Terrence Brodnik v. Cottage Rents LLC

• Court: Indiana Court of Appeals
• Decided: May 10, 2023
• Docket: 22A-SC-01103
• Status: Published

Opinion

FILED May 10 2023, 9:05 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE Thomas A. Brodnik Alexander W. Robbins McNeely Law LLP The Law Office of Alex Robbins Indianapolis, Indiana Bedford, Indiana

IN THE COURT OF APPEALS OF INDIANA May 10, 2023 Terrence Brodnik, Court of Appeals Case No. Appellant-Plaintiff, 22A-SC-1103 Appeal from the Hendricks v. Superior Court The Honorable Tammy Somers, Cottage Rents LLC, Judge Appellee-Defendant. Trial Court Cause No. 32D01-2008-SC-929

Opinion by Judge Kenworthy Judge Bradford concurs. Judge Mathias dissents with separate opinion.

Kenworthy, Judge.

Case Summary [1] In 2019, Terrence Brodnik (“Vacationer”) planned a Florida vacation for late

March 2020. After reserving the “Salt Air Cottage” from Cottage Rents LLC

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 1 of 12 (“Rental Company”), Vacationer prepaid more than $6,000. A few weeks

ahead of the planned vacation, the COVID-19 pandemic emerged; then five

days before the planned arrival date, Governor Holcomb issued an Executive

Order prohibiting all but essential travel. It is undisputed the order prohibited

Vacationer from traveling to the Florida vacation home. It is also undisputed

that, under the rental agreement, Florida law governs this contract dispute.

[2] Ultimately, Vacationer sued Rental Company in an Indiana small claims court,

alleging Rental Company refused to refund the prepaid fee. In seeking a

refund, Vacationer argued, among other things, the contract was unenforceable

because of the Florida doctrine of impossibility. The small claims court held a

bench trial and entered judgment for Rental Company. The court implicitly

found the doctrine of impossibility did not apply, noting Vacationer “failed to

comply with the . . . contract.” Appellant’s App. Vol. 2 at 8. Vacationer appeals.

[3] Applying Florida law, we address the following dispositive issue:

Does Florida’s common-law doctrine of “impossibility” apply under the circumstances, rendering the vacation rental agreement unenforceable against Vacationer, who was prohibited from vacationing in Florida because of the Executive Order?

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 2 of 12 [4] Concluding the doctrine applies and therefore Vacationer had a right to rescind

the contract, we remand for the trial court to balance the equities and determine

what, if any, restitution is due to Vacationer under the circumstances.1

Facts and Procedural History [5] In May 2019, Vacationer reserved a Florida home for a vacation starting on

March 28, 2020. Under the contract with Rental Company, the rent and

security deposit totaled $6,663.69. By March 2020, Vacationer had paid in full.

[6] On March 13, President Trump declared a national emergency due to the

COVID-19 pandemic. And on March 23, Governor Holcomb issued an

Executive Order prohibiting all but essential travel. The parties do not dispute

the Executive Order prohibited Vacationer from traveling to Florida as planned.

[7] At some point, Vacationer contacted the owner of Rental Company, Robert

Toler, Jr., about “what would happen” if Vacationer was “unable to travel due

to the pandemic[.]” Tr. Vol. 2 at 9. Toler offered Vacationer “a replacement

week . . . within the next twelve (12) months.” Id. Toler also offered to

discount a “certain week” by $2,500. Id. at 25. Vacationer declined, explaining

that, because of his family’s incompatible schedules, there “wasn’t really an

option in getting there within the next” year. Id. at 9. Vacationer and Toler

1 Because this issue is dispositive, we do not address any other issue.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 3 of 12 exchanged a “number of communications[.]” Id. Eventually, on the day before

the planned arrival, Vacationer told Toler he would not be traveling to Florida.

[8] In August 2020, Vacationer sued Rental Company in small claims court,

seeking a refund. It is undisputed Florida law governs the contract dispute. See

Ex. at 6 (contract paragraph 15). It is also undisputed that, apart from

containing a “Hurricane or Storm Policy,” see id. at 5, the contract does not

address or attempt to allocate liability for an Act of God impeding performance.

