COA splits in reversal for flooded cottage owners

A Kosciusko County couple has secured a partial reversal from a split appellate panel after disputes about their waterlogged cottage revealed genuine issues of material fact and an improper calculation of the property’s value.

In June 2018, Julie and Mike Nordin ran into trouble with a small, unoccupied 100-year-old cottage on their newly purchased land in the town of Syracuse.

The couple, wanting to fix up the place, argued that the structure was “older” but only needed minor repairs. However, the town maintained that the cottage was “an uninhabitable, dilapidated shell of a structure that needed an entirely new bathroom, new dry wall, new windows, new ceiling tiles, walls replaced, new plumbing, new faucets, a new stove, and a new foundation.”

A week after the Nordins bought the property and before they had done any work, the town issued a work order to shut off the water at the cottage because a deposit had not yet been paid. Due to confusion, the water, which was already turned off, was accidentally turned on. As a result, the cottage flooded with 6,000 gallons of water.

The damages were estimated at $55,928.44 but reduced to $43,062.26 for “Non-recoverable Depreciation” by a claim representative for the town. A tax assessment for the cottage post-flooding was $14,300.

In order to remain compliant with the Kosciusko County Area Plan Commission’s Flood Control Ordinance, the cottage foundation would need to be elevated. When the couple looked at demolition estimates, they ranged from $255,000 to nearly $295,000. An appraiser also estimated a replacement cost of $269,483.

The Nordins sued the town for negligence, seeking damages for “damage to property, loss of use of property, and lost rental income.” The town moved for summary judgment, acknowledging the Nordins were entitled to damages but arguing the damages are limited to the difference in the fair market value of the cottage before and after the flooding.

Looking at the cottage’s pre-flooding tax assessment of $14,700 and post-flooding tax assessment of $14,300, the town proposed a damages award of $400. It also argued that because the cottage was uninhabitable even before the flooding, the Nordins couldn’t recover for loss of use or lost rental income.

The Kosciusko Circuit Court agreed and granted the town’s motion and granting $400 in damages.

But a split Court of Appeals of Indiana reversed in Julie Nordin and Mike Nordin v. Town of Syracuse, 22A-CT-135, finding that the court subtracted the post-damage market value of the building from the pre-damage market value instead of awarding the full pre-damage market value.

It also found error with the trial court’s award of damages, which the appellate majority determined did not account for the cost of demolishing the cottage, which must be done. It therefore reversed the $400 award and remanded the matter to the trial court with instructions to address both concerns.

“Demolition costs are not settled. If the parties cannot reach a resolution, and if there is a genuine issue of material fact, that issue should proceed to trial,” Judge Nancy Vaidik wrote. 

Although the COA agreed that the Nordins should be compensated $14,700, the court disagreed with the couple’s assertion that the trial court should not have relied on General Outdoor Advertising Co. v. La Salle Realty Corp., 218 N.E.2d 141 (Ind. Ct. App. 1966) and instead that all the evidence should be presented to a jury to determine the appropriate amount of damages.

It also disagreed with the Nordins’ claim that the trial court erred in determining the pre-flooding market value of the cottage to be $14,700.

“The Nordins have not pointed to any other evidence to contradict the pre-flooding assessed value of $14,700,” Vaidik wrote. “Therefore, we cannot say the trial court erred by using that amount in its damages calculation.”

However, the appellate court did part ways with the trial court’s conclusion that the cottage was in a “primitive,” “unsafe,” and “un-useable” condition even before the flooding and that any necessary repairs exceeded 50% of its fair market value prior to the incident.

Instead, it found genuine issues of material fact as to what repairs, if any, were “necessary” and that the town did not direct the court to any evidence definitively establishing that the repairs would have cost more than $7,350.

“Therefore, on remand, the Nordins are entitled to a trial on their loss-of-use claim,” Vaidik wrote.

Judge Terry Crone affirmed in part with the majority’s decision to reverse and remand on the issues of damages and loss of use, but dissented on the determination of the cottage’s pre-flooding market value. Crone also disagreed with the majority’s “restrictive” approach to determining the proper measure of damages.

In a separate opinion, the dissenting judge opined that the majority improperly faulted the Nordins for “fail[ing] to specify an alternative measure of damages” to the pre-flooding market value of the cottage, and in turn “disregarded Indiana’s summary judgment procedure.”

Crone opined that additional genuine issues of material fact were raised regarding whether the flooding negatively affected the value of the land and, if so, by how much, and if the Nordins would have had to bring the cottage into compliance with the Flood Control Ordinance when completing the allegedly minor repairs that they planned to do themselves.

“The Nordins are the innocent parties in this case, and we should follow the Indiana tort law that seeks to make them whole, rather than focus solely on ‘rais[ing] a safeguard against a windfall[,]’as the majority does here,” Crone concluded.