2513-2515 S. Holt Rd. Holdings, LLC v. Holt Rd., LLC

• Decision Date: 08 July 2015
• Docket Number: No. 49A02–1407–MF–525.,49A02–1407–MF–525.
• Citation: 40 N.E.3d 859
• Parties: 2513–2515 SOUTH HOLT ROAD HOLDINGS, LLC, Appellant–Plaintiff, v. HOLT ROAD, LLC, Res Holt Road, LLC, MSP Holt Road, LLC, K3D Holt Road, LLC, and Roll & Hold Warehousing & Distribution Corp., Appellees–Defendants.
• Court: Indiana Appellate Court

40 N.E.3d 859

2513–2515 SOUTH HOLT ROAD HOLDINGS, LLC, Appellant–Plaintiff

v.HOLT ROAD, LLC, Res Holt Road, LLC, MSP Holt Road, LLC, K3D Holt Road, LLC, and Roll & Hold Warehousing & Distribution Corp., Appellees–Defendants.

No. 49A02–1407–MF–525.

Court of Appeals of Indiana.

July 8, 2015.

Jeffrey C. Gerish, Plunkett Cooney, Bloomfield Hills, MI, Pamela A. Paige, J. Dustin Smith, Plunkett Cooney, Indianapolis, IN, Attorneys for Appellant.

Michael J. Lewinski, Ice Miller LLP, Indianapolis, IN, Attorney for Appellees.

Opinion

BROWN, Judge.

[1] 2513–2515 South Holt Road Holdings, LLC (“Lender”) appeals the trial court's Final Judgment Regarding Tax Refunds in favor of Holt Road, LLC, Res Holt Road, LLC, MSP Holt Road, LLC, K3D Holt Road, LLC, and Roll & Hold Warehousing & Distribution Corp. (collectively, “Borrowers”). Lender raises one issue, which we revise and restate as whether the court erred in ruling that the Lender is not entitled to recover certain property tax refunds received by Borrowers. We reverse and remand.¹

Facts and Procedural History

[2] Borrowers were the record owners of real property located in Marion County commonly known as 2513–2515 South Holt Road, Indianapolis, Indiana (the “Real Estate”). On December 21, 2006, Borrowers executed and delivered to Wachovia Bank, National Association (“Wachovia”) a certain Promissory Note in the original principal amount of $5,094,240, which was amended by an Amendment to Promissory Note dated May 25, 2010 (collectively, the “Note”). In connection with the execution of the Note, Borrowers executed a Mortgage, Security Agreement and Fixture Filing dated December 21, 2006, and recorded January 3, 2007, and an Amendment to Mortgage, Security Agreement and Fixture Filing dated May 25, 2010, and recorded June 1, 2010 (collectively, the “Mortgage”). In addition, other documents related to the loan were executed including: (A) an Assignment of Leases and Rents dated December 21, 2006, and recorded January 3, 2007; (B) a Lockbox Account and Security Agreement dated December 10, 2009; (C) a Cash Management Agreement dated December 10, 2009, which was amended by an Amendment to Cash Management Agreement dated May 25, 2010; and (D) an Amendment to Loan Documents dated May 25, 2010 (the Note, Mortgage, and documents listed in (A)-(D) collectively, the “Loan Documents”). Wachovia's rights and interest in and by the Loan Documents were ultimately assigned to Lender through various assignments.

[3] Borrowers defaulted under the terms of the Note by failing to make payments beginning in May 2013, and no loan payment has been made since April 2013. As of July 2013, there was due and owing to Lender under the Loan Documents the principal amount of $5,013,663.00, plus $70,464.25 in interest, $28,410.57 in default interest, $4,496.48 in late charges, $840.62 in property protective advances, $859,532.26 in prepayment premiums, $345.00 in administrative fees, and $5,414.37 in legal fees, less a combined escrow offset of $247,181.76. Thus, the total due was $5,735,984.79, plus interest at the default rate of 12.06 percent per annum accruing from and after July 1, 2013.

[4] The loan evidenced by the Note is a limited recourse loan and specifically provides in § 3.6, titled “Exculpation,” as follows:

(a) Borrower shall be liable upon the indebtedness evidenced hereby and for the other obligations arising under the Loan Documents to the full extent (but only to the extent) of the security therefor, the same being all properties (whether real or personal), rights, estates and interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents (collectively, the “Property ”);

