Dorothy Edwards Realtors, Inc. v. McAdams

• Decision Date: 11 July 1988
• Docket Number: No. 34A02-8609-CV-00320,34A02-8609-CV-00320
• Citation: 525 N.E.2d 1248
• Court: Indiana Appellate Court
• Parties: DOROTHY EDWARDS REALTORS, INC., First Federal Savings & Loan Association of Kokomo, Appellants (Defendants), v. Walter I. McADAMS, Margie L. McAdams, Appellees (Plaintiffs).

Page 1248

525 N.E.2d 1248

DOROTHY EDWARDS REALTORS, INC., First Federal Savings & Loan Association of Kokomo, Appellants (Defendants), v. Walter I. McADAMS, Margie L. McAdams, Appellees (Plaintiffs).

No. 34A02-8609-CV-00320.

Court of Appeals of Indiana Second District.

July 11, 1988.

J. Conrad Maugans, Bayliff, Harrigan, Cord & Maugans, P.C., Kokomo, for appellant Dorothy Edwards Realtors, Inc.

Thomas J. Simmons, Simmons & Fleming, Kokomo, for appellant First Federal Sav. & Loan Ass'n of Kokomo.

Joseph H. Davis, Lawrence R. Murrell, Davis & Murrell Law Firm, Kokomo, for appellees.

BUCHANAN, Judge.

Dorothy Edwards Realtors, Inc. (Edwards Realtors) and First Federal Savings & Loan Association of Kokomo (First Federal) appeal the trial court's judgment in favor of Walter I. McAdams (Walter) and Margie L. McAdams [hereinafter collectively referred to as the McAdamses], claiming that the statute of limitations barred the McAdamses' claim, that the trial court's findings and conclusions were contrary to the law and to the evidence, that the trial court erred in finding that First Federal violated various consumer credit laws and awarding attorneys fees based thereon, and that the trial court should have allowed First Federal foreclosure on the mortgage.

We reverse.

FACTS

On September 29, 1975, Donald L. Parnell and Loretta M. Parnell [hereinafter referred to as the Parnells] borrowed $31,000 from First Federal, a sum secured by a note and recorded mortgage on their residential real estate [hereinafter referred to as the property]. According to the mortgage, if the property was sold by the Parnells On November 28, 1980, the Parnells entered into an exclusive agreement with Edwards Realtors to sell the property. Gary Taylor (Taylor) was the principal owner of Edwards Realtors and the Parnells' real estate agent.

without First Federal's written consent, First Federal had the option to declare the Note immediately due and payable.

The Parnells and the McAdamses, through Taylor, entered into a purchase agreement on June 12, 1981, which provided for the sale of the property to the McAdamses by land sale contract, with the purchase price being $72,500. The down payment was set at $40,000, with the balance of $32,500 to be paid in minimum monthly installments of $500. The purchase agreement provided that "[t]itle shall be subject to easements, and restrictions of record, if any, and free and clear of all other liens and encumbrances except as herein stated." Record at 34. The mortgage lien held by First Federal was not mentioned.

On or before June 23, 1981, Taylor gave to Robert Heltzel, First Federal's vice-president, a copy of the purchase agreement and a proposed land sale contract. First Federal orally agreed to the sale, and then chose not to declare the unpaid balance due and payable.

After Taylor delivered an abstract of title to the property to the McAdamses' attorney, Joseph Davis (Davis), Davis returned to Taylor a title opinion on June 23, 1981. Davis found merchantable title in the Parnells and specifically referred in the title opinion to two mortgage liens on the property, one of which was the lien held by First Federal. Davis concluded in his opinion that the lien held by First Federal should be satisfied and released at closing. The McAdamses did not receive a copy of the opinion.

At the closing on June 24, 1981, a land sale contract prepared by Taylor was signed by the parties. The McAdamses made a $40,079.68 down payment to Taylor, which Taylor placed in the Edwards Realtors' trust account. This contract provided that "[t]he Seller may, at his election, place or maintain a mortgage on said premises for an amount not in excess of the then unpaid balance of the sale price; and the Buyer agrees that any such mortgage shall be a first lien and prior to any interest of his in said premises...." Record at 43. Neither the McAdamses' attorney nor their real estate agent was present at closing. Although Taylor was aware that First Federal's mortgage should be released at closing, he did not so advise the McAdamses before the closing was consummated. The fact that the mortgage would remain on the property after closing was not discussed with Walter at any time. However, Walter was indirectly aware of that because he heard the Parnells remark at closing they would pay $10,000 to First Federal on their obligation. He also knew that the approximate amount of the mortgage was $31,000. A copy of the recorded land sale contract was delivered to First Federal on June 25, 1981.

