Court Opinion

ID: 4210750
Source: CourtListenerOpinion
Date Created: 2017-10-11 15:09:29.893722+00
Date Added: 2024-06-11T14:14:18.098887
License: Public Domain

FILED
                                                                            Oct 11 2017, 5:36 am

                                                                                CLERK
                                                                            Indiana Supreme Court
                                                                               Court of Appeals
                                                                                 and Tax Court

      ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
      Daniel H. Pfeifer                                          Timothy J. Abeska
      James P. Barth                                             Brian E. Casey
      Pfeifer Morgan & Stesiak                                   Barnes & Thornburg LLP
      South Bend, Indiana                                        South Bend, Indiana

                                                                 Alice J. Springer
                                                                 Barnes & Thornburg LLP
                                                                 Elkhart, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Bobick’s Pro Shop, Inc.,                                   October 11, 2017
      Appellant-Plaintiff,                                       Court of Appeals Case No.
                                                                 71A04-1703-CT-655
              v.                                                 Appeal from the St. Joseph
                                                                 Superior Court
      1st Source Bank,                                           The Honorable Jenny Pitts Manier,
      Appellee-Defendant.                                        Judge
                                                                 Trial Court Cause No.
                                                                 71D05-1410-CT-356

      Najam, Judge.

                                        Statement of the Case
[1]   Bobick’s Pro Shop, Inc. (“BPS”) appeals the trial court’s grant of summary

      judgment to 1st Source Bank (“1st Source”). BPS raises two issues for our

      Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017                    Page 1 of 9
      review, but we consider only the following dispositive issue: whether the trial

      court erred when it concluded that an “Agreement for Deed in Lieu of

      Foreclosure” (“the Agreement”) between BPS and 1st Source entitled 1st

      Source to judgment as a matter of law.

[2]   We affirm.1

                                   Facts and Procedural History
[3]   In September of 2009, BPS, 1st Source, and Donna J. Bobick (“Bobick”)

      entered into the Agreement. The Agreement provided in relevant part as

      follows:

                                                   RECITALS

               A.      [BPS] is the record owner of certain real property located
               in St. Joseph County . . . .

               B.    [BPS] and [1st Source] are parties to [a] . . . Real Estate
               Mortgage and Security Agreement dated October 29, 1999[,] and
               recorded . . . on November 4, 1999 . . . .

               C.    The indebtedness of [BPS] owed to [1st Source] . . . arising
               under the Mortgage was, as of September 22, 2009, . . . in the
               approximate sum of $2,550,326.16 (“Mortgagor’s Obligations”).

      1
        Because we agree with the trial court that the Agreement entitles 1st Source to judgment as a matter of law
      on BPS’s claims, we need not consider BPS’s additional argument on appeal that the trial court abused its
      discretion when it struck certain evidence regarding the value of the real property underlying the Agreement.

      Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017                        Page 2 of 9
        D.    [BPS] is in default under the terms of the Mortgage and is
        presently unable to pay Mortgagor’s Obligations.

        E.     [BPS] and Bobick are parties to [a] . . . Mortgage dated
        October 23, 2001[,] and recorded . . . on October 24, 2001 . . .
        (the “Junior Mortgage”). The indebtedness of [BPS] . . . to
        Bobick arising under the Junior Mortgage as of September 22,
        2009[,] is . . . in the sum of $565,607.30 and bears interest at a
        rate of $150.43 per diem (the “Bobick Obligations”).

                                                 ***

        G.     [BPS] has proposed a settlement to [1st Source] and to
        Bobick so as to induce [1st Source] to forego the exercise of its
        default remedies such as foreclosure[] and to accept instead a
        deed in lieu of foreclosure in full satisfaction of Mortgagor’s
        Obligations.

        H.    [1st Source] and Bobick have each agreed to a settlement
        with [BPS] pursuant to the terms and conditions set forth
        hereinafter.

        NOW THEREFORE in consideration of the above recitals of
        fact (which shall be deemed binding covenants of the parties) and
        the several agreements between the parties hereinafter set forth,
        and in reliance thereon, the parties AGREE AS FOLLOWS:

        1.     SETTLEMENT AGREEMENT. This Agreement is an
        integral part of a settlement between [1st Source] and [BPS].

        2.     RELEASE OF JUNIOR MORTGAGE. Concurrent with
        the execution of this Agreement, Bobick has delivered to [1st
        Source] a release of the Junior Mortgage . . . .

Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017   Page 3 of 9
                                                 ***

        4.       [BPS]’S DEED IN LIEU OF FORECLOSURE.
        Concurrent with the execution of this Agreement, [BPS] has
        executed and delivered to [1st Source] a Deed in Lieu of
        Foreclosure . . . conveying to [1st Source] all of [BPS’s] right,
        title[,] and interest in and to the Property and all improvements
        thereon including fixtures.

