FILED
Mar 19 2019, 8:50 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEES
Robert A. Welsh C. Anthony Ashford
Connor H. Nolan Ashford Law Group, P.C.
Harris Welsh & Lukmann Valparaiso, Indiana
Chesterton, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Cheng Song, March 19, 2019
Appellant-Plaintiff, Court of Appeals Case No.
18A-PL-2134
v. Appeal from the Porter Superior
Court
Thomas Iatarola and Theresa The Honorable Roger V. Bradford,
Iatarola, Special Judge
Appellees-Defendants. Trial Court Cause No.
64D02-1109-PL-9151
Najam, Judge.
Statement of the Case
[1] Cheng Song appeals the trial court’s order denying his request for attorney’s
fees. Song presents three issues for our review, which we consolidate and
restate as one issue, namely, whether the trial court erred when it denied his
request for attorney’s fees. We reverse and remand with instructions.
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Facts and Procedural History
[2] This is the second appeal in this matter. In our prior opinion, we set out the
facts and procedural history as follows:
In 1998, the Iatarolas purchased thirty-four acres of land that was
zoned for agricultural use. Thomas [Iatarola] built several
structures on the property to warehouse equipment and inventory
from his telecommunications and classic car sales business.
The land, which was adjacent to the Porter County Airport, was
mortgaged. The Iatarolas decided to try to sell ten acres of their
land to reduce or repay their debt to the bank. Thomas and
Theresa [Iatarola] agreed between themselves that Thomas
would take charge of arranging for the sale of their land, and he
acted as an agent on behalf of his wife from September 2010
through September 2011. On September 14, 2010, Thomas
retained Robert Macmahon as their exclusive real estate agent for
the sale of the ten acres.
On September 14, 2010, Macmahon showed Thomas a listing
agreement for the real estate sale. The form was entitled “Listing
Contract (Exclusive Right to Sell) Commercial-Industrial Real
Estate”; under the section entitled “Seller’s Representations,” the
property is stated to be zoned I-2 Industrial. Macmahon asked
Thomas to review the listing to ensure its accuracy and asked
both Thomas and Theresa to initial each page of the listing
agreement to verify that they read it and that it was accurate.
Thomas did so, but Theresa refused to sign her initials because
the listing inaccurately stated that the zoning was I-2 Industrial
rather than Agricultural. Theresa told Thomas that her reason
for not initialing the listing and told him to have Macmahon
correct the listing error.
A few days later, Thomas told Theresa that he had spoken with
Macmahon and that the listing had been corrected. Theresa did
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not see or initial a corrected listing. On or around September 14,
2010, Macmahon began advertising the real estate online. The
advertisements stated that the land was zoned I-2 Industrial and
that it was suitable for warehousing and other light industrial
uses.
In December 2010, Song saw online the advertisement for the
sale of the ten acres of land. At this time, Song was a New Jersey
resident who wanted to buy industrial real estate in northwest
Indiana to use for an imported tool business he wanted to start.
Song arranged a meeting with Macmahon to take place on
December 31, 2010, to visit two industrially zoned properties,
one of which was the Iatarolas’ land. During their meeting, Song
told Macmahon that he wanted to buy property that had
buildings suitable for warehousing for an imported tool business,
and they discussed Song’s ability to expand and build additional
industrial warehousing on the property. In an internet
advertisement that has Macmahon’s handwriting on it, the
property’s type is described as “Industrial For Sale”; the property
overview states that the land is “in an established industrial
area.”
Also on December 31, 2010, Song told the Iatarolas of his
intended use of the property he wanted to purchase. That same
day, Song signed a purchase agreement with the Iatarolas to buy
their ten acres for $600,000. The contract was entitled “Purchase
Agreement Commercial-Industrial Real Estate.”
Sometime before the signing, the Porter County Airport had
stated that it might impose a runway protection zone in this
property to comply with Federal Aviation Administration
(“FAA”) requirements. The purchase agreement included a
contingency clause that stated, “This agreement is contingent
upon the Buyer’s agreement with the final approval of FAA
regarding land use.” After reviewing the airport’s proposal, Song
worried that the runway protection zone could lead to a
governmental taking of part of the property that he was
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purchasing, the removal of some of the warehousing buildings, or
a restriction on the height of future construction. On January 6,
2011, he exercised his contingency right and terminated the
purchase agreement.
