Case Name: The TOWN & COUNTRY HOMECENTER OF CRAWFORDSVILLE, INDIANA, INC., Appellant-Plaintiff, v. Ronald W. WOODS, National City Bank of Indiana, Appellees-Defendants
Court: Court of Appeals of Indiana
Jurisdiction: Indiana
Decision Date: 2000-04-04
Citations: 725 N.E.2d 1006
Docket Number: No. 54A01-9903-CV-89
Parties: The TOWN & COUNTRY HOMECENTER OF CRAWFORDSVILLE, INDIANA, INC., Appellant-Plaintiff, v. Ronald W. WOODS, National City Bank of Indiana, Appellees-Defendants.
Judges: SULLIVAN, J., concurs with opinion.
Reporter: North Eastern Reporter 2d
Volume: 725
Pages: 1006–1015

Head Matter:
The TOWN & COUNTRY HOMECENTER OF CRAWFORDSVILLE, INDIANA, INC., Appellant-Plaintiff, v. Ronald W. WOODS, National City Bank of Indiana, Appellees-Defendants.
No. 54A01-9903-CV-89.
Court of Appeals of Indiana.
April 4, 2000.
James E. Ayers, Wernle, Ristine & Ayers, Crawfordsville, Indiana, Attorney for Appellant.
Mark R. Galliher, Hopper, Galliher & Tucker, P.C., Indianapolis, Indiana, Attorney for Appellant.

Opinion:
OPINION
BAKER, Judge
Appellant-plaintiff Town & Country Homecenter of Crawfordsville, Indiana, Inc. (T&C) appeals the trial court's judgment in favor of appellee-defendant, National City Bank (NCB). Specifically, T&C argues that, as vendor of materials to builder Woods, it was a third-party beneficiary of the agreement between mortgagee NCB and mortgagor Lynn Fellows, who purchased a house built by Woods. Furthermore, T&C argues that NCB's action in disbursing funds to Woods when T&C was still owed $32,866.12 constituted constructive fraud. Finally, T&C maintains that NCB committed the criminal offense of deception when it required that Woods sign an affidavit stating that there were no unpaid claims for materials furnished.
FACTS
The facts most favorable to the judgment reveal that in June 1992, Lynn Fellows contracted with Ronald Woods to build a house. Fellows paid Woods $10,-000 as down payment and applied for a mortgage with NCB to cover the remaining balance, which was due at closing. Woods purchased materials for the house from T&C. On September 23, 1992, Fellows received a letter from T&C entitled "a routine letter" (the pre-lien notice) which.stated that T&C could perfect a lien against his property if payment was not received for the materials. Record at 60-61, 92-93. Fellows brought the letter to the attention of Tom Gineris, the NCB representative handling his mortgage. Gineris responded that there was no problem, that similar situations arose "all the time" and that the letter would be addressed at closing. R. at 155. '
The closing on Fellows' house occurred on October 13, 1992. Prior to the closing, T&C did not communicate with anyone at NCB regarding the bill owed by Woods. At the closing, Gineris questioned Woods about liens against the property. Woods acknowledged the existence of a mortgage held on the property by Tri-County Bank & Trust. Woods also confirmed that he had not completed payment to T&C but stated that he would pay T&C from the check he received at the closing. Gineris required that Woods sign a vendor's affidavit which stated that there were no liens on the property and that there were "no unpaid claims for labor done upon or materials furnished for the real estate in respect of which liens have been or may be filed." R. at 141-42. NCB then issued one check in the amount of $40,321.90 to Tri-County for Woods' construction loan and a second check to Woods in the amount of $59,229.17. Before doing so, Gineris asked Fellows if he was "comfortable" with disbursing the funds to Woods, based on Woods' statement that he would pay T&C from the proceeds. R. at 123. Fellows said, "That would be fine." R. at 123.
On January 11, 1993, T&C filed a mechanics lien against Fellows' residence with the Montgomery County Recorder, asserting it was owed $32,866.12. On January 7, 1994, T&C filed a complaint seeking to foreclose the lien, naming Woods, Fellows, NCB and the Montgomery County Treasurer as defendants. However, Fellows and the Montgomery County Treasurer were dismissed from the action. T&C's mechanics lien was ultimately released because the notice to Fellows did not comply with statutory limits.
Evidence was submitted by stipulation and deposition testimony presented by T&C and NCB. The trial court then made its decision without hearing or jury, as agreed by the parties. It entered its order and judgment in favor of NCB and against T&C on December 17, 1998. T&C filed a motion to correct errors, which the trial court denied. T&C now appeals.