[9] In seeking a refund, Vacationer argued the rental agreement was unenforceable

due to—among other things—the Florida defense of impossibility. Vacationer

argued, in the alternative, that Rental Company breached the rental agreement.

[10] At trial, Rental Company pointed out Vacationer could have received a refund

under Section 11 of the contract, which addresses cancellation. That provision

states Vacationer would receive a full refund of rent, less a $250 service fee, if

(1) Vacationer gives “prior written notice” to Rental Company, and (2) Rental

Company is able to re-rent the home. Id. Rental Company noted Vacationer

waited until March 27—one day before the scheduled rental period—to tell

Toler he would not be traveling to Florida. Toler opined that, had Vacationer

given additional notice, the home “would’ve been re-rented[.]” Tr. Vol. 2 at 27.

[11] Vacationer argued the case presented a “unique situation” in that there had not

been a pandemic “since 1918.” Id. at 33. Vacationer asserted “acts of God,

impossibility[,] and frustration of purpose are well[-]recognized doctrines in

Florida,” and those doctrines “render a contract unenforceable.” Id. at 35.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 4 of 12 Vacationer stated: “I don’t know how this COVID pandemic could’ve been

considered anything other than an act of God.” Id. At bottom, he argued the

notice provisions did not apply because, under the circumstances, the contract

was unenforceable and Vacationer was entitled to a refund of the prepaid fee.

[12] The small claims court entered judgment for Rental Company. In its written

judgment, the court implicitly found the contract was enforceable: “Plaintiff

failed to comply with the terms of the contract.” Appellant’s App. Vol. 2 at 8.

[13] Vacationer now appeals. He argues the court erred in (1) determining the

contract was enforceable or, in the alternative, (2) finding Vacationer breached.

Discussion and Decision [14] We begin by addressing Vacationer’s claim the contract is unenforceable under

Florida law because “the contract’s performance was rendered impossible[.]”

Appellant’s Br. at 8. He argues the theory of impossibility applies because the

pandemic led to an Executive Order prohibiting him from traveling to Florida.

[15] Under Florida law, “[r]escission or cancellation of a contract may be obtained

on the ground of ‘impossibility of performance[.]’” 11 Fla. Juris. 2d.

Cancellation § 28 (2023). “‘Impossibility of performance’ refers to those factual

situations where the purposes for which the contract was made have, on one

side, become impossible to perform[.]” Id.; see also Harvey v. Lake Buena Vista

Resort, LLC, 568 F. Supp. 2d 1354, 1367 (M.D. Fla. 2008). “In an action for the

rescission or cancellation of a contract upon the theory of impossibility of

performance, the fact that the defendant, in good faith, endeavored to fulfill its

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 5 of 12 contract is immaterial[.]” 11 Fla. Juris. 2d. Cancellation § 28 (2023); see also

Crown Ice Mach. Leasing Co. v. Sam Senter Farms, Inc., 174 So. 2d 614, 619 (Fla.

Dist. Ct. App. 1965) (declining to address any contention the defendant had

“good intentions or laudable motive”). Put differently, the proper inquiry is not

whether any party diligently tried to perform, but whether the doctrine of

impossibility applies under the circumstances. See Crown, 174 So. 2d at 619.

[16] Impossibility is a “judicially created” doctrine, Cook v. Deltona Corp., 753 F.2d

1552, 1557 (11th Cir. 1985), susceptible to application as a matter of law, see,

e.g., Harvey, 568 F. Supp. 2d at 1367 (impossibility doctrine did not apply);

Marathon Sunsets, Inc. v. Coldiron, 189 So. 3d 235, 236 (Fla. Dist. Ct. App. 2016)

(impossibility doctrine applied). Scenarios implicating impossibility include

“‘Acts of God’ and governmental action[.]” Harvey, 568 F. Supp. 2d at 1367.

