NAJAM, Judge.
JPMCC 2006-CIBC14 Eads Parkway, LLC ("JPMCC") appeals the trial court's partial denial of its motion for summary judgment and partial grant of summary judgment in favor of DBL Axel, LLC ("DBL"); David Richman; Lynette Gridley, as Trustee of the Hartunian Family Trust; Black Diamond Realty, LLC ("Black Diamond"); Gary Hartunian; and Tyson Korkmaz.
We affirm in part, reverse in part, and remand for further proceedings.
DBL is a single-asset company. In 2005, Richman held a ten-percent membership interest in DBL and the Hartunian Family Trust held a ninety-percent membership interest. We have discussed the relationship between DBL and JPMCC as follows:
DBL Axel, LLC v. LaSalle Bank Nat'l Ass'n, 946 N.E.2d 1173, 1174 (Ind.Ct.App. 2011). As collateral, Richman and the Hartunian Family Trust signed a limited guaranty of the Mortgage and other loan documents (and are hereafter referred to collectively as "the Guarantors").
During the course of DBL's declaratory judgment action, the court appointed a receiver to take possession of and to manage the Property. JPMCC learned of the $1,725,600 nuisance award DBL had received from the City from the receiver.
On June 1, 2009, JPMCC filed its Answer, Counterclaim against DBL, and Third-Party Complaint against the Guarantors, which it amended on September 24, 2010. JPMCC alleged the following ten counts in its amended counterclaim and third-party complaint:
Appellees' App. at 57-74.
On January 31, 2011, the parties filed cross-motions for summary judgment. On May 12, the trial court held a hearing on the parties' numerous pending motions, including the summary judgment requests. On December 16, the trial court entered the following final judgment: judgment for JPMCC and against DBL on JPMCC's Counts I, VIII, and IX (the "Breach of Contract Claims"); judgment for DBL and against JPMCC on JPMCC's Counts II, III, IV, V, VI, and X (the "Tort Claims"); judgment for the Guarantors and against JPMCC on JPMCC's breach of guaranty claims (the "Breach of Guaranty Claims"); and judgment against JPMCC on JPMCC's request for summary judgment on DBL's complaint for declaratory judgment. This appeal ensued.
JPMCC appeals the trial court's denial of its motion for summary judgment on DBL's declaratory judgment action, on the Tort Claims JPMCC asserted against DBL, and on the Breach of Guaranty Claims it asserted against the Guarantors.
Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267, 1269-70 (Ind.2009) (citations omitted). The party appealing from a summary judgment decision has the burden of persuading this court that the grant or denial of summary judgment was erroneous. Knoebel v. Clark County Superior Court No. 1, 901 N.E.2d 529,
Further, much of this appeal is based on the interpretation of written contracts. Our standard of review for interpreting the parties' written contracts is de novo. Gerstbauer v. Styers, 898 N.E.2d 369, 379 (Ind.Ct.App.2008). The goal of contract interpretation is to ascertain and enforce the parties' intent as manifested in their contracts. See Gregg v. Cooper, 812 N.E.2d 210, 215 (Ind.Ct.App.2004), trans. denied. To that end, we construe a contract as a whole and consider all of the provisions of the contract, not just individual words, phrases, or paragraphs. See id. An ambiguity exists where a provision is susceptible to more than one interpretation and reasonable persons would differ as to its meaning. Id. However, when a contract is clear and unambiguous, the language must be given its plain meaning. See, e.g., Tippecanoe Valley Sch. Corp. v. Landis, 698 N.E.2d 1218, 1221 (Ind.Ct. App.1998), trans. denied.
JPMCC first challenges the trial court's denial of its request for summary judgment on DBL's complaint for declaratory judgment. In its complaint, DBL requested that the trial court interpret the parties' loan documents to determine the amount of the $224,600 condemnation award that DBL had to remit to JPMCC and how any such amount would be applied to the loan.
This issue is controlled by the following paragraphs of the Mortgage agreement:
Appellant's App. at 308-09, 311-12, 320 (emphases added; original emphasis removed). According to JPMCC, those provisions, and especially Section 3.4, are an unambiguous conveyance of any condemnation award received by DBL to JPMCC.
DBL responds by noting first that Section 3.4 requires JPMCC to act as DBL's attorney-in-fact in any condemnation proceedings
This argument is not clear. Indeed, it reads as if DBL has confused an attorney-in-fact with an attorney-at-law. An attorney-in-fact is simply "a legal agent," whereas an attorney-at-law is a lawyer. Black's Law Dictionary 124 (7th ed. 1999). The "attorney-in-fact" language of Section 3.4 merely makes JPMCC the agent in charge of receiving any condemnation proceeds otherwise payable to DBL and gives JPMCC the authority to approve any condemnation settlement award. That language does not impose a duty on JPMCC to represent DBL in any proceedings involving the Property, and no reasonable person would read Section 3.4 to create such an obligation.
