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Casenotes

Indiana

Installment Contracts

Hooker v Norbu, 899 NE2d 655 (Ind Ct App 2008)

Facts:On February 1, 1995, Ronald Hooker, Yaling Huang, and her husband Jigme Norbu, (collectively "Buyers") entered into a real estate installment contract (the Contract) for the purchase of a restaurant. The sale price was $338,000 plus 11.5% interest, and the parties agreed that the Buyers would not make a down payment but would make monthly payments of $3,625.86 towards the principal and interest beginning on April 1, 1995. The Buyers each signed a guaranty that guaranteed their performance on the Contract.

The Buyers occupied the property beginning in April 1995, and made the required payments through October 1995. They then began making only partial payments for six months, and then no payments at all. In April 1997, the Buyers abandoned the property and returned the keys to Hooker, taking with them personal property, contrary to the contract terms. Hooker paid the property taxes that the Buyers failed to pay while they occupied the property.

On December 29, 2005, Hooker filed a complaint against the Buyers for default on the Contract. On June 12, 2007, the trial court entered a judgment of default against the Buyers. On February 4, 2008, the trial court ordered the contract be forfeited and awarded Hooker damages for the monthly payments the Buyers failed to make while they occupied the premises, the 11.5% interest per annum, the taxes Hooker paid, and the value of the personal property the Buyers removed from the property.

On March 4, 2008, Hooker filed a motion to correct error, arguing that the trial court erred by failing to (1) award damages for the Buyers removal of the restaurant's air conditioning unit; (2) failing to award interest for the personal property removed; and (3) failing to award the unpaid interest on the Contract. On March 13, 2008, the trial court granted Hooker's motion with regards to the air conditioner and the interest on the personal property. However, the court denied the request for payments of the unpaid interest amounts called for in the contract. The court stated that Hooker could not both retain the property and collect the unpaid payments under the contract. Hooker appealed.

Holding:Affirmed. The appellate court stated that Hooker had two options, given the Buyers' contractual default. He could have proceeded as though he had a mortgage, enforced and accelerated the Contract, and eventually sought foreclosure. Or, he could have sought forfeiture, cancelling the Contract, retaining the payments made by the Buyers, retaining the real estate, and recouping any damages he actually suffered from the transaction. Because he sought forfeiture, Hooker was no longer allowed to enforce the Contract. Therefore the appellate court held that the lower court did not err in denying Hooker the right to both cancel the Contract and then collect missed payments or interest on those payments.

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[Last update: 5-12-09]