(b) if a default occurs in the timely and proper payment of all or any part of such indebtedness evidenced hereby or in the timely and proper performance of the other obligations of Borrower under the Loan Documents, any judicial proceedings brought by Lender against Borrower shall be limited to the preservation, enforcement and foreclosure, or any thereof, of the liens, security titles, estates, assignments, rights and security interests now or at any time hereafter securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, and no attachment, execution or other writ of process shall be sought, issued or levied upon any assets, properties or funds of Borrower other than the Property, except with respect to the liability described below in this section; and (c) in the event of a foreclosure of such liens, security titles, estates, assignments, rights or security interests securing the payment of this Note and/or the other obligations of Borrower under the Loan Documents, no judgment for any deficiency upon the indebtedness evidenced hereby shall be sought or obtained by Lender against Borrower, except with respect to the liability described below in this section; provided, however, that notwithstanding the foregoing provisions of this section, Borrower shall be fully and personally liable and subject to legal action ... (v) for rents, issues, profits and revenues of all or any portion of the Property received or applicable to a period after the occurrence of any Event of Default hereunder or under the Loan Documents which are not either applied to the ordinary and necessary expenses of owning and operating the Property or paid to Lender....^[ [[^{2 ]}

Appellant's Appendix at 40–41. The Mortgage contains a number of categories of “Property” that secure the loan listed as Paragraphs (A)-(P) and specifically includes the following:

... BORROWER HEREBY IRREVOCABLY MORTGAGES, GRANTS, BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS ... all of Borrower's estate, right, title and interest in, to and under any and all of the following described property, whether now owned or hereafter acquired by Borrower (collectively, the “Property ”):

* * * * *

(H) All leases ... license, concessions and occupancy agreements of all or any part of the Premises or the Improvements ... now or hereafter entered into and all rents, royalties, issues, profits, bonus money, revenue, income, rights and other benefits (collectively, the “Rents and Profits ”) of the Premises or the Improvements, now or hereafter arising from the use or enjoyment of all or any portion thereof or from any present or future Lease or other agreement pertaining thereto or arising from any of the Leases or any of the General Intangibles (as hereinafter defined) ... subject, however, to the provisions contained in Section 2.7 hereinbelow; ...

* * * * *

(K) All present and future funds ... claims, general intangibles (including, without limitation, trademarks, trade names, service marks and symbols now or hereafter used in connection with any part of the Premises or the Improvements, all names by which the Premises or the Improvements may be operated or known, all rights to carry on business under such names, and all rights, interest and privileges which Borrower has or may have as developer or declarant under any covenants, restrictions or declarations now or hereafter relating to the Premises or the Improvements) and all notes or chattel paper now or hereafter arising from or by virtue of any transactions related to the Premises or the Improvements (collectively, the “General Intangibles ”); ...

* * * * *

(P) All other or greater rights and interests of every nature in the Premises or the Improvements and in the possession or use thereof and income therefrom, whether now owned or hereafter acquired by Borrower.

Id. at 62, 64.

[5] On July 12, 2013, Lender filed its Complaint For Judgment and Foreclosure of Commercial Mortgage and Security Interest against Borrowers.³ Borrowers acknowledged that default had occurred and cooperated with Lender in having a receiver appointed over the Real Estate in October 2013, and on January 24, 2014, the court issued a Consent Order Granting In Rem Judgment and Decree of Foreclosure of the Real Estate (the “Foreclosure Decree”). In the Foreclosure Decree, the court specifically found:

The parties agree that absent liability under Paragraph 3.6(c) of the Note (the “Limited Recourse Provisions”), [Lender's] collection of its judgment herein shall be limited to the Mortgaged Property and no judgment for any deficiency, if any, shall be pursued by [Lender] or entered by the Court against any Defendant, guarantor, indemnitor, or any individual member, owner or partner of any of the [Borrowers]. Nothing herein precludes [Lender] from seeking a judgment on the deficiency, if any, against [Borrowers] or any guarantors, if [Lender] later determines liability exists under the Limited Recourse Provisions.

Appellees' Appendix at 34. The Real Estate was subsequently sold to Lender at a Sheriff's sale for $2.7 million, or less than the amount in the Foreclosure Decree, thereby resulting in a deficiency.

[6] Meanwhile, in November 2013, while the foreclosure proceedings were pending, Borrowers notified Lender that they had obtained $307,193.76 from the Marion County Treasurer as a refund from an appeal of real estate taxes relating to tax years 2008–2011 (the “Tax Refunds”).⁴ The parties disputed whether the Tax Refunds should be distributed to Borrowers or Lender, Borrowers deposited said Tax Refunds into an escrow account with the court, and on December 9, 2013, the parties filed briefs on the issue. On May 14, 2014, the court held a hearing on the issue and heard argument, and at the conclusion of the hearing it asked the parties to submit proposed orders. On July 3, 2014, the court issued its Final Judgment Regarding Tax Refunds (the “Final Judgment”) in which it concluded that the Tax Refunds should be retained by Borrowers. The Final Judgment stated in part:

7. [Borrowers] asserted that none of the loan documents explicitly gave [Lender] a security interest in the Tax Refunds. In the alternative, [Lender] contended that the Tax

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