LLC v. John Dudley, Bonnie Dunn, and James O. Westfall Jr., Appellees-Plaintiffs (2025)

MEMORANDUM DECISION

[1] Sroya London, an individual doing business as Rothasy Eshamlech, LLC (Rothasy), accepted a $1,000 down payment for a house in Lynn, Indiana. Buyers understood that they were purchasing the home on contract and spent thousands of dollars improving the property from its original nearly uninhabitable condition. But after the buyers had paid nearly ten years of monthly installments, totaling approximately $50,000, Rothasy refused to convey title to them.

[2] Rothasy claimed the three documents the parties signed—a lease, an addendum, and an option to purchase—were merely a rental agreement and that the nearly 10 years of payments were rent, not installments toward ownership. The trial court found the agreements constituted a land contract and ordered Rothasy to deliver a warranty deed. Rothasy appeals, reasserting his claim that the agreements operated as a lease and also asserting that no option to purchase was ever validly exercised. Finding the trial court correctly determined the documents constituted an enforceable land contract, we affirm.

Facts

[3] Rothasy, based in New York, bought a house in Lynn, Indiana (the Property), for $7,501 at a tax sale in February 2013. Two weeks later, Rothasy's property manager, Thomas Parkison, met with potential buyer James Westfall to discuss two options to buy the Property: purchase it outright for $15,000 cash or finance it for $25,000. Westfall chose to finance.

[4] Westfall and Parkison signed three agreements (collectively, the Documents): a Residential Lease Agreement (Lease), an Addendum to Residential Lease Agreement (Addendum), and a Residential Option to Purchase Agreement (Option). Westfall wrote a check to Rothasy for $1,000, noting on the memo line, “House Down Payment Lynn.” Exhs., p. 13. In return, Parkison gave Westfall a handwritten receipt: “Downpayment on LZP - $25,000.” Id. at 14.

[5] The Addendum specified how the purchase would operate. After the $1,000 down payment was paid, the remaining $24,000 would be paid over ten years at 10% annual interest. Each monthly payment of $402.16 would be split: $317.16 to principal and interest, $25 to insurance, and $60 to property taxes. The Addendum included a full amortization schedule showing how each payment would reduce the principal balance.

[6] The Lease technically set rent at $552.16 per month, but the Addendum provided a $150 monthly credit for on-time payments—making the actual monthly payment $402.16. In March 2015, Parkison added Westfall's sister, Bonnie Dunn, and Westfall's brother-in-law, John Dudley, to each of the Documents. The cost to add Dunn and Dudley to the Documents was $965.32, which they paid to Rothasy.

[7] The house was barely habitable in 2013 when the Documents were initially signed. When Westfall first moved in, only the kitchen, bathroom, and one bedroom were usable. The rest of the house was blocked off because it was unlivable. Much of the property lacked running water or electricity. Before Dunn and Dudley could move in, they spent months making the house habitable while still renting another place. Working with generators for electricity and hauling in water, they repaired the plumbing and electrical systems throughout the house and fixed walls, floors, and doors. They also replaced windows, repaired the roof, releveled the entire house, painted, and installed carpet and linoleum. They renovated the exterior, the yard, and the garage, which was in complete disrepair. Rothasy did not fund or otherwise contribute to any of these repairs.

[8] From April 2013 through March 2023, the trio (Westfall, Dunn, and Dudley) made monthly payments of $402.16 deposited directly into Rothasy's bank account, with occasional additional payments of $150 when the payments were more than 10 days late. Rothasy accepted each of these payments. Although Rothasy's effective owner, London, later claimed not to know about the Addendum or Option, he was aware that the payments on the property sometimes were $552.16 (the $402.16 required by the Lease plus the $150 that Westfall, Dunn, and Dudley did not receive as a credit when their payments were untimely). The Lease did not mention the $150 credit, which is found only in the Addendum.

[9] In June 2022—less than a year before the final payment was due—Rothasy's attorney contacted Dudley by letter to inform him that Parkison was not authorized to execute the Option or Addendum on behalf of Rothasy and that Dudley was just renting the property. This was the first time Rothasy had indicated it would not honor the Documents, although it had accepted payments from the trio for nearly ten years. Dunn and Dudley hired counsel, who wrote to Rothasy's counsel to indicate that the Option and Addendum were valid and that they expected the property to be transferred to them when the final payment was made in March 2023. Dunn and Dudley continued making the payments through March 2023 and requested a deed at that time. Rothasy refused, claiming he only leased the property and never intended to sell it.