For the next two and one-half months, Song and Thomas
negotiated a new sale of a different part of the Iatarolas’ land.
On March 21, 2011, they signed a second purchase agreement for
sixteen acres, which included most of the original ten acres with
the warehousing buildings plus additional acres of land outside
the potential runway protection zone. This second purchase
agreement was entitled “Purchase Agreement Commercial-
Industrial Real Estate.” It required $150,000 in earnest money
and included a provision for liquidated damages of $150,000 if
either party breached the contract. Song and Thomas signed an
addendum to the second purchase agreement that provided:
Closing date will be predicated on the Seller’s ability
to vacate and exit the subject property. A maximum
of 180 days (“Due Diligence Period”) from the day of
acceptance of this contract, has been agreed by both
parties. When the seller advises the Buyer in writing,
that the exit is complete, the Buyer will have 30 days,
from that date, to close.
Song deposited the $150,000 earnest money in the bank.
In early June 2011, Thomas called Macmahon to say that while
reviewing the transaction paperwork, he saw that the September
14, 2010, listing inaccurately stated that the property for sale was
zoned I-2 Industrial instead of Agricultural. Macmahon
acknowledged the error and made a note to his file of the date
and subject of their phone call. That same day, Macmahon
corrected the zoning represented in his advertisements online so
that they showed the property to be zoned Agricultural. Neither
Macmahon nor Thomas told Song about this error.
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On August 7, 2011, Thomas and Song met on the property for a
final inspection, and Thomas told Song that the property was
zoned Agricultural. Thomas told Song that Agricultural zoning
was preferred over Industrial zoning because the tax rate was
lower; he also stated that Agricultural zoning allowed for the
land to be used for the industrial warehousing and import tool
business that Song wanted to start. Song told Thomas that he
needed to consult an attorney to determine whether the
Agricultural zoning would suit his needs. Later that day, Song
saw that the online listing for the property had been updated to
show that it was zoned Agricultural.
On August 12, 2011, Lee Lane, Song’s attorney, wrote to
Macmahon to advise him that the Porter County zoning
regulations did not permit the use of warehousing for industrial
purposes on agriculturally-zoned property. Lane stated that Song
would not continue with his purchase unless the Iatarolas
secured I-2 Industrial zoning and demanded a price reduction in
order to compensate Song for the increase in real estate tax that
would result from the change from agricultural to industrial
zoning.
The Iatarolas refused to obtain the I-2 Industrial zoning or
consider a price reduction. Song subsequently exercised his due
diligence contingency rights under the contract, terminated the
purchase agreement within the 180-day due diligence period
provided in the addendum, and demanded the return of his
$150,000 earnest money deposit, which was being held in escrow
at Horizon Bank. The Iatarolas refused to return Song’s escrow
deposit.
On September 19, 2011, Song filed a complaint against the
Iatarolas, alleging actual fraud, constructive fraud, breach of
contract, and contract rescission. The Iatarolas filed a
counterclaim, also alleging actual and constructive fraud. On
January 22, 2014, both parties filed motions for summary
judgment; the trial court denied both. A jury trial took place
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from May 16-19, 2016. On May 19, 2016, Song filed a motion
for judgment on the evidence, which the trial court denied. The
jury returned a verdict for Song, [which stated as follows: “We,
the Jury, decide in favor of the Plaintiff, Cheng Song, and against
the Defendants, Thomas Iatarola and Theresa Iatarola, that the
Plaintiff is entitled to and shall have the return of his earnest
money in the amount of ONE HUNDRED AND FIFTY
THOUSAND AND 00/100 DOLLARS ($150,000). A]nd the
trial court entered judgment on the jury’s verdict in Song’s favor
for $150,000. On June 20, 2016, the Iatarolas filed a motion to
correct error[]. On June 23, 2016, Song filed a motion for an
award of attorney[’]s fees, prejudgment interest, and
postjudgment interest. On August 12, 2016, Song filed a motion
for an award of his post-trial attorney[’]s fees.
On August 12, 2016, the trial court held a joint hearing for the
Iatarolas’ motion to correct error[] and Song’s motions for
attorney[’]s fees, prejudgment interest, and postjudgment interest.
The trial court denied all motions.
Song v. Iatarola, 76 N.E.3d 926, 930-32 (Ind. Ct. App. 2017) (record citations
omitted) (“Song I”), clarified on reh’g, 83 N.E.3d 80 (“Song II”), trans. denied.
