Alexander v. PSB Lending Corp., 82A04-0212-CV-592.

• Decision Date: 31 December 2003
• Docket Number: No. 82A04-0212-CV-592.,82A04-0212-CV-592.
• Citation: 800 N.E.2d 984
• Parties: Theodore & Joyce ALEXANDER, Husband and Wife; on behalf of themselves And all others similarly situated, Appellants, v. PSB LENDING CORPORATION, et al., Appellees.
• Court: Indiana Appellate Court

800 N.E.2d 984

Theodore & Joyce ALEXANDER, Husband and Wife; on behalf of themselves And all others similarly situated, Appellants, v. PSB LENDING CORPORATION, et al., Appellees.

No. 82A04-0212-CV-592.

Court of Appeals of Indiana.

December 31, 2003.

Daniel Myers, Kevin Oufnac, Richardson Patrick Westbrook & Brickman, LLC, Mount Pleasant, SC, Eric G. Calhoun, Lawson Fields McCue & Campbell, P.C., Addison, TX, Stephen L. Williams, Mann Law Firm, Terre Haute, IN, Attorneys for Appellants.

Terry Farmer, Michele S. Bryant, Bamberger Foreman Oswald & Hahn, LLP, Evansville, IN, Mark S. Melodia, Lauren Graham Delehey, Reed Smith LLP, Princeton, NJ, Thomas L. Allen, Roy W. Arnold, Reed Smith LLP, Pittsburg, PA, David Sturgeon-Garcia, Reed Smith LLP, San Franciso, CA, Ronald J. Ehinger, Michael H. Michmerhuisen, Barrett & McNagny LLP, Ft. Wayne, IN, Brian K. Carroll, Johnson Carroll Griffith & D'Amour, Evansville, IN, Russell J. Pope, Gregory Lockwood, Pope & Hughes, Towson, MD, Richard Malad, Cohen & Malad LLP, Indianapolis, IN, Alan S. Brown, Locke Reynolds LLP, Indianapolis, IN, Steven K. Huffer, Huffer & Weathers, P.C., Indianapolis, IN, Michael J. Feiwell, Indianapolis, IN, Danny E. Glass, Fine & Hatfield, Evansville, IN, Pamela M. Conover, Ward B. Coe, III, Whiteford Taylor & Preston LLP, Baltimore, MD, Cory Brundage, Indianapolis, IN, Daniel J. Tobin, Kirkpatrick & Lockhart LLP, Washington, DC, Paul E. Ridley, Kirkpatrick & Lockhart LLP, Dallas, TX, Patrick A. Shoulders, Robert L. Burkart, Ziemer Stayman Weitzel & Shoulders LLP, Evansville, IN, James D. Johnson, Rudolph Fine Porter & Johnson LLP, Evansville, IN, Robert R. Clark, R.C. Richmond, III, Andrew T. Kight, Sommer Barnard Ackerson, Indianapolis, IN, Jeffrey W. Ahlers, Steven S. Hoar, Kahn Dees Donovan & Kahn, LLP, Evansville, IN, Robert K. Stanley, David R. Hamer, Erica S. Black, Baker & Daniels, Indianapolis, IN, Peter A. Velde, Eric Johnson, Kightlinger & Gray, Indianapolis, IN, Attorneys for Appellees.

OPINION

FRIEDLANDER, Judge.

Between October 10, 2001 and February 4, 2002, nine putative class action complaints were filed in Vanderburgh County by plaintiffs-appellants (Named Plaintiffs) on behalf of individuals and/or married couples, as well as those similarly situated, who had obtained loans secured by second mortgages on their Indiana homes.¹ All nine complaints alleged similar violations of the Indiana Uniform Consumer Credit Code (IUCCC), namely, that excessive (greater than 2%) origination fees were charged on their second mortgage loans in violation of Ind.Code Ann. § 24-4.5-3-201(8) (West, PREMISE through 2003 1st Regular Sess.). Each complaint identified the respective lender (the Originator) that initially made the second mortgage loans to Named Plaintiffs, but only some of the complaints named the Originator as a defendant. Additionally, the complaints named over eighty entities as defendants (Non-Holder Defendants) who were not alleged to have originated or held Named Plaintiffs' loans, but rather were alleged to have purchased loans issued by the Originators to borrowers other than Named Plaintiffs. No complaint identified the current holder of Named Plaintiffs' loans.

In May 2002, the trial court consolidated the nine putative actions for pretrial purposes. All appearing defendants filed motions to dismiss alleging a variety of defects in Named Plaintiffs' complaints. The trial court heard oral argument in September 2002, and on November 11, 2002, entered a Dismissal Entry dismissing all nine putative actions for various reasons:

The defendants having filed their motions to dismiss, and the plaintiffs having filed their responses thereto, and the Court having heard the argument of counsel and being duly advised in the premises, now finds that all motions to dismiss of all defendants should be granted, based where applicable upon lack of personal jurisdiction, lack of standing, lack of standing based on bankruptcy of the particular plaintiff, arbitration agreement, and/or the "safe harbor provision" of I..C. [sic] 24-4.4-6-104(2)[sic].

Appellants' Appendix at 41.² The Dismissal Entry did not identify which Defendants were dismissed for which reason.

