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Bayview Loan Servicing, LLC v. Golden Foods, Inc.

Court of Appeals of Indiana

September 14, 2016

Bayview Loan Servicing, LLC, Appellant-Plaintiff and Counter-Defendant,
v.
Golden Foods, Inc., and Lewis R. Coulter, Appellees-Defendants and Counterclaimants.

         Appeal from the Delaware Circuit Court Trial Court Cause No. 18C05-1011-MI-39 The Honorable Thomas A. Cannon, Jr., Judge

          Attorneys for Appellant Michael J. Cork Jamie B. Dameron Bamberger, Foreman, Oswald & Hahn, LLP Indianapolis, Indiana

          Attorney for Appellee Robert C. Beasley Beasley Law Office Muncie, Indiana

          Pyle, Judge.

         Statement of the Case

         [¶1] Bayview Loan Servicing LLC ("Bayview") appeals the trial court's order entering judgment in favor of Golden Foods, Inc., ("Golden Foods") and Lewis Coulter ("Coulter") on Bayview's mortgage foreclosure claim and Golden Food's conversion counterclaim. Bayview argues that there is insufficient evidence that it intended: (1) for Golden Food's mortgage to merge with the tax deed that Bayview purchased from M. Jewell, LLC ("Jewell"); and (2) to exert unauthorized control over Golden Foods' property and monthly payments. Concluding that Bayview's arguments are requests to reweigh the evidence and that there is sufficient evidence that Bayview intended both the merger and the exercise of unauthorized control, we affirm the trial court.

         [¶2] We affirm.

         Issues

1. Whether the trial court's judgment in favor of Golden Foods on Bayview's mortgage foreclosure claim is contrary to law; and
2. Whether the trial court's judgment in favor of Golden Goods on its conversion counterclaim is clearly erroneous.

         Facts

         [¶3] Coulter is the president and sole shareholder of Golden Foods, which is an Indiana Corporation. In 1988, he executed an adjustable rate note with Industrial Trust and Savings Bank, ("the Note"). To secure payment for the $113, 800.00 Note, Golden Foods executed a mortgage against a commercial property on Madison Street ("Madison Street Property") in Muncie, which Colter operated as a restaurant. As further security for Golden Foods' indebtedness under the Note, Coulter and Golden Foods executed a mortgage against Coulter's home on Oliver Drive, ("Oliver Drive Mortgage").[1] Both mortgages were assigned to Bayview in 2005.[2]

         [¶4] By 2008, Golden Foods had reduced the balance of the Note to $42, 822.77. However, Golden Foods had become delinquent in the payment of real estate taxes on the Madison Street Property, which had been vacant and non-income producing since 2006. In April 2008, Golden Foods advised Bayview that it was unable to pay the $22, 000.000 in overdue taxes on the property. A Bayview representative recommended that Coulter: (1) submit a letter of hardship; and (2) request that Bayview advance him the money to pay the delinquent taxes and modify his mortgage payment to include the advance. Coulter explained that he did not know if he could afford a payment modification because the only money he had available to make his current mortgage payment was his monthly retirement income. Coulter also advised the Bayview representative that he was making repairs on the property in order to sell it. In December 2008, Coulter sent Bayview a hardship letter, which stated that Coulter's only income available to pay the mortgage loan was from Social Security.

         [¶5] Three months later, Bayview decided not to advance Coulter the funds to pay the delinquent taxes. Rather, Bayview decided that it would attempt to work out a tax capitalization agreement with Golden Foods. Meanwhile, because of the delinquent taxes, the Madison Street Property was offered at a Fall 2008 tax sale. M. Jewell, LLC ("Jewell") purchased the tax sale certificate for the Madison Street Property for $8, 001.00. Jewell sent notice of the sale to Golden Foods, which immediately notified Bayview of the situation. Jewell, however, did not send the required notice to Bayview. The redemption period was scheduled to expire on January 6, 2009.

         [¶6] Following the tax sale, Bayview completed an internal assessment to identify, value, and prioritize its options regarding the Madison Street Property, which included loan modification, foreclosure, or acquiring the property as real estate owned property ("REO property").[3] Bayview's internal valuation of the Madison Street Property was $140, 000.00, and Bayview had received a broker's price opinion that the property was in a "hot pocket area with potential." (BLS-412).[4] Bayview's assessment disclosed that the best option for Bayview was to capitalize the taxes and enter into a loan modification agreement with Golden Foods. The net present value of this scenario to Bayview was $84, 676.15. The second best alternative for Bayview was to acquire the property as an REO property. The net present value of this scenario to Bayview was $54, 504.12.

