Opinion ID: 384735
Heading Depth: 1
Heading Rank: 2

Heading: Denial of Partial Summary Judgment on Plaintiffs' Claims Was Appropriate.

Text: 19
20 As noted above, the Mortgage Company and the Bank, as a third-party beneficiary and assignee of the third-party beneficiary Trust, sued in Count I on a breach of contract theory. Steel moved for summary judgment with respect to the Bank on the argument that the Bank and Trust were not third-party beneficiaries of its participation agreement with the Mortgage Company. 4 Judge Steckler held that there was a genuine issue of fact as to whether the participation agreements were intended to benefit the Bank and Trust and therefore denied the motion (Steel App. 8-9). Steel contends this holding was erroneous because an intent to benefit the Bank and Trust does not affirmatively appear from the language of the document as required by Indiana law. We disagree. 21 The contractual obligation on which the Bank and Trust predicate their claims is Steel's duty to cooperate in efforts to protect the project and minimize loss-and the concomitant duty not to submarine the project to further its own hand (Plaintiffs' Br. 41). They rely on the clause in the participation agreements requiring Steel to reimburse the Mortgage Company for all extraordinary out-of-pocket costs and expenses incurred for the protection and preservation of security, for the minimizing of loss     (Steel App. 104, 106). In addition, there is, of course, an implied covenant of good faith and fair dealing by Steel. Photovest Corp. v. Fotomat Corp., 606 F.2d 704, 727-729 (7th Cir. 1979), certiorari denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601; Lesh v. Trustees of Purdue University, 124 Ind.App. 422, 116 N.E.2d 117, 120 (1953); Indiana Code § 26-1-1-203; 5 Williston on Contracts § 670, p. 159 (3d ed. 1961). 22 The Bank and Trust had a combined participation interest of 60% in the Cromwell project and stood to incur 60% of the losses. The participation agreements between Steel and the Mortgage Company expressly state that this 60% interest belonged to the Bank and Trust, not the Mortgage Company (Steel App. 103, 105). Thus Steel's obligation to minimize loss would necessarily and within the contemplation of the parties result in a direct benefit to the Bank and Trust. Jackman Cigar Mfg. Co. v. John Berger & Son Co., 114 Ind.App. 437, 52 N.E.2d 363, 367-368 (1944). Indeed, as plaintiffs point out, it is difficult to see whom the minimization of loss clause was intended to benefit if not the three risk-bearers. 23 For the foregoing reasons, we cannot agree with Steel that any benefit flowing from the contracts to the Bank and Trust was as a matter of law merely incidental. At best from Steel's viewpoint, the contract is ambiguous as Judge Steckler concluded, and therefore the question whether the contractual language in the circumstances of the transaction evidences an intent to benefit the Trust and Bank is an appropriate one for trial. See Jackman Cigar Mfg. Co. v. John Berger & Son Co., supra; Standard Land Corp. of Indiana v. Bogardus, 154 Ind.App. 283, 289 N.E.2d 803, 824-825 (1972); Shahan v. Brinegar, Ind.App., 390 N.E.2d 1036, 1041 (1979). Furthermore, we agree with plaintiffs that what is at issue here is the question who are the real parties-in-interest. If it is found at trial that the parties did not intend to benefit the Bank and Trust, that would not, of course, alter the Mortgage Company's capacity to sue in Count I for Steel's alleged breach of its duty of good faith. Rule 17(a), Fed.R.Civ.Pro. 24
25 In Count II plaintiffs assert that Steel through its dilatoriness interfered with the contractual relationships between the Mortgage Company, the Trust and the Bank, 5 justifying an award of compensatory and punitive damages to the Mortgage Company and the Bank in its own right and as assignee of the Trust. Steel moved for summary judgment on this Count with respect to the Bank and Trust, arguing that its alleged delaying tactics did not cause the Mortgage Company to breach any agreement with the Bank or Trust and that without an actual breach plaintiffs' claim will not lie under Indiana law. 26 Steel relies on the fact that the tort of interference with contractual relationship by inducing a breach of contract recognized by Indiana law requires an actual breach. The question before the district court, however, was whether Indiana law recognizes the more loosely defined tort of tortious interference with contractual or business relations without an actual breach of contract (Steel App. 9). 27 Since Indiana case law apparently gives no definitive answer to this question, Judge Steckler properly proceeded to attempt to determine how the Indiana courts would decide the question if confronted with it. In concluding that the Indiana courts would recognize such a tort, he relied on Spier v. Home Insurance Co., 404 F.2d 896, 898 (7th Cir. 1968); Martin v. Platt, Ind.App., 386 N.E.2d 1026, 1027 (1979); and Gibson v. Miami Valley Milk Producers, Inc., 157 Ind.App. 218, 299 N.E.2d 631 (1973), all of which lend support to his position. 6 He also observed that the commentators recognize the broader tort. E. g., Restatement (Second) of Torts § 766A (1979) and Comment c thereto; Prosser, Law of Torts § 129 (4th ed. 1971). 28 Steel cites no authority to the contrary. Kiyose v. Trustees of Indiana University, 166 Ind.App. 34, 333 N.E.2d 886 (1975), and Martin v. Platt, supra, on which Steel principally relies, stand for the proposition that only a third party, and not a party to the underlying contract, may be liable for tortious interference. Count II does not, however, allege interference with the contract between the Mortgage Company and Steel. With respect to the contracts between the Mortgage Company and the Bank and Trust, Steel is a third party. Since we find no reason to disagree with Judge Steckler's conclusion that a claim for tortious interference without an actual breach of contract would be recognized under Indiana law, we affirm his denial of Steel's motion with respect to Count II. 29
30 In Count III, the Bank, again in its own right and as assignee of the Trust, is seeking actual damages according to proof and punitive damages of $3,000,000 based on Steel's alleged breach of its obligations as a co-loan participant to the other participants. Steel's objection to this Count is that it had no legal relationship to the Bank or Trust and therefore no legal obligations to them. Judge Steckler refused to grant summary judgment for Steel on the ground that if plaintiffs can substantially substantiate their third-party claim, a contractual relationship giving rise to the duty to act in good faith toward each other would exist (Steel App. 11). Since Steel concedes the district court's point (Br. 59), its argument here must be taken as an extension of the argument we rejected with respect to Count I, namely, that the Bank and Trust are as a matter of law not third-party beneficiaries of the agreement between the Mortgage Company and Steel. 31 The bank further argues in support of the district court's ruling that the three participants became real estate developers when the Mortgage Company acquired title to the Cromwell project in settlement with the borrower. Steel's dilatoriness in 1976, 1977 and 1978 is relied upon to show that the Bank and Trust sustained damages equal to 60% of the difference between the project's April 1978 value and the value it would have had if the Mortgage Company had been able to implement its proposals to move forward with and/or dispose of the project (Steel App. 99). Indiana law has long recognized the duty of a party engaged in a common enterprise to act in the utmost good faith toward its co-venturers. Grover v. Marott, 192 Ind. 552, 136 N.E. 81, 85 (1922). For this reason and that stated by Judge Steckler, the district court properly denied Steel's motion for partial summary judgment with respect to Count III. 32 Accordingly, we affirm the district court's order of March 20 in its entirety. 7 Our ruling does not mean, of course, that Steel may not prevail on any or all of the three Counts after trial. 33