Olsson v. Moore
1992 Ind. App. LEXIS 481, 1992 WL 73470, 590 N.E.2d 160 (1992)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a prospective buyer makes improvements to a property with the owner's consent but without a binding sales contract, the owner is unjustly enriched and must compensate the buyer for the value of the improvements if the property is destroyed, as the risk of loss remains with the legal owner.
Facts:
- In late 1988, Forrest and Nancy Moore responded to a newspaper advertisement from Ben Olsson for a house and lot for sale.
- Because the sale of their current home was imminent, the Moores wished to begin renovating Olsson's house immediately, and Olsson agreed.
- The Moores placed the utilities in their name and proceeded to repair floors, renovate several rooms, and re-roof the house.
- During this period, the parties were still negotiating the purchase price and the total acreage to be included in the sale, and no final agreement was reached on these essential terms.
- Forrest Moore believed the deal was for 40 acres at $70,000, while Olsson was considering selling only five acres and testified that no definite agreement on price or acreage existed.
- On December 16, 1988, after the renovations were complete but before any contract was signed, the house burned to the ground.
- Olsson was insured and collected $40,000, but his insurance adjuster testified that this payment did not cover any of the improvements made by the Moores.
Procedural Posture:
- Forrest and Nancy Moore filed a lawsuit against Ben Olsson, Lee Ferree, and Debra Ferree in the trial court.
- The Moores sought a judgment to compensate them for materials supplied, work performed, and other expenses.
- The trial court issued a general judgment in favor of the Moores, awarding them $4,798.91 for labor, materials, and utility bills.
- Olsson, as the defendant-appellant, appealed the trial court's judgment to the Court of Appeals of Indiana.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a property owner who consents to renovations by a prospective buyer bear the cost of those renovations if the property is destroyed before a sales contract is finalized?
Opinions:
Majority - Baker, J.
Yes, a property owner who consents to renovations by a prospective buyer must bear the cost of those renovations if the property is destroyed before a sales contract is finalized. The court's reasoning proceeded in three parts. First, it determined no contract for the sale of the property existed, as there was no written agreement and the parties' testimonies revealed no meeting of the minds on essential terms like price and acreage. Second, because no contract existed, equitable ownership never passed to the Moores; Olsson remained the sole legal and equitable owner, and thus the risk of loss remained with him. Third, the court applied the equitable principle of unjust enrichment. It found that the Moores' renovations conferred a benefit on Olsson by increasing the value of his property. The court also found that Olsson consented to this benefit, as he gave the Moores broad permission to do 'whatever they needed' and did not object to the work. Because Olsson consented to and benefited from the improvements on property he still exclusively owned, equity demands that he compensate the Moores for their labor and materials to prevent his own unjust enrichment.
Analysis:
This case illustrates the critical role of equitable remedies, like unjust enrichment, when a formal contract fails to materialize. It clarifies that in the absence of a consummated real estate contract, the doctrine of equitable conversion does not apply, and the risk of loss remains squarely with the legal title holder. The decision establishes that an owner's consent to improvements by a prospective buyer can create a liability for the value of those improvements, even if the owner never intended to use them and they are subsequently destroyed. This precedent serves as a caution to property owners to either formalize agreements quickly or explicitly define the terms and risks associated with pre-closing renovations.