Neither do we agree with DBL's second argument, that JPMCC is only entitled to receive the condemnation proceeds net of DBL's expenses. Section 3.4 describes the lender-borrower relationship in the event of a government taking. It does not describe the borrower-government relationship. Pursuant to the lender-borrower relationship, during any condemnation proceedings the borrower must continue to make timely payments on the debt. The lender is entitled to any and all condemnation awards, and the debt may be reduced or discharged upon the lender's receipt of the award.
However, before the lender applies the condemnation award to the debt, the lender is entitled to first deduct its "expenses of collection." Appellant's App. at 320. In the full context of Section 3.4, the "expenses of collection" language unambiguously applies only when the lender incurs expenses of collection against the borrower due to the borrower's failure to timely remit the condemnation award to the lender. It does not apply to the borrower's expenses of defending itself in the underlying condemnation proceedings.
Thus, we agree with JPMCC that the plain language of Section 3.4 does not require JPMCC to represent DBL in any legal proceedings nor does that language entitle DBL to any reimbursement for DBL's expenses in defending the Property. Further, insofar as DBL asserts that the language of Section 3.4 or any other part of the Mortgage entitles DBL to control how JPMCC will distribute the condemnation award, DBL is incorrect. Sections 1.1(f), 2.1, and 3.4 expressly and unambiguously authorize JPMCC to use its own discretion in applying the award to the loan debt. Id. at 308-09, 311-12, 320. We note, however, that DBL would be entitled to an explanation, after the fact, showing how JPMCC applied the award.
Having determined that the plain language of the Mortgage favors JPMCC on each of DBL's assertions in its declaratory judgment complaint, we next turn to DBL's alternative argument that, notwithstanding that plain language, the common law requires JPMCC to reimburse DBL
That provision of the Restatement does not apply here.
In sum, JPMCC met its burden of showing that it was entitled to summary judgment on DBL's complaint for declaratory judgment, and DBL has made no showing that a genuine issue of material fact precludes such judgment. Thus, the trial court erred when it denied JPMCC's motion for summary judgment on DBL's complaint for declaratory judgment. We reverse the trial court's judgment and direct the court to enter final judgment for JPMCC on DBL's complaint.
JPMCC next argues that the trial court erred when it denied JPMCC's motion for summary judgment on the Tort Claims and instead granted summary judgment on those claims to DBL. In support of the trial court's judgment, DBL contends that the Tort Claims cannot stand because they are based on DBL's contractual relationship with JPMCC, not on facts independent
In addition to its Breach of Contract Claims, JPMCC alleged that DBL's failure to timely remit the condemnation and nuisance awards to JPMCC constituted theft, conversion, constructive fraud, actual fraud, fraudulent conveyance, and criminal mischief. Each of these allegations is based on JPMCC's interpretation of the Mortgage, in which JPMCC is entitled to those monies. The trial court agreed with JPMCC's interpretation of the Mortgage when it entered summary judgment in favor of JPMCC on the Breach of Contract Claims. DBL does not appeal that judgment.
But a party may not restyle a breach-of-contract claim as a tort claim simply to obtain additional damages. French-Tex Cleaners, Inc. v. Cafaro Co., 893 N.E.2d 1156, 1167 (Ind.Ct.App.2008). Where the source of a party's duty to another arises from a contract, "tort law should not interfere." Greg Allen Const. Co. v. Estelle, 798 N.E.2d 171, 175 (Ind. 2003). "[T]he question is not whether [the plaintiffs] have, as we assume, adequately pled their tort claims, but, rather, whether [the defendant] is alleged to have done anything that constituted an independent tort if there were no contract." Koehlinger v. State Lottery Comm'n of Ind., 933 N.E.2d 534, 542 (Ind.Ct.App.2010) (quotation omitted), trans. denied. Further, "the Indiana legislature did not intend to criminalize bona fide contract disputes." French-Tex Cleaners, 893 N.E.2d at 1168.
