DBL Axel, LLC v. LaSalle Bank Nat. Ass'n

• Citation: 936 N.E.2d 326
• Decision Date: 04 November 2010
• Docket Number: No. 15A01-1003-PL-205.,15A01-1003-PL-205.
• Parties: DBL AXEL, LLC, Appellant-Plaintiff, v. LASALLE BANK NATIONAL ASSOCIATION, Trustee for Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC14, Commercial Mortgage Pass Through Certificates, Series 2006-CIBC14, Acting by and Through its Special Servicer, Midland Loan Services, Inc., Appellees-Defendants.
• Court: Court of Appeals of Indiana

936 N.E.2d 326

DBL AXEL, LLC, Appellant-Plaintiff,
v.
LASALLE BANK NATIONAL ASSOCIATION, Trustee for Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC14, Commercial Mortgage Pass Through Certificates, Series 2006-CIBC14, Acting by and Through its Special Servicer, Midland Loan Services, Inc., Appellees-Defendants.

No. 15A01-1003-PL-205.

Court of Appeals of Indiana.

Nov. 4, 2010.

936 N.E.2d 328

Tonny D. Storey, Sever Storey, LLP, Carmel, IN, Attorney for Appellant.

Ethel H. Badawi, Barnes & Thornburg LLP, Indianapolis, IN, Dawn R. Rosemond, Barnes & Thornburg LLP, Fort Wayne, IN, Attorneys for Appellees.

OPINION

BROWN, Judge.

In this interlocutory appeal, DBL Axel, LLC ("DBL") appeals the trial court's Order Directing Immediate Turnover of Funds (the "Order Directing Turnover") in favor of LaSalle Bank National Association, Trustee (the "Trustee") for Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2006-CIBC14, Commercial Mortgage Pass Through Certificates, Series 2006-CIBC14, ("J.P. Morgan") acting by and through its Special Servicer, Midland Loan Services, Inc. ("Midland"). DBL raises one issue, which we revise and restate as whether DBL's constitutional due process rights were violated when the trial court granted the Trustee's motion for turnover of funds and issued its Order Directing Turnover.¹ We affirm and remand.

The relevant facts follow.² J.P. Morgan extended a loan (the "Loan") in the original principal amount of $8,840,000 to DBL, and the Loan was secured by a Mortgage and Security Agreement dated January 6, 2006 and recorded January 19, 2006 (the "Mortgage"), in which DBL granted to J.P. Morgan a security interest in certain real property commonly known as Dearborn Plaza in Dearborn County, Lawrenceburg, Indiana (the "Property"). On March 16, 2006, J.P. Morgan assigned the Loan and the Mortgage to Trustee, and the assignment was recorded on September 15, 2006. On March 26, 2008, the City of Lawrenceburg (the "City") filed a Complaint under Cause Number 15C01-0803-PL-007 ("Cause No. 007") for the Appropriation of Real Estate to acquire a portion of the Property and two temporary right-

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of-way easements. On August 21, 2008, Midland by counsel sent to DBL a notice of default in connection with the Loan.

On March 6, 2009, DBL and the City entered into a Settlement Agreement and Release (the "Settlement Agreement"). The Settlement Agreement stated that DBL alleged that the City "has performed or caused to be performed actions surrounding [the Property] so as to cause a nuisance ...," and that the parties "agreed to resolve all of their disputes concerning relating [sic] to this nuisance...." Appellees' Appendix at 150. Pursuant to the Settlement Agreement, the City agreed to pay to DBL a sum of $1,725,600 payable in installments of $1,005,600 immediately, $360,000 on or before January 5, 2010, and $360,000 on or before January 5, 2011. The Settlement Agreement also noted that all "claims, rights, demands, or causes of action" which the City or DBL might have against each other were released and discharged other than "that certain Condemnation lawsuit filed by [the City] against DBL ...," under Cause No. 007. Id. at 151.

On March 9, 2009, DBL and the City filed an Agreed Findings and Judgment (the "Agreed Judgment") in Cause No. 007 which was signed by the trial court. As part of the Agreed Judgment, the City obtained the portions of the Property and two right-of-way easements it sought and agreed to pay to DBL and Trustee $224,600. However, on March 16, 2009, the clerk of the court "inadvertently issued the cash portion of the Condemnation Proceeds directly to [DBL] instead of to [DBL] and [Trustee] as ordered. ..." Appellant's Appendix at 13. On April 22, 2009, Trustee sent a letter to DBL demanding, "[p]ursuant to the Mortgage and Loan Documents ... unconditional and immediate payment of an amount not less than $224,600.00...." Appellees' Appendix at 305. The letter stated, quoting Section 3.4 of the Mortgage, that "the Trustee has the [ ] 'exclusive power to collect, receive and retain any award or payment for said condemnation or eminent domain and to make any compromise or settlement in connection with such proceeding....' " Id. at 304.

