ATTORNEY FOR APPELLANTS: ATTORNEY FOR APPELLEES:
ROBERT J. PALMER SUSAN R. HANSON
JOHN H. PEDDYCORD KENNETH P. COTTER
May, Oberfell & Lorber Tuesley & Hall, LLP
South Bend, Indiana South Bend, Indiana
TIMOTHY P. McLAUGHLIN
South Bend, Indiana
IN THE COURT OF APPEALS OF INDIANA
MICHAEL W. SMITH and
KATHRYN H. SMITH ) ) Appellants, ) ) vs. ) No. 71A03-0002-CV-0045 ) MILLER BUILDERS, INC., ) ST. JOSEPH COUNTY DRAINAGE ) BOARD and ST. JOSEPH COUNTY ) SURVEYOR, JOHN R. McNAMARA ) ) Appellees. )
APPEAL FROM THE ST. JOSEPH SUPERIOR COURT
The Honorable William C. Whitman, Judge
Cause No. 71D06-9501-CP-00051
December 14, 2000
OPINION - FOR PUBLICATION
SHARPNACK, Chief Judge
Michael and Kathryn Smith (collectively, the Smiths) appeal the trial courts judgment in favor of the St. Joseph County Surveyor, John McNamara (the Surveyor); the St. Joseph County Drainage Board (the Board); and Miller Builders, Inc. (Miller). The Smiths raise three issues, which we restate as:
whether the trial courts conclusion that the notice the Smiths sent to the Surveyor did not comply with the Indiana Tort Claims Act is clearly erroneous;
whether the trial courts conclusion that the Boards acts or omissions did not create any cause of action in favor of the Smiths is clearly erroneous; and
whether the trial courts conclusion that the Smiths could not recover against Miller
on an implied warranty of habitability theory because the Smiths did not rely
on Millers skill or expertise is clearly erroneous.
We affirm in part, reverse in part, and remand.
The facts most favorable to the judgment follow. In 1980, Miller filed an application with the Area Plan Commission for the approval of a subdivision located in St. Joseph County. Miller proposed using retention ponds as the mode of draining storm water. After an investigation of Millers application, the Surveyor indicated that an urban drain See footnote was needed. On July 15, 1980, the Area Plan Commission approved the tentative subdivision plan subject to certain recommendations.
The project was dormant until April 28, 1981, when Miller submitted a second and revised application for the same real estate. As part of the application, Miller submitted a soils review report that indicated the possibility of groundwater problems on certain lots. Consequently, the application was referred to the Soil Review Committee of the Area Plan Commission. After a meeting, the Soil Review Committee approved the preliminary subdivision subject to the condition that the ground elevation for lots 66 through 73 be set at 793 feet above sea level. In August 1986, after the subdivisions drainage system was classified as an urban drain, the Area Plan Commission gave its final approval for the subdivision.
At some point, Miller conveyed lot 71 of the subdivision to Mrs. Crachy, the wife of experienced homebuilder, William Crachy. In 1988, Crachy built a house on lot 71. At some point during Crachys ownership, the basement area flooded on one occasion following heavy rains. The drainage basin at the rear of the lot also filled with water, as did the walkout basement leading to a patio area.
In 1991, the Smiths bought the house on lot 71 from Mrs. Crachy. During one of the meetings preceding the sale, the Crachys informed the Smiths of the earlier flood. In June 1993, following extensive rainfall, the Smiths basement flooded. Shortly after the June 1993 flood, the Smiths contacted the Surveyor and requested that the Board authorize an engineering firm to do a study regarding the ground water problem. The resulting study revealed that the retention basins, which were designed to accommodate 101,000 cubic feet of water, were constructed to accommodate only 79,074 cubic feet of water. Additionally, although the plans called for the installation of an 1,800 gallon drywell in each retention basin, none were found. Moreover, the study revealed that the lots located in the southwest part of the subdivision, which included the Smiths home located on lot 71, were in a natural drainage course.
The Smiths filed a complaint against Miller in January 1995 alleging that Miller negligently designed, planned, supervised, constructed or observed the construction of the drainage facilities in the subdivision and that Miller had failed to disclose a latent defect in the drainage facilities thereby breaching the implied warranty of habitability. The complaint was later amended to add the Board and the Surveyor as defendants. In the amended complaint, the Smiths alleged that the Board and the Surveyor negligently supervised, monitored, or observed the construction of the drainage facilities, failed to warn buyers of the lots in the subdivision of the potential water problems, and maintained said drainage facility as a nuisance. Following a bench trial, the trial court entered judgment in favor of the defendants.