        5.     NO MERGER. [BPS], Bobick[,] and [1st Source]
        expressly acknowledge and agree that the interest to be acquired
        by [1st Source] pursuant to the Deed shall not merge with the
        liens and security interests of [1st Source] in the Property under
        the Mortgage, but that such liens and security interests shall be
        and remain at all times separate, distinct, valid, perfected and
        continuous liens and security interests on the Property until
        expressly released by [1st Source]. . . .

                                                 ***

        10. APPLICATION OF PROCEEDS OF THE PROPERTY.
        [1st Source] may dispose of the Property in such manner (including but
        not limited to whether as a single parcel or as multiple parcels)
        and at such time as it determines in its sole and absolute discretion. All
        costs of [1st Source] arising out of or related to its holding,
        maintaining, leasing, developing, subdividing, selling[,] or
        disposing of the Property (including but not limited to the costs
        of satisfying any mortgage, lien[,] or encumbrance on the
        Property and of acquiring [a third-party’s property]), net of any
        rental or similar revenues actually received by [1st Source] from
        the Property, are referred to in this Agreement as [1st Source’s]
        “Costs.” The sum of (i) Mortgagor’s Obligations as of the date of
        this Agreement, plus (ii) [1st Source’s] Costs, plus (iii) interest on
        both (i) and (ii) at a rate per annum of the greater of (x) seven
        percent (7.00%) or (y) [1st Source’s] “Prime Rate” of

Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017       Page 4 of 9
               interest . . . plus three and one-half percent (3.50%), is referred to
               in this Agreement as the “Amount Payable to Bank.” Interest
               will be accrued in the same manner as [1st Source] has accrued
               interest on the Mortgagor’s Obligations prior to the date of this
               Agreement. Upon any sale or other disposition by [1st Source] of the
               Property, [1st Source] will apply the proceeds of sale (i) first, to the
               Amount Payable to Bank, until that amount has been fully satisfied, (ii)
               the excess, if any, ninety percent (90%) to the Bobick Obligations and the
               remaining ten percent (10%) retained by [1st Source], until the Bobick
               Obligations have been fully satisfied, and (iii) the excess, if any,
               distributed eighty percent (80%) to [BPS] and the remaining twenty
               percent (20%) retained by [1st Source].

      Appellant’s App. Vol. 2 at 22-26 (emphases added).

[4]   Following the Agreement, 1st Source placed the property in other real estate

      owned (“OREO”) on its balance sheet.2 Over the next three years, 1st Source

      attempted to sell the property, but 1st Source never received an offer higher

      than a $2.9 million offer it received in 2012. 1st Source declined that offer and

      instead sold the property to itself for the same amount. There is no dispute that

      the proceeds of that sale were insufficient to result in a distribution to BPS.

[5]   BPS filed suit against 1st Source. In its amended complaint, BPS alleged that

      1st Source’s sale of the property to itself was a breach of the Agreement. BPS

      also alleged that 1st Source’s sale was an act of criminal fraud. 3 Thereafter, the

      2
        BPS’s mortgage loan was a nonperforming asset and, sooner or later, regulatory authorities would have
      required 1st Source to charge off the loan and move the asset into OREO.
      3
        In its briefs on appeal, BPS repeatedly and mistakenly describes its criminal fraud claim as a fraudulent
      transfer claim. See Ind. Code §§ 32-18-2-14 (2017) (fraudulent transfer); 35-43-5-4(8) (criminal fraud); see also

      Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017                            Page 5 of 9
      parties cross-moved for summary judgment, and, after a hearing, the trial court

      granted summary judgment to 1st Source based in relevant part on the

      “unambiguous . . . terms” of the Agreement. Id. at 11. This appeal ensued.

                                       Discussion and Decision
[6]   BPS appeals the trial court’s grant of summary judgment to 1st Source. Our

      standard of review is clear:

               As we have recently reiterated, summary judgment imposes a
               heavy factual burden on the moving party—and a
               correspondingly light burden for the non-movant’s response—
               because “Indiana consciously errs on the side of letting marginal
               cases proceed to trial on the merits, rather than risk short-
               circuiting meritorious claims.” Hughley v. State, 15 N.E.3d 1000,
               1004 (Ind. 2014). By definition, cases that hinge upon disputed
               facts are inappropriate for summary judgment, because
               “weighing [evidence]—no matter how decisively the scales may
               seem to tip—[is] a matter for trial, not summary judgment.” Id.
               at 1005-06.

