HAGIOS INC v. CITY OF MONTPELIER (2025)

MEMORANDUM DECISION

Case Summary

[1] In 2023, Hagios, Inc. and Spencer Roller (collectively, Hagios) purchased real property from the City of Montpelier (the City). In 2025, the City filed an action for possession of the property and damages against Hagios, asserting, among other claims, fraudulent inducement. The trial court awarded prejudgment possession of the property to the City pursuant to Indiana Code section 32-30-3-5. Hagios then filed this interlocutory appeal, asserting the trial court's judgment is clearly erroneous. Because we agree the findings do not support with reasonable probability that the City is entitled to the property under a theory of fraudulent inducement, we reverse the trial court's order and remand for further proceedings.

Facts and Procedural History

[2] The property at issue is “located directly in the center of the City of Montpelier” at 107 E. Monroe Street. App. Vol. II p. 142. It was previously used as Montpelier High School and is over 95,000 square feet with approximately fifty classrooms, a gymnasium, and cafeteria. The assessed value of the property is $1.5 million.

[3] The property became vacant in 2022, and in 2023 the Blackford County School Corporation conveyed the property to the City of Montpelier. The City “aspired to find a beneficial use for the [p]roperty that would substantially benefit the community[.]” Id. Hagios submitted to the City a “business plan-outline” in which it proposed using the property and building for the “Hagios School of the Arts and Technology.” Id. at 52. The plan outlined Hagios’ ten-year goal for the school, including repairing the building and property. In the plan, Hagios claimed it was “prepared to invest $300,000 in 2024 as necessary to ready the building” and that “[m]aintaining the integrity of the building will be [Hagios’] top priority[.]” Id. At the time, the property had been vacant for several years and had several “known issues” that would need to be addressed, including “the roof” and “heating system.” Tr. Vol. II p. 10. The City and Hagios executed a purchase agreement in December 2023, in which Hagios purchased the property for $20,000.00.¹

[4] For the next year, Hagios “fail[ed] to properly repair and maintain” the property and generally “fail[ed] to operate the [p]roperty as a school[.]” App. Vol. II p. 145. The HVAC system was not repaired, and the building had no heating system. There were “serious safety concerns” as to the building's electrical system, the roof had “potential leaks,” and by January 2025 the water in the entire building had been turned off. Id. at 144. The building, often vacant, was broken into at least once in 2024. While the property was used as a school briefly in fall 2024, at its height it enrolled only six students. By January 2025, the school was no longer operating.

[5] In January 2025, the City filed a complaint for damages and for the return of the property, asserting breach of contract, actual fraud, and constructive fraud. The City also filed a motion for prejudgment possession of the property. A hearing on the motion for prejudgment possession was held in February. Following the hearing, the trial court issued an order containing findings of fact and awarding prejudgment possession of the property to the City. Specifically, the trial court found the City “has shown with reasonable probability that the Purchase Agreement will be rescinded following a final adjudication of the claims of the parties, and ownership of the [p]roperty will accordingly revert back to the City, because Hagios fraudulently induced the City to sell” the property. Id. at 146-47. Hagios then filed this interlocutory appeal.

Discussion and Decision

[6] As an initial matter, we note that this appeal is interlocutory, as the trial court has not yet entered a final judgment. Because the trial court awarded prejudgment possession of real property to the City, Hagios is entitled to this interlocutory appeal as a matter of right pursuant to Indiana Appellate Rule 14(A)(4). Although the parties address other issues in their briefs, the only issue before us on this interlocutory appeal is the award of prejudgment possession.

[7] Where, as here, the trial court issues findings of fact and conclusions thereon, “we review the issues covered by the findings with a two-tiered standard of review: (1) whether the evidence supports the findings, (2) and whether the findings support the judgment.” TKG Assocs., LLC v. MBG Monmouth, LLC, 259 N.E.3d 306, 315 (Ind. Ct. App. 2025), reh'g denied.

[8] Indiana Code section 32-30-2-1 (2002) provides “[a] person having a valid subsisting interest in real property and a right to the possession of the real property may recover the real property and take possession by an action brought ․ against the person claiming the title or interest in the real property.” During such a proceeding, a person may request an order for prejudgment possession of the property. Ind. Code § 32-30-3-5 (2002). Following a hearing on such a request, the court shall: “(1) consider the pleadings, evidence, and testimony presented at the hearing; and (2) determine with reasonable probability which party is entitled to possession, use, and enjoyment of the property.” Id. “The court's determination is preliminary pending final adjudication of the claims of the parties.” Id. “A reasonable probability is a probability sufficient to undermine confidence[.]” Kinko's Graphics Corp. v. Townsend, 803 F.Supp. 1450, 1455 (S.D. Ind. 1992) (quotation omitted) (applying Indiana ejectment law). “ ‘The statutory hearing manifests the inherent power of trial courts to intercede at an early stage—to make a preliminary decision before what could thereafter be a lengthy judicial process.’ ” I-65 Plaza LLC v. Indiana Grocery Group, LLC, 167 N.E.3d 1161, 1170 (Ind. Ct. App. 2021) (quoting Bishop v. Housing Auth. of S. Bend, 920 N.E.2d 772, 779 (Ind. Ct. App. 2010)).