Where, as here, a party has requested specific findings of fact and conclusions thereon pursuant to Ind. Trial Rule 52(A), we engage in a two-tiered standard of review. Yates-Cobb v. Hays, 681 N.E.2d 729, 733 (Ind. Ct. App. 1997). We first determine whether the evidence supports the findings. Id. Then we determine whether the findings support the judgment. Id. The trial courts findings and conclusions will not be set aside unless they are clearly erroneous. Id. Findings are clearly erroneous if the record contains no facts or reasonable inferences to support them. Id. In determining whether the findings and judgment are clearly erroneous, we neither reweigh the evidence nor judge the credibility of witnesses. Id.
In this case, the Smiths do not challenge the trial courts findings of fact. [W]here a party challenges only the judgment as contrary to law and does not challenge the special findings as unsupported by the evidence, we do not look to the evidence but only to the findings to determine whether they support the judgment. Boyer v. First Nat. Bank of Kokomo, 476 N.E.2d 895, 897 (Ind. Ct. App. 1985).
Ind. Code § 34-13-3-10.
With respect to the notice that the Smiths sent to the Surveyor in this case, the trial court found as follows:
The notice was sent to [the Surveyor], among others, at least according to the heading. Nonetheless, he is never mentioned in the recitation of events as one of the persons involved. It was not until [the Smiths] filed their Third Amended Complaint in early March of 1997 that [the Surveyor] (and the County) were apprised that his own actions were being called into question by Mr. and Mrs. Smith. Such was nearly four years after-the-fact. The notice was insufficient.
Record, pp. 689-690. The Smiths argue that the trial courts conclusion that
the notice they sent to the Surveyor was insufficient is clearly erroneous for
three reasons: (1) the notice substantially complies with the requirements of the
Act; (2) notice to the Surveyor was unnecessary to the extent that their
complaint requested equitable relief; and (3) the Surveyor waived, or is estopped from
asserting, the inadequacy of the tort claims notice because he failed to obtain
a pretrial determination of the sufficiency of the notice. We will address
each contention in turn.
These tort claims arise from the fact that [the Board] is negligently maintaining
and/or continuing and maintaining a nuisance at certain drainage basins and related facilities
located in Section I of Sherwood Forest, a residential subdivision in St. Joseph
County, Indiana. Specifically, on or about August 7, 1986, [Miller] . .
. obtained approval of a plat for Sherwood Forest, Section I, in said
residential subdivision, from the St. Joseph County Area Plan Commission and [the Board]
. . . .
That in conjunction with the approval of said subdivision, [Miller] submitted a drainage
plan . . . which was approved by the appropriate governmental authorities, including
[the Board], and which contained specific provisions for the construction of drainage facilities;
that said facilities were to have been constructed in accordance with the government-approved
plans and specifications for the drainage facility.
The [Miller] and [the Board] negligently designed, planned, supervised, constructed or observed the
construction of said drainage facilities . . . in that they failed to
construct three (3) level basins with a total retention capacity of one hundred
thousand sixty-six (100,066) cubic feet; failed to install two (2) separate dams between
the three (3) separate retention areas as provided in the plans and specifications
as approved by the governmental authorities, including [the Board]; and failed to install
drywells in the bottoms of said drainage basins.
That as a result of the negligence of [Miller] and [the Board], the
[Smiths] property, including the lower living quarters of their residence, were flooded by
overflow water and [the Smiths] believe they will continue to be flooded by
overflow water from the retainage basins constructed by [Miller] and that both the
[Smiths] residence and personal property were damaged thereby; that [the Smiths] have incurred
loss of use of their property and other damages in attempting to rectify
the problems caused by the negligence of [Miller] and [the Board], as well
as the continuance and maintenance of the nuisance by [the Board].
That [the Board] is negligently maintaining and/or continuing and maintaining a nuisance of
said property belonging to [the Smiths] as well as adjoining lots and that
said nuisance constitutes a public health hazard to not only the Smiths but
also to other members of the public.
That [the Board] has failed and refused to cause the nuisance in question
to be abated by the correction and reconstruction of the drainage basins and
facilities in question by [Miller] despite repeated requests to do so from [the
Smiths] and their counsel.
That [the Smiths] hereby claim damages from [the Board] in amounts sufficient to
compensate them for their losses plus prejudgment interest, for the costs, including reasonable
attorney fees, of any negligence and/or nuisance actions they might file against [the
Board], said damages not anticipated to exceed the sum of one hundred thousand
That [the Smiths], in addition to seeking damages for said negligence and/or continuing
nuisance, demand that [the Board] abate said nuisance and, upon its failure to
do so, shall file an appropriate court action to seek abatement of the
nuisance, including injunctive relief, and shall further seek to recover reasonable attorney fees,
court costs, etc. incurred in the process.
(1) Drains in
need of reconstruction;
(2) Drains in need of periodic maintenance; or
(3) Drains that should be vacated.
