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East Point Business Park, LLC v. Private Real Estate Holdings, LLC

Court of Appeals of Indiana

December 31, 2015

East Point Business Park, LLC, Fieldview Properties, LLC, and Karen Rusin, Appellants-Defendants,
Private Real Estate Holdings, LLC, Appellee-Plaintiff

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[Copyrighted Material Omitted]

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          Appeal from the Lake Superior Court. The Honorable John M. Sedia, Judge. Trial Court Cause No. 45D01-1102-MF-40.

         ATTORNEY FOR APPELLANT FIELDVIEW PROPERTIES, LLC AND KAREN RUSIN: David J. Tipton, Densborn Blachly, LLP, Indianapolis, Indiana.

         ATTORNEY FOR APPELLANT EAST POINT BUSINESS PARK, LLC: Geoffrey G. Giorgi, Giorgi & Bebekoski, LLC, Merillville, Indiana.

         ATTORNEYS FOR APPELLEE: Megan L. Craig, John R. Craig, Craig, Craig & Maroc, LLC, Crown Point, Indiana.

         Mathias, Judge. Baker, J., and Bailey, J., concur.


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          Mathias, Judge.

         [¶1] Appellants-Defendants East Point Business Park, LLC (" East Point" ), Fieldview Properties, LLC, (" Fieldview" ) and Karen Rusin (" Rusin" ) (collectively " the Defendants" ) challenge the Lake Superior Court's grant of summary judgment in favor of Appellee-Plaintiff Private Real Estate Holdings, LLC (" PREH" ), in PREH's foreclosure action against the Defendants.

         [¶2] We affirm.

         Facts and Procedural History

         [¶3] East Point is a limited liability company formed for the purpose of acquiring a 124-acre parcel of real estate (" the Property" ) in Crown Point, Indiana, and developing a business park for lease and eventual sale. The members of East Point are Fieldview and another group called Investors of East Point, LLC (" IEP" ). IEP owns a 70% interest in East Point and Fieldview a 30% interest. While Rusin is the sole owner of Fieldview, IEP is owned by: Michael Barrett (" Barrett), who owns a 50% interest; Sheridan Investors, LLC (" Sheridan" ), which owns a 25% interest; and Lake Charles Investors, LLC (" Lake Charles" ), which owns the remaining 25% interest. Sheridan is itself owned by Don and Pat Manhard, and Lake Charles by Pete and Lynn Manhard. Accordingly, Barrett owns a 35% interest in East Point, and Sheridan and Lake Charles each own a 17.5% interest.

         [¶4] On May 1, 2006, East Point purchased the Property from Fieldview for a purchase price of $4.9 million. The purchase was financed by loans from Private-Bank (" the Bank" ), an Illinois bank based in Chicago. East Point borrowed $2.2 million, and Fieldview borrowed $2.7 million. The loans were secured by promissory notes and mortgages on the Property. East Point's mortgage was listed as a primary mortgage, and Fieldview's mortgage

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was listed as a secondary mortgage. In addition, Rusin, Barrett, and the Manhards all personally guaranteed the loan to East Point.

         [¶5] During the development of the Property, East Point received three loan renewals from the Bank, each extending the maturity date of the East Point loan. The first renewal extended the maturity date to March 15, 2009; the second renewal extended the maturity date to March 15, 2010; and the third renewal extended the maturity date to September 15, 2010.[1] This renewal process also involved two other loans involving the Manhards, and the Bank desired to keep the Manhards as clients.

         [¶6] East Point's loan had an " interest reserve" feature that allowed East Point to borrow from the loan commitment to pay the interest due on the loan, thereby increasing the balance of the loan.[2] East Point did this to fund development costs and to pay Fieldview's two yearly loan payments of $32,500. Although the East Point loan was not formally tied to other loans via cross-collateralization, the Bank viewed the East Point loan together with the loans to Barrett and the Manhards for purposes of determining the Bank's aggregate credit exposure.

         [¶7] The Bank funded East Point's first draw request in 2009, and East Point used the money from this draw to make three $32,500 payments on the Fieldview loans. The Bank also funded two other draw requests, the last being a $33,000 draw to pay the March 2010 Fieldview mortgage payment, which was funded on March 15, 2010, the maturity date of the East Point loan, which was later extended to September 15, 2010, as noted above.