[10] Westfall, Dunn, and Dudley sued Rothasy for breach of contract in July 2023. Although Rothasy continued to maintain that the Addendum and Option were invalid, the company counterclaimed for breach of all three Documents and the eviction of Westfall, Dunn, and Dudley. According to Rothasy, the Lease had expired on February 28, 2014, and the rent thereafter increased to $690.20 per month under a “Holdover” provision in the Lease. Tr. Vol. II, p. 81. Thus, Rothasy claimed that Dunn and Dudley, as holdover tenants, owed the company $47,586.76 in damages as of November 2024. Rothasy also sought a declaratory judgment as to the assignability and enforcement of the Documents.

[11] In its findings of fact and conclusions of law, the trial court found the agreements operated as a land contract and ordered Rothasy to convey the property. In its judgment, the trial court's order addressed the validity and enforcement of the Documents, so the court did not enter a separate declaratory judgment.

Discussion and Decision

[12] We review the trial court's findings of fact and conclusions of law under a two-tiered standard, first determining whether the evidence supports the findings and then whether the findings support the judgment. State v. Int'l Bus. Machs. Corp., 51 N.E.3d 150, 158 (Ind. 2016) (quotations omitted). Neither the findings nor the judgment may be set aside unless clearly erroneous. Id. “Findings are clearly erroneous only when the record contains no facts to support them either directly or by inference.” Id. (quoting Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind. 1996)). “A judgment is clearly erroneous if it relies on an incorrect legal standard” or is otherwise contrary to law. Id. (quoting Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1210 (Ind. 2000)); Gamble v. McQueary, 255 N.E.3d 477, 486 (Ind. Ct. App. 2025). Although this standard of review necessarily requires substantial deference to the trial court's findings of fact, we do not defer to the trial court's conclusions of law. Id.

[13] Rothasy raises several arguments on appeal, but they all rest on one central claim: the Documents operated as a lease, not a land contract. The trial court concluded that the Documents constituted an enforceable land contract. Because Rothasy has not shown the trial court erred, we affirm.

I. The Documents Were a Land Contract

[14] “Indiana courts have recognized the contractual nature of leases and the applicability of the law of contracts to leases.” King v. Conley, 87 N.E.3d 1146, 1152 (Ind. Ct. App. 2017). Interpretation of written contracts is a question of law that we review de novo. Id. “When interpreting a contract, our paramount goal is to ascertain and effectuate the intent of the parties.” Id. “This requires the contract to be read as a whole, and the language construed so as not to render any words, phrases, or terms ineffective or meaningless.” Id.

[15] “[T]o determine whether [an] agreement is a lease or a land sale contract, we must look beneath the surface of the agreement and consider the substance of the agreement to determine the intent of the parties.” Vic's Antiques & Uniques, Inc. v. J. Elra Holdingz, LLC, 143 N.E.3d 300, 306 (Ind. Ct. App. 2020). When “the agreement speaks for itself,” consideration of extrinsic evidence is not required to interpret the agreement. Id. “Rather, the substance of the agreement is found in the economics of the transaction,” which “demonstrate that the agreement is unambiguous and is a land sale contract rather than a lease.” Id.

[16] The parties dispute whether the Documents, when read together, created merely a lease (as Rothasy argues) or a land contract (as Westfall, Dunn, and Dudley contend). Rothasy points to language in the Option that states the agreement “is not an installment land contract, contract-for-deed or equitable mortgage.” Exhs., p. 9. But as our Supreme Court has observed, “the transaction's purported form and assigned label do not control its legal status.” Rainbow Realty Grp., Inc. v. Carter, 131 N.E.3d 168, 173 (Ind. 2019). We look to substance, not form, when reviewing contracts. Skendzel v. Marshall, 301 N.E.2d 641, 646 (Ind. 1973) (declining “to pay homage to form over substance”).

[17] Vic's Antiques is instructive here. In that case, a document labeled a “lease” required the tenant to make monthly payments for twenty years, after which the tenant could buy the subject property for one dollar. Vic's Antiques, 143 N.E.3d at 302. Looking “beneath the surface” to examine “the economics of the transaction,” this Court determined the agreement was actually a land sale contract. Id. at 306, 308. The Court based that decision on various facts such as the amortization schedule admitted into evidence, noting that “[a]mortization is the Rosetta Stone that unpacks and reveals the nature of the agreement” and that renters do not pay interest on future rent. Id. at 306-07. The Court observed that interest is paid only by purchasers paying down a debt. Id. at 307.