Finally, I.C. 36-9-27-35 provides, in pertinent part:
(a) The county surveyor shall submit to the board a written report setting
forth his classification of regulated drains in order of priority for action by
the board. This report may be made from time to time during
the surveyors process of classification.
(b) The board may adopt the classifications and order of work priority as made by the county surveyor, or may modify them.
Given the statutory scheme establishing the duty of the Surveyor or vis a
vis the duty of the Drainage Board, the court is unable to conclude
that the Boards acts or omissions regarding the Sherwood Forest drainage systems created
any cause of action by [the Smiths].
Record, pp. 690-691.
The Smiths do not dispute that it is the Surveyor, not the Board, that has the statutory responsibility for supervising all construction, reconstruction, and maintenance work with respect to the drain at issue. However, because of the Surveyors status as an ex officio, nonvoting member of the Board, the Smiths assert that when the Surveyor exercised his powers and duties in matters relating to the drain at issue, he did so as a member of the Board. See Ind. Code § 36-9-27-5(a). Consequently, the Smiths conclude that the Surveyors acts and omissions are attributable to the Board and, therefore, the Board is responsible for the alleged negligence of the Surveyor in supervising the construction of the drainage facilities.
The crux of the Smiths argument, although not using the term agent, is that the Surveyor is an agent of the Board. In order for the Surveyor to be considered an agent of the Board, it must be shown that he acted on behalf of the Board, with the Boards consent, and subject to the Boards control. See Hires Parts Serv., Inc., v. Oil Supply Co., 726 N.E.2d 246, 248 (Ind. 2000).
Pursuant to the statutes on drainage law, the Surveyor is an ex officio member of the Board. See I.C. § 36-9-27-5(a). An ex officio member is one that is a member by virtue of his title to a particular office, without the necessity of further warrant or appointment. See Blacks Law Dictionary 575 (6th ed. 1990); Victory Comm. v. Genesis Convention Center, 597 N.E.2d 361, 363 n.1 (Ind. Ct. App. 1992), rehg denied. Thus, the Surveyor is a member of the Board by virtue of his position as the county surveyor. However, there is nothing in the statutes that give agent status to the Surveyor as an ex officio board member. In fact, the statute gives different powers and duties to the Surveyor and the Board, and does not provide for the Board to have any oversight or control over the Surveyor in the completion of his statutory duties. See, e.g., Ind. Code §§ 36-9-27-29, 36-9-27-34(a), 36-9-27-35. Moreover, the Board is not required to adopt the recommendations of the Surveyor: The [B]oard may adopt the classifications and order of work priority as made by the county surveyor, or may modify them. I.C. § 36-9-27-35(b). Thus, the Surveyor does not act on behalf of the Board when he performs his statutory duties nor is he subject to the Boards control in the performance of those duties. Therefore, the Surveyor is not an agent of the Board and the Board cannot be held responsible for the alleged negligence of the Surveyor. See, e.g., Hires, 726 N.E.2d at 248. Consequently, we hold that the trial courts conclusion that the Boards acts or omissions did not create any cause of action in favor of the Smiths is not clearly erroneous. See, e.g., Yates-Cobb, 681 N.E.2d at 733.
Accordingly, we hold that if land is improved and sold for a particular
purpose, if vendor has reason to know that the purchaser is replying [sic]
upon the skill or expertise of the vendor in improving the parcel for
that particular purpose, and the purchaser does in fact so rely, there is
an implied warranty that the parcel is suitable for the intended purpose.
In this case Miller Builders improved real estate and sold it to Mrs.
Crachy for a particular purpose, namely the construction of a home. Miller
had reason to know that prospective purchasers of lots in Sherwood Forest would
rely on its skill and foresight in the construction of facilities that would
prevent flooding of peoples homes. In fact, Miller constructed the drainage basins
with 21,926 cubic feet less capacity than the plans called for, a significant
fact in this especially vulnerable area with its high water table.
The last element is: Did [the Smiths] so rely? [The Smiths]
have the burden of proving by a greater weight of the evidence that
they did. Certain events preceding their purchase of Lot 71 are significant.
Mr. Crachy told Mr. Smith about the earlier flooded basement, but indicated
it was surface water. Mr. Smith also observed the drainage basins, which
contained standing water. As he put it: I had concerns about
whether the elevation of the water would ever be a problem. Finally,
the following colloquy took place with [an attorney for the Board and the
Q. What efforts did you make on your own to determine how
high the water table was out there before you purchased it? What
did you do about that?
I observed it in the retention pond.
So you knew right from the start before you bought this place it
was a high water table; is that true?
Yes. And I asked if it was a potential problem, and I
was assured that it was not.
But you didnt ask?
I asked the builder.
You asked the builder. And that was the only person you asked?
That was the person from whom I was purchasing the property.
The greater weight of the evidence does not support the premise that Mr.
and Mrs. Smith relied on Miller Builders skills or expertise in this regard.