[3] Song appealed the trial court’s denial of his motions, and the Iatarolas cross-
appealed the court’s denial of their motion to correct error. The Iatarolas also
appealed the trial court’s denial of their motion for summary judgment. In Song
I we held that the trial court did not err when it denied the Iatarolas’ summary
judgment motion. But we held that the trial court did err when it denied Song’s
motion for prejudgment interest and when it “declined to consider” his request
for attorney’s fees. Id. at 939.
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[4] In particular, on the issue of Song’s attorney’s fee request, we noted that the
Iatarolas had “argue[d] that because Song repudiated the purchase agreement,
he [could not] seek to have the agreement’s attorney[’]s fees provision
enforced.” Id. at 938. That provision provided as follows: “Any party who is
the prevailing party against any other party in any legal or equitable proceeding
relating to this Agreement shall be entitled to recover court costs and reasonable
attorney fees from the non-prevailing party.” Id. However, we did not address
the Iatarolas’ contention that Song had repudiated the agreement. Instead, we
addressed the trial court’s conclusion that, because “[t]here was no request
before the jury . . . with regard to attorney’s fees[,]” the court could not grant
Song’s attorney’s fee request. Id.
[5] We rejected the trial court’s reasoning in denying Song’s request for attorney’s
fees and held as follows:
Song was not required to submit to the jury a request for
attorney[’]s fees. In this case, because the jury had already
fulfilled its role, the trial court was the appropriate trier of fact in
determining whether attorney[’]s fees should have been awarded.
Further, Song was not required to submit a petition for
attorney[’]s fees before the jury returned its verdict; indeed, doing
so would have been premature. The appropriate time for Song to
petition the trial court for attorney[’]s fees was after the jury
returned a verdict in his favor—which is what Song did. The
trial court erred when, instead of ruling on the issue, it simply
declined to consider it. Accordingly, the judgment of the trial
court is reversed and remanded so that the trial court may
consider the issue of attorney[’]s fees as provided for in the
parties’ purchase agreement.
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Id. at 938-39.1
[6] On remand, the parties submitted memoranda to the trial court. In their
memorandum, the Iatarolas reiterated their contention that Song had
“repudiated the purchase agreement and therefore [could not] seek attorney[’]s
fees pursuant to the same.” Appellant’s App. Vol. 2 at 29. In particular, the
Iatarolas asserted that,
[a]s part of his pretrial contentions, Song acknowledged that he
“terminated the transaction” with the Iatarolas after determining
that the zoning on the subject property was agricultural, and not
industrial. The contentions further reflected that Song was
seeking the return of his $150,000.00 earnest money based upon
such claims as breach of contract, fraud in the inducement,
contractual right to terminate due to “due diligence provision[,”]
and rescission. Since Song repudiated the purchase agreement
and sought to be, and was in fact, returned to the status quo ante,
he cannot now, after the conclusion of trial, seek to enforce an
attorney fee provision from the repudiated contract.
Id. at 30. Following a hearing, the trial court awarded prejudgment interest to
Song but denied his request for attorney’s fees. In particular, in its order, the
court stated in relevant part as follows:
The Court has now had the opportunity to review the
memoranda regarding attorney[’]s fees and the case law cited;
and [the court] concludes that the jury’s verdict at the jury trial in
1
Song contends that our instructions to the trial court on remand constitute law of the case and required the
court to award him attorney’s fees. However, our instructions left the discretion to award fees, or not, with
the trial court, and, as such, application of the law of the case doctrine here is not appropriate.
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this cause was based on [Song]’s repudiation of the contract
between the parties. Therefore, the cont[r]act having been
repudiated, the attorney[’]s fees provision of the contract is no
longer applicable and the Court rules that [Song] is not entitled to
recover attorney[’]s fees in this cause.
Id. at 22. This appeal ensued.
Discussion and Decision
[7] Song appeals the trial court’s denial of his request for attorney’s fees following a
hearing where the parties presented argument, but no witnesses were called.
Because the trial court’s judgment was based on a paper record, we are in as
good a position as the trial court to determine whether Song is entitled to
attorney’s fees under the terms of the parties’ agreement, and our review is de
novo. Anderson v. Wayne Post 64, Am. Legion Corp., 4 N.E.3d 1200, 1206 (Ind. Ct.
App. 2014), trans. denied.