[18] The economics here point in the same direction for several reasons. First, Westfall initially paid $1,000 and wrote on the check: “House Down Payment Lynn.” Exhs., p. 13. His receipt from Rothasy's property manager, Parkison, specified: “Downpayment on LZP - $25,000.” Id. at 14. And Rothasy deposited Westfall's $1,000 check. Because this down payment reduced the $25,000 purchase price to $24,000, these circumstances suggest a land contract, rather than a lease.

[19] Second, the Addendum included a detailed amortization schedule. This schedule showed exactly how the remaining $24,000 owed ($25,000 purchase price minus the $1,000 down payment) would be paid over ten years at 10% interest. The schedule reflects that $317.16 was applied to principal and interest each month. The principal balance reflected in the schedule started at $24,000 but decreased with each monthly payment until reaching zero at the end of the 10-year period.

[20] As in Vic's Antiques, “all four of these factors—the principal amount, the number of monthly payments, the amount of each monthly payment, and the interest rate—are integral to the amortization schedule, and each factor depends upon the others.” Id. at 306. This is how installment sales work—not leases. “While contract purchasers pay interest on the unpaid principal balance of a land sale contract, lessees do not pay interest on future rent payments.” Id. at 307. Here, as in Vic's Antiques, “the four factors comprising the amortization show that the monthly payments were not ‘rent payments’ but contract payments of principal and interest on a fully amortized land sale contract.” Id.

[21] Third, the monthly payments paid by Westfall, Dunn, and Dudley also included $25 for insurance and $60 for property taxes. These are usually ownership expenses, as landlords, not tenants, typically pay property taxes and home insurance. See, e.g., Skendzel, 301 N.E.2d at 646 (noting that under a “typical conditional land contract,” “all incidents of ownership accrue to the” buyer, who “assumes the risk of loss” and “is responsible for taxes”).

[22] Fourth, the Documents provided for Westfall, Dunn, and Dudley to receive title to the Property at the end of the ten-year payment schedule without giving anything more in return. See generally Vic's Antiques, 143 N.E.3d at 308 (finding “no other plausible explanation for the transaction” other than a land contract when buyer paid 20 years of payments, taxes, and insurance under contract which provided for deed transfer upon payment of additional $1 at the end of the 20-year period); see also Skendzel, 301 N.E.2d at 646 (“Legal title does not vest in the (land contract buyer) until the contract terms are satisfied, but equitable title vests in the (buyer) at the time the contract is consummated.”).

II. The Option Alone Does Not Control

[23] Rothasy contends no purchase occurred because the Option's language shows that the Documents remained a lease until the option was exercised. The Option specifies that the payments would apply to the purchase price “if, and only if, tenant exercises this option to purchase.” Exhs., p. 9. Rothasy claims no option was exercised so the payments were just rent under that provision of the Option.

[24] This argument ignores how the parties actually behaved. Westfall, Dunn, and Dudley made a down payment, paid monthly installments with interest according to an amortization schedule, paid property taxes and insurance, and made major improvements to the Property. Rothasy accepted all of this for ten years without objection. In sum, the parties treated this as a purchase from day one. Only after Westfall, Dunn, and Dudley had paid nearly all they owed did Rothasy suggest otherwise. Having agreed to sell and having reaped the benefits of that sale, Rothasy cannot now claim only a lease existed.

[25] Moreover, Westfall testified he understood he was buying the house. Dudley testified he believed he was entering a land contract—testimony that Dunn essentially echoed. Dudley also testified that Rothasy's property manager, Parkison, told him that the Property would eventually be his. The trial court could reasonably find the parties’ intent was to create an enforceable land contract.

III. Dudley and Dunn Were Properly Added as Parties

[26] Rothasy argues that Dudley and Dunn were not parties to the agreements because their names were not added to the body of the Documents. Only their signatures appear on the Documents, and the Option only lists Westfall as the “Optionee.” This argument fails.

[27] Rothasy's property manager, Parkison, added the names of Dunn and Dudley to the Documents. Dunn and Dudley signed those documents and paid $965.32 in consideration to become parties to the contract. For eight years thereafter, Rothasy accepted payments from Dunn and Dudley that were deposited directly into the company's business account. By accepting these payments year after year, Rothasy ratified the status of Dunn and Dudley as parties to the Documents and purchase. See Gamble, 255 N.E.3d at 488 (finding seller's conduct ratified oral modification to land contract by accepting payments different from that specified in original agreement).

