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Scheffer v. Centier Bank

Court of Appeals of Indiana

April 26, 2018

Bruce and Sybil Scheffer, Appellants-Plaintiffs,
Centier Bank, Appellee-Defendant.

          Appeal from the Lake Superior Court The Honorable Diane Kavadias Schneider, Judge Trial Court Cause No. 45D11-1212-PL-106

          ATTORNEYS FOR APPELLANT Edward P. Grimmer Daniel A. Gohdes Edward P. Grimmer, P.C. Crown Point, Indiana

          ATTORNEY FOR APPELLEE Paul B. Poracky Koransky, Bouwer and Poracky, P.C. Dyer, Indiana

          BROWN, JUDGE.

         [¶1] Bruce and Sybil Scheffer appeal the trial court's order granting the motion for judgment on the evidence of Centier Bank ("Centier"). The Scheffers raise several issues which we consolidate and restate as whether the trial court erred in granting Centier's motion for judgment on the evidence and request for attorney fees. Centier requests appellate attorney fees and costs. We affirm the trial court's ruling on Centier's motion for judgment on the evidence and for attorney fees and remand for a determination of reasonable appellate attorney fees.

         Facts and Procedural History

         [¶2] This is the second appeal in this case. In December 2012, the Scheffers filed a complaint against Centier alleging that they had obtained a loan from Centier's predecessor, The First Bank of Whiting, in 1985 for the purchase of residential real property located on Wexford Road in Valparaiso, Porter County, Indiana, and that the loan had been secured by a mortgage on the real property and by an assignment of insurance policies on the Scheffers' lives. The life insurance policy assignments, which were dated in November of 1985 and attached to the complaint, provide: "It is understood that this assignment is for the sole purpose of using the policy as collateral security for existing or future loans made by the assignee to the owner." Appellants' Appendix Volume 2 at 35-36. The Scheffers alleged "[t]hat mortgage loan was the only loan that Scheffer had personally with Centier at that time of November 1985, " "[t]he assignments were not given or received as collateral for any loan or debt obligation other than that mortgage loan on that residential property, " and they paid Centier "all remaining balances on that mortgage loan on or about December 17, 2010." Id. at 31. The Scheffers requested a judgment including an order that Centier execute releases of the assignments of the life insurance policies.

         [¶3] Centier filed an answer denying that the life insurance policy assignments related in any way to a mortgage loan on residential real estate. Centier also stated that it entered into a mortgage and note on Wexford Road property in 2002 and that the loan had been paid off in December 2010, and it denied that the loan dealt with any type of mortgage or loan arrangement dating back to 1985. Centier also answered that it had not released the assignments of the life insurance policies because the loan obligations for which they served as collateral had not been satisfied.

         [¶4] The Scheffers moved for summary judgment and designated their own affidavit which alleged that they had owned life insurance policies since 1985 and had assigned the policies as collateral on a promissory note and mortgage on their residential property in 1985. The Scheffers did not designate any documentary evidence of a 1985 residential mortgage or loan with Centier or its predecessor. Centier filed a response and cross-motion for summary judgment and designated the affidavit of Brian Miller, a vice-president for Centier, which stated that Centier had a business relationship with the Scheffers and Scheffer, Inc., dating before 1985; Centier did not have a residential mortgage loan on the Wexford Road property at that time; in 1985 the Scheffers as owners of Scheffer, Inc., assigned several life insurance policies to Centier as the assignee for the benefit of the commercial loan relationship between the parties; and that the first residential mortgage relationship between Centier and the Scheffers regarding Wexford Road occurred in 2002. The trial court granted Centier's cross-motion for summary judgment and denied the Scheffers' motion for summary judgment. The Scheffers appealed, and Centier cross-appealed.

         [¶5] On March 12, 2015, this Court issued a memorandum decision which reversed the trial court's entry of summary judgment. See Scheffer v. Centier Bank, No. 45A03-1410-PL-367 (Ind.Ct.App. Mar. 12, 2015). We acknowledged that the Scheffers designated no documentary evidence of a 1985 personal residential loan between the Scheffers and Centier or its predecessor that could have been connected with the life insurance policy assignments. We nevertheless noted that the Indiana Supreme Court had "recently clarified that even perfunctory, self-serving affidavits are enough to create a genuine issue of material fact for summary judgment purposes." No. 45A03-1410-PL-367, slip op. at 4 (citing Hughley v. State, 15 N.E.3d 1000, 1004 (Ind. 2014) (stating that "Indiana consciously errs on the side of letting marginal cases proceed to trial on the merits, rather than risk short-circuiting meritorious claims" and concluding that a designated affidavit was "sufficient, though minimally so, to raise a factual issue to be resolved at trial, and thus to defeat the State's summary-judgment motion"). We concluded that the Scheffers' affidavit, although lacking any documentary support, "was enough to create a genuine issue as to whether the assignments related to a 1985 mortgage on their personal residence rather than loans to their business, Scheffer, Inc., " and that consequently summary judgment was improper. Id. at 5. We remanded to the trial court for further proceedings. Id.

         [¶6] The trial court held a bench trial over several days in July and August of 2017 at which it admitted documentary evidence and testimony. The Scheffers introduced the life insurance policy assignments which indicated they were executed by them in November of 1985. The Scheffers also introduced a promissory note dated September 18, 2002, signed by them evidencing a loan from Centier in the original principal amount of $225, 000 and a satisfaction of mortgage dated December 20, 2010, executed by Centier stating that this mortgage had been fully paid and satisfied and was released.