         [¶7] After considering the options, Bayview drafted and proposed a Loan Adjustment Agreement (LAA) to Golden Foods. Pursuant to the terms of the LAA, Golden Foods had to make a $1, 000.00 down payment and a $1, 218.55 monthly payment.[5] With the additional capitalization, Bayview agreed to redeem the Madison Street Property from the tax sale and include approximately $12, 900.00 to fund the new escrow account for future taxes and insurance. Coulter signed the LAA individually and on behalf of Golden Foods and returned it to Bayview with the $1, 000.00 fee on December 26, 2008. According to the LAA, which Bayview never signed, the first payment was due February 1, 2009.

         [¶8] In the meantime, although Bayview knew the redemption deadline for the Madison Street Property was January 6, 2009, Bayview failed to redeem the property. Therefore, Jewell immediately filed a petition for issuance of a tax deed. Realizing that if the tax sale was not set aside, Golden Foods would lose title, and Bayview would likely be liable for damages, Bayview hired Indiana counsel Jason Lueking ("Lueking") to defend its interests and intervene in the tax sale proceeding. Lueking immediately noticed that Jewell had failed to give the required notice to Bayview. Therefore, both Bayview and Golden Foods had the right to object to the issuance of the tax deed and to seek to set aside the tax sale. With these rights in mind, Lueking entered into negotiations with Jewell.

         [¶9] During the course of the negotiations, Lueking structured a deal to change Bayview's status from mortgage lienholder of the Madison Street Property to fee simple owner. Specifically, Lueking's settlement draft passed title of the Madison Street Property directly from Jewell to IB Property Holdings ("IB Property"), which is a subsidiary of Bayview that takes title to REO Properties acquired through either foreclosure or a deed in lieu of foreclosure.[6] When title is passed to IB Property, the property is sold, and any sale proceeds are kept by the lender. This differs from a foreclosure where any excess funds become the property of the borrower. Lueking did not advise Golden Foods about these negotiations with Jewell or suggest that Golden Foods obtain counsel.

         [¶10] In April 2009, Bayview expressed concerns to Lueking about taking title to the Madison Street Property in its name or in the name of IB Property. Bayview was considering an alternative structure, which would have given the tax title deed directly to Jewell. Jewell would then have quitclaimed the property to Golden Foods. This alternative would have returned Bayview and Golden Foods to the relationship contemplated by the LAA. Lueking revised the settlement documents to reflect this structure for the transaction and provided them to Lawrence Halpern, Bayview's vice president and in-house counsel ("Halpern"). However, these documents were never presented to Jewell.

         [¶11] Rather, in May 2009, Lueking sent a revised settlement agreement to Jewell. This agreement had the tax certificate and tax title deed going directly to Bayview. In an email, Lueking explained to Jewell's attorney that the "transaction [was] similar to a deed in lieu of foreclosure from [Bayview's] perspective." (Bayview Ex. 49). Halpern was copied on Lueking's email to Jewell's attorney. Lueking understood that a deed in lieu of foreclosure meant that Bayview was acquiring title to and equity in the property rather than initiating foreclosure proceedings. Both Lueking and Bayview Vice President of Commercial Servicing, Jo Ann Snyder ("Snyder"), [7] knew that a deed in lieu of foreclosure would extinguish Golden Foods' underlying debt unless the parties contemporaneously executed documentation to establish a residual financial obligation on the borrower. However, no such documentation was ever prepared or submitted to Golden Foods.

         [¶12] On June 4, 2009, before finalizing the agreement with Jewell, Bayview ran another internal assessment, which revealed that the Madison Street Property had a present value of $64, 933.74 to Bayview if Bayview took the property as an REO property. This value was based on Bayview's $140, 000 valuation of the Madison Street Property minus Bayview's invested funds, which included the $42, 822.77 mortgage principal at the time of the LAA and the $32, 469.75 paid to Jewell. Bayview Vice President Gyselle Piedra ("Piedra") authorized the settlement agreement, which Bayview signed that day.