DISCUSSION AND DECISION
I. Standard of Review
By agreement of the parties in this case, the trial court weighed evidence from exhibits and deposition transcripts and arrived at findings of fact and conclusions of law. Our standard of review for the trial court's findings of fact requires that we not reweigh the evidence, but rather affirm the trial court's decision unless the trial court's findings are clearly erroneous. Indiana Farmers Mut. Ins. Co. v. Ellison, 679 N.E.2d 1378, 1380-81 (Ind.Ct.App.1997), trans. denied. The trial court's findings of fact may be found clearly erroneous only if the record lacks any evidence or reasonable inferences from the evidence to support such findings. Id.
The trial court also decided questions of law: whether an agreement existed and whether T&C was a third-party beneficiary to such an agreement. We review the trial court's conclusions of law de novo. Brown v. State, 677 N.E.2d 517, 518 (Ind.1997).
II. Third-Party Beneficiary Status
T&C first claims that it is the third-party beneficiary of the agreement between mortgagee NCB and mortgagor Fellows which permitted Fellows to take out a mortgage for his home. Specifically, T&C argues that NCB had a fiduciary duty to Fellows and T&C to exercise reasonable care that T&C be paid and that it breached that duty in disbursing funds to Woods knowing that T&C had not been paid.
We note that, in order to prevail upon a claim that one is a third-party beneficiary to a contract, a plaintiff must prove:
(1) A clear intent by the actual parties to the contract to benefit the third party;
(2) A duty imposed on one of the contracting parties in favor of the third party; and
(3) Performance of the contract terms is necessary to render the third party a direct benefit intended by the parties to the contract.
Prairie Heights Educ. v. Bd. of Sch. Trustees of Prairie Heights Community Sch., 585 N.E.2d 289, 294 (Ind.Ct.App.1992).
In this case, NCB's representative Gineris stated to Fellows that T&C's pre-lien notice would be "address[ed]" at the closing. R. at 155. We do not see in this statement a promise that T&C would be paid. Rather, at most, any promise amounted to a commitment to protect Fellows' interest by addressing the notice at the closing, where it was indeed addressed. R. at 123-24, 146. After Woods informed Gineris that he would pay T&C with the check he was to receive from NCB, Gineris required Woods to sign a vendor's affidavit which stated that there were "no unpaid claims for . materials furnished for the Real Estate in respect of which lien have been or may be filed." R. at 141-42. Fellows stated that NCB's payment to Woods, based on Woods' statement that he would pay T&C, was "fine." R. at 123. Thus, we do not see on NCB's part a commitment to ensure payment to T&C.
Furthermore, even if a contract were established by Gineris' remark that the pre-lien notice would be addressed, the evidence presented does not demonstrate that NCB and Fellows had a "clear intent" to benefit T&C, as required under Indiana law. See Prairie Heights, 585 N.E.2d at 294.
T&C also contends that it was the intended beneficiary of the agreement between Gineris and Fellows. Specifically, it asserts that it is a "creditor beneficiary" under the Restatement of Contracts and therefore is entitled to bring suit based on the agreement of Gineris and Fellows. Appellant's brief at 19-20.
Section 302 of the Restatement (Second) of Contracts (1981) provides that:
(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either:
(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
Restatement (Second) of Contracts, § 302 (1981). Furthermore, the Comments to § 302 define a creditor beneficiary as "[t]he type of beneficiary covered by (l)(a)," that is the beneficiary of a promise to pay the promisee's debt.
In this case, T&C is not a creditor beneficiary because such a beneficiary is one who is a creditor of the promisee. Here, the promisee was Fellows, and T&C was not his creditor. Thus, the analysis which T&C asks us to perform does not apply.
We note that T&C did not avail itself in a timely fashion of its remedy: a mechanics lien on Fellows' property. T&C finally filed its lien more than sixty days after the materials had been supplied and thus exceeded the statutory filing limit then in effect. T&C then realized its next possible remedy, a judgment against Woods for the money it was owed. We cannot say that its failure to act in a timely manner on its own behalf creates a duty in other parties to have done more. We note further that the trial court correctly found that NCB had a duty as mortgagee to protect the interests of Fellows, the mortgagor, for three reasons: because of the express agreement that the pre-lien letter from T&C would be addressed at closing, because custom and practice so dictated, and because of the special relationship created by NCB's control of payment and its disbursement to a third party. However, Fellows was not harmed by NCB's breach of its duty to protect Fellows against a valid claim by T&C.
