indication that the Grotts objected to the clause at issue or that they
attempted to have it removed from the agreement. There was no suggestion that

,„j,^

Mr. Grott "initialed each paragraph and signed the contract unwillingly or was Lw
unaware ofthe forum-selection clause."'^' Simply put, the Grotts failed to show *"*

that they were unable to negotiate the removal of the provision or that they could pan
not have purchased the home from another seller of log homes. "As a general J2
rule, the law allows competent adults the utmost liberty in entering into

contracts," and those contracts will be enforced "when entered into freely and
voluntarily . . . ."'^^ The Grotts were bound to the terms of their contract.

128. 794 N.E.2d 1098 (Ind. Ct. App. 2003).

129. /^. at 1100-01.

130. /^. at 1101.

131. Mat 1103.
132. Id. The Grotts also argued that because Rosi signed the contract as a representative of

Barna, he was not a party to the contract and thus was not subject to the forum-seiection clause.

The court turned to a Texas decision which held that forum-selection provisions apply to so-called

"transaction participants." Accelerated Christian Educ, Inc. v. Oracle Corp., 925 S.W.2d 66, 75

(Tex. Ct. App. 1996). A transaction participant is "an employee of one of the contracting parties
who is individually named by another contracting party in a suit arising out of the contract

containing the forum selection clause." Id. The court of appeals in Grott followed this line of

thinking and concluded that Rosi was a transaction participant and thus was subject to the forum

selection provision. If the Grotts wanted to sue him, they had to do it in Tennessee. Grott, 794

N.E.2dat 1105.

Mill

1B

1110!!

VIIL Sale OF Goods Under Article 2 v«'

The courts addressed the following important issues under Article 2 of the
I"""

Uniform Commercial Code: the relationship ofthe entrustment provisions ofthe

code to Indiana's Certificate ofTitle Act; the circumstances under which a person «

with voidable title can transfer good title to a buyer; the point at which title to

goods passes to a buyer; what constitutes an admission for purposes of the

admission exception to the statute of frauds; and the need for the writing under

the statute of frauds to be clearly connected to the sale of the goods.

^\

r



992 INDIANA LAW REVIEW [Vol. 37:975

A. Entrustment and the Certificate of Title Act

In Madrid v, Bloomington Auto Co.,'^^ the court clarified the relationship
between Indiana's Certificate of Title Act and Article 2 of the Uniform
Commercial Code (UCC),'^"* and it also interpreted the UCC's entrustment
provisions. '^^ The Madrids were interested in buying a Lincoln Navigator and
visited Gary Pratt University Motors, Inc. ("Pratt"), a used car dealer located in
West Lafayette, Indiana. '^^ Pratt discovered that Royal Lincoln Mercury Nissan
("Royal"), a Lincoln dealership located in Bloomington, Indiana, owned "a new
2000-model-year Navigator," and Pratt requested that Royal bring the vehicle to

West Lafayette so that the Madrids could see it.'^^
In early June 2001, one of Royal's employees drove the Navigator to West

Lafayette, but Royal retained the vehicle's certificate of origin, as well as its

owner's manuals, extra keys, and phone. '^^ When the Madrids came to inspect
the vehicle, Pratt told them that it had bought the Navigator for $40,000 and that

it hoped to sell it to the Madrids for $43,000. In fact, Pratt had not purchased the

vehicle from Royal.
'^^

The parties agreed on a purchase price of $41,500, which the Madrids paid
to Pratt, and Pratt promised to deliver the title, paperwork, and other accessories

to the buyers. Of course, it could not follow through on this promise because all
ofthose items remained in Royal's possession. In the meantime. Royal continued

to call Pratt for updates regarding the prospective sale until finally, in the latter

part of June 2001, Royal learned that there was a police seizure of Pratt's
automobiles. Royal's general manager drove to West Lafayette to retrieve the
dealership's vehicle but discovered that it was not among the vehicles seized
because the Madrids possessed it.'"^^

The Madrids sued Royal seeking the title to the Navigator, but the trial court

133. 782 N.E.2d 386 (Ind. Ct. App. 2003).

