Candlelight Properties, LLC v. MHC OPERATING LTD.
| Decision Date | 29 May 2001 |
| Docket Number | No. 03A01-0006-CV-177.,03A01-0006-CV-177. |
| Citation | 750 N.E.2d 1 |
| Parties | CANDLELIGHT PROPERTIES, LLC, and Ronald E. Farren, Appellants-Plaintiffs/Counterclaim Defendants, v. MHC OPERATING LIMITED PARTNERSHIP, An Illinois Limited Partnership, and MHC Lending Limited Partnership, An Illinois Limited Partnership, Appellees-Defendants/Counterclaimants. |
| Court | Indiana Appellate Court |
Todd A. Richardson, Bette J. Dodd, Lewis & Kappes, P.C., Indianapolis, IN, Attorneys for Appellants.
Thomas G. Stayton, Andrea Roberts, Baker & Daniels, Indianapolis, IN, Attorneys for Appellees.
Appellants-Plaintiffs-Counterclaim Defendants, Candlelight Properties, L.L.C. (Candlelight) and Ronald E. Farren (Farren) (hereinafter referred to collectively as "Appellants"), bring this consolidated appeal following two trial court judgments in favor of Appellees-Defendants-Counterclaimants, MHC Operating Limited Partnership (MHC Operating) and MHC Lending Limited Partnership (MHC Lending). The first judgment resulted from a Complaint for Declaratory Judgment filed by Candlelight against MHC Operating and Chicago Title Insurance Company (Chicago Title)2 for a determination of the parties' rights and obligations under an Option to Purchase Agreement between Candlelight and MHC Operating. In this action, a bench trial was held on the merits and the trial court entered its original judgment determining that MHC Operating had validly exercised the option to purchase real estate. In the second action, the trial court entered summary judgment in favor of MHC Lending in a foreclosure action it filed against Candlelight and Farren, as guarantor, finding that Candlelight defaulted on an $8.05 million loan from MHC Lending.
We reverse and remand for further proceedings.
On appeal, the Appellants raise the following two restated issues:
1. Whether in the trial court's declaratory judgment it properly determined that MHC Operating validly exercised its option to purchase the real estate, when the notice MHC Operating gave to Candlelight deviated from the form required by the Option Agreement.
2. Whether the trial court properly granted summary judgment in favor of MHC Lending on MHC Lending's foreclosure action, by finding that Candlelight defaulted on an $8.05 million loan from MHC Lending for failing to pay the loan by its due date.
Plaintiff and counterclaim defendant Candlelight is an Indiana domestic limited liability company with its principal office in Indiana. Defendant and counterclaimant MHC Operating is an Illinois limited partnership with its principal office in Illinois, and is in the business of acquiring, owning and operating manufactured home communities throughout the United States. Defendant and counterclaimant MHC Lending is an Illinois limited partnership with its principal office in Illinois, and is in the business of offering property loans secured by real estate. Defendant Chicago Title is a Missouri corporation with offices in Indiana and its principal office in Illinois.
Candlelight is the owner of a manufactured home community consisting of approximately 110.96 acres of real estate and related improvements in Columbus, Indiana, commonly known as "Candlelight Village." Farren owns a ninety-nine percent (99%) interest in Candlelight and sought to cash out the appreciation he had acquired in Candlelight Village on a tax-deferred basis.
On May 3, 1996, Candlelight and MHC Lending agreed that MHC Lending would loan Candlelight $8.05 million. The terms of the loan were provided in a Promissory Note dated May 3, 1996. Pursuant to the Promissory Note, Appellants agreed to pay MHC Lending, on or before May 3, 1999, a debt in the principal sum of $8,050,000 or such lesser amounts as may be outstanding from time to time, together with interest thereon as set forth in the Promissory Note. The Promissory Note was secured with a Mortgage, Assignment of Rents and Security Agreement, an Assignment of Leases and Rents, and a Security Agreement, all dated May 3, 1996. The Mortgage assigned to MHC Lending all rents and revenues from Candlelight Village. The Lease Assignment assigned to MHC Lending all of Candlelight's rights under the lease agreements covering all or any portion of Candlelight Village, including all rents and revenues payable under the lease agreements. The Mortgage and the Lease Assignment also required all rents and revenues of the Real Estate to be deposited in a Lock Box Account, as such term is defined in a Lock Box Agreement dated May 3, 1996, which was to be used for payment of obligations under the Note and the Mortgage.
Although Candlelight was required to repay the Promissory Note in full by May 3, 1999, the Promissory Note allowed Candlelight to extend the term of the loan. Specifically, the Promissory Note provided that:
[Candlelight] may extend the term of the Loan, and thus the Due Date, for a period of six (6) months (the "Extension Period") from the end of the third (3rd) Loan Year by giving notice to [MHC Lending] of its intention to extend the term of the Loan if MHC Operating has not exercised its option to purchase the Property, in order to facilitate Borrower's refinancing of the Loan. [Candlelight] shall give [MHC Lending] notice of its intention to so extend the Loan no later than the earlier to occur of (a) thirty (30) days after MHC Operating notifies [Candlelight] that it will not exercise its option and (b) thirty (30) days prior to the Due Date if [Candlelight] has received no notice from MHC operating regarding exercise of the option.
(R. 700).
