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April 16, 2006

INDIANA CASE REVIEW: Merger, Notice of Appeal and Trial Rule 56(E)

Indiana Case Review

Merger, Notice of Appeal and Trial Rule 56(E)

Stephen E. Arthur



Doctrine of Merger

    Under the doctrine of merger, any existing contracts between parties, if not carried forward into the deed, are extinguished and no action on the contract survives.  An exception to the doctrine of merger exists where the contract creates rights collateral to and independent of the conveyance. 

    In Williams v. Younginer, 851 N.E.2d 351 (Ind. Ct. App. 2006), the Younginers came upon a newly constructed home they wanted to purchase.  A brochure obtained while viewing the home stated that Jerry Williams could be contacted for more information regarding the home.  The brochure did not state that Jerry Williams operated Building, Inc., which built and marketed homes. 

    After negotiations, a purchase agreement was signed by the Younginers as “buyers” and Williams as “seller.”  Williams’ capacity as president of Builder, Inc. was not apparent from the document.  Later, the Younginers became aware of defects in the home and commenced an action against Williams that involved claims for breach of implied warranties.  The Younginers recovered a judgment on the implied warranties count.

    On appeal, Williams asserted that any implied warranties were extinguished by the doctrine of merger.  The doctrine of merger by deed provides that in the absence of fraud or mistake, all prior or contemporaneous negotiations or executory agreements, written or oral, leading up to the execution of a deed are merged therein by the grantee’s acceptance of the conveyance in performance thereof.  Williams argued that Younginer could not assert a claim based on the purchase agreement.  The Indiana Court of Appeals disagreed.

    Rights that exist independent and collateral to the conveyance provide an exception to the doctrine of merger.  The court stated that, generally, these rights are not related to title, possession, quality, or emblements of the land contract, and survive because their performance is not necessary to the conveyance of the real estate.  There is no reason to merge them into the deed. 

    The Court of Appeals noted that the deed was silent on the issue of implied warranties and the implied warranties were not satisfied by a conveyance of the deed.  Therefore, the implied warranties survived the deed as did the Younginer’s claims. 



Timing of Notice to Appeal

The trial court has an obligation to promptly rule on a motion to correct error.  Under Trial Rule 53.3 a motion to correct error is deemed denied if not set for a hearing within forty-five days or is not ruled upon within thirty days after a hearing.  A trial court may continue a hearing on the motion so that a successor judge can be appointed and rule on the motion.

In Copenhaver v. Lister, 2006 WL 2323216 (Ind. Ct. App. 2006), the Copenhavers appealed a judgment entered in favor of Lister on a claim for replevin of certain business assets and conversion.  The Court of Appeals opinion included an important procedural discussion regarding Lister’s argument that the appeal must be dismissed because Copenhaver has failed  to timely file a notice of appeal.

After judgment was entered against the Copenhavers, a timely motion to correct error was filed together with a pro se ethics complaint against the trial judge on May 4, 2005.  On June 8, 2005, the Copenhavers asked the court to set a hearing be set on their motion, and a hearing was scheduled for July 13, 2005.  The Judge recused himself on June 29, 2005, and ordered that the hearing on the motion “should be continued without date subject to a special judge appearing, qualifying and assuming jurisdiction of the case and then setting the hearing on the motion to correct errors.”  On July 13, 2005, a special judge was appointed.  On August 2, 2005, all deadlines were vacated and a telephone conference was set for August 19, 2005. On August 26, 2005, the trial court denied the motion and the Copenhavers filed their notice of appeal on September 23, 2005. 

Arguing that the notice of appeal was untimely and should be dismissed pursuant to Trial Rule 53.3, Lister claimed the decision of Williamson v. Williamson, 825 N.E.2d 33 (Ind. Ct. App. 2005), controlled.  Specifically, Lister argued, when the recusal order was entered, the motion was deemed denied on August 13, 2005, because no hearing had been scheduled on the motion within forty-five days from the date of the recusal order.  To be timely, Lister asserted, the notice of appeal should have been filed by September 12, 2005.  The Court of Appeals disagreed. 

Noting the uncertainty as to whether the forty-five day requirement under Trial Rule 53.3, which applies to initial hearings, applied to rescheduled hearings, the court  distinguished the case from Williamson.  Unlike Williamson, the recusal order did not indefinitely continue the hearing but rather directed the successor judge to resume consideration of the motion and reset the hearing date.  Specifically, the court found “the trial court was simply providing additional time for the special judge to qualify, become familiar with the case, fairly assess the merits of the action, and conduct the hearing according to the availability of the court’s calendar.”  Expressly refusing to elevate form over substance, the court found that a bright line rule regarding the application of Rule 53.3 should not control and that the appeal was timely filed.

Admissibility of Affidavits under Trial Rule 56(E)

Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.  Trial Rule 56(E).

In City of Gary v. McCrady, 831 N.E.2d 359 (Ind. Ct. App. 2006), McCrady was effectively terminated from his position as Chief of Operations by the Gary Common Council when the Council voted to fill the position with another applicant.  Alleging violations of the Open Door Law, McCrady filed suit against Gary and the Council.  Partial summary judgment was granted in favor of McCrady and the Council appealed. 

The Court of Appeals was asked to decide the admissibility of certain affidavits used to support McCrady’s motion for partial summary judgment.  One of the challenged affidavits was signed by the Public Access Counselor who conducted an investigation of the alleged violation of the Open Door Law.  The bulk of the affidavit referred to statements and investigations of third parties.  The Court of Appeals determined this illustrated an absence of personal knowledge.  Additionally, the court found that the affidavit contained impermissible legal conclusions and opinion, as well as inadmissible hearsay.

The second of the challenged affidavits was signed by McCrady, which the Council argued contained hearsay.  That affidavit, according to the Court of Appeals, simply quoted certain council members as to statements they allegedly made at council meetings.  Additionally, the affidavit included information from the deposition of a third party and attached exhibits which the court found were not based on McCrady’s personal knowledge, but, instead were statements containing inadmissible hearsay.  Therefore, the court held McCrady’s affidavit was inadmissible. 

This opinion is interesting because it suggests a shift in Indiana law towards that of other jurisdictions which hold that admissibility of affidavits for purposes of a motion for summary judgment is equivalent to admissibility of evidence at trial. This issue was last addressed by the Indiana Supreme Court in Reeder v. Harper, 788 N.E.2d 1236, 1241-1442 (Ind. 2003), where the court held: “[A]n affidavit that would be inadmissible at trial may be considered at the summary judgment stage of the proceedings if the substance of the affidavit would be admissible in another form at trial.”  The McCrady court did not discuss Reeder.
Stephen Arthur (sarthur@h-mlaw.com) is a partner with Harrison & Moberly, LLP, in Indianapolis, concentrating his practice in federal and state complex commercial litigation. Mr. Arthur is the author of books on Indiana Civil Trial Practice and Indiana Procedural Forms, and co-author of Professor Harvey’s volumes in West Publishing’s Indiana Practice Series. The author wishes to thank Paul Carroll for his assistance in the preparation of this case review.  The opinions and analysis expressed in this column are those of the author.


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