134. The text of this article may contain references to generic sections of the Uniform

Commercial Code (e.g., section 2-201), but all notes will contain specific citations to Indiana's

version of the UCC (e.g., Ind. Code Ann. § 26-1-2-201 (West 2003)).
135. IND. Code Ann. § 26-1-2-403.

1 36. Madrid, 782 N.E.2d at 389. Pratt was not an authorized dealer of Lincoln vehicles and

thus was not permitted to sell new Lincoln autos. "It is an unfair practice for a dealer to sell any

new motor vehicle having a trade name, trade or service mark, or related characteristics

for which the dealer does not have a franchise in effect at the time of the sale." iND. Code Ann.

§ 9-23-3-4.

1 37. Madrid, 782 N.E.2d at 389. Pratt and Royal had done this before. If Pratt had a customer

interested in buying a new Lincoln, it would request that Royal bring a new auto to West Lafayette

for the customer to inspect. If the customer chose to buy the vehicle, the customer would pay

Royal directly. Subsequently, Royal would pay a "finder's fee" to Pratt for establishing the contact

between Royal and the buyer. Id.

138. Id.

139. Id

140. /^. at 390.



It'

IS

2004] CONTRACT LAW 993

concluded that Royal was entitled to summary judgment. More specifically, it
determined that through its retention of the certificate of origin, Royal retained

ownership of the vehicle under Indiana's Certificate of Title Act,'"*' and in the

alternative, that Royal's actions did not lead to a transfer of ownership under the

entrustment provisions of the UCC.'"^^

The first issue that the court of appeals considered was whether the sales
provisions of the UCC or Indiana's Certificate of Title Act controls in
determining who holds legal title to a motor vehicle in Indiana.'"^^ Royal argued
that the Certificate of Title Act controlled, and it relied on an Ohio Supreme

Court case interpreting that state's title statute and its relationship to Ohio's

version of the Uniform Commercial Code.''^'* The court of appeals rejected this

argument, however, distinguishing the Ohio statute from Indiana's, and relying

on Indiana case law interpreting an earlier version of the Certificate of Title

Act.'"*^ The court agreed with the Madrids' contention that the current version of

the Certificate of Title Act results in a "'registration' type system rather than an
*"*

'ownership' type system . . . [and consequently,] legal ownership of vehicles is vnn

determined by the sales provisions of the UCC.""^ g!
The court tumed next to the entrustment provisions of the Uniform |p

Commercial Code, which provide that "any entrusting of possession of goods to

a merchant who deals in goods of that kind gives him power to transfer all rights
ofthe entruster to a buyer in [the] ordinary course of business.'""*^ The trial court L^

concluded that Royal retained ownership of the Navigator because it did not 7'

entrust the vehicle to Pratt, Pratt was not a merchant who dealt in goods of that ^
kind, and the Madrids "should have known" that Pratt did not own the automobile L
and was not authorized to sell it to them.'"*^ The court of appeals disagreed with 'i^
the tower court on all three points. m

The court summarily dismissed the trial court's conclusion that the vehicle ms*
was not entrusted to Pratt, noting that entrustment includes ''any delivery and any m*

141. An individual "may not purchase or acquire a pew motor vehicle without obtaining from

the seller of the motor vehicle a valid manufacturer's certificate of origin." iND. CODE Ann. § 9-

17-8-2 (West 2003).

142. Madrid, 782 N.E.2d at 390; see also iND. CODE ANN. § 26-1-2-403 (West 2003).

143. To this point, "no Indiana court [had] discussed the effect of the current Indiana

Certificate of Title Act on the sales provisions of the UCC." Madrid, 1%2 N.E.2d at 390.

144. iSee Saturn of Kings Aulomall, Inc. v. Miice Albert Leasing, Inc., 751 N.E.2d 1019 (Ohio

2001).

