Court Opinion

ID: 4241815
Source: CourtListenerOpinion
Date Created: 2018-02-02 16:12:42.918083+00
Date Added: 2024-06-11T14:43:54.590380
License: Public Domain

MEMORANDUM DECISION
                                                                                    FILED
Pursuant to Ind. Appellate Rule 65(D),                                         Feb 02 2018, 5:22 am
this Memorandum Decision shall not be                                               CLERK
regarded as precedent or cited before any                                       Indiana Supreme Court
                                                                                   Court of Appeals
court except for the purpose of establishing                                         and Tax Court

the defense of res judicata, collateral
estoppel, or the law of the case.

ATTORNEY FOR APPELLANT                                   ATTORNEYS FOR APPELLEE
Fred L. Cline                                            Nathaniel Lee
Oliver & Cline, LLP                                      Robert E. Feagley, II
Danville, Indiana                                        Lee Cossell Crowley, LLP
                                                         Indianapolis, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Hometown Station, Inc., et al.,                          February 2, 2018
Appellants-Plaintiffs,                                   Court of Appeals Case No.
                                                         32A01-1707-PL-1548
        v.                                               Appeal from the Hendricks Circuit
                                                         Court
Jimmy Jessey,                                            The Honorable Daniel F. Zielinski,
Appellee-Defendant.                                      Judge
                                                         Trial Court Cause No.
                                                         32C01-1605-PL-61

Riley, Judge.

Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018          Page 1 of 10
                                STATEMENT OF THE CASE
[1]   Appellants-Plaintiffs, Hometown Station, Inc. and CE Hughes Enterprises,

      LLC (collectively, the Business), appeal the trial court’s judgment in favor of

      Appellee-Defendant, Jimmy Jessey (Jessey), on a breach of contract claim.

[2]   We affirm.

                                                    ISSUE
[3]   The Business raises two issues on appeal, one of which we find dispositive and

      restate as: Whether the trial court erroneously concluded that Jessey did not

      breach his obligations under a contract entered into with the Business.

                      FACTS AND PROCEDURAL HISTORY
[4]   In 2015, Christopher Edward Hughes was the owner of both Hometown

      Station, Inc. and CE Hughes Enterprises, LLC, which together comprised the

      Business. The Business owned and operated a gas station/convenience store

      located at 5871 Liberty Parkway in Clayton, Hendricks County, Indiana. On

      August 18, 2015, the Business and Jessey entered into an Asset Purchase

      Agreement (APA), pursuant to which Jessey agreed to purchase substantially

      all of the assets of the Business (i.e., the gas station, real estate, contracts,

      intellectual property, etc.) for a price of $1,600,000.

[5]   The terms of the APA specified that Jessey,

              [w]ithin fifteen (15) days of this [APA], . . . shall obtain a
              Commitment for Title Insurance . . . and legible instruments

      Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 2 of 10
        affecting the Real Estate and recited as exceptions in the
        Commitment. If [Jessey] has an objection to items disclosed in
        such Commitment or the survey provided herein, [Jessey] shall
        make written objections to [the Business] within fifteen (15) days
        after the delivery of the Commitment. [The Business] shall have
        fifteen (15) days from the date such objections are disclosed to
        cure the same. If the objections are not satisfied within such time
        period, [Jessey] may in [his] sole discretion (a) terminate this
        [APA] and Escrow Agent shall return the Earnest Money to
        [Jessey], (b) grant [the Business] an extension of time to cure the
        objection, or (c) waive the unsatisfied objections and close the
        transaction.

(Appellant’s App. Vol. II, p. 17). Furthermore, the consummation of the

transaction was subject to Jessey

        securing a general financing commitment from a financial
        institution or any other party, upon commercially reasonable
        terms, within one hundred twenty (120) days of the execution of
        this [APA]. [Jessey] shall exert due diligence in pursuing,
        applying for and obtaining such a commitment. In the event that
        [Jessey] does not obtain a financing commitment within one
        hundred twenty (120) days of the execution of this [APA],
        [Jessey] may receive an extension of sixty (60) days upon
        payment to [the Business] of an additional non-refundable
        payment of Ten Thousand Dollars ($10,000.00), which payment
        shall be applied to the Purchase Price at Closing.

(Appellant’s App. Vol. II, p. 22). Thus, Jessey had until approximately

December 16, 2015, to obtain commercially reasonable financing, and the APA

specified that the deal would close five days thereafter.

Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 3 of 10
[6]   In accordance with the APA, Jessey applied for a Commitment for Title

      Insurance from Fidelity National Title Insurance Company. The title search

      revealed that in May of 2015, the Business’s lender had commenced foreclosure

      proceedings against the gas station and property. The Business had entered into

      a forbearance arrangement with its lender and was anticipating that the

      proceeds of the sale would cover its debt and cancel out the foreclosure action.

      Nevertheless, the Business did not disclose the pending foreclosure to Jessey

      during negotiations.

