Bayview Loan Servicing, LLC v. Golden Foods, Inc.

• Decision Date: 14 September 2016
• Docket Number: No. 18A02–1508–MI–1191.,18A02–1508–MI–1191.
• Citation: Bayview Loan Servicing, LLC v. Golden Foods, Inc., 59 N.E.3d 1056 (Ind. App. 2016)
• Parties: BAYVIEW LOAN SERVICING, LLC, Appellant–Plaintiff and Counter–Defendant, v. GOLDEN FOODS, INC., and Lewis R. Coulter, Appellees–Defendants and Counterclaimants.
• Court: Indiana Appellate Court

59 N.E.3d 1056

BAYVIEW LOAN SERVICING, LLC, Appellant–Plaintiff and Counter–Defendant,

v.GOLDEN FOODS, INC., and Lewis R. Coulter, Appellees–Defendants and Counterclaimants.

No. 18A02–1508–MI–1191.

Court of Appeals of Indiana.

Sept. 14, 2016.

Michael J. Cork, Jamie B. Dameron, Bamberger, Foreman, Oswald & Hahn, LLP, Indianapolis, IN Attorneys for Appellant.

Robert C. Beasley, Beasley Law Office, Muncie, IN, Attorney for Appellee.

PYLE, Judge.

Statement of the Case

[1] Bayview Loan Servicing LLC ("Bayview") appeals the trial court's order entering judgment in favor of Golden Foods, Inc., ("Golden Foods") and Lewis Coulter ("Coulter") on Bayview's mortgage foreclosure claim and Golden Food's conversion counterclaim. Bayview argues that there is insufficient evidence that it intended: (1) for Golden Food's mortgage to merge with the tax deed that Bayview purchased from M. Jewell, LLC ("Jewell"); and (2) to exert unauthorized control over Golden Foods' property and monthly payments. Concluding that Bayview's arguments are requests to reweigh the evidence and that there is sufficient evidence that Bayview intended both the merger and the exercise of unauthorized control, we affirm the trial court.

[2] We affirm.

Issues

1. Whether the trial court's judgment in favor of Golden Foods on Bayview's mortgage foreclosure claim is contrary to law; and

2. Whether the trial court's judgment in favor of Golden Goods on its conversion counterclaim is clearly erroneous.

Facts

[3] Coulter is the president and sole shareholder of Golden Foods, which is an Indiana Corporation. In 1988, he executed an adjustable rate note with Industrial Trust and Savings Bank, ("the Note"). To secure payment for the $113,800.00 Note, Golden Foods executed a mortgage against a commercial property on Madison Street ("Madison Street Property") in Muncie, which Coulter operated as a restaurant. As further security for Golden Foods' indebtedness under the Note, Coulter and Golden Foods executed a mortgage against Coulter's home on Oliver Drive, ("Oliver Drive Mortgage").¹ Both mortgages were assigned to Bayview in 2005.²

[4] By 2008, Golden Foods had reduced the balance of the Note to $42,822.77. However, Golden Foods had become delinquent in the payment of real estate taxes on the Madison Street Property, which had been vacant and non-income producing since 2006. In April 2008, Golden Foods advised Bayview that it was unable to pay the $22,000,000 in overdue taxes on the property. A Bayview representative recommended that Coulter: (1) submit a letter of hardship; and (2) request that Bayview advance him the money to pay the delinquent taxes and modify his mortgage payment to include the advance. Coulter explained that he did not know if he could afford a payment modification because the only money he had available to make his current mortgage payment was his monthly retirement income. Coulter also advised the Bayview representative that he was making repairs on the property in order to sell it. In December 2008, Coulter sent Bayview a hardship letter, which stated that Coulter's only income available to pay the mortgage loan was from Social Security.

[5] Three months later, Bayview decided not to advance Coulter the funds to pay the delinquent taxes. Rather, Bayview decided that it would attempt to work out a tax capitalization agreement with Golden Foods. Meanwhile, because of the delinquent taxes, the Madison Street Property was offered at a Fall 2008 tax sale. M. Jewell, LLC ("Jewell") purchased the tax sale certificate for the Madison Street Property for $8,001.00. Jewell sent notice of the sale to Golden Foods, which immediately notified Bayview of the situation. Jewell, however, did not send the required notice to Bayview. The redemption period was scheduled to expire on January 6, 2009.

[6] Following the tax sale, Bayview completed an internal assessment to identify, value, and prioritize its options regarding the Madison Street Property, which included loan modification, foreclosure, or acquiring the property as real estate owned property ("REO property").³ Bayview's internal valuation of the Madison Street Property was $140,000.00, and Bayview had received a broker's price opinion that the property was in a "hot pocket area with potential." (BTS–412).⁴ Bayview's assessment disclosed that the best option for Bayview was to capitalize the taxes and enter into a loan modification agreement with Golden Foods. The net present value of this scenario to Bayview was $84,676.15. The second best alternative for Bayview was to acquire the property as an REO property. The net present value of this scenario to Bayview was $54,504.12.