Nonetheless, "[t]o the extent that a plaintiff's interests have been invaded beyond mere failure to fulfill contractual obligations, a tort remedy should be available." Greg Allen Const. Co., 798 N.E.2d at 173. This court has applied this rule in various contexts. For example, to show both a breach of contract and fraud, "a plaintiff ... must prove that the breaching party committed the separate and independent tort of fraud and that such fraud resulted in injury distinct from that resulting from the breach of contract." Dean V. Kruse Found., Inc. v. Gates, 932 N.E.2d 763, 768 (Ind.Ct.App. 2010), trans. denied. And to prevail on a claim of conversion, "the plaintiff must show that the defendant was aware that there was a high probability that its control over the property was unauthorized." Id. at 769.
Here, to avoid the general rule that its Tort Claims are prohibited, JPMCC first asserts that DBL's refusal to remit the condemnation and nuisance awards to JPMCC was such a blatant violation of the parties' contractual relationship that the refusal rose to the level of a tort. Regarding the condemnation award, upon receipt of the award from the City DBL filed its declaratory judgment action and deposited the award with the trial court.
Those facts do not demonstrate a triable issue on DBL's mens rea for any of the alleged torts. DBL's surrender of the condemnation award and the third installment of the nuisance award to a neutral third party — the trial court — in the course of its declaratory judgment action and in response to JPMCC's counterclaim demonstrates only that the right to those funds was in dispute. See, e.g., Coffel v. Perry, 452 N.E.2d 1066, 1069 (Ind.Ct.App.1983); see also French-Tex Cleaners, 893 N.E.2d at 1168 ("the Indiana legislature did not intend to criminalize bona fide contract disputes."). It does not demonstrate the degree of culpability necessary to establish any of the Tort Claims.
Neither does DBL's erroneous distribution of the first two installments of the nuisance award to entities other than JPMCC demonstrate that DBL committed a tort. Again, DBL asserted that it disbursed the first two installments of the nuisance award to entities other than JPMCC because it did not believe that the nuisance award was a "condemnation" payment owed to JPMCC pursuant to Section 1.1(f) and Section 3.4. See DBL's Br. at 13-26. DBL's belief was, as a matter of law, incorrect.
On April 20, 2010, our supreme court held that inverse condemnation is the "only remedy" for a government's damage to the plaintiff's property, in the absence of formal proceedings initiated by the government, even though the action may be styled as a nuisance or some other property-related tort. Murray v. City of Lawrenceburg, 925 N.E.2d 728, 732-33 (Ind.2010). And even though Murray was announced by our supreme court five years after DBL and JPMCC entered into the Mortgage, "[i]n general, pronouncements of common law made in rendering judicial opinions of civil cases have retroactive effect unless such pronouncements impair contracts made or vested rights acquired in reliance on an earlier decision." Sink & Edwards, Inc. v. Huber, Hunt & Nichols, Inc., 458 N.E.2d 291, 295 (Ind.Ct. App.1984). Murray did not overturn any earlier decisions, expressly or impliedly. Moreover, neither DBL nor the Guarantors make any suggestion that applying Murray retroactively, in accordance with the general rule, would impair their contracts or vested rights. Thus, as a matter of Indiana law, DBL's nuisance action against the City was an inverse condemnation action and, as such, JPMCC was entitled to the proceeds of that action under the plain language of the Mortgage.
But this discussion simply demonstrates that DBL breached its contract with JPMCC when it disbursed the first two installments of the nuisance award to entities other than JPMCC. More is required for JPMCC to demonstrate a triable issue on its Tort Claims. While DBL's interpretation of the contract was incorrect as a matter of law, that interpretation at least had an arguable basis before Murray. And it is undisputed that the erroneous distributions each occurred before our supreme court's decision in Murray. Accordingly, JPMCC cannot demonstrate that DBL had the requisite mens rea to support any of the Tort Claims.
The essence of JPMCC's dispute on the Tort Claims is that DBL breached its contract. "Indiana does not recognize a claim for tortious breach of contract." Comfax Corp. v. N. Am. Van Lines, Inc., 587 N.E.2d 118, 124 (Ind.Ct.App.1992). "It is axiomatic that tort obligations arise, not from an agreement between the parties, but by operation of law." Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 518 (Ind. 1993). Indeed, there is no dispute that the Mortgage was the source of DBL's duties
Nonetheless, JPMCC also contends that the Tort Claims are justified because, "[n]otwithstanding the Loan Documents, DBL owed an independent duty to disclose the existence of the [nuisance award] as a result of the Receivership Order." Appellant's Br. at 33. This argument does not justify the Tort Claims. The trial court ordered a receiver for the Property because of JPMCC's contractual rights. Absent the parties' contractual relationship, DBL had no other duties to JPMCC.