[8] Song contends that he is entitled to attorney’s fees under the parties’ agreement
because he did not repudiate the contract but exercised his right under the
contract to terminate the purchase agreement when he discovered that the
property was not zoned industrial, as advertised, and, thus, that he is the
prevailing party in this litigation. The Iatarolas contend that Song’s termination
of the agreement constituted a repudiation and the trial court correctly denied
his request for attorney’s fees on that basis. We agree with Song.
[9] To repudiate is to reject without legal justification. Black’s Law Dictionary
defines “repudiation” as: “A contracting party’s words or actions that indicate
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an intention not to perform the contract in the future; a threatened breach of
contract.” Black’s Law Dictionary 1496 (10th ed. 2014). Thus, the Iatarolas
contend, in effect, that Song committed an anticipatory breach of the purchase
agreement. See, e.g., Metro Holdings One, LLC v. Flynn Creek Partner, LLC, 25
N.E.3d 141, 160 (Ind. Ct. App. 2014), trans. denied. However, as we explain
below, Song did not repudiate the purchase agreement but exercised his right to
terminate the agreement under the due diligence provision.
[10] The jury’s verdict was a general verdict in favor of Song and awarded him “the
return of his earnest money in the amount of” $150,000. Appellant’s App. Vol.
II at 23. On remand, in support of their contention that Song could not seek
attorney’s fees under the purchase agreement, the Iatarolas “argued [to the trial
court] that Song’s claims and the issues presented to and decided by the jury
were based upon Song’s repudiation, or rejection of the purchase agreement.”
Appellees’ Br. at 11. However, our review of the trial transcript reveals no
argument or jury instructions addressing Song’s alleged repudiation of the
purchase agreement.2 And the Iatarolas do not direct us to any evidence
presented at trial to support their claim that Song repudiated the agreement.
2
We take judicial notice of the trial transcript, which we have obtained via the Odyssey case management
system. See Horton v. State, 51 N.E.3d 1154, 1160-61 (Ind. 2016) (observing that Ind. Evidence Rule 201(b)(5)
“now permits courts to take judicial notice of ‘records of a court of this state,’” and that such records are
presumptively sources of facts “that cannot reasonably be questioned”); see also Ind. Appellate Rule 27
(providing that the “Record on Appeal . . . consist[s] of the Clerk’s Record and all proceedings before the trial
court . . . whether or not transcribed or transmitted to the Court on Appeal”).
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[11] Rather, the Iatarolas categorically assert that Song’s acknowledgment that he
terminated the agreement meant that he had repudiated or rescinded the
contract. Both in their argument to the trial court and in their brief on appeal,
the Iatarolas conflate and confuse the terms termination, repudiation, and
rescission. But those terms have distinct meanings in the law, and, on these
facts and this record, the Iatarolas’ contention that Song’s termination was
equivalent to a repudiation or rescission is not well taken.3
[12] The addendum to the purchase agreement included a 180-day due diligence
period “from the day of acceptance of [the] contract [on March 21, 2011].” Id.
at 187. As we observed in Song I, “[g]enerally, in real estate transactions, the
term ‘due diligence’ refers to the parties’ obligations to ‘investigate facts rather
than make assumptions about them.’” 76 N.E.3d at 933 (quoting Hartig v.
Stratman, 760 N.E.2d 668, 671 (Ind. Ct. App. 2002)). But we noted that the
parties’ purchase agreement “does not state the purpose of the due diligence
period” and is, therefore, “ambiguous.” Id. At trial, Song argued that, in light
of the zoning discrepancy, that provision entitled him to terminate the purchase
agreement during the due diligence period, which he did, and to recover the
3
To the extent the Iatarolas contend that the jury’s verdict was based on Song’s request to rescind the
contract, there is no indication in the record that Song’s alternative claim for rescission was even tried to the
jury. Indeed, in Song I we noted that the trial court “did not grant Song’s request to rescind the contract,” 76
N.E.3d at 937, and it is well settled that “rescission is an equitable remedy and must be tried by the court,”
Stevens v. Olsen, 713 N.E.2d 889, 891 (Ind. Ct. App. 1999), trans. denied. The Iatarolas’ contention is without
merit.