         [¶13] That same day, Bayview employee, Juan Gonzalez ("Gonzalez"), told Coulter that Bayview was going to pay the delinquent taxes on the Madison Street Property and that Coulter could proceed with his plans to sell it. Four days later, Gonzalez told Coulter that the taxes had been paid but did not mention that Bayview had taken title to the property. Bayview also continued to send Golden Foods monthly LAA statements.

         [¶14] The very next day, the agreed order directing the tax deed to be issued was entered, and the tax deed was issued to Bayview on July 8, 2009. In August 2009, Gonzales issued an order to secure the unoccupied Madison Street Property, winterize the pipes, and change the locks. Bayview still did not advise Coulter that it had acquired title to the property. Golden Foods began making the $1, 218.55 per month LAA payments in November 2009. Golden Foods made ten payments on the LAA, all of which Bayview accepted even though Bayview had never signed the LAA.

         [¶15] Golden Foods did not learn that Bayview had acquired title to the Madison Street Property until Bayview filed a complaint to quiet title to the property in November 2010. In the complaint, Bayview stated that in July 2009, Bayview had obtained a tax deed to the Madison Street Property and had recorded it. Bayview alleged that its interest and title to this property was "superior to all persons who have an interest therein, " and that the purpose of the action was to "quiet title to the Real Estate as against the world." (App. 2).

         [¶16] Golden Foods filed an answer wherein it alleged that Bayview had represented to Golden Foods that Bayview had redeemed the Madison Street Property and that Bayview had accepted Golden Foods' $1, 218.55 monthly payments pursuant to the LAA. Golden Foods also alleged that Bayview had covertly acquired title to the Madison Street Property without notifying Golden Foods. Golden Foods raised the affirmative defenses of actual and constructive fraud, unjust enrichment, and estoppel. Golden Foods also filed a counterclaim alleging that Bayview breached its agreement to redeem the real estate; breached its duties as Golden Foods' agent; committed criminal conversion when it exerted unauthorized control over Golden Foods' funds and rights in the Madison Street Property; and fraudulently procured the tax deed.

         [¶17] In May 2012, Bayview filed a second amended complaint wherein it added Coulter as a defendant and added mortgage foreclosure of both Madison Street and Oliver Street Properties and related claims. The following month, Golden Foods responded as follows:

71. [Bayview] converted and exerted unauthorized control over the rights of Golden Foods in the Madison Street Real Estate by failing to redeem the Madison Street Real Estate and acquiring title for itself.
* * *
73. The Plaintiff has further converted and exercised unauthorized control over the monies paid to [Bayview] by Golden Foods since December 15, 2008.

(App. 103).

         [¶18] In March 2013, Bayview filed a motion for partial summary judgment on the grounds that there were no genuine issues as to any material fact with respect to Bayview's quiet title action and Golden Foods' criminal conversion action. The trial court granted Bayview's motion on the quiet title claim but denied the motion on Golden Foods' conversion claim.

         [¶19] In March 2015, the trial court held a bench trial on the remaining claims, which included Bayview's mortgage foreclosure claim and Golden Foods' conversion claim. Bayview did not call its two senior managers, Halpern and Piedra, to testify. After a trial that included the evidence set forth above, the trial court issued a detailed twenty-seven-page order with 168 findings of fact and conclusions, which provides in relevant part as follows:

Conversion of Madison Street Property
* * *
70. So to summarize the actions of Bayview in connection with the Tax Sale Proceedings:
a. Bayview had breached its undertaking to redeem the Madison Street Property by the redemption deadline, and was faced with the prospect of not only losing its lien, but incurring liability to Golden Foods;
b. Since there was a statutory defect in the tax sale proceedings, both Bayview and Golden Foods had the right to have it set aside;
c. Bayview told Coulter they would look into it, and waive late charges until the matter was resolved;
d. Lueking, as Bayview's counsel, then undertook settlement negotiations;
e. Lueking knew that Golden Foods was a party, and should have been served with documents filed in the Tax Sale Proceeding, but he failed to do so;
f. Although Lueking felt that the interests of Golden Foods and Bayview were initially aligned, he soon determined that they had become adverse when Bayview began contemplating taking title without notice to Golden Foods and Coulter; however, Lueking never advised Coulter or Golden Foods to engage separate counsel;
g. Once the financial terms were established for the settlement with M. Jewell, Lueking and Bayview knew that the settlement structure was ...

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