[7]   Jessey forwarded a copy of the APA and the title survey to a financial broker,

      Raj Tulshan (Tulshan) of Hudson and Capital in New York, with whom he had

      worked on numerous occasions in the past to finance his various business

      developments. However, due to the pending foreclosure, Jessey’s request for

      financing “was shot down at the beginning.” (Tr. Vol. II, p. 65). Although

      Jessey never submitted any written objections to the Business, he subsequently

      informed the Business in person that he would be unable to complete the

      purchase due to the pending foreclosure. Yet, the Business and Jessey

      discussed the possibility of refinancing in order “to get rid of this problem,” so

      negotiations remained ongoing. (Tr. Vol. II, p. 75). Although the Business did

      refinance its loans in January of 2016, as a result of which the foreclosure action

      was dismissed, the APA was never revived. In April of 2016, the Business

      agreed to sell its business to another buyer for the price of $1,300,000, which

      was finalized on May 10, 2016.

      Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 4 of 10
[8]    On May 26, 2016, the Business filed a Complaint, alleging that Jessey had

       breached the APA by failing to exert due diligence in pursuing, applying for,

       and obtaining a financing commitment. The Business sought at least $300,000

       in damages, along with prejudgment interest, court costs, attorney fees, and all

       other appropriate relief. On April 25, 2017, the trial court conducted a bench

       trial. On June 9, 2017, the trial court issued Findings of Fact and Conclusions

       of Law and entered judgment in favor of Jessey. Specifically, the trial court

       determined that “Jessey was unable to purchase [the Business’s assets] due to

       his inability to secure financing, and that he was unable to obtain financing due

       to the undisclosed mortgage foreclosures, which hampers commercial real

       estate transaction.” (Appellant’s App. Vol. II, p. 9).

[9]    The Business now appeals. Additional facts will be provided as necessary.

                               DISCUSSION AND DECISION
                                             I. Standard of Review

[10]   Pursuant to the Business’s request, the trial court entered specific findings of

       fact and conclusions thereon, thus triggering a review under Indiana Trial Rule

       52(A): our court “shall not set aside the findings or judgment unless clearly

       erroneous, and due regard shall be given to the opportunity of the trial court to

       judge the credibility of the witnesses.” In applying this two-tiered standard of

       review, we consider “whether the evidence supports the findings and then

       whether the findings support the judgment.” L.H. Controls, Inc. v. Custom

       Conveyor, Inc., 974 N.E.2d 1031, 1041 (Ind. Ct. App. 2012). In determining

       whether a finding or judgment is clearly erroneous, we neither reweigh
       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 5 of 10
       evidence nor reassess the credibility of witnesses. Id. Instead, we view the

       evidence in a light most favorable to the judgment and “defer to the trial court’s

       factual findings if they are supported by the evidence and any legitimate

       inferences therefrom.” Id. However, we review a trial court’s legal conclusions

       de novo. Id. In addition, a judgment will be found to be clearly erroneous “if

       the trial court has applied the wrong legal standard to properly found facts.” Id.

       at 1042.

                                             II. Breach of the APA

[11]   The Business claims that Jessey breached the APA because he did not exercise

       due diligence in obtaining financing. “The elements of a breach of contract

       claim are the existence of a contract, the defendant’s breach, and damages to

       the plaintiff.” WESCO Distribution, Inc. v. ArcelorMittal Ind. Harbor LLC, 23

       N.E.3d 682, 695 (Ind. Ct. App. 2014), trans. dismissed. “The construction of a

       contract and an action for its breach are matters of judicial determination.”

       Niezer v. Todd Realty, Inc., 913 N.E.2d 211, 215 (Ind. Ct. App. 2009). Thus, in

       general, construction of a written contract is a matter of law and is reviewed de

       novo. Id. When construing a contract, “unambiguous contractual language is

       conclusive upon the parties and the courts.” Id. However, where a contract is

       ambiguous, “its meaning is determined by extrinsic evidence and its

       construction is a matter for the fact-finder.” Id. A court “should attempt to

       determine the parties’ intent at the time the contract was made” by reading the

       contract as a whole and relying on “the language used to express their rights

       and duties.” Id. “The court will make every attempt to construe the contractual

       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 6 of 10
       language such that no words, phrases, or terms are rendered ineffective or

       meaningless.” Id. at 216. Rather, a contract should be interpreted such that the

       provisions harmonize rather than conflict. Id.

[12]   In this case, the closing of the sale of the Business’s assets was contingent upon

       Jessey “[s]ecuring a general financing commitment . . . upon commercially

       reasonable terms[] within one hundred twenty (120) days” of executing the

       APA. (Appellant’s App. Vol. II, p. 22). Jessey was contractually obligated to

       “exert due diligence in pursuing, applying for and obtaining such a [financing]

       commitment.” (Appellant’s App. Vol. II, p. 22). Relying on dictionary

       definitions for “due diligence,” the Business now asserts that Jessey “exerted no

       ‘continual effort’ to gain financing,” but instead “only spoke to one financing

       broker who had his information on file, and there was no evidence that that

       broker ever contacted even a single lender. And Jessey never received any

       written denial for financing.” (Appellant’s Br. p. 9). Furthermore, the Business

       insists that the evidence does not support a finding that the pending foreclosure

       impeded Jessey’s ability to obtain financing.

