Broadhurst v. Moenning, 56A05-9304-CV-135

• Decision Date: 28 April 1994
• Docket Number: No. 56A05-9304-CV-135,56A05-9304-CV-135
• Citation: 633 N.E.2d 326
• Parties: James G. BROADHURST, Appellant, v. Walter P. MOENNING, Jr., et al., Appellees.
• Court: Indiana Appellate Court

Page 326

633 N.E.2d 326

James G. BROADHURST, Appellant, v. Walter P. MOENNING, Jr., et al., Appellees.

No. 56A05-9304-CV-135.

Court of Appeals of Indiana Fifth District.

April 28, 1994.

Robert Leirer Justice, Logansport, for appellant.

Kathryn D. Schmidt, Fred M. Cuppy, Burke Murphy Costanza & Cuppy, Merrillville, for appellees.

SHARPNACK, Chief Judge.

James G. Broadhurst appeals the trial court's entry of summary judgment in favor of Gainer Bank, N.A. ("the Bank") and Walter P. Moenning. We affirm in part and reverse in part.

Broadhurst presents the following restated and renumbered issues for our review:

1. whether Ind.Trial Rule 13(A), which provides for compulsory counterclaims, violates Article I, § 20 of the Indiana Constitution as applied in this case;

2. whether the logical relationship test for determining if a claim is a compulsory counterclaim under T.R. 13(A) is inadequate;

3. whether the trial court erred in granting summary judgment in favor of the Bank; and

4. whether the trial court erred in granting summary judgment in favor of Moenning.

The present case has a lengthy history, including a prior related appeal, Gainer Bank, N.A. v. Broadhurst (filed Feb. 20, 1992), Ind.App., No. 08A02-9102-CV-80 ("Case I"). This court's Case I memorandum decision provides a statement of facts useful in understanding the background of the present appeal ("Case II"):

"While operating Northern Supplies, Inc., James Broadhurst executed a note of $302,500 from Gainer Bank ² on March 7, 1983. The unsecured loan was due on

March 7, 1984. When the loan was not repaid when due, the bank obtained a mortgage on property called Adams Mill as security. By 1985, the balance Broadhurst owed was $362,131.45. To avoid bankruptcy, Broadhurst entered a 'workout' agreement with Gainer Bank on May 13, 1985. In the workout agreement, Broadhurst agreed to liquidate Northern Supplies, Inc., sell Adams Mill, and two residences on the mill property in order to pay the remaining debt to Gainer Bank. Gainer Bank agreed to release Broadhurst and his wife from personal guarantees on the note, freeze the amount of the debt and not assess further interest. Bank also waived its legal rights and remedies regarding the debt. The workout agreement failed to set a time for performance by Broadhurst.

Broadhurst proceeded to liquidate his business. By May, 1986, only two accounts receivable remained outstanding, and Broadhurst had yet to sell Adams Mill and the two residences. Broadhurst listed the mill and residences with a real estate agent from July 7, 1987 to July 7, 1988, seeking a total of $495,000. In April 1988, J. Jorgensen, an attorney for Gainer Bank, warned Broadhurst that foreclosure was imminent if the mill was not sold. Leslie Robinson, the president of Gainer Bank, also told Broadhurst that the listing price for Adams Mill was too high.

William Brown became interested in the property in the spring of 1988. He submitted an offer on the residences for $119,000 on May 17, 1988 and expected to make an offer on the mill later. Gainer Bank informed Brown they would grant a loan of $107,000 for the purchase of the residences. When the residences were appraised at $101,000, the bank decided it could not lend $107,000, but that it could lend 100% of the appraised value. An appraisal value of $116,000 was made for the mill. After Brown and Broadhurst could not agree about easements for the residences on the mill property and the bank changed the inital [sic] financing conditions, Brown decided instead to make an offer for the entire property. He offered to purchase the mill and residences for $235,000. Broadhurst was still asking for $495,000 for the total property. Broadhurst never responded to Brown's offer, and Brown, therefore, never proceeded to seek financing from Gainer Bank.

Gainer Bank received the amounts from the accounts receivable on November 18, 1988. On November 21, 1988, when $194,185.00 remained due on the note, Gainer Bank filed for foreclosure of its mortgage on Adams Mill. Broadhurst requested specific findings of fact and conclusions of law from the trial court. After the bench trial, the court found that Gainer Bank was responsible for hindering the sale of the residences to Brown and that both Gainer Bank and Broadhurst's failure to cooperate dampened any possible sale of the whole property to Brown. The court further found that Broadhurst asked an unreasonable price for the mill, and that Gainer Bank breached its agreement by failing to exercise reasonable efforts in providing financing for the sale of Adams Mill. The court determined that Gainer Bank had unclean hands and was not entitled to foreclosure. Additionally, the court found that Gainer Bank had failed to show that a reasonable time for Broadhurst's performance of the agreement had expired."