1 45. The court stated, "Ohio's Certificate ofMotor Vehicle Title Law is substantially different

than Indiana's Certificate ofTitle Act." Madrid, 782 N.E.2d at 393. The Ohio statute provides that

"[n]o person . . . shall acquire any right, title, claim, or interest in or to the motor vehicle until there

is issued to the person a certificate oftitle . . . ." Ohio Rev. CodeAnn. § 4505.04(A) (West 2004).

The Indiana Title Act, however, "does not expressly limit the passing of legal title until the

certificate of title is issued." Madrid, 19^1 N.E.2d at 393.

1 46. Madrid, 782 N.E.2d at 395.

147. iND. Code Ann. § 26-1-2-403(2).

148. Madrid, 782 N.E.2d at 390.



994 INDIANA LAW REVIEW [Vol. 37:975

acquiescence" in the entrusted party's retention of the goods. '*^ It did not matter

that "the vehicle was only brought to University Motors so that the Madrids could
inspect the vehicle.'"^^ Royal then asserted that Pratt was not a merchant dealing
in goods of that kind because it did not deal "in new Lincoln cars."'^' The court
ofappeals determined that Royal's interpretation was too narrow and agreed with
the Madrids' position "that it is sufficient that both University Motors and Royal

were car dealers" because both dealt in goods that were fundamentally the
152

same.

Finally, the court addressed whether the Madrids were buyers in the ordinary

course of business. '^^ The trial court stated that the Madrids likely had notice of
the identity of the true owner of the Navigator and that they should have known
that Pratt was not an authorized Lincoln dealership; consequently, they did not
qualify as buyers in the ordinary course of business.'^"* The court of appeals
reviewed the facts and concluded that the only evidence even raising an inference

that the sale might have been outside the ordinary course was Pratt's failure to
give the Madrids a certificate of origin when it sold the Navigator to them.'^^
However, "the failure of a buyer to demand a certificate of title at the time ofthe
sale [does] not result in the buyer losing its status as a buyer in the ordinary

course of business."'^^ The court reversed the decision and remanded the case.'^^

B. Voidable Title and Transfer ofGood Title

Marlow v. Conley^^^ also dealt with section 2-403 ofthe Uniform Commercial
Code. There, Robert Medley purchased a 1932 Ford truck at an Indianapolis car

show. The seller was Herchel Ray Con ley who told Medley that he operated a

149. IND. Code Ann. § 26-1-2-403(3) (emphasis added).

1 50. Madrid, 782 N.E.2d at 396 (quoting Appellant's App. at 75).

151. Id.

1 52. Id. (citing Shacket v. Philco Aviation, Inc., 681 F.2d 506 (7th Cir. 1982), cert, granted

in part, 459 U.S. 1069 (1 982), rev 'don other grounds, 462 U.S. 406 (1983)). The court in Shacket

stated, "The term 'goods of that kind' is not limited to the same goods but encompasses goods of

the same fundamental nature." Shacket, 681 F.2d at 51 1.

1 53. The statute defines "buyer in the ordinary course of business" as follows: "[A] person

that buys goods in good faith without knowledge that the sale violates the rights ofanother person

in the goods, and in the ordinary course from a person ... in the business of selling goods of that

kind. A person buys in the ordinary course of business if the sale to the person comports with the
usual or customary practices in the kind of business in which the seller is engaged or with the

seller's own usual or customary practices." iND. CODE Ann. § 26-1-1-201(9) (West 2003).

1 54. Madrid, 782 N.E.2d at 396.

155. Id. ai 397.

156. Id. (citation omitted).

1 57. Id. at 397-98. This is the proper result, particularly given the intent ofthe statute to favor

the innocent third party and thus to promote commerce. See Mowan v. Anweiler, 454 N.E.2d 436,

439(Ind.Ct. App. 1983).

158. 787N.E.2d490(Ind.Ct. App. 2003).

.



2004] CONTRACT LAW 995

"buy here, pay here car lot.'"^^ Medley noted that the truck had a dealer license
plate on it. He purchased it as a gift for his wife Linda, and he paid $7500.
Conley provided Medley with the certificate of title, but Donald Marlow was
listed as the owner. Medley inquired about this fact, and Conley told him that

"Marlow had signed the title as part of a deal Conley had made with him."'^°
Medley subsequently sought a certificate of title from the Bureau of Motor
Vehicles in his wife's name.