Moreover, as part of the May 3, 1996 transaction, Candlelight and MHC Operating entered into an Option to Purchase Agreement as additional security to MHC Lending for the loan to Candlelight. Pursuant to the Option Agreement, Candlelight granted to MHC Operating an irrevocable option to purchase Candlelight Village, and MHC Operating paid Candlelight $150,000 as consideration for the grant of the option.
In conjunction with the Option Agreement, Candlelight executed a Warranty Deed conveying Candlelight Village to MHC Operating and deposited the Deed in escrow with Chicago Title.
On May 9, 1996, Candlelight and MHC Operating entered into a letter agreement that amended the Option Agreement to give Candlelight the option of receiving cash or partnership units in MHC Operating if MHC Operating exercised the Option to purchase Candlelight Village.
On May 5, 1997, Candlelight and MHC Operating entered into another letter agreement that further amended the Option Agreement to address the effect on the purchase price for Candlelight Village of a rent increase implemented by Candlelight. In conjunction with the execution and delivery of the Option Agreement and the making of the Loan, Farren executed and delivered a Guaranty dated May 3, 1996, in favor of MHC Lending and MHC Operating. Under the terms of the Guaranty, Farren guaranteed payment of $700,000 to MHC Operating upon its exercise of the Option, which was to be applied against the purchase price provided for in the Option Agreement. The Option Agreement prescribed how MHC Operating was to exercise the Option:
3. Exercise of the Option. The Option must be exercised either (i) if the Loan is not accelerated or prepaid, at any time during the 180 day period prior to the third (3rd) anniversary of the date of the Agreement or (ii) if the Loan is accelerated, within ninety (90) days after the date [MHC Operating] receives notice of the acceleration of the Loan from [Candlelight] or Lender, or (iii) if the Loan is extended for any reason other than that [MHC Operating] has not given the Option notice, at any time after [Candlelight]'s receipt from [MHC Operating] of the Option Notice (as hereinafter defined). Notice of the exercise shall be given in the form attached to this Agreement as Exhibit B (the "Option Notice"). [Candlelight] shall notify [MHC Operating], if the Loan is accelerated, that the Loan has been accelerated or extended as the case may be and the date of such acceleration or date of such extension.
(R. 1421).
Because the Loan was neither accelerated nor prepaid, MHC Operating was permitted to exercise its Option at any time between November 4, 1998 and May 3, 1999 (the 180 day period prior to the third anniversary of the date of the Agreement).
On March 11, 1999, MHC Operating sent to Candlelight two letters, one being a cover letter referencing the enclosed Option Notice, and the other being MHC Operating's exercise of the Option. The cover letter provides in pertinent part as follows:
I am enclosing [MHC Operating's] notice to [Candlelight] of [MHC Operating's] election to exercise its option to purchase [Candlelight Village] in accordance with the above-referenced Agreement. As provided for in the Agreement, please have [Candlelight] execute the enclosed Agreement for Contribution of Real Estate and Related Property ("Contribution Agreement") (which conforms to the form of Contribution Agreement attached as Exhibit C to the Agreement, with various blanks filled in, exhibits attached and supplemental provisions inserted as contemplated by the Agreement).
(R. 1822). The Option Notice states that:
The undersigned hereby exercises its option to purchase [Candlelight Village] in accordance with the terms of the Agreement. As required by the Agreement, within five (5) days after delivery of this notice, the Contract (as defined in the Agreement) must be executed by [Candlelight] and returned to [MHC Operating] for execution. Regardless, the Contract is hereby deemed to be executed by each of us as of the date of delivery of this notice.
(R. 1824). However, the form notice attached to the Option Agreement as Exhibit B provides as follows:
The undersigned hereby exercises its option to purchase [Candlelight Village] in accordance with the terms of the Agreement. As required by...
To continue reading
Request your trial
-
Ransburg v. Richards
...and their contracts, when entered into freely and voluntarily, are enforced by the courts. Candlelight Prop., LLC v. MHC Operating Ltd. P'ship, 750 N.E.2d 1, 10 (Ind.Ct.App. 2001). It is in the best interest of the public that persons should not be unnecessarily restricted in their freedom ......
-
United States Fire Ins. Co. v. Estate of Campbell
...preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect[.]"); Candlelight Props., LLC v. MHC Operating Ltd. P'ship, 750 N.E.2d 1, 17 (Ind. Ct. App. 2001) (explaining that in interpreting the rights and duties under a promissory note and a mortgage, the cou......
-
Evergreen Eng'g, Inc. v. Green Energy Team LLC
...an interpretation which leaves a part unreasonable, unlawful, or of no effect[.]”); Candlelight Props., LLC v. MHC Operating Ltd. P'ship, 750 N.E.2d 1, 17 (Ind.Ct.App.2001) (explaining that in interpreting the rights and duties under a promissory note and a mortgage, the court “make[s] all ......
-
Evergreen Eng'g, Inc. v. Green Energy Team LLC, CIVIL NO. 10-00676 LEK-BMK
...an interpretation which leaves a part unreasonable, unlawful, or of no effect[.]"); Candlelight Props., LLC v. MHC Operating Ltd. P'ship, 750 N.E.2d 1, 17 (Ind. Ct. App. 2001) (explaining that in interpreting the rights and duties under a promissory note and a mortgage, the court "make[s] a......