Ernst v. Schmal

• Decision Date: 28 March 1974
• Docket Number: No. 3--373A24,3--373A24
• Citation: 308 N.E.2d 732
• Parties: James ERNST and Joyce Ernst, husband and wife, Appellants, v. Thomas E. SCHMAL et al., Appellees.
• Court: Indiana Appellate Court

Page 732

308 N.E.2d 732

James ERNST and Joyce Ernst, husband and wife, Appellants, v. Thomas E. SCHMAL et al., Appellees.

No. 3--373A24.

Court of Appeals of Indiana, Third District.

March 28, 1974.

Albert C. Hand and Michael L. Muenich, of Hand & Muenich, Hammond, for appellants.

William F. Carroll, of Carroll Barber & Sorbello, Crown Point, for appellees.

HOFFMAN, Chief Judge.

This is an appeal by defendants, cross-plaintiffs and third-party plaintiffs-appellants James and Joyce Ernst from the granting of a new trial on a motion to correct errors filed by defendant and cross-defendant Thomas E. Schmal.

On December 1, 1970, plaintiff Federal National Mortgage Association (Federal) filed a complaint for foreclosure of a mortgage which it held on certain property located in Crown Point, Indiana. The complaint named Thomas E. and Betty L. Schmal and James and Joyce Ernst as defendants in the action. Pursuant to a petition filed by Federal on the same date, Nick Roman, Jr. was appointed receiver of the real estate in question.

On December 21, 1970, the Ernsts, who had purchased the property from the Schmals under the terms of a real estate land contract, filed a third-party complaint and cross-claim against the Schmals and Lake Mortgage Company, Inc. (Mortgage Co.)--the local servicing agent for the mortgage. Thereafter, on March 16, 1971, the Schmals filed a cross-claim against the Ernsts to foreclose the real estate land contract, and on May 19, 1971, filed an affidavit for immediate possession. The property was subsequently turned over to the Schmals on September 9, 1971. On November 19, 1971, the Ernsts filed an amended third-party complaint and cross-claim against Mortgage Co., Federal, the Schmals, Nick Roman, Jr. as receiver, and William Carroll as trustee of a sum deposited in escrow by the Ernsts to be held subject to an agreement of settlement.

Count III of the Ernsts' five-count amended third-party complaint and cross-claim was, however, subsequently dismissed to the extent that it pertained to William Carroll, and Counts II and IV were withdrawn.

The remainder of the Ernsts' amended third-party complaint and cross-claim alleged, inter alia, that the Schmals and Mortgage Co. entered into some arrangement between themselves to cause the Ernsts to become involved as defendants in an action to foreclose a mortgage on the real estate. It was also alleged that the Schmals, Mortgage Co. and Nick Roman, Jr. receiver, entered into some arrangement to wrongfully remove the Ernsts from possession of the real estate.

Trial on all issues except those involved in Federal's foreclosure action was commenced before a jury on March 20, 1972. At the close of all of the evidence, Mortgage Co., the Schmals and Roman moved for judgment on the evidence. After argument, the trial court entered judgment for Mortgage Co., Roman and Betty Schmal. The case against Thomas Schmal was then submitted to the jury. Thereafter, the jury returned a verdict for cross-plaintiffs James and Joyce Ernst in the amount of $12,500; and on March 30, 1972, the trial court entered judgment on the verdict. Subsequently, on May 8, 1972, the trial court entered judgment for Federal upon its complaint for foreclosure.

Thomas Schmal filed a motion to correct errors and, after a hearing on December 5, 1972, the trial court stated 'that because of the complexity of the issues herein, the jury may have been confused in its conclusions and verdict, and the Court now grants a new trial in this cause and the verdict rendered is held for naught.' The instant appeal followed.

The record discloses that during 1962 Kenneth R. and Jeanette Cunningham gave a mortgage to secure part of the purchase price of certain property located in Crown Point, Indiana. The mortgage note, in the amount of $11,000, was made payable to Neal J. Hardy, as Federal Housing Commissioner. On March 7, 1963, the note was assigned to Federal National Mortgage Association. Thereafter, the Cunninghams conveyed the property in question to Robert L. and Bette T. Golden by warranty deed. On May 4, 1963, the Goldens sold the property to the Ernsts under the terms of a real estate land contract which provided for payments of $95 per month on a purchase price of $12,300. From 1964 to 1969, Thomas E. Schmal, a real estate broker in Crown Point, collected mortgage payments from Mr. Golden and forwarded them to Mortgage Co.--Federal's local serving agent for the account. On June 12, 1969, the Goldens conveyed the property by warranty deed to the Schmals.