Approximately seven months later, Marlow filed suit against Conley and the
Medleys, seeking replevin of the truck. Marlow contended at trial that Conley
had asked him to invest in Conley's business, and that Marlow had given him
$4500. Marlow then stated that Conley stole the truck and its certificate of title
and that when Marlow asked Conley to return the truck, Conley told him the
truck had caught on fire.'^^ Marlow called the police, but the police report told
a story that did not comport with Marlow' s testimony at trial. According to the

police report, Marlow and Conley apparently had entered into a deal whereby
Marlow would provide Conley with $4500 and the 1932 Ford truck in exchange
for a 1994 Ford flatbed dump truck and a 1989 Ford Bronco. Conley gave
Marlow several titles of vehicles (thought to be junk), but he never delivered the
two Fords to Marlow.

'^^

The question on appeal was whether the Medleys obtained good title to the
truck that Robert Medley purchased at the auto show in Indianapolis. The statute
at issue was Indiana Code section 26-1-2-403(1), which provides as follows: "A
person with voidable title has power to transfer a good title to a good faith f"^
purchaser for value." '^-^ While the UCC does not define "voidable title," it does J'
state that the person possessing voidable title has the power to transfer good title 'C

to a good faith purchaser for value "even though ... the delivery was procured
"

through fraud. '"^'^ The "defrauding buyer" thus obtains voidable title, and "when f

'

title gets into the hands of a bona fide purchaser for value then he will prevail m
over the defrauded seller."'^^ \xm

The trial court did not believe Marlow's story about Conley stealing the Im
truck, and consequently, the court of appeals concluded that Conley defrauded S
Marlow, that Conley thereby obtained voidable title to the 1932 Ford, and that 2
Conley could transfer good title to a good faith purchaser for value. ^^^ Clearly,

the Medleys were purchasers for value. The question was whether they acted in
good faith.^''

159. /^. at 491.

160. Id.

161. Id.

162. /^. at 491-92.

163. lND.CODEANN.§26-l-2-403(l)(West2003).

164. /J. §26- 1-2-403(1 )(d).

1 65. Marlow, 787 N.E.2d at 493 (quoting Mowan v. Anweiler, 454 N.E.2d 236, 238 (Ind. Ct.

App. 1983)).

166. Id. at 495.

1 67. Good faith is defined as "honesty in fact in the conduct or transaction concerned." Ind.



996 INDIANA LAW REVIEW [Vol. 37:975

Marlow contended that they did not, and he argued that the sale from Conley
to Robert Medley violated Indiana's Certificate of Title Act.*^^ The Court of
Appeals relied on its analysis in Madrid v. Bloomington Auto CoJ^^ and
concluded that the Medleys' failure to request a title in compliance with the

Certificate of Title Act did not affect their status as good faith purchasers.

"Although the failure to comply with Ind. Code § 9-17-3-3 may, combined with
other suspicious circumstances, raise questions about a purchaser's good faith, we
find no such circumstances here.'"^^ In short, as a holder ofvoidable title, Conley
had the power to pass good title to the Medleys as long as they were good faith
purchasers for value. The court concluded that the Medleys did purchase the
truck in good faith, and it affirmed the lower court's decision in their favor.

^^'

C. The Passing of Title to Goods

Sam and Mac, Inc. v. Treat^^^ involved a question of whether title to
undelivered goods that were paid for in full passed from the seller to the buyer

(and if so, when) under Article 2 of the Uniform Commercial Code. Sam and
Mac, Inc. ("SMI"), a construction and contracting company, entered into a

contract whereby Gruda Enterprises, Inc. would sell to SMI and install in the
house that SMI was building a set ofkitchen cabinets. Gruda Enterprises ordered
the cabinets from the manufacturer, and SMI pre-paid the order in fuU.'^^ At
some point following that payment, the cabinets arrived at the seller's warehouse,

and a representative of Gruda Enterprises contacted SMI to arrange for the
delivery and installation of the goods.^^"^ However, SMI was not prepared to
receive them and requested that the cabinets remain at the warehouse until SMI
was ready to have them installed.

