Brown v. Indiana Nat. Bank

• Decision Date: 17 April 1985
• Docket Number: No. 4-983A325,4-983A325
• Citation: 476 N.E.2d 888
• Parties: 40 UCC Rep.Serv. 1401 Andrew C. BROWN, Appellant (Plaintiff Below), v. The INDIANA NATIONAL BANK, Appellee (Defendant Below).
• Court: Indiana Appellate Court

Page 888

476 N.E.2d 888

40 UCC Rep.Serv. 1401

Andrew C. BROWN, Appellant (Plaintiff Below), v. The INDIANA NATIONAL BANK, Appellee (Defendant Below).

No. 4-983A325.

Court of Appeals of Indiana Fourth District.

April 17, 1985.

Douglass R. Shortridge, Indianapolis, for appellant.

Richard D. Wagner, Max W. Hittle, Jr., Indianapolis, Michael J. Antrim, Church, Roberts & Beerbower, Noblesville, for appellee.

CONOVER, Judge.

Plaintiff-Appellant Andrew C. Brown (Brown) appeals the trial court's granting of a motion for judgment on the evidence in favor of the Indiana National Bank (INB).

We affirm.

ISSUE

Did the trial court err in granting INB's motion for judgment on the evidence at the close of all the evidence?

FACTS

Brown signed a contract in July, 1974 to play professional hockey for the Indianapolis Racers hockey franchise, then owned by IPS Management, Inc. Under the contract's terms, Brown was to play for 5 years, starting with the 1974-75 season. The contract also provided Brown could not be traded without his written consent. Finally, the contract provided for salary payments and an "interest factor". Both were to be paid over the first 5 years and the "interest factor" to be continued to be paid over the remaining 5 years. IPS Management shortly thereafter sold its hockey franchise to Indianapolis Racers, Ltd. (Racers, Ltd.).

Racers, Ltd. initially borrowed $500,000 from INB in late 1974. INB took a security interest in Racers, Ltd.'s assets, including all players' contracts. INB perfected this security interest by filing a financing statement in January, 1975. INB subsequently loaned Racers, Ltd. additional funds over the next two years, and took security interests in similar collateral.

By 1977, Racers, Ltd. was experiencing financial difficulties and had borrowed from INB nearly $1,000,000. In April, 1977, INB requested Racers, Ltd. to deliver to it copies of its players' contracts, one of which was Brown's. Racers, Ltd. complied. On June 3, 1977, INB called all previous Racers, Ltd. loans. INB notified Racers, Ltd. it (INB) would take possession of all Racers, Ltd. secured collateral which included Brown's player contract and would sell the same at a private sale to be held on or before June 13, 1977. INB, in June and July of 1977, made at least two salary payments to Brown after it took possession of his player contract.

Canadian businessman Nelson Skalbania (Skalbania) offered to buy various Racers, Ltd. assets. Skalbania formed the limited partnership Hockey World Ltd. (HW, Ltd.). He also formed a new organization, Indianapolis Racers, 1977 (Racers '77) and made it a general partner of HW, Ltd. In November, 1977, INB transferred nearly all of Racers, Ltd.'s assets to HW, Ltd. and in exchange received a 20% limited partnership interest in HW, Ltd. HW, Ltd., however, did not purchase Brown's player contract.

Unable to find a buyer, INB returned Brown's contract to the general partner of Racers, Ltd., in January, 1978 and reaffirmed its security interest therein. INB never received money from its 20% limited partnership status in HW, Ltd. INB lost an estimated 1.2 million dollars on Racers, Ltd. loans. Likewise, Brown was paid for the first three years of his player contract, up to the 1976-77 season. He has received no further payment.

Brown sued INB for fraud in its failure to notify him of (a) the security agreement it executed with Racers, Ltd. initially taking his player contract as collateral; (b) INB's possession of the player contract once Racers, Ltd. defaulted on its loans; and (c) INB's intention to sell Racers, Ltd. assets at a private sale. Brown also alleged a breach of INB's duty of good faith in regards to these transactions.

The case was tried initially before a jury. The trial court denied INB's motion for judgment on the evidence made at the end of Brown's case. However, INB renewed this motion at the close of all the evidence. The trial court granted the motion. Brown appeals.