Finally, the penalties that distinguish the Tort Claims from the Breach of Contract Claims were not assignable. As our supreme court has held:
Midtown Chiropractic v. Ill. Farmers Ins. Co., 847 N.E.2d 942, 945 (Ind.2006) (citation omitted). Likewise, "[t]he general rule is that the right to collect a penalty is a personal right that is not assignable." Hart Conversions, Inc. v. Pyramid Seating Co., 658 N.E.2d 129, 131 (Ind.Ct.App. 1995). And Indiana Code Section 34-24-3-1, which describes relief available on a tort claim (including treble damages, costs, and fees), "is a punitive statute intended to deter the wrongdoer and others from engaging in similar future conduct. The right is personal in nature and cannot be assigned." Id. (citation omitted). Thus, even if JPMCC could maintain any of its Tort Claims, a judgment in JPMCC's favor on those claims would be limited to its actual loss, not a multiple, which is the same as the judgment it received against DBL
In sum, JPMCC's designated evidence fails to establish a genuine question of material fact on whether the Tort Claims were independent of the Breach of Contract Claims. They were not. But, even if they were, JPMCC would have no greater remedy against DBL than that which it has already received. Accordingly, the trial court did not err when it granted summary judgment to DBL and against JMPCC on the Tort Claims.
Finally, JPMCC appeals the trial court's grant of summary judgment in favor of the Guarantors. A guarantor is "a person who is liable for the payment of a debt or performance of a duty to another person." Irish v. Woods, 864 N.E.2d 1117, 1121 (Ind.Ct.App.2007) (quotation omitted). As such, a guarantor's liability "is only relevant in the event of a default by the accommodated party." Id. As discussed above, the trial court granted summary judgment in favor of JPMCC on its Breach of Contract Claims against DBL, the accommodated party. Nonetheless, the trial court also granted summary judgment in favor of the Guarantors on JPMCC's Breach of Guaranty Claims.
Appellant's App. at 460-61.
The undisputed facts show that DBL breached its contract with JPMCC when DBL did not immediately surrender to JPMCC either the condemnation award or the nuisance award. However, as discussed in Issue Two, supra, DBL's surrender of the condemnation award and the third installment of the nuisance award to a neutral third party in the course of these legal proceedings was not a misapplication of those awards. See, e.g., Coffel, 452 N.E.2d at 1069. As such, JPMCC cannot show a genuine issue of material fact as to whether the Guarantors are liable for JPMCC's losses arising out of or in connection with those amounts.
DBL's use of the first two installments of the nuisance award, however, is another matter. Rather than surrendering the first two installments of that award to JPMCC or a neutral third party in the course of a bona fide contract dispute, DBL disbursed those installment payments to its members and other creditors without JPMCC's knowledge or authorization. As discussed in Issue Two, that action was a breach of its contract with JPMCC, although it did not rise to the level of a tort. Thus, DBL misapplied the first two installments of the nuisance award, which, again, is a condemnation award as a matter of law. Pursuant to the plain terms of the guaranty, the Guarantors are liable to JPMCC for its losses arising out of DBL's misapplication of those amounts. See Appellant's App. at 460-61.
Taking JPMCC's arguments on their face would render Section 1.2(b) of the guaranty meaningless. That is, JPMCC's arguments, in effect, are that the violation of Section 1.2(b) establishes a condition that makes the Guarantors liable for the balance of the debt, rather than just JPMCC's losses arising from or in connection with the Section 1.2(b) violation. But that is not what the full recourse provision says. Rather, that provision states that, "[i]n addition" to Section 1.2(b), the Guarantors might further be liable for the balance of the debt if other "event[s]" occur. See id. at 461.
It is our task to interpret a contract "so as not to render any words, phrases, or terms ineffective or meaningless." Bailey v. Mann, 895 N.E.2d 1215, 1217 (Ind.2008). Accordingly, we conclude that a violation of Section 1.2(b), without more, does not satisfy the conditions precedent required to trigger the full recourse obligation and make the Guarantors liable for the balance of the debt. Rather, pursuant to the plain language of the guaranty, JPMCC must show factors "[i]n addition" to a Section 1.2(b) violation. See Appellant's App. at 461. JPMCC has not done so. Thus, the Guarantors are not liable under the guaranty for the balance of the debt.
In sum, we hold that the trial court erred when it denied JPMCC's motion for summary judgment on DBL's complaint for declaratory judgment. We also hold that the trial court erred in part when it denied JPMCC's motion for summary
Affirmed in part, reversed in part, and remanded for further proceedings.
RILEY, J., and BROWN, J., concur.