The doctrine ultimately turns on foreseeability. See, e.g., id. In other words:

[C]hange is what impossibility is about. As Professor Gilmore put it, [impossibility] arises as a defense when “the real world has in some way failed to correspond with the imaginary world hypothesized by the parties to the contract.” G. Gilmore, The Death of Contract 81 (1974). By recognizing impossibility as a sort of ‘escape hatch’ from the self-made chamber of contractual duty, the courts have recognized that absolute contractual liability is economically and socially unworkable. Impossibility [accommodates] the tension between the changes a party bargains to avoid and the changes, unbargained for and radical, that make enforcement of the bargain unwise.

Thus, it seems . . . the most profitable approach to an impossibility claim is not to pass on the relative difficulty caused

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 6 of 12 by a supervening event, but to ask whether that supervening event so radically altered the world in which the parties were expected to fulfill their promises that it is unwise to hold them to the bargain. Ultimately the issue is whether the change was foreseeable. This is the rule in Florida.

Cook, 753 F.2d at 1558; cf. Harvey, 658 F. Supp. 2d at 1367–68 (determining

impossibility did not apply when premised on the effect of (a) hurricanes the

year before signing and (b) a regulatory change posted well before signing).

[17] As to circumstances arising from the COVID-19 pandemic, in McGuire v.

Intelident Sols., LLC, the court declined to apply Florida’s theory of impossibility

when the parties entered into the pertinent agreement in June 2020, “mid-

pandemic.” No. 8:18-cv-02995-T-23SPF, 2021 WL 3195145, at *3 (M.D. Fla.

May 12, 2021). The court reasoned that, by June 2020, the defendants could

have foreseen pandemic-related financial risks, and the defendants “could have

negotiated the inclusion of a provision” concerning those financial risks. Id.

[18] Turning to the case at hand, Vacationer planned the Florida vacation well

before the pandemic. About one week before the vacation, Governor Holcomb

issued an Executive Order that prohibited Vacationer from traveling to Florida.

[19] In some cases, unforeseeable events—although inconvenient—might not render

performance impossible. See, e.g., In re Cinemex USA Real Estate Holdings, Inc.,

627 B.R. 693, 699–70 (Bankr. S.D. Fla. 2021) (determining a movie theater

could not rely on an Act of God to excuse nonpayment of rent after June 5,

2020; by that point, the Florida Governor had lifted a COVID-related shut-

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 7 of 12 down order and allowed movie theaters to operate at partial capacity, but the

movie theater had declined to re-open). Here, however, the Executive Order

made it impossible for Vacationer to derive any benefit from the bargain.2

[20] On appeal, Rental Company argues Vacationer cannot claim impossibility

because Vacationer prepaid for the vacation. According to Rental Company:

“Once payment was rendered, [Vacationer’s] performance was already

complete” and “what [he] experienced was not impossibility of performance,

but a severe inconvenience of not being able to travel in order to reap the benefit

that his performance by payment had guaranteed.” Appellee’s Br. at 9.

[21] We disagree. The impossibility doctrine addresses “the tension between the

changes a party bargains to avoid and the changes, unbargained for and radical,

that make enforcement of the bargain unwise.” Cook, 753 F.2d at 1558.

[22] At bottom, the Executive Order amounted to an unforeseeable supervening

event that “radically altered the world in which the parties were expected to

fulfill their promises[.]” Id. Thus, we conclude the doctrine of impossibility

applies under the circumstances. Cf. Cinemex, 627 B.R. at 698–99 (“Clearly the

2 In applying the doctrine of impossibility, the dissent looks to the cancellation provisions in the contract. Yet those provisions formed part of an overall bargain for the rental of a Florida vacation home—a deal struck in May 2019 with the basic understanding Vacationer could lawfully enjoy the “Salt Air Cottage” in March 2020. Unforeseeably, the tide changed; the pandemic led to an Executive Order prohibiting interstate travel. In other words, “the real world . . . in some way failed to correspond with the imaginary world hypothesized by the parties to the contract.” Cook, 753 F.2d at 1558 (quoting G. Gilmore, The Death of Contract 81 (1974)). That is why the doctrine of impossibility applies here, permitting Vacationer to rescind the contract regardless of any ancillary term contained in the bargain; the foundation unforeseeably shifted, resulting in “changes, unbargained for and radical, that make enforcement of the bargain unwise.” Id.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 8 of 12 events that caused the shutdown were not foreseeable.”); Appellee’s Br. at 13

