Commercial Litigation: Contractor v. Homeowners

Thalheimer v. Halum (Ind. Ct. App. Aug. 13, 2012)

This case involved a dispute between homeowners and a contractor, whom the homeowners hired to remove carpet and tiles and to install new tiles. The homeowners eventually hired a new contractor to fix the allegedly deficient work. The homeowners also alleged that their son was injured because of the contractor’s work. The trial court entered judgment in favor of the homeowners. The contractor raised four issues on appeal.

The Court of Appeals held the contractor waived the first error, the homeowners’ alleged spoliation of evidence by not raising the issue until the motion to correct error filed after the bench verdict. It is a well-established rule that arguments made for the first time in a motion to correct error do not preserve the issue for appeal. A motion to correct an error can be a wise strategic move and is required to preserve some issues such as newly-discovered evidence or an excessive jury verdict. However, parties considering an appeal should clearly understand that first filing a motion to correct error will not allow the party to raise additional arguments to the Court of Appeals.

The Court of Appeals next rejected the contractor’s claim that the economic loss doctrine applied and barred the homeowners’ attempt to recover damages in excess of the actual property damage. The Court rejected the argument on the grounds that the homeowners brought two claims, one for property damages resulting from a breach of contract and one for personal injuries resulting from negligence. This holding is a fairly straightforward application of the economic loss doctrine and the principle that parties may bring negligence claims based on negligent performance of a contractual duty.

The Court of Appeals next rejected the contractor’s argument that the homeowners failed to comply with the warranty provision of the contract between the homeowners and the contractor. That provision stated: “All workmanship guaranteed for two (2) years from the date of completion.” The contractor argued that this provision entitled the homeowners to only the contractor’s continued labor while the homeowners argued that the provision entitled the homeowners to a satisfactory final product. The Court, relying on a prior decision that interpreted the term “faulty workmanship” in an insurance contract, found that the term “workmanship” was ambiguous. (Slip Op. p. 12 Schultz v. Erie Ins. Group, 754 N.E.2d 971 (Ind. Ct. App. 2011), trans.denied). The Court held that the trial court properly construed the term against the contractor, who drafted the contract. This aspect of the Court’s decision is important for anyone who practices commercial law. Indiana courts have now held the term “workmanship” to be ambiguous in two contexts. Practitioners who assist clients with drafting contracts would be wise to either exclude the term from contracts or define the term.

The Court of Appeals denied the contractors’ claim that the trial court improperly found the contractor’s work was deficient. As the Court recognized, the contractor’s argument was a classic request for the Court of Appeals to reweigh the evidence.

Finally, the Court of Appeals rejected the homeowners’ request for appellate attorney fees. The Court found that the contractor’s claims, although unsuccessful, were not frivolous or made in bad faith. The standard for appellate attorney fees is extremely high; it is not at all surprising that the Court did not award fees in this case.