[28] Rothasy's effective owner—London—testified that the Option and Addendum are invalid because he did not authorize the sale of the Property or even know about Dunn and Dudley. However, London testified that Rothasy applied the $150 timely-payment credit when calculating amounts the company claimed it was owed, and that credit appears only in the Addendum—the document of which London claimed ignorance.

[29] Moreover, London could offer no reasonable explanation for why he continued to accept the monthly payments from Dunn and Dudley for nearly a decade in amounts less than that specified in the Lease ($552.16) if, in fact, he was unaware of the Addendum and Option. In addition, Rothasy did not increase the so-called rent that it was charging for nine years, although an increase could have occurred as early as a year into the alleged lease. Only after Dunn and Dudley contacted Rothasy about the deed did Rothasy assert that a higher rent had been owed for years. The trial court was entitled to discredit London's testimony on these points. Ryle v. State, 549 N.E.2d 81, 83 (Ind. Ct. App. 1990) (“The weight and credit afforded the witnesses’ testimony and the resolution of the conflicts between their testimony and the inconsistencies within their testimony is exclusively the function of the fact finder and one with which this court will not interfere”).

IV. The Documents Would Be Illegal as a Lease

[30] If we were to accept Rothasy's claim that only a lease was executed, several provisions of the Documents would violate Indiana's landlord-tenant laws. Indiana requires landlords to deliver rental premises “in a safe, clean, and habitable condition.” Ind. Code § 32-31-8-5(1). The property here was not habitable, as it lacked running water and electricity in at least part of the dwelling at the time the Documents were executed.

[31] The Addendum also provides that the tenant will “[l]ease the property in ‘As Is’ condition” and “make repairs to maintain the house in a livable, suitable living space.” Exhs., p. 7. Landlords may not waive their duty to provide habitable premises. Rainbow Realty, 131 N.E.3d at 172-73. If the Documents constituted a lease, this “As Is” provision would be void. See id. Yet courts try to construe contracts to avoid rendering provisions void. Ind.-Am. Water Co. v. Town of Seelyville, 698 N.E.2d 1255, 1259 (Ind. Ct. App. 1998). Reading the Documents as a land contract—meaning buyers take the property “as is” and are responsible for any repairs—renders these provisions legal and enforceable.

V. Rothasy Waived Reliance on Certain Lease Terms

[32] Pointing to provisions in the Lease concerning late fees and default, Rothasy argues that Westfall, Dunn, and Dudley were not entitled to execute the Option because they were not in compliance with the Lease. Rothasy points to late payments by the trio over the ten years and their failure to pay any $25 late fees as specified in the Documents. But Rothasy has waived any reliance on these late fee and default provisions.

[33] The Lease required written notice if rent was not received by the 10th of the month. Rothasy presented no evidence that it ever sent such notices. When a landlord continually accepts late payments without enforcing late fees and otherwise is not compliant with the landlord's duties to the tenant, those fees may be deemed waived. Welch v. 1106 Traub Tr., 204 N.E.3d 243, 255 (Ind. Ct. App. 2023). A landlord waives or acquiesces in late payment restrictions through a “continuous history of non-compliance” that goes unaddressed. Ellis v. George Ryan Co., Inc., 424 N.E.2d 125, 128 (Ind. Ct. App. 1981).

[34] Rothasy accepted every payment for ten years without declaring a default, sending a notice to cure, or rejecting a payment. The first time Rothasy said it would not honor the Documents was June 2022—after nearly a decade of receiving payments and less than a year before the final payment. If some payments were late, Rothasy waived any reliance on the late fee and default provisions by failing to send the required notices. See id; Welch, 204 N.E.3d at 255.

Conclusion

[35] The parties’ conduct establishes they understood the Documents as a land contract, not a lease. Moreover, the substance of this transaction, as demonstrated by the deal's economics, was a land contract, regardless of the labels on the Documents. As Westfall, Dunn, and Dudley paid all sums owed for the purchase, the trial court correctly ordered Rothasy to deliver a warranty deed to them.

[36] We affirm the trial court's judgment.

Weissmann, Judge.

Bradford, J., and DeBoer, J., concur.