The Trusted Adviser December 2010 | Volume 3 • Number 11



Installment Contracts; Vendor and Purchaser

Chiprean v Brody & Lacy Stock, 925 NE2d 489 (Ind Ct App 2010).

Facts:Brody and Lacy Stock owned a house in Anderson, Indiana. On February 7, 2007, they entered into a &€œPurchase Agreement&€ with Frank Chiprean. The Stocks offered to sell the house for $103,995 contingent on Chiprean acquiring a mortgage. The parties also entered into a &€œpossession agreement&€ allowing Chiprean to move into the house before he obtained the mortgage and completed the sale. In March 2007, Chiprean moved in and began paying $895 per month to the Stocks. These payments were to increase in March 2008 to $962 per month. The possession agreement also required Chiprean to close the sale within 18 months with the possibility of a six-month extension by the Stocks. Chiprean agreed to take possession of the property in its current condition; the Stocks had no responsibility to repair or maintain the house. Finally, Chiprean had to provide a $5,000 deposit with the listing broker, which would be forfeited by both parties if the sale never closed.

At some time during 2007 the roof collapsed over the great room of the house. The Stocks&€™ insurance company paid for repairs and Chiprean kept living there, confined to the master bedroom and without heat or air conditioning. As of December 2007, Chiprean stopped making complete payments under the possession agreement. The insurance company reimbursed the Stocks for four rental payments in 2008.

In January 2009, the Stocks filed a complaint in small claims court to evict Chiprean. In February, Chiprean consented to immediate eviction. Afterwards, the court awarded the Stocks $6,000 in damages. The court denied Chiprean&€™s counterclaim seeking the $5,000 deposit based on evidence that the deposit was split between the parties&€™ brokers. Chiprean appealed.

Holding:Affirmed. Chiprean argued that the court should have foreclosed his interest in the Stocks&€™ property rather than simply evicting him and awarding damages to the Stocks. The court disagreed, citing the fact that Chiprean never actually consummated a land sale contract. Despite the parties&€™ agreements, Chiprean never obtained the financing that was a condition of the contract of sale, so that contract never became enforceable.

Likewise, the possession agreement functioned in a manner similar to a lease. It was of limited term and would terminate if Chiprean failed to meet the requirements to conclude the sale. The payments were not expressly meant to pay down a balance on the overall property, nor were the payments divided into portions based on the overall property&€™s value. Therefore, Chiprean&€™s payments were similar to rent and did not create an equitable interest in the property.

With regard to Chiprean&€™s $5,000 deposit, the court could not possibly rule in Chiprean&€™s favor. First, the deposit was given to the brokers and not the Stocks, so his counterclaim against the Stocks could never achieve his desired relief. Second, the money was clearly intended as a nonrefundable deposit and not a down payment on the purchase price of the house.

Finally, Chiprean argued that the court erred in giving the Stocks $6,000 in damages, mostly stemming from unpaid rent, because it would be unconscionable to force him to pay rent when the home was in severe disrepair following the roof collapse. The court rejected this argument, first looking to the possession agreement&€™s language eliminating the Stocks from any liability to maintain or repair the property. Thus, the Stocks&€™ repairs were gratuitous. Next, the court indicated that Chiprean could not provide any evidence that the Stocks&€™ real estate report was fraudulent because Chiprean did not undertake an independent inspection of the property. Lastly, Chiprean could not claim that he was constructively convicted because that remedy is only available when the tenant actually vacates the premises, which Chiprean did not do.






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[Last update: 12-14-10]