First Federal Sav. and Loan Ass'n of Gary v. Arena

• Decision Date: 22 July 1980
• Docket Number: No. 3-278A37,3-278A37
• Citation: 406 N.E.2d 1279
• Parties: FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF GARY, Plaintiff-Appellant, v. Michael ARENA and Grace Arena, Defendants-Appellees.
• Court: Indiana Appellate Court

Page 1279

406 N.E.2d 1279

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF GARY Plaintiff-Appellant, v. Michael ARENA and Grace Arena, Defendants-Appellees.

No. 3-278A37.

Court of Appeals of Indiana, Fourth District.

July 22, 1980.

Thomas E. Dolatowski, Glenn S. Vician, Borns, Quinn, Kopko & Lindquist, Merrillville, for plaintiff-appellant.

William F. Kane, Jr., Merrillville, for defendants-appellees.

CHIPMAN, Judge.

CASE SUMMARY

First Federal Savings and Loan Association of Gary, (First Federal), appeals from a grant of summary judgment in favor of Michael and Grace Arena, (Arenas), in a foreclosure action brought by First Federal against the Arenas and their grantee, Sanford G. Richardson, as well as various lienholders.

First Federal asserts it was erroneous for the trial court to hold that altering the mortgages' interest rate was a material change which discharged the Arenas from personal liability on the mortgages. According to First Federal, a reservation of rights clause contained in the supplemental agreements to the mortgages executed by the Arenas and First Federal, permitted First Federal in its dealings with Mr. Richardson to increase the rate of interest on the mortgages without first affording the Arenas notice or obtaining their consent, while still retaining the Arenas' liability on the mortgages. The trial court, however, found the reservation of rights clause did not authorize First Federal to so act and entered judgment in favor of the Arenas.

We affirm the judgment of the trial court.

FACTS

On May 26, 1965, the Arenas executed a note, mortgage, and supplemental agreement with First Federal. The note provided for a loan of $32,000 at an interest rate of 53/4%, and the mortgage securing this note provided for advances of up to $6,400. March 11, 1966, the Arenas were granted an advance of $5,100, and in consideration, they executed a modification and extension agreement which provided they would owe a new balance of $36,664.81, and the interest rate would be increased to 6%. A separate note, mortgage, and supplemental agreement were also executed by the Arenas in relation to this advance.

March 10, 1969, the Arenas conveyed the real estate which was the subject of both the May 26, 1965, and March 11, 1966, mortgages to Sanford G. Richardson by warranty deed subject to the two mortgages to First Federal. ¹ The same day, without notice After June 27, 1975, Richardson failed to make the payments due under the March 10, 1969, modification and extension agreement. As a result, a default on the mortgages and notes occurred and a suit in foreclosure was filed on behalf of First Federal against the Arenas, Richardson, and several lienholders.

to or the consent of the Arenas, Mr. Richardson and First Federal entered into a modification and extension agreement, under the terms of which Richardson assumed both of the mortgages in question, and the time for payment was extended to twenty years; there was also a change in the interest rate from 6% to 71/4%. Thus, this agreement, signed only by Richardson and First Federal, was designed to be a modification of First Federal's earlier agreement with the Arenas by extending the time of payment and modifying the terms of payment to which the Arenas and First Federal had agreed.

ISSUE

Before setting forth the issue before us, it appears imperative we reiterate that all allegations of error claimed to have occurred prior to the filing of the motion to correct errors must be specifically set forth within that motion in order to preserve the alleged error for appellate review. In First Federal's motion to correct errors it raised one broad allegation of error. On appeal, First Federal has attempted to raise tangential issues not heretofore specifically presented. Having sown the seed to bring forth one allegation of error, First Federal can not expect to now cultivate a garden of many on appeal. We, therefore, confine our review to whether the entry of summary judgment was "contrary to the great weight of authority and law which has held that in a factual situation of the type that exists in this case, there should be no discharge of personal liability as to the original mortgagors, the Arenas." ² Thus, the sole question which has been duly and properly preserved for our consideration is the propriety of granting the Arenas' motion for summary judgment.