Gainer Bank, N.A. v. Broadhurst (filed Feb. 20, 1992), Ind.App., No. 08A02-9102-CV-80, slip op. 2-4. The Bank appealed to this court in Case I, arguing that several of the trial court's findings of fact were clearly erroneous and that the trial court's conclusions thereon were contrary to law. This court reversed, determining that the Bank was entitled to foreclosure. Id. at 12. The Indiana Supreme Court denied Broadhurst's petition to transfer on July 30, 1992.

In Case I, the Bank had filed its complaint for foreclosure on November 21, 1988, in the Carroll Circuit Court. Trial was held in that case and, on September 7, 1990, the trial court entered its order from which the Bank appealed as described above. The present action, Case II, was commenced on August 1, 1990, when Broadhurst filed his complaint against the Bank and Moenning, individually and as Vice President of the Bank, in the Carroll Superior Court.

Broadhurst's Case II complaint pleads, in pertinent part:

"4. In 1985, Defendant Bank held various debts secured by mortgages and guarantees on property owned by Broadhurst and businesses which he ran, owned or controlled....

5. Broadhurst and his businesses were in financial difficulty, and he and Bank entered into an Agreement to enable Broadhurst to avoid bankruptcy.

6. Under this Workout Agreement, Broadhurst gave Bank a mortgage on certain real estate hereinafter referred to as "Adams Mill and adjacent property" located in Carroll County, Indiana....

7. Under this Agreement, Broadhurst agreed to seek to dispose of Adams Mill and the adjacent property, and Bank agreed in return to forego exercise of legal rights and remedies. A copy of the Agreement is attached and incorporated by reference....

8. Broadhurst performed all other aspects of his part of the Agreement and engaged in negotiating the sale of Adams Mill and adjacent property to one William Brown.

9. On May 17, 1988, Broadhurst, with Bank's approval (given by Defendant Moenning), signed a written agreement with Brown to sell Brown a part of the adjacent property....

10. In entering this agreement, Broadhurst relied upon Bank's approval of the transaction and agreement to cooperate in the transaction and assist in its execution.

* * * * * *

13. Bank, through Moenning, first promised, then refused, to finance various percentages of the purchase price agreed to between Brown and Broadhurst.

* * * * * *

20. Because of Bank's unreliability and changeability and various deceptive acts and practices by Bank via Moenning, Brown became disgusted with the entire transaction, withdrew his offer to purchase the adjacent property, and refused to negotiate further to purchase all or any part of the property.

21. On May 23, 1989, in violation of its promise and in breach of its Agreement with Broadhurst, Bank filed a Complaint for Foreclosure against the Adams Mill property....

22. By reason of Bank and Moenning's actions, Broadhurst was prevented from selling his property at its fair market value and thus prevented from performing his contract with Bank and incurred legal fees and expenses in defending the foreclosure.

23. The conduct of Bank and Moenning was deliberate, oppressive and in bad faith.

WHEREFORE, Plaintiff Broadhurst requests damages from Gainer Bank, N.A., and from Walter P. Moenning in a sum adequate to compensate him for his losses, including actual damages for the lost sale a potential sale to Brown and others, interest, costs, and for punitive damages."

Record, pp. 7-9.

Case II was transferred to Lake County; the parties then agreed to a change of venue to Newton County; a change of judge followed and a special judge was appointed on February 20, 1991. On October 28, 1991, while Case I was pending on appeal, the Case II trial court entered its order granting summary judgment in favor of the Bank and Moenning. ¹ The trial court ruled that Broadhurst's claims against the Bank for breach of contract and interference with contractual relations were compulsory counterclaims in Case I. On Broadhurst's claims against Moenning, the trial court ruled that the claims were barred because they were "in the nature of a cross-complaint, which was not plead in the foregoing mortgage foreclosure action." Record, p. 187. The trial court also granted summary judgment in favor of the Bank and Moenning on Broadhurst's claims sounding in malicious prosecution, ruling that they were premature in light of the pending Case I appeal.

Broadhurst's counsel did not receive notice of the trial court's order until August 5, 1992. Broadhurst requested and received an extension of time to file a motion to correct errors, which was filed with the court in September, 1992. Broadhurst's motion to correct errors was denied, and this appeal was initiated.

I

The first issue Broadhurst presents for our review is whether Ind.Trial Rule 13(A), which provides for compulsory counterclaims, violates Article I, § 20 of the Indiana Constitution as applied in this case. Broadhurst argues, in effect, that because his claims against the Bank and Moenning would be triable by jury but for being...