[7] After considering the options, Bayview drafted and proposed a Loan Adjustment Agreement (LAA) to Golden Foods. Pursuant to the terms of the LAA, Golden Foods had to make a $1,000.00 down payment and a $1,218.55 monthly payment.⁵ With the additional capitalization, Bayview agreed to redeem the Madison Street Property from the tax sale and include approximately $12,900.00 to fund the new escrow account for future taxes and insurance. Coulter signed the LAA individually and on behalf of Golden Foods and returned it to Bayview with the $1,000.00 fee on December 26, 2008. According to the LAA, which Bayview never signed, the first payment was due February 1, 2009.

[8] In the meantime, although Bayview knew the redemption deadline for the Madison Street Property was January 6, 2009, Bayview failed to redeem the property. Therefore, Jewell immediately filed a petition for issuance of a tax deed. Realizing that if the tax sale was not set aside, Golden Foods would lose title, and Bayview would likely be liable for damages, Bayview hired Indiana counsel Jason Lueking ("Lueking") to defend its interests and intervene in the tax sale proceeding. Lueking immediately noticed that Jewell had failed to give the required notice to Bayview. Therefore, both Bayview and Golden Foods had the right to object to the issuance of the tax deed and to seek to set aside the tax sale. With these rights in mind, Lueking entered into negotiations with Jewell.

[9] During the course of the negotiations, Lueking structured a deal to change Bayview's status from mortgage lienholder of the Madison Street Property to fee simple owner. Specifically, Lueking's settlement draft passed title of the Madison Street Property directly from Jewell to IB Property Holdings ("IB Property"), which is a subsidiary of Bayview that takes title to REO Properties acquired through either foreclosure or a deed in lieu of foreclosure.⁶ When title is passed to IB Property, the property is sold, and any sale proceeds are kept by the lender. This differs from a foreclosure where any excess funds become the property of the borrower. Lueking did not advise Golden Foods about these negotiations with Jewell or suggest that Golden Foods obtain counsel.

[10]In April 2009, Bayview expressed concerns to Lueking about taking title to the Madison Street Property in its name or in the name of IB Property. Bayview was considering an alternative structure, which would have given the tax title deed directly to Jewell. Jewell would then have quitclaimed the property to Golden Foods. This alternative would have returned Bayview and Golden Foods to the relationship contemplated by the LAA. Lueking revised the settlement documents to reflect this structure for the transaction and provided them to Lawrence Halpern, Bayview's vice president and in-house counsel ("Halpern"). However, these documents were never presented to Jewell.

[11] Rather, in May 2009, Lueking sent a revised settlement agreement to Jewell. This agreement had the tax certificate and tax title deed going directly to Bayview. In an email, Lueking explained to Jewell's attorney that the "transaction [was] similar to a deed in lieu of foreclosure from [Bayview's] perspective." (Bayview Ex. 49). Halpern was copied on Lueking's email to Jewell's attorney. Lueking understood that a deed in lieu of foreclosure meant that Bayview was acquiring title to and equity in the property rather than initiating foreclosure proceedings. Both Lueking and Bayview Vice President of Commercial Servicing, Jo Ann Snyder ("Snyder"),⁷ knew that a deed in lieu of foreclosure would extinguish Golden Foods' underlying debt unless the parties contemporaneously executed documentation to establish a residual financial obligation on the borrower. However, no such documentation was ever prepared or submitted to Golden Foods.

[12] On June 4, 2009, before finalizing the agreement with Jewell, Bayview ran another internal assessment, which revealed that the Madison Street Property had a present value of $64,933.74 to Bayview if Bayview took the property as an REO property. This value was based on Bayview's $140,000 valuation of the Madison Street Property minus Bayview's invested funds, which included the $42,822.77 mortgage principal at the time of the LAA and the $32,469.75 paid to Jewell. Bayview Vice President Gyselle Piedra ("Piedra") authorized the settlement agreement, which Bayview signed that day.

[13] That same day, Bayview employee, Juan Gonzalez ("Gonzalez"), told Coulter that Bayview was going to pay the delinquent taxes on the Madison Street Property and that Coulter could proceed with his plans to sell it. Four days later, Gonzalez told Coulter that the taxes had been paid but did not mention that Bayview had taken title to the property. Bayview also continued to send Golden Foods monthly FAA statements.

[14] The very next day, the agreed order directing the tax deed to be issued was entered, and the tax deed was issued to Bayview on July 8, 2009. In August 2009, Gonzales issued an order to secure the unoccupied Madison Street Property, winterize the pipes, and change the locks. Bayview still did not advise Coulter that it had acquired title to the property. Golden Foods began making the $1,218.55 per month FAA payments in November 2009. Golden Foods made ten payments on...