Before considering the merits of the respective arguments, we note the standard of review involved in a summary judgment. It is well settled that a motion for summary judgment may be sustained only where the pleadings and other matters filed with the court reveal no genuine issue as to any material fact exists, and the moving party is entitled to judgment as a matter of law. Ind.Rules of Procedure, Trial Rule 56(C); Randolph v. Wolff, (1978) Ind.App., 374 N.E.2d 533; Johnson v. Motors Dispatch, Inc., (1977) Ind.App., 360 N.E.2d 224; Letson v. Lowmaster, (1976) 168 Ind.App. 159, 341 N.E.2d 785. Moreover, in determining whether a genuine issue of material fact exists, the facts set forth by the opponent must be taken as true, and all doubts must be resolved against the proponent of the motion. Crase v. Highland Village Value Plus Pharmacy, (1978) Ind.App., 374 N.E.2d 58; Levy Company, Inc. v. State Board of Tax Commissioners, (1977) Ind.App., 365 N.E.2d 796; Union State Bank v.

Williams, (1976) Ind.App., 348 N.E.2d 683. With this standard of review in mind, we now address First Federal's appeal.

DECISION

CONCLUSION By reason of an expressed provision to that effect in the supplemental agreements between the Arenas and First Federal, the Arenas were not released from liability upon extension of the mortgage in the agreement between Mr. Richardson and First Federal; however, this agreement not only extended the time for payment, but it also modified the terms of payment by increasing the interest rate. It is our opinion the trial court properly found the Arenas had not consented to such a change in interest rates and, therefore, were released from liability. ³ Arenas' grantee and First Federal could not modify the original mortgagors' agreement without the mortgagors' consent.

The focal point in this controversy is the meaning to be accorded a reservation of rights clause which appeared in the supplemental agreement executed by the Arenas when they obtained the initial mortgage and later secured the advance. The agreement provided:

"THE UNDERSIGNED, Michael Arena and Grace Arena, Husband and Wife, . . . , hereinafter referred to as the Mortgagor, hereby executes and delivers to FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF GARY, . . . , hereinafter referred to as the Mortgagee, this Supplemental Agreement, pursuant to a Mortgage executed and delivered concurrently herewith, and this Supplemental Agreement is expressly made a part of said Mortgage, . . . .

THE MORTGAGOR COVENANTS:

6. That in the event the ownership of said property or any part thereof becomes vested in a person other than the Mortgagor, the Mortgagee may, without notice to the Mortgagor, deal with such successor or successors in interest with reference to this mortgage and the debt hereby secured in the same manner as with the Mortgagor, and may forbear to sue or may extend time for payment of the debt, secured hereby, without discharging or in any way affecting the liability of the Mortgagor hereunder or upon the debt hereby secured;"

First Federal asserts the reservation of rights language set out above permitted it, in dealing with Richardson, to increase the interest rate and extend the time of payment without first obtaining the Arenas' consent while still retaining their liability. Appellant takes the position that the portion of paragraph six providing for no discharge modified forbearing to sue and extending time for payment as well as dealing in the same manner as with the mortgagor; therefore, since the interest rate was increased when the Arenas were given their additional advance, according to First Federal, raising the interest rate in its agreement with Richardson would merely be dealing with him in the same manner as it had dealt with the Arenas and, consequently, should not result in a discharge.

The Arenas, on the other hand, contend the reservation of rights clause in the Supplemental Agreement made no reference to the alteration or modification of the interest rate but rather, referred only to an extension of the time for payment or the decision to forbear to sue.

While it is true paragraph six indicates First Federal could deal with successors in interest to the mortgage in the same manner as with the mortgagor, we hold the resolution of whether this meant First Federal and the Arenas' grantee would be permitted to increase the interest rate without affecting the Arenas' liability was a question of law for the trial court since the rules applicable to construction of contracts generally apply to the construction of an agreement whereby a purchaser...