On April 30, 2009, DBL filed a Complaint for Declaratory Judgment under Cause Number 15D01-0904-PL-12 ("Cause No. 12"). In its complaint, DBL alleged that "[o]n several occasions, [DBL] has requested from [Trustee] an accounting as to how the Condemnation Proceeds would be applied towards the Mortgage," but that these requests "were rebuffed by [Trustee]." Appellant's Appendix at 13. The complaint stated: "As of this date, [Trustee] has failed to communicate to [DBL] how it intends to calculate the value of said real estate interest and/or how it will be applied to the Mortgage." Id. On June 1, 2009, Trustee filed a "Motion For Immediate Appointment Of Receiver and an Answer To [DBL's] Complaint For Declaratory Judgment, Counterclaim And Third-Party Complaint For Conversion, Pre-Judgment Garnishment, Foreclosure And Immediate Appt Of Receiver." ³ Id. at 3.

On September 23, 2009, the court held a hearing on the motion for immediate appointment of receiver, and on September

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30, 2009 issued an Order Granting Motion for Receiver and Appointing Receiver (the "Receivership Order") appointing as receiver McKinley, Inc. (the "Receiver"). The court ordered the Receiver:

[T]o (i) take possession of, manage, maintain, preserve and operate the Property, and to collect the rents, accounts, issues, income and profits thereof; (ii) to administer and/or sell DBL's assets and manage business operations with respect to the Property for the benefit of Trustee and all other creditors[;] and (iii) to apply the same to or otherwise expend funds for the payment of all amounts required in the Receiver's judgment for the operation, maintenance and preservation thereof and to retain the remainder for eventual disposition.... The Receiver is granted all powers necessary and usual in such cases....

Id. at 17.⁴

On or about February 24, 2010, the Receiver contacted the Trustee by phone regarding the payments made by the City to DBL pursuant to the Settlement Agreement and "inquired whether the Trustee received any payments from the City related to the Property." Id. at 141. The Trustee "indicated that it had not received any payments from the City ...," and the Receiver "then indicated that it had received information that the City may have distributed up to $1,725,600.00 to DBL, all or a portion of which may have been distributed to DBL and accepted by DBL post-receivership." Id. The Trustee then phoned Joseph Votaw, counsel for the City, who confirmed that the City and DBL had entered into the Settlement Agreement in March 2009. The Trustee contacted the Dearborn County Clerk, who provided the Trustee with copies of two checks evidencing payment from the City to DBL in the amount of $1,005,600, which was negotiated in March 2009, and $360,000 which was dated January 27, 2010.

On March 17, 2010, the Trustee filed its Verified Motion for an Order to Show Cause and Directing Immediate Turnover of Funds (the "Motion for Turnover"). ⁵ In its Motion for Turnover, the Trustee recited

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facts consistent with the foregoing and argued that:

DBL is in direct violation of the Mortgage and the Receivership order by, among other things, (i) DBL's continued failure to provide an accurate accounting of DBL's operating funds including the whereabouts of the Installment in the amount of $1,050,600.00 ⁶ (ii) DBL's failure to disclose and turnover the Installment dated January 27, 2010 from the City to DBL in the amount of $360,000 and (iii) DBL's failure to notify the Receiver of the Settlement Agreement and the amounts collectible thereunder.... DBL's actions ... are in direct violation of, inter alia, paragraphs 45, 46, and 52 [of the] Receivership Order and its purpose in preserving the receivership estate.

Id. at 144. The Trustee requested in relevant part that the court order DBL to immediately pay to the Receiver the full amount of the two checks paid to it by the City. The Trustee sent to DBL via email a copy of its motion.

The next day, March 18, 2010, the court granted the Motion for Turnover and, in its Order Directing Turnover, ordered that "[w]ithin seven (7) days of this Order, DBL shall pay the full amount of $1,400,600.00 to Receiver in good funds," and also reiterated to both parties "to comply with all terms of the [Receivership] Order...." ⁷ Id. at 161. On March 24, 2010, DBL filed its notice of appeal.

The sole issue is whether DBL's constitutional due process rights were violated when the trial court granted the Trustee's Motion for Turnover and issued its Order Directing Turnover. The question of whether a litigant was denied "a sufficient opportunity to present a defense" is a question of law which we review de novo. Morton v. Ivacic, 898 N.E.2d 1196, 1199 (Ind.2008) (citing Harrison v. Thomas, 761 N.E.2d 816 (Ind.2002), reh'g denied ).

The Fourteenth Amendment of the United States Constitution prohibits any state from depriving a person of life, liberty, or property without due process of law. Also, Article 1, Section 12 of the Indiana Constitution states that "[a]ll courts shall be open; and every person, for injury done to him in his person, property, or reputation, shall have remedy by due course of law. Justice shall be administered freely, and without purchase; completely, and without denial; speedily, and without delay." Indiana courts have consistently construed Article 1, Section 12, also known as the due course of law provision, as analogous to the federal due process clause. See, e.g., Doe v. O'Connor, 790 N.E.2d 985, 988 (Ind.2003); see also McIntosh v. Melroe Co., 729 N.E.2d 972, 976 (Ind.2000).

The requirements of procedural due process apply only to the deprivation of...