From the down payment received at closing from the McAdamses and placed in the trust account, Taylor paid $6,000 to Household Finance and thereby satisfied Houshold's lien on the property. None of the money received by Taylor at closing was applied to extinguish or reduce the debt secured by the mortgage held by First Federal.

On June 25, 1981, the Parnells paid First Federal $10,000 on their debt. On June 29, 1981, the Parnells and First Federal entered a modification agreement, which provided for the payment of the remaining indebtedness (approximately $20,000) owed on the Parnells' debt. The interest rate was raised to 16%, with the first of monthly payments of approximately $400 due in July, 1981. The Parnells, however, did not make any payments under this agreement until April, 1983. First Federal made no disclosures to either the Parnells or the McAdamses of any deferrals it was making of the Parnells' required payments, although each month that the Parnells did not pay, First Federal capitalized the interest and added it to the outstanding balance.

The McAdamses, on the other hand, made all of their regular monthly payments of $500 to the Parnells under the land sale contract. Record at 323, 433-34. Sometime prior to May 7, 1983, Walter was ready to pay the balance on the land sale contract, but was "troubled" about the balance of the Parnells' debt. Record at 318, 320. Inquiries to the Parnells and First Federal as to the amount of the unpaid balance on the loan were unavailing. Record at 320-21, 397. An agent of First Federal did inform Walter that the Parnells were current on their payments. Record at 321, 396. It was not until February, 1984, that the McAdamses first learned that the balance on the mortgage exceeded the balance due on the contract and that the Parnells had not been making payments on the debt secured by the mortgage. Record at 321-22, 326. After learning this, the McAdamses made no further payments under the land sale contract. Record at 323. The unpaid contract balance at that time was $5,253.97. Record at 324.

First Federal declared the Parnells in default in July, 1984. On October 2, 1984, the McAdamses brought suit against the Parnells, Edwards Realtors, and First Federal. The McAdamses asked that the Parnells be ordered to convey the property to them free of all liens and encumbrances. Against Edwards Realtors, the McAdamses alleged that Taylor failed to pay First Federal the money received from the McAdamses at closing to satisfy the lien, and asked for a judgment against Edwards Realtors to pay the remaining debt on the mortgage lien, and for attorney fees. Against First Federal, the McAdamses charged violations of federal and state consumer credit laws. They asked for attorney fees and requested the trial court to quiet title in the McAdamses' name free of the mortgage upon payment to First Federal of the remaining amount due the Parnells under the land sale contract. First Federal then asked for a judgment against the Parnells for the amount due under the mortgage and for mortgage foreclosure against the McAdamses. The McAdamses tendered to the clerk of the court the unpaid principal sum on the land contract, plus interest, in the sum of $6,248.69. The McAdamses also gave to First Federal notice of cancellation and rescission of loans made by First Federal to the Parnells.

The Parnells subsequently moved away from Indiana, and the trial court found it had no jurisdiction over their property except for the payment by the McAdamses into court of the final installment under the land sale contract.

The unpaid balance of the mortgage as of the first date of the two-day trial was $32,964.03, with daily interest accruing at $14.65 per day. After the trial, the trial court entered judgment for First Federal against the Parnells for the sum which the McAdamses deposited into court, and also ordered that the payment of that sum to First Federal would satisfy and release the lien which First Federal held on the McAdamses' property, which in effect denied foreclosure. The trial court also entered judgment for the McAdamses against Edwards Realtors and First Federal in the amount of $7,500 for attorney fees, plus costs of the action. Specific findings of fact and conclusions of law were made by the trial court at the request of the McAdamses. Both First Federal and Edwards Realtors appeal from the trial court's denial of their motions to correct errors.

ISSUES

Edwards Realtors raises three issues, but we need address only the following two: ¹

1. Was the McAdamses' action barred by the statute of limitations?

2. Did the trial court err in awarding attorney fees?

First Federal adequately raises two issues, which we restate as:

1. Did the trial court err in finding that First Federal violated various provisions of federal and state consumer credit laws?

2. Were the trial court's findings and conclusions, that First Federal's mortgage lien was subordinate to the McAdamses' interest in the property and that First Federal was entitled to only approximately $6,200 on its mortgage debt, contrary to law?

DECISION

A. ISSUES BETWEEN EDWARDS REALTORS AND THE McADAMSES

The McAdamses were denied leave by this court to file a brief in excess of fifty pages. They then chose to file a brief countering only those arguments presented by First Federal, and have presented no arguments in regard to Edwards...