'^^

Unfortunately for SMI, approximately two months later, Anthony and Sharon

CODEANfN. § 26-1-1-201(19) (West 2003).

168. See id. §9-17-3-3.

169. See supra notes 143-46 and accompanying text.

1 70. Marlow, 7S1 N.E.2d at 497-98. The only evidence suggesting that the Medleys acted in

bad faith was that the title that Conley provided Robert Medley was signed by Marlow. Conley

should have transferred the title to his name before selling the truck. Id. at 496. However, Robert

Medley's testimony regarding the dealer license plate and his inquiry about the signature on the

title, among other facts, further supported the Medleys' position that they acted in good faith.

Marlow also argued that the Medleys violated Indiana's Certificate of Title Act by providing false

information to the Bureau ofMotor Vehicles, (i.e., by allegedly listing Marlow, rather than Conley,

as the seller of the truck). Id. at 498. The court of appeals stated that "although false statements

to the Bureau ofMotor Vehicles under Ind. Code § 9- 1 7-2-2 could result in prosecution for perjury,

such false statements do not affect legal title to the vehicle." Id.

171. Mat 499.
172. 783 N.E.2d 760 (Ind. Ct. App. 2003).

173. Id at 162.

174. Id. at 766'61.

175. Id. at 765.



2004] CONTRACT LAW 997

Gruda, who owned and operated Gruda Enterprises, filed for personal bankruptcy
and ceased the company's business operations. '^^ The cabinets were never
delivered to SMI, so SMI contacted James Treat, the landlord for Gruda
Enterprises, and requested that he open the warehouse to allow SMI to remove
the cabinets. Treat refused, and SMI sued him for criminal conversion. SMI
argued that it held title to the cabinets under Article 2 of the UCC. Following
entry of partial summary judgment for SMI and a reversal of that decision on
interlocutory appeal, the trial court granted summary judgment in Treat's favor,
and SMI appealed.

'^^

SMI argued that the transaction between SMI and Gruda Enterprises
constituted a "completed sale,'"^^ and that SMI consequently held title to the
cabinets under section 2-401 (3 )(b) of the UCC.'^^ The court of appeals correctly
disagreed with SMI's contention. It was clear that the goods were supposed to

be delivered to the house that SMI was building, so the goods obviously had to CI
be moved from the warehouse, rendering section 2-401(3)(b) inapplicable.
Instead, section 2-401(2)(b)—which states that "if the contract requires delivery
at destination, title passes on tender there'"^^—controlled. "The title to the
cabinets did not pass to SMI because the cabinets were not delivered and installed
at the agreed upon destination.'"^' Therefore, SMI never obtained any possessory
interest in the goods, and the court of appeals affirmed the lower court's grant of

summary judgment in Treat's favor

mm

III

lifK

Itfil

«i

m

176. Id.aiiei. (*,

177. Id. at 763.
j|;

178. Id at 164.

....
f. J ^^ , J .^ . ^ ...^ ^^

goods[,] . . . if the goods are at the time of contracting already identified and no documents are to |ffi

be delivered, title passes at the time and place ofcontracting." IND. CODE Ann. §26-l-2-401(3)(b)
"JJ

(West 2003).

180. Id §26-1 -2-40 l(2)(b).

181. Sam and Mac, 783 N.E.2d at 765. The court also noted that while title to the goods ,^
cannot pass to the buyer until the goods are identified to the contract, "identification does not, in

and of itself, confer either ownership or possessory rights in the goods." Id. (citing iND. CodeAnn.

§ 26-1-2-401(1) (West 2003) ("Title to goods cannot pass under a contract for sale prior to their

identification to the contract , . . .").