[13]   On the other hand, Jessey points out that the APA, “written by [the Business’s]

       attorney[,] is silent with regard to the definition of the due diligence required by

       [Jessey].” (Appellee’s Br. p. 10). Jessey also argues that the Business’s

       argument that he “was required to make a ‘continual effort’ to obtain financing

       . . . fails to address at what point [Jessey] would be excused from further

       attempts to obtain financing.” (Appellee’s Br. p. 10). Notwithstanding the fact

       “that [the Business] did not have clear title to transfer the asset due to the

       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 7 of 10
       pending foreclosure,” Jessey argues that the evidence established that he

       engaged in the due diligence reasonably expected by the parties at the time of

       contracting. (Appellee’s Br. p. 10).

[14]   Where terms are not defined in the contract at issue, our courts have previously

       “turn[ed] to sources that reflect the ordinary meaning of the term at the time the

       contract was executed.” Reuille v. E.E. Brandenberger Const., Inc., 888 N.E.2d

       770, 771 (Ind. 2008). In this case, at the time of execution, Black’s Law

       Dictionary defined the term “due diligence” as “[t]he diligence reasonably

       expected from, and ordinarily exercised by, a person who seeks to satisfy a legal

       requirement or to discharge an obligation.” BLACK’S LAW DICTIONARY 553

       (10th ed. 2014). “Diligence” is more specifically defined as “[c]onstant

       application to one’s business or duty; persevering effort to accomplish

       something undertaken. . . . The attention and care required from a person in a

       given situation; care; heedfulness.” BLACK’S LAW DICTIONARY 552-53 (10th

       ed. 2014).

[15]   The trial court concluded that “Jessey exercised due diligence in [the pursuit of]

       obtaining a financial commitment.” (Appellant’s App. Vol. II, p. 9). We agree.

       As the trial court found, Jessey contacted Tulshan, a financial broker whom

       Jessey had utilized since 2011, and “forwarded to [Tulshan] the [APA] and title

       commitment in an attempt to obtain financing for the property.” (Appellant’s

       App. Vol. II, p. 9). During the bench trial, Jessey testified that Tulshan

       maintains a file with all of Jessey’s updated financial information and that

       Tulshan applied for financing on Jessey’s behalf with “about nine different

       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 8 of 10
       banks.” (Tr. Vol. II, p. 66). Jessey stated that financing was denied because of

       the pending foreclosure. Furthermore, the trial court accorded special credit to

       Jessey’s testimony based on Jessey’s substantial experience in buying and

       selling convenience stores. Specifically, Jessey

               has owned and operated numerous convenience stores, gas
               stations, and commercial businesses since the late 1980’s and was
               familiar with the loan process of banks and/or financial
               institutions denying financing if the business had a foreclosure
               filed against it, since the business was deemed a high risk, and
               therefore, banks and financing companies would deny the
               application due to foreclosure.

       (Appellant’s App. Vol. II, p. 9).

[16]   The evidence clearly establishes that Jessey was not going to be able to obtain

       typical, “commercially reasonable” financing while a foreclosure was pending

       against the assets subject to the sale. (Appellant’s App. Vol. II, p. 22). By the

       time the Business refinanced and the foreclosure case was dismissed, the

       timeframe for closing the deal had expired. While Jessey acknowledged that

       special financing conditions may have been available under certain criteria for

       purchasing “a failing business,” the fact remains that the Business did not

       disclose the pending foreclosure to Jessey, and no provision for obtaining

       special financing in the event of such an occurrence was included in the APA.

       (Tr. Vol. II, p. 75). Jessey pursued financing in the same manner that he did for

       his prior successful transactions: he contacted a financial broker who contacted

       lenders on his behalf. We therefore agree with the trial court that Jessey

       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018   Page 9 of 10
       exercised the required care under the situation for seeking financing and did not

       breach the APA. 1

                                                CONCLUSION
[17]   Based on the foregoing, we conclude that the trial court correctly found that

       Jessey did not breach the APA because he exercised due diligence in pursuing

       financing to purchase the Business’s assets.

[18]   Affirmed.

[19]   Baker, J. and Brown, J. concur

       1
         Based on our determination that Jessey did not breach the APA due to a lack of diligence, we need not
       consider the Business’s additional argument that the trial court erroneously concluded that, even in the event
       of a breach, the Business failed to mitigate its damages. Nor do we address Jessey’s assertions that any
       breach on his part would be excused by a breach of the Business’s duty of good faith and fair dealing and
       constructive fraud.

       Court of Appeals of Indiana | Memorandum Decision 32A01-1707-PL-1548 | February 2, 2018          Page 10 of 10