Record, pp. 691-693.
The Smiths argue that reliance is not an element of the implied warranty of habitability and that the trial court therefore erred in imposing a burden upon them to rely on answers to specific inquiries to Miller, a party with whom they had no direct contact or privity of contract. Miller, on the other hand, argues that reliance is an essential element of the implied warranty of habitability and that because the Smiths knew about prior flooding problems and sought to have their concerns addressed by the builder rather than Miller, the trial court was correct in entering judgment in Millers favor because the Smiths did not rely upon Millers skill or expertise when making their decision to purchase the home.
Because the trial court relied upon Jordan in reaching its conclusion on this issue, an examination of that case is warranted. Jordan v. Talaga, 532 N.E.2d 1174, 1178 (Ind. Ct. App. 1989), rehg denied, trans. denied. Shortly after moving into their home, the homeowners in Jordan experienced flooding in their backyard. Id. After several more flooding incidents, which eventually involved the home itself and not just the land, the homeowners brought suit against the subdivision developers (who did not build the home), alleging breach of implied warranty of habitability. Id. at 1177, 1179. The question addressed by this court on appeal was [w]hether a professional developer who improves land for the express purpose of residential homebuilding with knowledge but without disclosure of a latent defect in the real estate that renders the land unsuitable for the purpose of residential homebuilding breaches an implied warranty of habitability. Id. at 1182. Because there was very little authority from our state to provide direction in deciding this question, we turned to decisions from the courts of other states. Id. at 1182-1185. In doing so, we stated that [t]he decisions from two other states are worthy of note because they hold the implied warranty of habitability applies to the sale of land from a developer. Id. at 1185. Those two cases were Hinson and Rusch. Hinson v. Jefferson, 287 N.C. 422, 215 S.E.2d 102 (1975); Rusch v. Lincoln-Devore Testing Lab., Inc., 698 P.2d 832 (Colo. Ct. App. 1984). We then discussed both cases and quoted the holding from Rusch. Jordan, 532 N.E.2d at 1185.
It was from this quotation of Rusch that the trial court concluded that the Smiths had to prove that they did so rely on Millers skill and expertise. However, we did not adopt the holding of Rusch as stated by the trial court. Instead, we found the decision in Rusch to be worthy of note. Id. Our discussion and quotation of Rusch in the Jordan case was designed to illustrate that other jurisdictions had reached the same conclusion under similar facts; namely, that the subdivision developers were liable to the homeowners for breach of the implied warranty of habitability. In reaching this same conclusion, we stated that [t]he facts and circumstances of the present case are particularly appropriate for the imposition of an implied warranty of habitability. Id. We then noted that the developers, who were professionals in the real estate business with knowledge of the water channel problem that they did not disclose, did more than sell raw land: they put in sewers and streets, and rough graded the lots for the express purpose of facilitating the building of homes. Id. Our holding was further guided by our concern that homeowners would be left without a remedy for latent defects in real estate that unscrupulous developers failed to disclose. Id. at 1186. Thus, the trial courts conclusion that the Smiths had to prove that they relied on Millers skill and expertise is not supported by our holding in Jordan.
Having determined that proof of reliance on the subdivision developer is not mandated by our holding in Jordan, we next examine whether this reliance requirement is supported by other case law. Prior to 1976, a warranty of habitability was implied only between the builder and the initial purchaser. See Theis v. Heuer, 264 Ind. 1, 12, 280 N.E.2d 300, 306 (1972) (holding that the rule of caveat emptor would no longer be applied with respect to the purchase of a new residence from the builder-vendor). Then, in Barnes, our supreme court extended the implied warranty of habitability to second or subsequent purchasers in the case of latent defects that are not discoverable upon the purchasers reasonable inspection and which manifest themselves after the purchase. Barnes, 264 Ind. at 229, 342 N.E.2d at 621. However, Barnes and its progeny do not require the second or subsequent purchaser to show that they relied on the builders skill or expertise. See, e.g., Wagner Constr. Co., Inc. v. Noonan, 403 N.E.2d 1144, 1148 (Ind. Ct. App. 1980). Indeed, such reliance would be unlikely and hard to prove given the lack of privity between the parties. Therefore, we hold that the trial courts conclusion that the Smiths could not recover against Miller on an implied warranty of habitability theory because the Smiths did not rely on Millers skill or expertise is clearly erroneous. See, e.g., Yates-Cobb, 681 N.E.2d at 733. However, because the trial court did not make any conclusions, apart from the lack of reliance, about whether the warranty had been breached, we remand for a determination of that issue.
For the foregoing reasons, the judgment of the trial court is affirmed in part, reversed in part, and remanded.
Affirmed in part, reversed in part, and remanded.
BAKER, J., and VAIDIK, J. concur