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earnest money. Because the due diligence provision is ambiguous, the jury, as
factfinder, was entitled to adopt Song’s interpretation.4
[13] The evidence presented at trial shows that, during the final inspection of the
property on August 7, 2011, which occurred within the due diligence period,
Thomas informed Song, for the first time, that the property was zoned
agricultural, not industrial. By letter dated August 12, Song’s attorney advised
Macmahon “that Song would not continue with his purchase unless the
Iatarolas secured I-2 Industrial zoning and demanded a price reduction in order
to compensate Song for the increase in real estate tax that would result from the
change from agricultural to industrial zoning.” Song I, 76 N.E.3d at 932. The
Iatarolas responded that they would not secure different zoning for the
property. Accordingly, “Song subsequently exercised his due diligence
contingency rights under the contract, terminated the purchase agreement within
the 180-day due diligence period provided in the addendum, and demanded the
return of his $150,000 earnest money deposit,” which the Iatarolas refused to
return. Id. (emphasis added).
[14] There is no evidence that Song repudiated the purchase agreement. Indeed, the
trial court did not instruct the jury on repudiation and the parties made no
argument on repudiation. Instead, the court instructed the jury that it could
4
The Iatarolas argued at trial that the due diligence provision applied only to the Iatarolas’ responsibility to
vacate the premises within 180 days of the date of the purchase agreement. The jury verdict in favor of Song
shows that the jurors rejected that interpretation of the provision.
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find that either Song or the Iatarolas had breached the purchase agreement and
that the non-breaching party was entitled to the earnest money.5 Consistent
with that instruction, Song argued that the purchase agreement
gave 180-days’ due diligence to Mr. Song to investigate the
usability of this property for his intended purpose. Within that
180 days, he did so and withdrew because the property did not
qualify, could not be used for his intended purpose, and because
the Iatarolas refused as a part of the transaction before a closing
to go ahead and get it zoned [industrial].
Trial Tr. Vol. 4 at 186. And Song argued that the Iatarolas breached the
purchase agreement when, upon his termination of the agreement during the
due diligence period, they did not return the earnest money. Our review of the
record, including the jury instructions and arguments, reveals that the jury’s
award of earnest money to Song could only have been based on a finding that
the Iatarolas breached the purchase agreement.
[15] Further, the law is well settled that,
5
Final Instruction No. 5 provided as follows:
The terms of the March 21, 2011[,] contract, also called a Purchase Agreement, state that
upon a breach of the agreement by either party, the non-breaching party is entitled to
liquidated damages. If you determine that the Defendants breached the March 21,
2011[,] contract, then under the terms of the contract, Plaintiff is entitled to a return of his
earnest money deposit for the Defendants’ breach. If however, you find that the Plaintiff
breached the March 21, 2011[,] contract, then the Defendants are entitled to receive the
earnest money deposit.
Appellant’s App. Vol. II at 107.
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[w]hen one party repudiates the contract, the injured party has the
option of pursuing one of three remedies: 1) he may treat the
contract as rescinded and recover upon quantum meruit; 2) he may
keep the contract alive for the benefit of both parties, being at all
time ready and able to perform, and at the end of the time
specified in the contract for performance, sue to recover under the
contract; or 3) he may treat the repudiation as putting an end to
the contract and sue to recover the damages caused by refusing to
carry out the contract.
Scott-Reitz Ltd. v. Rein Warsaw Assoc., 658 N.E.2d 98, 103-04 (Ind. Ct. App.
1995) (emphases added). Here, if, as the trial court found, the jury had based its
verdict on Song’s repudiation of the purchase agreement, then the Iatarolas
would have been the injured party and entitled to damages rather than Song.
See Scott-Reitz Ltd., 658 N.E.2d at 103-04. But the jury entered a verdict in
Song’s favor and awarded him the earnest money. Thus, both as a matter of
fact and a matter of law, the jury’s damage award precludes the trial court’s
determination that the verdict was based on Song’s repudiation of the purchase
agreement.
[16] We hold that the trial court erred when it found that the jury’s verdict was
based on Song’s repudiation of the purchase agreement and concluded that
Song was not entitled to attorney’s fees under the agreement. Song was the
prevailing party at trial and, as such, is “entitled to recover court costs and
reasonable attorney[’]s fees” incurred in the course of this litigation.
Appellant’s App. Vol. II at 185. Accordingly, we reverse and remand with
instructions for the trial court to conduct a hearing to determine the amount of
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reasonable attorney’s fees incurred by Song, including appellate attorney’s fees,
and to award those fees and court costs to Song.
[17] Reversed and remanded with instructions.
Pyle, J., and Altice, J., concur.
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