On appeal, Named Plaintiffs contend that the trial court improperly granted the Defendants' motions to dismiss. The following issues are dispositive of our review:

1) Did the trial court correctly determine that Named Plaintiffs lacked standing against the Non-Holder Defendants?

2) Did the trial court correctly determine that Named Plaintiffs failed to state a claim based on the "safe harbor" provision of the IUCCC?³

Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.⁴ The facts are undisputed that Named Plaintiffs obtained loans secured by second mortgages on their Indiana homes between April 1997 and August 2000. The loans originated from six different lenders and ranged in amount from $17,000 to $35,000. Only two Originators remain in this appeal, Bann-Cor Mortgage Corporation (Bann Cor) and Independent Realty Capital Corporation d/b/a Independent Mortgage Company (Independent Realty), Defendants in the Drake and Simms actions, respectively. No direct connection was alleged between the remaining sixty-four Non-Holder Defendants and Named Plaintiffs, rather, the Non-Holder Defendants are alleged holders of promissory notes relating to loans made to Named Plaintiffs and the putative class members. None of the complaints identifies the actual holders of Named Plaintiffs' loans.

In their complaints, Named Plaintiffs assert that the Defendants had violated the IUCCC, specifically, I.C. § 24-4.5-3-201(8), by charging more than a 2% origination fee as permitted by the statute. Defendants contend that charging more than a 2% origination fee is permissible so long as the total loan finance charge does not exceed 21% of the principal value of the loan as permitted by I.C. § 24-4.5-3-201(1). Alternatively, Defendants argue that the loan charges conformed with a written interpretation of the statute by the Department of Financial Institutions (DFI), the agency charged with administering and interpreting the IUCCC, and, thus, the IUCCC's "safe harbor" provision, I.C. § 24-4.5-6-104(2), shielded Defendants from liability. Additionally, all Non-Holder Defendants moved to dismiss for lack of standing, and the IMPAC and Trust Defendants, a subset of the Non-Holder Defendants, moved separately to dismiss Named Plaintiffs' complaints for lack of personal jurisdiction.

Named Plaintiffs counter that they have established standing under Indiana law against all Non-Holder Defendants, and, alternatively, that standing may be properly determined on a classwide basis, via the juridical link doctrine, or through permissive joinder under Trial Rule 20. Named Plaintiffs assert that Indiana courts have personal jurisdiction over the IMPAC and Trust Defendants by virtue of these Defendants holding second mortgages on real property located in Indiana.

After a hearing, the trial court granted motions to dismiss as to all Defendants, and this appeal ensued. Named Plaintiffs argue that the trial court erroneously dismissed all Defendants based on lack of standing, personal jurisdiction,⁵ and an incorrect interpretation of the IUCCC and its "safe harbor" provision.

Upon review of a trial court's dismissal for lack of standing, we apply a de novo standard of review. Schulz v. State, 731 N.E.2d 1041 (Ind.Ct.App.2000). The facts alleged in the complaint must be taken as true and only where it appears that under no set of facts could the plaintiff be granted relief is dismissal appropriate. City of New Haven v. Allen County Bd. of Zoning Appeals, 694 N.E.2d 306 (Ind.Ct.App.1998),trans. denied. Similarly, statutory interpretation is a question of law reserved for the court and is reviewed de novo. In re K.J.A. 790 N.E.2d 155 (Ind.Ct.App.2003).

1.

Standing is a fundamental, threshold, constitutional issue that must be addressed by this, or any, court to determine if it should exercise jurisdiction in the particular case before it. The issue of standing focuses on whether the complaining party is the proper one to invoke the court's power. Scott v. Randle, 736 N.E.2d 308 (Ind.Ct.App.2000). The standing requirement assures that litigation will be actively and vigorously contested, as plaintiffs must demonstrate a personal stake in the litigation's outcome in addition to showing that they have sustained, or are in immediate danger of sustaining, a direct injury as a result of the defendant's conduct. Id. To establish standing, therefore, a plaintiff must demonstrate a personal stake in the outcome of the lawsuit and that the injury is a result of the defendant's conduct. Hibler v. Conseco, Inc., 744 N.E.2d 1012 (Ind.Ct.App.2001). If properly challenged, when a plaintiff fails to establish standing in the pleadings, the court must dismiss the complaint. Schulz v. State, 731 N.E.2d 1041. Moreover:

Although the Indiana constitution contains no "case or controversy" requirement, the federal limits on justiciability are instructive, because the standing requirement under both federal and state constitutional law fulfills the same purpose: ensuring that the litigant is entitled to have the court decide the merits of the dispute or of particular issues. Id. at 1044. Under the federal test, to establish standing a plaintiff must allege a personal injury that is fairly traceable to the defendant's allegedly unlawful conduct and is likely to be redressed by the requested relief. Id. (citing Allen v. Wright, 468 U.S. 737, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984)).

Named Plaintiffs contend they have standing to maintain claims against all sixty-six remaining Defendants—the two Originators, Bann-Cor and Independent Realty, and the sixty-four Non-Holder Defendants. We agree that Ernest and Mary Drake and Dean and Laura Simms have standing to assert claims against...