         [¶8] In July 2010, the Bank and East Point discussed the loan. East Point wanted the Bank to extend the maturity date once again. The Bank proposed that $500,000 of debt from one of the other Manhard loans be transferred to the East Point loan, the reason being that the loan-to-value ratio of one of the Manhard loans was too high, whereas the loan-to-value ratio of the East Point loan was within the Bank's underwriting criteria. One of East Point's agents, Tom Sherman (" Sherman" ), told the Bank that shifting this debt was a problem because the East Point loan involved Barrett and Rusin in addition to the Manhards. The Bank responded that it had issues with a long-term loan renewal on the East Point loan because Barrett had an unrelated loan on property with an outstanding tax payment.

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          [¶9] On September 8, 2010, East Point submitted another draw request to the Bank for $32,500 to pay the Fieldview loan payment. Although the loan had not yet matured, and funds were available in the loan commitment, the Bank did not fund the draw request, nor did the Bank respond to the request or provide East Point with an explanation of the failure to fund the requested draw.

         [¶10] On September 10, 2010, five days before the maturity date of the East Point loan, Sherman and Tom Manhard met with the Bank's loan officers. The East Point offer was modified to include payment of Barrett's outstanding property taxes. East Point's proposal also included transferring $300,000 of debt to East Point with an eighteen-month extension of the maturity date with an option for an additional eighteen-month extension. It also proposed eliminating the interest reserve and draw feature, thereby requiring East Point to make its payments from funds other than the loan itself.

         [¶11] East Point contends that the Bank agreed to this renewal, as evidenced by the Bank's asset report, which states: " Pape and Ahern [the Bank's agents] met with [the] Manhards on 09/10/10 and they have agreed to [the] plan above and bank needs to formalize the proposal above." Appellants' App. p. 1350. However, the alleged renewal agreement was never reduced to writing.

         [¶12] On November 29, 2010, the Bank made an internal report indicating that it was " scrapping" the proposed East Point loan renewal. On December 10, 2010, the Bank sent a demand letter to East Point and its guarantors, declaring that the loan was in default due to the maturation date having passed, and demanded payment of the balance of the loan within ten days. The Bank subsequently presented a pre-negotiation agreement to East Point and its guarantors, which contained a provision stating, " Borrower acknowledges and agrees that Lender is not in default under any of Lender's obligations contained in the Loan Documents," and " Borrower acknowledges and agrees that Lender has . . . performed all of Lender's obligations and agreements . . . that all actions taken to date by Lender . . . have been reasonable . . . in good faith, and within lender's rights under the loan documents and applicable law." Appellants' App. pp. 1216, 1218. East Point and its guarantors refused to sign this agreement and sent a revised version of the agreement to the Bank. The Bank never signed the revised agreement and filed suit against East Point and its guarantors on February 15, 2011.

         [¶13] After filing suit, the Bank made a joint forbearance proposal to East Point and two of the other Manhard loans. The Bank's proposal called for cross-defaults among the three loans and their guarantors, and called for Fieldview to assign its mortgage to the Bank as security for Rusin's guarantee of the East Point loan. The borrowers rejected the Bank's proposals.

         [¶14] The Bank subsequently settled with the Manhards and Barrett under agreements that provided that the Manhards and Barrett would pay $350,000 to settle their liability with the Bank as guarantors of the East Point loan. One provision of the settlement agreements provided that the Manhards and Barrett, or any entity they controlled:

Shall not, directly or indirectly, provide any loans, capital contributions or financial assistance to East Point, Fieldview or IEP; contest, delay, hinder, interfere with or otherwise affect the prosecution of the Foreclosure Action; provide any assistance to East Point in contesting, delaying or hindering the Foreclosure

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Action; consent to, approve or acquiesce in any amendment to the Operating Agreement of East Point or IEP which is in any manner adverse to the Bank; and sell, assign, transfer, encumber or consent to any transfer of any interest in East Point or IEP.

         Appellants' App. pp. 1223, 1362, 1371. After signing the settlement agreements, Barrett and the Manhards notified Rusin that they were resigning their management roles at East Point. On September 26, 2011, the Bank dismissed Barrett and the Manhards from the suit. The remaining defendants were East Point, Fieldview, and Rusin. Since Rusin was the sole owner of Fieldview, and Fieldview the only non-settling owner of East Point, the remaining defendant is effectively Rusin. Fieldview filed a counterclaim on May 18, 2011, alleging tortious interference with the contract and inducement of breach of contract, breach of contract, and abuse of process. Fieldview also sought to foreclose on its secondary mortgage on the Property.