DISCUSSION AND DECISION

I. Standard of Review

We review a trial court's ruling on a motion for judgment on the evidence in the same light as the trial court. We look at the evidence and reasonable inferences therefrom most favorable to the nonmoving party. Judgment on the evidence in favor of a party is proper where there is an absence of evidence ¹ or reasonable inferences which support an essential element of the nonmoving party's claim. Jones v. Gleim (1984), Ind., 468 N.E.2d 205, 206; Dettman v. Sumner (1985), Ind.App., 474 N.E.2d 100, 103; Perry v. Leo P. Knoerzer Corporation (1984), Ind.App., 472 N.E.2d 223, 225. Our third district has stated "if there is evidence on each element of the claim, the issue should be tendered to the jury and the motion denied." Farm Bureau Insurance Co. v. Crabtree (1984), Ind.App., 467 N.E.2d 1220, 1225; see also Thatcher Engineering Corp. v. Bihlman (1985), Ind.App., 473 N.E.2d 1022, 1024-25. Conversely, the issue should not go to the jury if there is no evidence on one or more essential elements of the claim. Thus Brown may overcome a motion for judgment on the evidence only if he presented evidence at trial on each element of his claim, one being INB's duty to disclose.

II. Judgment on the Evidence

Brown's amended complaint alleges INB had a duty to notify Brown of various events occurring after INB took a security interest in Racers, Ltd. assets. Had INB fulfilled its duty, Brown opines, he could have taken steps to minimize the loss he suffered by either suing Racers, Ltd. for breach of contract or declaring himself a free agent enabling him to accept a player contract elsewhere. We find INB owed Brown no duty to inform him of these events.

Fraud

Although not susceptible to a precise definition, broadly stated, fraud is any act, omission or concealment which involves breach of a duty causing damage as a result. Hinds v. McNair (1980), Ind.App., 413 N.E.2d 586, 603. Fraudulent concealment is one type of actionable fraud in which one having a duty to disclose certain facts to another knowingly fails to do so, and as a result, the other relies upon this nondisclosure to his detriment. See, generally, Barnd v. Borst (1982), Ind.App., 431 N.E.2d 161, 168; Fleetwood Corp. v. Mirich (1980), Ind.App., 404 N.E.2d 38, 47; Grow v. Indiana Retired Teachers Community (1971), 149 Ind.App. 109, 118, 271 N.E.2d 140, 145. The party asserting fraud bears the burden of establishing the wrongdoer's duty to disclose. Barnd, 431 N.E.2d at 168; Grow, 271 N.E.2d at 145.

a. INB's Duty to Disclose Under Article 9

At trial, Brown argued INB had a duty of disclosure under Article 9 of Indiana's Uniform Commercial Code. We find no such duty.

Brown first claims INB should have notified him it took a security interest in his player contract. However, a security agreement is a contract between the creditor and debtor allowing the creditor to take a security interest in specified collateral. See IC 26-1-9-201. A security interest created by such agreement may be perfected by filing a financing statement. This financing statement serves as notice to the rest of the world the secured party has taken a security interest in the collateral. See IC 26-1-9-303. INB fulfilled any duty it had under Article 9 to notify Brown by properly filing a financing statement.

Brown next contends INB should have notified him it intended to sell his player contract at a private sale and it was taking possession of Racers, Ltd. assets.

Article 9 of Indiana's Uniform Commercial Code governs secured transactions whereby tangible or intangible personal property or fixtures are made to serve as security for an obligation. A creditor with a security interest in a debtor's property is a secured party. A security interest is "an interest in the personal property or fixtures securing payment or performance of an obligation." IC 26-1-1-201(37); see also, IC 26-1-9-105(h); (i). Where the debtor defaults on the obligation owed, the secured party may take possession of the collateral put up by the debtor and thereafter dispose of it by public or private sale. The proceeds are used to satisfy the indebtedness. IC 26-1-9-503, 9-504. However 26-1-9-504(3) requires (1) the secured party electing this remedy to send notice thereof to the debtor, and (2) the method, manner, time, place and terms of the sale must be commercially reasonable:

* * *

(3) Disposition of the collateral may be by public or private proceedings and may be made by way of one or more contracts. Sale or other disposition may be as a unit or in parcels and at any time and place and on any terms but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable. Unless collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, reasonable notification of the time and place of any public sale or reasonable notification of the time after which any private sale or other intended disposition is to be made shall be sent by the secured party to the debtor, and except in the case of consumer goods to any other person who has a security interest in the collateral and who has duly filed a financing statement indexed in the name of the debtor in this state or who is known by the secured party to have a security interest in the collateral. ² (Emphasis and footnote added.)

Thus, this section carves out three classes of persons entitled to notice of disposition of collateral, namely (1) the debtor; (2) one known by the secured party to have a security interest in the same collateral; and (3) one having a security interest in the same collateral. Furthermore "debtor" in turn

means the person who owes payment or other performance of the obligation secured, whether or not he owns or has rights in collateral, and includes the seller of accounts, contract rights or chattel paper. Where the debtor and the owner of the collateral are not the...