(asserting “an act of God prevented [Vacationer] from traveling to take

possession of the rental property” but his “indecisiveness and inaction” were

the proximate cause of any loss). And because the doctrine of impossibility

applies, Vacationer may avoid the contract, including all provisions concerning

cancellation. See, e.g., 11 Fla. Juris. 2d. Cancellation § 28 (2023) (contemplating

“an action for the rescission or cancellation of a contract upon the theory of

impossibility of performance”). We therefore conclude the small claims court

erred in entering judgment for Rental Company on the basis that Vacationer

“failed to comply with the terms of the contract.” Appellant’s App. Vol. 2 at 8.

[23] Although impossibility applies, Vacationer does not automatically receive a

refund. Rather, under the circumstances, a Florida court will “grant rescission

and remand . . . for a determination of what if any restitution is due[.]” E.B.

Sherman, Inc. v. Mirizio, 556 So. 2d 1143, 1144 (Fla. Dist. Ct. App. 1989) (per

curiam). That is because the defendant “may be entitled to retain all or part of

the money [it] received . . . for equitable reasons.” Id. Taking this approach,

we reverse the judgment, grant rescission, and remand for a decision on

restitution.

Conclusion [24] Applying Florida law and concluding the doctrine of impossibility applies, we

reverse the judgment, order rescission of the contract, and remand with

instructions for the trial court to balance the equities and determine restitution.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 9 of 12 [25] Reversed and remanded.

Bradford, J., concurs.

Mathias, J., dissents with separate opinion.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 10 of 12 Mathias, Judge, dissenting.

[1] I respectfully disagree that Brodnik’s performance under the contract was

rendered impossible, as a matter of law, due to the Governor’s stay-at-home

order. When Brodnik entered into the rental contract, he agreed to the

cancellation policy, which provided in relevant part that he could terminate the

agreement “at any time, upon prior written notice to Cottage Rents LLC.” Ex.

p. 5. The agreement also provided that, in the event of his termination, Brodnik

would be charged for the rental unless Cottage Rents could re-rent the property

during the rental week.

[2] It is undisputed that Brodnik did not give written notice to Cottage Rents that

he was terminating the agreement. And he waited until one day before the

rental period to tell Toler that “he was not coming down.” Tr. p. 25. During

trial, Toler testified that, had Brodnik complied with the terms of the agreement

and provided written notice of the cancellation prior to the rental week, he

“believe[d] that home would’ve been re-rented” Tr. p. 27.

[3] Our standard of review in small-claims cases is well settled. Small-claims court

judgments are “subject to review as prescribed by relevant Indiana rules and

statutes.” Ind. Small Claims Rule 11(A). Under Indiana Trial Rule 52(A), the

clearly erroneous standard applies to appellate review of facts determined in a

bench trial, with due regard given to the opportunity of the trial court to assess

witness credibility. This deferential standard of review is particularly important

in small-claims actions, where trials are designed to speedily dispense justice by

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 11 of 12 applying substantive law between the parties in an informal setting. Vance v.

Lozano, 981 N.E.2d 554, 557 (Ind. Ct. App. 2012).

[4] Cottage Rents presented evidence that, despite the Governor’s order, Brodnik

had the ability to comply with the cancellation policy but failed to do so. In

other words, the evidence shows that Brodnik’s performance was not rendered

impossible. The small claims court, sitting as the factfinder, clearly credited

Toler’s testimony and found that Brodnik had “failed to comply with the terms

of the contract.” Appellant’s App. Vol. 2, p. 8. Accordingly, I would hold that

the court did not err as a matter of law when it declined to apply the

impossibility doctrine here.

Court of Appeals of Indiana | Memorandum Decision 22A-SC-1103 | May 10, 2023 Page 12 of 12