         [¶7] The Scheffers then called their witnesses. Donald Kiszka testified that he worked for Centier Bank from 2008 until 2012 as a senior commercial workout or risk management officer. He indicated that, sometime around April of 2009, he began to work on Scheffer International loan accounts and that there were debts of Scheffer, Inc., that were owed to Centier. When asked if there was a line of credit, a commercial loan, and another commercial loan secured by a mortgage on the real estate of a commercial building, Kiszka replied that he believed he remembered that. He stated that he worked to maximize Centier's recovery from Scheffer, Inc., and that the recovery included an inventory and disposal of property in which Centier had a security interest. Kiszka testified that "key man insurance" is insurance which a "bank might typically take for collateral in order [to] recover money if the principal or key man in the business was no longer available for some reason, death, whatever." Transcript Volume 2 at 25. When asked if key man insurance is similar to life insurance assignments, Kiszka replied affirmatively. He stated that it is typical for banks to use life insurance assignments as collateral security to minimize the risk of default in the event of death of a key person. Kiszka indicated that the assignments in this case, by their language, secured any existing or future loans, and that, when a bank receives an assignment of a life insurance policy, the bank is the intended recipient of the benefit of the policy.

         [¶8] Thomas Wilk testified that he joined Centier in 1994 and was a vice president and chief lending officer, that he was a commercial account officer for Scheffer, Inc., and that in 2009 the loans to Scheffer, Inc., went into distress. He indicated that the life insurance assignments do not mention Scheffer, Inc., or the words "commercial loans." Id. at 67. Wilk testified "[w]e regularly take assignments of life insurance to support business that - especially when you have individuals that are key people in running the company. So in the event that something were to happen to them, you would have the benefit of the life insurance policy." Id. at 53-54. When asked, "[i]f the only loans starting in 1983 through 1985 are commercial loans, no residential loans, can we assume that the language from the assignment that says 'existing loans' means commercial loans, " Wilk responded "[y]es." Id. at 59. Wilk indicated there was no residential mortgage loan from Centier or First Bank of Whiting in November of 1985 for the Wexford Road property. He further testified that the commercial loans were also secured by business assets, equipment, inventory, accounts receivable, intellectual property, general intangibles, and commercial real estate.

         [¶9] Upon taking the stand, Bruce Scheffer indicated initially that the assignments "reference our residence in Valparaiso." Id. at 77. When asked the name of the first bank with which he did business "when [he] started in '78, '80, " Bruce replied "American Trust and Savings of Whiting." Id. He stated that he stayed with American Trust and Savings of Whiting for the first few years and that he purchased the Wexford Road property in 1985. When asked if he had transitioned his banking relationship from American Trust and Savings of Whiting to First Bank of Whiting, he replied that he had a relationship with both banks. Bruce stated that he obtained a loan from Centier in 2002 which he used to refinance his Wexford Road house and that a satisfaction of mortgage instrument dated in 2002 indicated that a previous mortgage dated September 22, 1995, was satisfied. When asked where he obtained the financing for his house in 1985, he replied it was from First Bank of Whiting. He testified that he was asked to give the life insurance policies as extra collateral with the understanding the policies would be released when the house was paid off and that the house was paid off in 2010. The Scheffers also introduced evidence that they received notifications that the life insurance policies had been surrendered and distributed.[1]

         [¶10] Centier's counsel then cross-examined Bruce who indicated that he and his wife were the sole owners and shareholders of Scheffer, Inc. He stated that he did not have any documents to support the claim that he entered into a residential mortgage with First Bank of Whiting in 1985. Centier's counsel asked Bruce if he had "ever done any banking transactions with Indiana Federal Savings and Loan Association out of Valparaiso, Indiana, " and he replied "I may have." Id. at 126-127. When asked "[a]nd as you sit here . . . it's still your testimony, after all this time, that the financing of the house, which price you don't know, was done through First Bank of Whiting; is that right, " Bruce replied "I don't recall." Id. at 127.

         [¶11] Centier's counsel then introduced exhibits containing a warranty deed, a mortgage, and a satisfaction of mortgage, and the court admitted the exhibits. The warranty deed, dated July 22, 1985, evidences the conveyance of the Wexford Road property to the Scheffers, and a file-stamp on the deed indicates it was recorded with the Porter County Recorder on July 25, 1985. The mortgage was signed by the Scheffers and granted a security interest in the Wexford Road property to Indiana Federal Savings and Loan Association as the mortgagee to secure repayment of a debt of $175, 000, and a file-stamp on the mortgage indicates it was recorded with the Porter County Recorder on July 25, 1985. Finally, the satisfaction of mortgage, dated January 19, 1987, states that the debt secured by the mortgage executed by the Scheffers in favor of Indiana Federal Savings and Loan Association in July of 1985 was paid and the mortgage was released.

         [¶12] Centier's counsel showed Bruce the warranty deed and mortgage in favor of Indiana Federal Savings and Loan Association recorded in July of 1985 and the following exchange occurred:

Q. Now, go back to the first page, if you would, just to make sure we're talking about the right house. The house that's at issue in your verified complaint, what's the address?
A. 504 Wexford.
Q. And this warranty deed, which was issued based upon a promissory note and mortgage from Indiana Federal Savings and Loan Association, in July of 1985 is what house?
A. Same.
Q. The same house. So the information in your verified complaint, Mr. Scheffer, that's ...

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