TOWN & COUNTRY HOMECENTER OF CRAWFORDSVILLE v. Woods
| Decision Date | 04 April 2000 |
| Docket Number | No. 54A01-9903-CV-89.,54A01-9903-CV-89. |
| Citation | 725 N.E.2d 1006 |
| Parties | The TOWN & COUNTRY HOMECENTER OF CRAWFORDSVILLE, INDIANA, INC., Appellant-Plaintiff, v. Ronald W. WOODS, National City Bank of Indiana, Appellees-Defendants. |
| Court | Indiana Appellate Court |
James E. Ayers, Wernle, Ristine & Ayers, Crawfordsville, Indiana, Attorney for Appellant.
Mark R. Galliher, Hopper, Galliher & Tucker, P.C., Indianapolis, Indiana, Attorney for Appellant.
Appellant-plaintiff Town & Country Homecenter of Crawfordsville, Indiana, Inc. (T&C) appeals the trial court's judgment in favor of appellee-defendant, National City Bank (NCB). Specifically, T&C argues that, as vendor of materials to builder Woods, it was a third-party beneficiary of the agreement between mortgagee NCB and mortgagor Lynn Fellows, who purchased a house built by Woods. Furthermore, T&C argues that NCB's action in disbursing funds to Woods when T&C was still owed $32,866.12 constituted constructive fraud. Finally, T&C maintains that NCB committed the criminal offense of deception when it required that Woods sign an affidavit stating that there were no unpaid claims for materials furnished.
The facts most favorable to the judgment reveal that in June 1992, Lynn Fellows contracted with Ronald Woods to build a house. Fellows paid Woods $10,000 as down payment and applied for a mortgage with NCB to cover the remaining balance, which was due at closing. Woods purchased materials for the house from T&C. On September 23, 1992, Fellows received a letter from T&C entitled "a routine letter" (the pre-lien notice) which stated that T&C could perfect a lien against his property if payment was not received for the materials. Record at 60-61, 92-93. Fellows brought the letter to the attention of Tom Gineris, the NCB representative handling his mortgage. Gineris responded that there was no problem, that similar situations arose "all the time" and that the letter would be addressed at closing. R. at 155.
The closing on Fellows' house occurred on October 13, 1992. Prior to the closing, T&C did not communicate with anyone at NCB regarding the bill owed by Woods. At the closing, Gineris questioned Woods about liens against the property. Woods acknowledged the existence of a mortgage held on the property by Tri-County Bank & Trust. Woods also confirmed that he had not completed payment to T&C but stated that he would pay T&C from the check he received at the closing. Gineris required that Woods sign a vendor's affidavit which stated that there were no liens on the property and that there were "no unpaid claims for labor done upon or materials furnished for the real estate in respect of which liens have been or may be filed." R. at 141-42. NCB then issued one check in the amount of $40,321.90 to Tri-County for Woods' construction loan and a second check to Woods in the amount of $59,229.17. Before doing so, Gineris asked Fellows if he was "comfortable" with disbursing the funds to Woods, based on Woods' statement that he would pay T&C from the proceeds. R. at 123. Fellows said, "That would be fine." R. at 123.
On January 11, 1993, T&C filed a mechanics lien against Fellows' residence with the Montgomery County Recorder, asserting it was owed $32,866.12. On January 7, 1994, T&C filed a complaint seeking to foreclose the lien, naming Woods, Fellows, NCB and the Montgomery County Treasurer as defendants. However, Fellows and the Montgomery County Treasurer were dismissed from the action.1 T&C's mechanics lien was ultimately released because the notice to Fellows did not comply with statutory limits.
Evidence was submitted by stipulation and deposition testimony presented by T&C and NCB. The trial court then made its decision without hearing or jury, as agreed by the parties. It entered its order and judgment in favor of NCB and against T&C on December 17, 1998. T&C filed a motion to correct errors, which the trial court denied. T&C now appeals.