               By contrast, matters of contract interpretation are “particularly
               well-suited for de novo appellate review,” because they
               “generally present [ ] questions purely of law.” Holiday
               Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 577
               (Ind. 2013). A contract may be construed on summary judgment
               if it “is not ambiguous or uncertain,” or if “the contract
               ambiguity, if one exists, can be resolved without the aid of a
               factual determination.” Warrick County ex rel. Conner v. Hill, 973
               N.E.2d 1138, 1144 (Ind. Ct. App. 2012), trans. denied. The

      Appellee’s App. Vol. II at 58 (stating a claim for criminal fraud and expressly noting that “the Indiana
      Uniform Fraudulent Transfer Act . . . is not the basis for BPS’s cause of action . . . .”).

      Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017                          Page 6 of 9
              meaning of a contract is a question for the fact[-]finder,
              precluding summary judgment, only where interpreting an
              ambiguity requires extrinsic evidence. Tate v. Secura Ins., 587
              N.E.2d 665, 668 (Ind. 1992).

              Moreover, our standard of review remains unchanged when, as
              here, the parties file cross-motions for summary judgment—we
              simply “consider each motion separately to determine whether
              the moving party is entitled to judgment as a matter of law.” SCI
              Propane, LLC v. Frederick, 39 N.E.3d 675, 677 (Ind. 2015) (quoting
              Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012)).

      Mid-America Sound Corp. v. Ind. State Fair Comm’n (In re Ind. State Fair Litigation),

      49 N.E.3d 545, 548 (Ind. 2016).

[7]   BPS asserts that 1st Source breached the Agreement when 1st Source sold the

      property to itself. According to BPS, “[p]ursuant to the plain language of the

      Agreement, 1st Source had limited discretion related to the manner and time for

      disposing of the Property.” Appellant’s Br. at 16-17. BPS further posits that

      “the fundamental purpose of the Agreement . . . was to provide a mechanism

      for the parties to share excess value in the Property . . . .” Id. at 17. Because 1st

      Source did not abide by those principles, BPS continues, 1st Source’s

      transaction was not just a breach of the Agreement but also an act of criminal

      fraud entitling BPS to increased damages.

[8]   BPS’s claims are wholly without merit and are contrary to the plain language of

      the Agreement. BPS plainly conveyed all its right, title, and interest in and to

      the property to 1st Source. And the Agreement expressly authorized 1st Source

      to “dispose of the Property in such manner . . . and at such time as [1st Source]
      Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017   Page 7 of 9
       determines in its sole and absolute discretion.” Appellant’s App. Vol. 2 at 25.

       Those terms are unambiguous and in no way “limited” 1st Source’s discretion

       in how to dispose of the property.4 Rather, that language categorically placed

       “sole and absolute discretion” in the disposal of the property with 1st Source.

       Indeed, there is no dispute that, had 1st Source sold the property to the third

       party that had made the $2.9 million offer, BPS would have no claim.

[9]    Moreover, the Agreement’s “fundamental purpose” was not, as BPS asserts, to

       provide a mechanism to share “excess value” in the property. See Appellant’s

       Br. at 17. The fundamental purpose of the Agreement was to settle a legal

       dispute between the parties by giving 1st Source exclusive control over

       disposition of the real estate and releasing BPS from its mortgage obligations.

       BPS received the benefit of its bargain. And the Agreement expressly

       contemplates that BPS would receive a distribution from the disposal of the

       property only “if any” such funds remained after various other distributions.

       Appellant’s App. Vol. 2 at 26. That is, the plain language of the Agreement

       demonstrates that the parties contemplated that 1st Source might dispose of the

       property in such a manner and time that there would be no funds to distribute

       to BPS.

[10]   We also reject BPS’ contention that 1st Source made a “unilateral

       determination that BPS’ rights under the Agreement were void and worthless.”

       4
         We reject BPS’s assertion that the Agreement’s use of the term “dispose of” requires a transaction with a
       third party.

       Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017                        Page 8 of 9
       Appellant’s Br. at 31. The ultimate $2.9 million sale price was not, as BPS

       contends, based on an “internal valuation” but matched the highest third-party

       offer 1st Source had received. See id. at 31. 1st Source made a business decision

       that it was authorized to make under the Agreement, and in so doing 1st Source

       also suffered a loss, at least in the foreseeable future. Accordingly, as 1st Source

       acted within its clear rights under the Agreement when it sold the property to

       itself, 1st Source is entitled to judgment as a matter of law on BPS’s claim that

       1st Source breached the Agreement.

[11]   For similar reasons, we also hold that 1st Source is entitled to judgment as a

       matter of law on BPS’s criminal fraud claim. An essential element of criminal

       fraud is the intent to defraud. Ind. Code § 35-43-5-4(8) (2017). As 1st Source

       acted within its clear rights under the Agreement, we reject BPS’s assertion that

       1st Source acted with an intent to defraud. In sum, we affirm the trial court’s

       grant of summary judgment to 1st Source on BPS’s claims.

[12]   Affirmed.

       Kirsch, J., and Brown, J., concur.

       Court of Appeals of Indiana | Opinion 71A04-1703-CT-655 | October 11, 2017   Page 9 of 9