1 82. Id. at 767. Interestingly, Howland v. Indiana Department ofState Revenue, 790 N.E.2d

627 (Ind. Tax Ct. 2003) also involved an issue relating to the title to goods. There, the question was

"whether Rowland's sale and installation of . . . satellite dishes [were] taxable 'retail unitary

transactions.'" Id. Resolution of the issue turned at least in part on when title passed from the

seller to the buyer. The court relied on Farmers ' National Bank ofSheridan v. Coyner, 88 N.E. 856

(Ind. Ct. App. 1909) to determine when title passed, without considering the title provisions of

Article 2. Howland, 790 N.E.2d at 630. Arguably, however, even though the sale included both

personal property and the provision of services, the transaction constituted a sale of goods covered

by Article 2 ofthe Uniform Commercial Code. In situations that involve both goods and services,

Indiana applies the predominant thrust test. Under this test, the court must determine "whether the

transaction's 'predominant factor, [its] thrust, [its] purpose ... is the rendition of service, with



998 INDIANA LAW REVIEW [Vol. 37:975

D. The Admission Exception to the Statute ofFrauds

Section 2-201 of the Uniform Commercial Code provides the circumstances
under which a contract for the sale of goods must be in writing under the statute

of frauds, '^^ and also includes a number of exceptions to the writing requirement,
including the admission exception.'^'* Wehry v. Daniels^^^ presented a question
that had not been previously addressed by Indiana's courts: namely, what
constitutes an admission under section 2-201 (3 )(b).

In the fall of 2001, Daniels, a seller of Formula One memorabilia, sold an
autographed Michael Schumacher helmet to Wehry for $3500. While Wehry was
in the store, he apparently told Daniels that he would like to purchase a scaled-
down reproduction ofa 1985 Aryton Senna helmet. Daniels informed Wehry that
the helmet was only sold in a set of three and that the price of the set was $9000.
When Wehry responded that he was only interested in the 1985 helmet and that
he was willing to pay up to $3000 for it, Daniels told him that he would check
with the distributor to see if the distributor would break up the set.'^^

Subsequently, Daniels contacted Wehry to inform him that he could purchase
the helmet he desired separately from the set, and Wehry instructed Daniels to
order the helmet, which Daniels did. Following its arrival, Daniels called Wehry
on numerous occasions, and Wehry repeatedly told Daniels that he would be in
soon to pick up the helmet. Daniels eventually sued seeking $2887.50 in

damages. '^^ At the hearing, Wehry was asked whether he had instructed Daniels
to order the helmet for him, and he responded as follows: "At Seventeen

goods incidentally involved ... or is a transaction of sale, with labor incidentally involved . . .
.'"

Insul-Mark Midwest, Inc. v. Modern Materials, Inc., 612 N.E.2d 550, 554 (Ind. 1993) (quoting

Bonebrake v. Cox, 499 F.2d 951, 960 (8th Cir. 1974)). The court in Insul-Mark adopted the

predominant thrust test and rejected the bifurcation approach to handlingmixed transactions. Insul-

Mark, 612 N.E.2d at 554. Ifthe court in Howland had applied the predominant thrust test, it might

have concluded that the transactions at issue constituted sales of goods covered by Article 2, and

ifthat were the situation, sections 2-401 and 2-501 would have provided the court with additional

guidance regarding the title question. See iND. CODE ANN. § 26-1-2-401 and § 26-1-2-501 (West

2003).

1 83. "Except as otherwise provided in this section, a contract for the sale ofgoods for the price

of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there

is some writing sufficient to indicate that a contract for sale has been made between the parties and

signed by the party against whom enforcement is sought . . . ." iND. CODE ANN. § 26-1-2-201.

184. Id § 26-l-2-201(3)(b) (West 2003).

185. 784 N.E.2d 532 (Ind. Ct. App. 2003).

186. Mat 533.
187. Id. at 534. Daniels said that he told Wehry before he ordered the helmet that it would

cost $2750. Wehry said that Daniels did not reveal this price to Wehry until the third phone call

that Daniels made to Wehry about picking up the helmet. Id. Daniels' claim included the price of

the helmet, along with sales tax and court costs. Id.