[9] Here, following a hearing, the trial court determined the City was entitled to prejudgment possession of the property because the “City has shown with reasonable probability that the Purchase Agreement will be rescinded following a final adjudication of the claims of the parties[.]” App. Vol. II p. 146. Specifically, the court found “Hagios was not prepared to invest an amount close to $300,000 at the time that it made that representation to the City” and therefore “fraudulently induced the City to sell the Property[.]” Id. at 146, 147.

[10] Fraudulent inducement occurs when a party is induced through fraudulent misrepresentations to enter into a contract. Spainhower v. Smart & Kessler, LLC, 176 N.E.3d 258, 265 (Ind. Ct. App. 2021), trans. denied. The essential elements of fraudulent inducement are no different from any other action on actual fraud. Siegel v. Williams, 818 N.E.2d 510, 515 (Ind. Ct. App. 2004). The elements of actual fraud are: (1) a material misrepresentation of past or existing facts; (2) made with knowledge or reckless ignorance of falsity; (3) which caused the claimant to rely upon the misrepresentation to the claimant's detriment. Id. Claims of actual fraud cannot be predicated upon representations of future conduct. Jones v. Oakland City Univ., 122 N.E.3d 911, 918 (Ind. Ct. App. 2019), trans. denied. “Neither may a claim of actual fraud be based on broken promises, unfulfilled predictions, or statements of intent which are not executed.” Id. (internal quotation omitted).

[11] The City claims Hagios misrepresented that it was “prepared to invest $300,000 in 2024 as necessary” in the property.² App. Vol. II p. 52. The trial court found this to be a misrepresentation of existing fact, because at the time Hagios made the statement, it “was not prepared to invest an amount close to $300,000[.]” Id. at 146. Hagios argues this finding was erroneous, characterizing its statement not as one of existing fact, but of future conduct.³

[12] We addressed a similar situation in Jones. There, the plaintiffs entered into an employment contract with the defendants based on oral representations during the contract negotiations that the employment would be for a five-year period. When defendants ended the employment prior to that five-year period, plaintiffs filed suit. On appeal we held these were “statements of current intentions” not actionable under a fraud claim. Id. at 919. This was true even assuming the defendants never intended to follow through on those intentions when they made the statements. Id.

[13] The same can be said here. Hagios’ statement that it was prepared to invest $300.000.00 in the property as necessary is one of current intention. And such statements cannot be the foundation for a fraud claim. That is the case even if, as the trial court found, Hagios never intended to invest $300,000.00.

[14] The City points to Whiteco Properties., Inc. v. Thielbar, 467 N.E.2d 433 (Ind. Ct. App. 1984), as support that Hagio's statements are misrepresentations of present fact. In Whiteco, the plaintiffs purchased a property after being told by the sellers that it had an unobstructed view of a nearby lake. At the time the sellers made such representations, there was a plan “in existence” to build a cabana that would obstruct the view. Id. at 436. On appeal, we rejected sellers’ contention that their representation was one of future conduct, finding it instead to be one of “past or present fact.” Id. But Whiteco is distinguishable. At the time those misrepresentations were made, the plan for the obstructing building was already in existence. As such, the seller's misrepresentations were of existing fact. In contrast, Hagios statement was not a misrepresentation of a present fact, but of his intention in the future to invest $300,000.00.

[15] We cannot say there is a reasonable probability that the City is entitled to possession of the Property on a theory of fraudulent inducement. We therefore reverse the trial court's judgment on prejudgment possession and remand for further proceedings.

[16] Reversed and remanded.

FOOTNOTES

1.   The Montpelier Redevelopment Corporation served as the seller in the purchase agreement and conveyed the real property to Hagios on behalf of the City.

2.   The City also claims Hagios misrepresented that maintaining the integrity of the building will be its top priority. While the trial court mentions this statement in its order, it only found the claim of being prepared to invest $300,000 to be a misrepresentation.

3.   A constructive fraud claim may be based on representations of future conduct. See Siegel, 818 N.E.2d at 515. Although the City asserted a constructive fraud claim in their complaint, the trial court made no finding as to the constructive fraud claim in its prejudgment possession order, and the parties agree that the constructive fraud claim is not before us on appeal. See Appellee's Br. p. 32; Appellant's Reply Br. p. 17.

Scheele, Judge.

Foley, J., and Kenworthy, J., concur.