By agreement of the parties in this case, the trial court weighed evidence from exhibits and deposition transcripts and arrived at findings of fact and conclusions of law.2 Our standard of review for the trial court's findings of fact requires that we not reweigh the evidence, but rather affirm the trial court's decision unless the trial court's findings are clearly erroneous. Indiana Farmers Mut. Ins. Co. v. Ellison, 679 N.E.2d 1378, 1380-81 (Ind.Ct. App.1997), trans. denied. The trial court's findings of fact may be found clearly erroneous only if the record lacks any evidence or reasonable inferences from the evidence to support such findings. Id.
The trial court also decided questions of law: whether an agreement existed and whether T&C was a third-party beneficiary to such an agreement. We review the trial court's conclusions of law de novo. Brown v. State, 677 N.E.2d 517, 518 (Ind.1997).
T&C first claims that it is the third-party beneficiary of the agreement between mortgagee NCB and mortgagor Fellows which permitted Fellows to take out a mortgage for his home. Specifically, T&C argues that NCB had a fiduciary duty to Fellows and T&C to exercise reasonable care that T&C be paid and that it breached that duty in disbursing funds to Woods knowing that T&C had not been paid.
We note that, in order to prevail upon a claim that one is a third-party beneficiary to a contract, a plaintiff must prove:
In this case, NCB's representative Gineris stated to Fellows that T&C's pre-lien notice would be "address[ed]" at the closing. R. at 155. We do not see in this statement a promise that T&C would be paid. Rather, at most, any promise amounted to a commitment to protect Fellows' interest by addressing the notice at the closing, where it was indeed addressed. R. at 123-24, 146. After Woods informed Gineris that he would pay T&C with the check he was to receive from NCB, Gineris required Woods to sign a vendor's affidavit which stated that there were "no unpaid claims for ... materials furnished for the Real Estate in respect of which lien have been or may be filed." R. at 141-42. Fellows stated that NCB's payment to Woods, based on Woods' statement that he would pay T&C, was "fine." R. at 123. Thus, we do not see on NCB's part a commitment to ensure payment to T&C. Furthermore, even if a contract were established by Gineris' remark that the pre-lien notice would be addressed, the evidence presented does not demonstrate that NCB and Fellows had a "clear intent" to benefit T&C, as required under Indiana law. See Prairie Heights, 585 N.E.2d at 294.
T&C also contends that it was the intended beneficiary of the agreement between Gineris and Fellows. Specifically, it asserts that it is a "creditor beneficiary" under the Restatement of Contracts and therefore is entitled to bring suit based on the agreement of Gineris and Fellows. Appellant's brief at 19-20.
Section 302 of the Restatement (Second) of Contracts (1981) provides that:
Restatement (Second) of Contracts, § 302 (1981). Furthermore, the Comments to § 302 define a creditor beneficiary as "[t]he type of beneficiary covered by (1)(a)," that is the beneficiary of a promise to pay the promisee's debt.
In this case, T&C is not a creditor beneficiary because such a beneficiary is one who is a creditor of the promisee. Here, the promisee was Fellows, and T&C was not his creditor. Thus, the analysis which T&C asks us to perform does not apply.
We note that T&C did not avail itself in a timely fashion of its remedy: a mechanics lien on Fellows' property. T&C finally filed its lien more than sixty days after the materials had been supplied and thus exceeded the statutory filing limit then in effect.3 T&C then realized its next possible remedy, a judgment against Woods for the money it was owed. We cannot say that its failure to act in a timely manner on its own behalf creates a duty in other parties to have done more. We note further that the trial court correctly found that NCB had a duty as mortgagee to protect the interests of Fellows, the mortgagor, for three reasons: because of the express agreement that the pre-lien letter from T&C would be addressed at closing, because custom and practice so dictated, and because of the special relationship created by NCB's control of payment and its disbursement to a third party. However, Fellows was not harmed by NCB's breach of its duty to protect Fellows against a valid claim by T&C.
T&C further argues that NCB is liable to T&C under the decision in Prudential Ins. Co. v. Executive Estates, Inc., 174 Ind.App. 674, 369 N.E.2d 1117 (1977). In that case, our supreme court held that a mortgage lender which controlled the disbursement of mortgage loan proceeds at closing had a duty to disburse loan proceeds so as to protect the interest of the mortgagor by securing releases from those having claims against the mortgagor under specific circumstances. Id. at 694, 369 N.E.2d at 1129. In this case, however, Executive Estates is inapplicable...
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