III. Case Law
T&C further argues that NCB is liable -to T&C under the decision in Prudential Ins. Co. v. Executive Estates, Inc., 174 Ind.App. 674, 369 N.E.2d 1117 (1977). In that case, our supreme court held that a mortgage lender which controlled the disbursement of mortgage loan proceeds at closing had a duty to disburse loan proceeds so as to protect the interest of the mortgagor by securing releases from those having claims against the mortgagor under specific circumstances. Id. at 694, 369 N.E.2d at 1129. In this case, however, Executive Estates is inapplicable because it solely concerns the liability that a mortgage lender has to its borrower, not to third parties. See id. Simply put, we cannot find that a mortgage lender has a duty to oversee the repayment of all contractors and suppliers. Indeed, our supreme court held in Executive Estates that, generally, a lender has no obligation to protect even the interests of its borrower unless bound to do so by an agreement. Id. at 684, 369 N.E.2d at 1123. As the trial court noted, T&C provided no case law to support the conclusion that a mortgagee's duty to protect the interests of the mortgagor can extend to a materialman as a third-party beneficiary or by any other means. Supp. R. at 10. The trial court did not err when it found that NCB had no duty to T&C.
TV. Constructive Fraud
T&C next makes an equitable claim for constructive fraud. Specifically, it argues that a bank has a duty of good faith and fair dealing, which NCB breached when it allowed Woods to sign an affidavit saying debts had been paid when they had not.
The elements of constructive fraud are:
(1) a duty existing by virtue of the relationship between the parties;
(2) a violation of that duty by the making of deceptive material misrepresentations of past or existing facts or remaining silent when the duty to speak exists;
(3) reliance thereon by the complaining party;
(4) injury to the complaining party as a proximate result of that reliance; and
(5) the gaining of an advantage by the party to be charged at the expense of the complaining party.
Wells v. Stone City Bank, 691 N.E.2d 1246, 1250-51 (Ind.Ct.App.1998), trans. denied.
In this case, the evidence did not establish the elements of constructive fraud. First, T&C submitted no proof of a relationship between T&C and NCB. Because we have already found that T&C was not a third-party beneficiary, that status will not help to establish the required relationship here. Furthermore, there was no evidence that T&C was injured by reliance upon any misrepresentations made by NCB. Finally, NCB gained no advantage at T&C's expense. Thus, we find that the elements of constructive fraud are not met and that the trial court correctly concluded so.
V. Deception
T&C next argues that NCB committed Deception, a Class A misdemeanor. Specifically, T&C contends that Woods knowingly made a false statement with intent to obtain property and that Gineris misapplied the funds paid by NCB by paying out money and accepting the false affidavit by Woods. T&C maintains that NCB was therefore complicit in Woods' act of deception.
I.C. § 35-43-5-3(a) provides that:
A person who:
(2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property . [or]
(3) misapplies entrusted property, . or property of a credit institution in a manner that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted .
commits deception, a Class A misdemeanor.
In this instance, however, there is no evidence that NCB misapplied entrusted property. The disbursed funds were originally its own, rather than "entrusted" to them, and these funds were disbursed to Woods and Fellows with Fellows' permission. R. at 123. Furthermore, there was no evidence that NCB had any warning from T&C or any other source that there was any danger of Woods failing to pay T&C for materials. R. at 152-54. Thus, we cannot agree that NCB knowingly placed Fellows and T&C at "substantial risk of loss" in disbursing the funds as it did. Appellant's brief at 29. Rather, we agree with the trial court finding that NCB's payment of funds to Woods did not constitute criminal deception.
VI. Damages
Finally, T&C argues that it should receive compensatory damages plus interest for the amount owed by Woods and treble statutory damages as well as expenses and costs and fees because its loss was due to criminal deception. I.C. § 34-24-3-1. Alternatively, it argues that common law punitive damages may be assessed.
Because we do not find that criminal deception was committed, or that T&C could prevail upon any other issue it presented, we conclude, as did the trial court, that T&C is not entitled to damages.
CONCLUSION
In conclusion, we find that, while NCB had a duty to protect Fellows, it had no duty to protect T&C, inasmuch as T&C was not a third-party beneficiary to its agreement with Fellows. Furthermore, we find that the elements of constructive fraud and of criminal deception are not met. As a result, the trial court properly entered judgment against T&C.
Judgment affirmed.
SULLIVAN, J., concurs with opinion.
STATON, Sr. J., dissents with opinion.
. We note that on November 14, 1994, the trial court entered a default judgment in favor of T&C against Woods for the sum of $45,-603.83.
. We wish to note that the trial court made extensive, clear and helpful findings of fact and conclusions of law.
. Ind.Code § 32-8-3-3 (1992).
. Ind.Code § 35-43-5-3.