The testimony of Mr. Michael Plinovich, Jr., the collection manager for Mortgage Co., revealed that the mortgage account in question had been frequently delinquent since 1964. Mr. Plinovich stated that during 1969 he had recommended to Federal that foreclosure proceedings be commenced. However, this recommendation was later withdrawn when the account was returned to current status by Mr. Schmal. It was also disclosed that no mortgage payments were received by Mortgage Co. after July 8, 1970. Mr. Plinovich again recommended foreclosure on October 9, 1970, and authorization to commence proceedings was received from Federal on October 22, 1970.

In October, 1970, James Ernst went to the office of Mortgage Co. to inquire about a homeowners policy on the property in question. Mr. Ernst testified that at that time he was informed by Mr. Plinovich that his 'house was going into foreclosure' and that upon foreclosure he would 'have the first chance to pick up the mortgage.' Upon learning of the impending foreclosure, Mr. Ernst tendered.$99 for the October mortgage payment to Mr. Plinovich. However, the money was refused and Mr. Ernst was advised by Mr. Plinovich not to make any payments to Mr. Schmal and was further advised to retain an attorney.

Subsequently, Federal filed its complaint for foreclosure and Mr. Roman was appointed receiver. He permitted the Ernsts to remain in possession of the property; and, in a letter dated December 9, 1970, requested them to send the December rent to him in his capacity as receiver. No rents were, however, collected and Mr. Roman did not direct any further correspondence to the Ernsts.

On May 19, 1971, after the filing of Ernsts' original third-party complaint and cross-claim and the Schmals' cross-claim for foreclosure of the real estate land contract, the Schmals filed an affidavit for immediate possession of the real estate. On May 20, 1971, a writ was issued by the Clerk of the Lake County Superior Court ordering the sheriff to take possession of the property. The property was thereafter turned over to the Schmals.

During the summer of 1971, attempts were made to settle the dispute and the Ernsts advanced $1,200 to the Schmals through the Schmals' attorney, William Carroll, to be held subject to an agreement of settlement. This amount, however, constituted only partial payment of the amount then due under the land contract. When negotiations failed, the money was not returned to the Ernsts upon demand and was subsequently paid into court.

The Schmals, in October, 1971, rented the property in question to another party for the sum of $135 per month. None of the rents collected were turned over to the receiver and the receiver, after learning through periodic inspection of the property that a new tenant was moving in, did not contact Mr. Schmal or attempt to remove him from possession.

Mr. Roman filed his final report as receiver on July 14, 1972, and on November 10, 1972, the trial court approved the final report and discharged the receiver.

The issue before this court is whether the trial court erred in granting a new trial on the motion to correct errors filed by defendant and cross-defendant Thomas E. Schmal.

The first question, however, to be considered, is whether the statement by the trial court, 'that because of the complexity of the issues herein, the jury may have been confused in its conclusions and verdict', constitutes a proper and sufficient reason for granting a new trial.

In resolving this issue we are mindful of the rulings in Memorial Hospital of South Bend, Inc. v. Scott (1973), Ind., 300 N.E.2d 50; and Bailey v. Kain (1963), 135 Ind.App. 657, 192 N.E.2d 486 (transfer denied), which hold that the trial court's action in granting a new trial is accorded a strong presumption of correctness.

On this point, the court in Bailey at 663 of 135 Ind.App., at 488--489 of 192 N.E.2d, stated:

'We will be hesitant to overrule a trial court in granting a motion for new trial for the reason that there are strong presumptions in favor of the trial court's action, and it is therefore a sound precedent which dictates that this court should be reluctant to second guess a trial court in granting a motion for new trial. (Citations omitted.)

'The trial judge is more than a mere umpire; his duties extend beyond the bounds of confining the evidence to the issues and instructing the jury on the law of the case; it was his duty to hear the case along with the jury; he had the opportunity to see and know the jury; * * *.' (Footnote omitted.)

Rule TR. 59(E), Ind. Rules of Procedure, IC 1971, 34--5--1--1, provides that '(i)f corrective relief (including a new trial) is granted, the court shall specify the general reasons therefor.' Only in the case in which a new trial is granted for the general reason that 'the verdict, findings or judgment do not accord with the evidence', shall the court be required to 'make special findings of fact upon each material issue or element of the claim or defense upon which a new trial is granted.' Rule TR. 59(E), supra.

It does not follow from the general reason stated by the trial court in the case at bar that the court has necessarily weighed the evidence and reached the conclusion that the jury's verdict is not in accord with the evidence. This is not implicit in the reason nor may it, in view of the holdings in Memorial Hospital of South Bend, Inc. v. Scott, sup...