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Brooks v. Bank of Geneva

Court of Appeals of Indiana

March 21, 2018

R. Kinsey Brooks, Susan K. Brooks, Appellants-Defendants,
v.
Bank of Geneva, Appellee-Plaintiff.

          Appeal from the Adams Circuit Court Trial Court Cause No. 01C01-1605-MF-16 The Honorable Chad E. Kukelhan, Judge

          Attorney for Appellant Andrew L. Teel Fort Wayne, Indiana

          Attorneys for Appellee James R. Williams Christopher L. Bills Matthew L. Kelsey DEFUR VORAN, LLP Muncie, Indiana

          Barnes, Judge.

         Case Summary

         [¶1] R. Kinsey and Susan Brooks appeal the trial court's grant of summary judgment in favor of Bank of Geneva ("the Bank") and the denial of their motion for summary judgment. We reverse and remand.

         Issue

         [¶2] The Brookses raise three issues. We need address only one dispositive issue: whether the Brookses were released from a mortgage obligation to the Bank when the terms of the third-party debt the mortgage secured were altered.

         Facts

         [¶3] On August 15, 2013, dairy farmers Matthew and Ginger Summersett executed a promissory note to borrow $398, 000.00 from the Bank. Ginger is the Brookses' daughter, and Matthew is their son-in-law. On the same date, the Brookses executed a mortgage in favor of the Bank for farmland they owned in Berne, in order to partially secure the Summersetts' debt to the Bank. The Summersetts also secured the debt with a mortgage on four parcels of their own property. The Brookses' mortgage specified that they were not personally liable for the Summersetts' debt.

         [¶4] Also on August 15, 2013, the Bank issued two other loans to the Summersetts: one for $994, 500.00 and one for $307, 500.00. On October 31, 2013, the Bank loaned another $50, 000.00 to the Summersetts; it was secured by a mortgage on one of the four pieces of property the Summersetts mortgaged for the $398, 000.00 loan. On October 31, 2014, the Bank loaned the Summersetts another $48, 976.22; again, it was secured by a mortgage on one of the properties mortgaged for the $398, 000.00 loan. The Brookses were not aware of these additional loans to the Summersetts.

         [¶5] On October 8, 2015, the Bank agreed to change the terms of the $398, 000.00 promissory note to provide for semi-annual payments rather than monthly payments by the Summersetts. The monthly payment amount had been $2, 173.80, while the new semi-annual payment was to be $13, 102.28. The first modified payment was due on March 15, 2016. However, the Summersetts never made that payment or any subsequent payment on the loan. The Brookses were not notified of this modification to the promissory note. According to the Bank, this modification was made "in order to address and accommodate the Summersetts [sic] cash flow issues regarding their ceasing of dairy operations . . . ." App. Vol. III p. 98.

         [¶6] In late 2015 and early 2016, the Summersetts began selling off the real estate they had mortgaged, as well as items of farm equipment and cattle. The total of these sales greatly exceeded $398, 000.00. However, the proceeds of the sales were applied only to the other four loans the Bank had made to the Summersetts, all of which were eventually deemed paid in full.

         [¶7] On May 19, 2016, the Bank filed a complaint against the Summersetts and Brookses for breach of note and foreclosure of mortgage with respect to the $398, 000.00 loan; the complaint was amended on June 21, 2016. It alleged a current balance due on the note of $407, 932.18. The complaint only sought foreclosure of the Brookses' mortgage, however.[1] In fact, on June 3, 2016, the Bank executed and duly filed with the Adams County Recorder the following "SATISFACTION OF MORTGAGE":

This Certifies that a mortgage, executed by Matthew K. Summersett and Ginger A. Summersett, to Bank of Geneva, Geneva, Adams County, an Indiana Corporation on the 15th day of August, 2013, calling for $398, 000.00, and recorded in Instrument #2013003704, Adams County, ...

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