James R. Stroud, Heartland Homestead, LLC, and Heartland Land Trust, Appellants-Defendants,
v.
Thomas J. Stone, Appellee-Plaintiff.
Appeal
from the Dearborn Superior Court Cause No. 15D02-1602-CC-53
The Honorable James D. Humphrey, Special Judge
Attorney for Appellant Leanna Weissmann Lawrenceburg, Indiana
Attorney for Appellee Andrew S. Williams Hunt Suedhoff
Kalamaros, LLP Fort Wayne, Indiana
ROBB,
JUDGE.
Case
Summary and Issues
[¶1]
James Ryan Stroud, Heartland Homestead LLC, and the Heartland
Land Trust (collectively "Stroud," where
appropriate) appeal the trial court's judgment in favor
of Thomas Stone granting him principal and interest due on a
promissory note and further awarding him $25, 000 in earnest
money due as a result of a failed contract to purchase land.
Stroud raises three issues for our review, of which we find
the following dispositive: 1) whether Stone's action on
the promissory note was barred by the statute of limitations;
and 2) whether judgment was entered against the proper
parties on the claim for earnest money. Concluding the claim
on the promissory note was time-barred and that accordingly,
the judgment must be amended to reflect the proper party
owing the earnest money, we reverse in part and remand.
Facts
and Procedural History
[¶2]
On April 29, 2003, Stone executed a deed to Heartland
Homestead LLC conveying a twenty-two acre mobile home park
and a non-contiguous twenty acres of unimproved agricultural
farmland in Dearborn County, Indiana. At that time, Stroud
and Steven Verkley were 50/50 partners in Heartland Homestead
LLC. A portion of the purchase price was financed by Fifth
Third Bank which took a first mortgage on the property. Stone
received cash at closing and a Promissory Note for $100, 000,
signed by Stroud and Verkley in their individual capacities
and as members of Heartland Homestead LLC. The Promissory
Note was secured by an Open-End Mortgage, Assignment of
Leases and Rents and Security Agreement and Stone was a
junior lienholder.
[¶3]
The Promissory Note required installment payments of $833.33
per month beginning June 1, 2003 until the amount was paid in
full. The maturity date was July 1, 2013. The terms of the
Promissory Note provided that, upon default and thirty days
after written notice from Stone, "the entire principal
balance and all accrued interest shall at once become due and
payable without additional notice or demand at the option of
[Stone]." Exhibit Volume I at 34. Stone received
payments on the Promissory Note through May 2008 totaling
$50, 000. After that, he did not receive any more payments.
[¶4]
The mobile home park was less profitable than anticipated and
Heartland Homestead LLC became unable to pay the Fifth Third
mortgage. On October 31, 2008, Fifth Third Bank filed for
foreclosure.[1] With the property due to be sold at a
foreclosure sale, Stroud hatched a plan. Stroud first
approached Stone and asked if he would be willing to buy the
entire project, but Stone declined. Stroud then arranged for
a trust he would set up to buy the property from Fifth Third
for $250, 000 and obtained financing from another
bank.[2] Despite turning down the opportunity to
buy back the entire property, Stone testified he and Stroud
made the following agreement with respect to the farmland:
"Look," I said, "Here's - you've paid
me $50, 000 on that note." And I said, "Why
don't I just give you back that $50, 000, even though you
want to give the land for what you're trying to do."
And [Stroud] was thrilled. . . . He said, "That'll
be great. I can put that down on my $550, 000 purchase."
. . . And I said, "Put it together." . . . It
seemed pretty straightforward. I would release my - release
the mortgage and provide a check for $50, 000 in exchange for
free and clear title to the 20 acres. It was as simple as
that.
Transcript,
Volume 1 at 35. Stroud described the deal similarly:
. . . I settled on the final buyer being myself, my wife, and
my brother under the Heartland Land Trust. And Mr. Stone, as
his part was to purchase the 20 acres and use the full
satisfaction and release of mortgage for his earnest money,
meaning that he was going to give full satisfaction for the
$50, 000 that I owed and that would be then used as his
earnest money. And that was our agreement.
* * *
[W]hat Tom and I agreed to was if our deal did not go
through, through no fault of [Stone's] own, that I would
pay him $25, 000. That was the value of the promissory note
and the release of mortgage at that point. That's what we
put the value as.
Id. at 202, 205-06.
[¶5]
On April 7, 2009, Stone signed a contract to purchase the
farmland directed to Dryden Properties, Inc. and executed a
release of the 2003 mortgage on both tracts of land. Also on
April 7, Stone's attorney forwarded a copy of the
contract to the attorney for the bank providing financing to
Stroud. The letter indicates a photocopy of the signed
release would be provided immediately and the original
release and check for $50, 000 would be provided at closing.
"Once title is vested in [Stroud], [Stone] will receive
a Deed for the real estate and a Policy of Title Insurance
insuring that [Stone] holds marketable title free and clear
of all liens and encumbrances." Exhibit Vol. I at 73.
Due to a "convoluted situation" on Stroud's
end, Tr., Vol. 1 at 40, Stone had to execute a replacement
contract to purchase the farmland on May 14, directed to
Merritt Alcorn, trustee of the Heartland Land
Trust.[3] Stone's "earnest money" for
the purchase was the release of the 2003 mortgage on both
properties, valued at $25, 000. The contract to purchase
stated, "This Release will only be recorded after the
successful closing between Heartland Homestead, LLC and
Merritt Alcorn, Trustee occurs. In the event that this
contract does not close through no fault of [Stone], [t]he
Earnest Money . . . shall be valued at $25, 000 and returned
to [Stone] within ten days of the release of this
contract[.]" Exhibit Vol. I at 76-77. The contract was
due to close "on June 30, 2009 (or at such time as
mutually agreeable in writing) to the parties hereto[.]"
Id. at 78. The date on the release was changed to
May 14 to reflect the new contract date.
[¶6]
The mobile home park was serviced by the Saint Leon Sewer
District and a sewer lien in the amount of $17, 564.67 was
recorded against the property on April 4, 2007. The Trust
closed its deal with Fifth Third on May 20 at which time the
existing sewer liens were paid in full and the Trust became
the owner of both properties. For some reason, however, the
sewer liens were not released. Stone's release of the
2003 mortgage was delivered at the May 20 closing and was
recorded in Dearborn County on June 12, 2009. The Stone/Trust
deal did not close on June 30 due to title searches
continuing to show the sewer lien and the corresponding
inability of the Trust to deliver free and clear title to
Stone. Communications between Stone's attorney and Alcorn
...