2004] CONTRACT LAW 999

($1700.00) Eighteen Hundred Dollars ($1800.00) yes.'"^^ The trial court found

for Daniels and awarded him $2926.50.'^^

Wehry argued that because the contract for sale did not satisfy the
requirement that there be a writing under the statute of frauds, it was not

enforceable. Daniels contended that, although there was no written contract, their
agreement was removed from the writing requirement under the admission
exception to the statute of frauds:

A contract which does not satisfy the requirements of subsection (1 ) but
which is valid in other respects is enforceable . . . if the party against

whom enforcement is sought admits in his pleading, testimony, or
otherwise in court that a contract for sale was made, but the contract is

not enforceable under this provision beyond the quantity of goods mm

admitted . . . .'^^ #«'««

Because this was an issue of first impression in Indiana,'^' the court turned to the

case law of other jurisdictions. The court noted that it is not necessary that a Sw

party literally say, "I admit that I entered into an oral contract." Instead, it is l£

enough if the party "testified to facts which . . . establish that a contract was "!;

formed.'"^^ In addition, it is not necessary that the admission encompass all the '*5

terms of the contract; rather, it must establish "that the parties did in fact enter
If""

into a contractual relationship.'"^^ Consequently, the admission does not have to

show that the parties agreed upon the price of the goods to be bought and sold.
'^"^ ""

r
,

m.i

1 88. Id. (quoting Hearing Transcript 26). U^

1 89. The award included $2887.50 (the price ofthe helmet plus sales tax), along with $39.00 p,
in court costs. Id. l^

190. IND. Code Ann. § 26-1 -2-20 l(3)(b) (West 2003). The court noted that the purpose P
underlying this exception is

JJp

( 1 ) to provide that a party cannot admit the existence of an oral contract for the sale of '©

goods and simultaneously claim the benefit of the statute of frauds, (2) to prevent the H^

statute of frauds from becoming an aid to fraud, and (3) to expand the exceptions to the «i4

nonenforceability of oral contracts under the statute of frauds.

Wehry, 784 N.E.2d at 535 (quoting Quaney v. Tobyne, 689 P.2d 844, 849 (Kan. 1984) (citations

omitted)).

191. "Although we have found no Indiana cases considering what constitutes an admission

within the statutory term, courts in other jurisdictions have considered this issue." Wehry, 784

N.E.2d at 535.

192. Id. (quoting Lewis v. Hughes, 346 A2d. 231 (Md. 1975)).

193. Id. at 536 (citing Jackson v. Meadows, 264 S.E.2d 503, 505 (Ga. Ct. App. 1980)).

194. /c/. (citingJac^o/?, 264S.E.2dat503). This conclusion comports with other sections of

the Uniform Commercial Code. See iND. CODE ANN. § 26-1-2-204(3) (West 2003) ("Even though

one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have

intended to make a contract and there is a reasonably certain basis for giving an appropriate

remedy."); see also id. § 26-1-2-305(1) ("The parties if they so intend can conclude a contract for

sale even though the price is not settled. In such a case the price is a reasonable price at the time

for delivery . . . .").



1 000 INDIANA LAW REVIEW [Vol. 37:975

In Cargill, Inc., Commodity Marketing Division v. Hale,^^^ during cross
examination, the plaintiff asked the defendant whether the defendant had agreed

in a phone conversation to sell soybeans to the plaintiff "The defendant
responded, 'Yes, Sir[,]'"'^^ and the court there concluded that this response was
an admission under 2-201(3)(b).'^^ The court in Wehry viewed the facts before
it as analogous to the facts in Cargill, and it reached the same conclusion as the
Missouri court. "Here, Wehry also responded affirmatively when asked ifhe told
Daniels to order the helmet for him. This testimony also constitutes an admission

within the meaning of the statute, and the contract is therefore enforceable by
Daniels."'^* Finally, the court stated that once it is clear that a contract was
formed, the only task remaining is to determine the contract's exact terms.

^^^

Here, the parties' disagreement over the price term raised a factual issue for the

trier of fact, and the court determined that it was not unreasonable for the trier of
fact to have determined that Wehry agreed to purchase the 1985 helmet for
$2750.^°° The court of appeals affirmed the lower court's decision in Daniels'
favor.