         [¶15] On September 27, 2012, the Bank sold the East Point loan to PREH, who was substituted as the plaintiff. On July 20, 2013, PREH filed a motion for summary judgment. The trial court granted the Defendants several extensions of time to file a reply to PREH's motion for summary judgment. The last of the trial court's orders on the subject provided that " Defendants' Response to the Motion for Summary Judgment shall be due three (3) days after the conclusion of the deposition of Private Bank and Trust, Co., unless otherwise agreed by the Parties or Ordered by the Court." Appellants' App. pp. 636-37. The Defendants' counsel then filed a Notice to the Court of Agreed Briefing Schedule on Motion for Summary Judgment. Id. at 641. In this notice, the Defendants stated that the parties had agreed that the Defendants' answer brief to the motion for summary judgment would be due on August 22, 2014, and that PREH's reply would be due on August 29, 2014.

         [¶16] On August 22, 2014, the Defendants filed a joint brief responding to PREH's motion for summary judgment. However, the brief was not accompanied by any affidavits or other designated evidence. Instead, the Defendants did not file their designated evidence until December 24, 2014. The Defendants also filed a motion to strike the affidavit of PREH's principal Arshad Malik (" Malik" ) as being contrary to his subsequent deposition testimony. PREH filed a reply brief on August 29, 2014, in accordance to the timeline set forth in the agreed briefing schedule. Accompanying PREH's reply was a motion to strike the Defendants' exhibits.

         [¶17] The trial court held a summary judgment hearing on September 3, 2014. At the conclusion of the hearing, the trial court took the matter under advisement and requested that the parties submit proposed findings and conclusions, which the parties subsequently did. On October 24, 2014, counsel for Fieldview and Rusin filed a Declaration of Technical Difficulty and Delay in filing Summary Judgment Motion Evidence. On November 20, 2014, the trial court granted PREH's motion for summary judgment and entered a decree of foreclosure. The Defendants now appeal.

         Summary Judgment Standard of Review

         [¶18] Our standard for reviewing a trial court's order granting a motion for summary judgment is well settled:

A trial court should grant a motion for summary judgment only when the evidence shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment

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as a matter of law. The trial court's grant of a motion for summary judgment comes to us cloaked with a presumption of validity. An appellate court reviewing a trial court summary judgment ruling likewise construes all facts and reasonable inferences in favor of the non-moving party and determines whether the moving party has shown from the designated evidentiary matter that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. But a de novo standard of review applies where the dispute is one of law rather than fact. We examine only those materials designated to the trial court on the motion for summary judgment. Our standard of review is not altered by the fact that the parties filed cross motions for summary judgment. Here, the trial court made findings of fact and conclusions of law in support of its entry of summary judgment. Although we are not bound by the trial court's findings and conclusions, they aid our review by providing reasons for the trial court's decision. We must affirm the trial court's entry of summary judgment if it can be sustained on any theory or basis in the record.

Altevogt v. Brand, 963 N.E.2d 1146, 1150 (Ind.Ct.App. 2012) (citations and internal quotations omitted).

         I. Did the Defendants Timely File Designated Evidence?

         [¶19] Before addressing the merits of the Defendants' arguments, we turn first to PREH's claim that the trial court should not have considered any of the Defendants' designated evidence because the evidence was not timely filed. PREH claims that the Defendants' response to its motion for summary judgment was due no later than May 30, 2014, which was the date listed in the trial court's order entered on April 25, 2014, in which the court accepted the parties' agreed motion to alter the due date of the Defendants' response to summary judgment. PREH argues that this was the last extension of time requested by the Defendants.

         [¶20] Our review of the record, however, reveals that the trial court entered several subsequent orders extending the date on which the Defendants' response to PREH's motion for summary judgment was due. Specifically, after PREH moved to continue the summary judgment hearing, on May 21, 2014, the Defendants filed an agreed motion requesting that the Defendants' summary judgment response(s) be due no later than June 30, 2014. The trial court granted this motion two days later, giving the Defendants until June 30, 2014, to file their materials in response to PREH's summary judgment motion.

         [¶21] Then again, on June 26, 2014, the Defendants filed another agreed motion, with the consent of opposing counsel, requesting that the trial court " alter the summary judgment motion response date to July 17, 2014[.]" Appellants' App. p. 627. The trial court granted this motion the following day, ordering that: " The time for Defendants' response to the summary judgment motion filed by Private Real Estate Holdings LLC (" PREH') is changed to July 17,2014[.]" Id. at 629-30.

         [¶22] Then, on July 16, 2014, the Defendants filed yet another agreed motion seeking to extend the deadline for filing their response to PREH's motion for summary judgment, this time to July 23, 2014. The trial court granted this motion to following day, ordering: " the time for Defendants' response to the summary judgment motion filed by [PREH] is changed to July 23, 2014[.]" Id. at 634.

         [¶23] That same day, July 17, 2014, however, the trial court issued an Agreed

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Order on Emergency Motion for Trial Rule 26(C)(2) Protective Order, which ...

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