E. Connection ofthe Writing to the Sale

One other case addressing writing requirements under the UCC reaffirmed
the long-ago-established proposition that there must be a clear connection

between the writing and the purported sale of goods in order to satisfy the

requirements of the statute of frauds. In Fillmore LLC v. Fillmore Machine <&
Tool Co.,^^^ the parties entered into a transfer and sale agreement designed to

establish Fillmore LLC.^°^ The contract provided that "Innotek was to contribute

$24,000 in cash to Fillmore LLC in exchange for 50% of Fillmore LLC's units.
Fillmore was to contribute $24,000 in accounts receivable to Fillmore LLC in
exchange for the other 50% of Fillmore LLC's units."^°^ The contract did not
mention the transfer of any other assets to Fillmore LLC. Despite this fact,
Innotek's accountant, Bruce Buchan, who prepared the tax returns for Fillmore
and Fillmore LLC, showed on the returns "a transfer of Fillmore's equipment and
real property to Fillmore LLC'^^"* Moreover, Buchan was the only person who

195. 537 S.W.2d 667 (Mo. Ct. App. 1976).

196. /^. at 669.

197. Id.

198. Wehry, lS4N.E.2d at 536.

199. Id. (citing Dangerfield v. Markel, 222 N.W.2d 373, 378 (N.D. 1974)).

200. Id

20 1

.

783 N.E.2d 1 1 69 (Ind. Ct. App. 2003).

202. /^. at 1172.

203. Id

204. /£/. atll73.

When questioned about the accounting entries and the tax returns showing a transfer of
assets other than $24,000 in accounts receivable from Fillmore to Fillmore LLC,

Buchan stated that he prepared the returns and made the entries to reflect his



2004] CONTRACT LAW 1001

testified that an agreement for such a transfer was made.^^^

Fillmore subsequently sued Innotek, alleging that Innotek was liable for
conversion of $275,000 worth of Fillmore's machinery and equipment.^^^ The
trial court concluded, among other determinations, that the Uniform Commercial
Code's statute of frauds precluded "any agreement regarding the transfer of the

equipment to Fillmore LLC."^^^ In response, Innotek contended, among other
things, that the signature of one of Fillmore's principals on the tax return

"indicated that the equipment had been transferred and that this was enough to

have satisfied the statute of frauds."^^^ The court, however, disagreed. Relying

on a 1 926 case, the court of appeals stated, "Long ago, this court determined that
the writing must specifically refer to a sale memorandum or other
acknowledgment of a sale—oral testimony will not establish a connection
between the writing and the parties' acknowledgment of sale."^°^ Here, the tax T^
returns did not specifically refer to an agreement for the sale of Fillmore's C»
equipment to Fillmore LLC, and thus, the statute of frauds was not satisfied.^'^
The court of appeals affirmed the lower court's decision.

Conclusion

understanding of the parties' discussions [at a meeting preceding the signing of the

contract for sale]. Buchan also acknowledged that before preparing the first tax return

for Fillmore and Fillmore LLC, he discovered that the transfer and sale agreement . .

,

reflected a different scenario—one in which Fillmore's contribution to Fillmore LLC
was only $24,000 in accounts receivable—not any and all assets ofthe company.

Id.

205. Id. at WIS.

206. /^. at 1174.

207. Id at 1 178. See supra note 183; IND. CODE ANN. § 26-1-2-201 (West 2003).

208. F///more, 783 N.E.2d at 1178.

209. Id. (citing Warner Sugar Ref Co. v. Beyer Bros., 151 N.E. 739 (Ind. Ct. App. 1926)).

210. Id.

Id

I
^

Will

Finally, in addition to the cases discussed here, the Indiana Court of Appeals

decided several other cases that Indiana attorneys will find interesting. However,

the Indiana Supreme Court has granted requests for transfer in each of those

cases, and as of this writing, it has not delivered those opinions. Consequently, mm

readers will have to wait unti 1 next year's survey issue ofthe Indiana Law Review L
for a discussion of those decisions. J#



I