Forty-One Associates, LLC v. BLUEFIELD ASSOCIATES

• Decision Date: 01 June 2004
• Docket Number: No. 02A05-0309-CV-441.,02A05-0309-CV-441.
• Citation: 809 N.E.2d 422
• Parties: FORTY-ONE ASSOCIATES, LLC, Appellant-Defendant/Counter Claimant, v. BLUEFIELD ASSOCIATES, L.P., Appellee-Plaintiff/Counter Defendant. Forty-One Associates, LLC, Appellant-Third Party Plaintiff, v. Buster Bluefield Associates, L.P. and Buster, Inc., Appellees-Third Party Defendants.
• Court: Indiana Appellate Court

809 N.E.2d 422

FORTY-ONE ASSOCIATES, LLC, Appellant-Defendant/Counter Claimant, v. BLUEFIELD ASSOCIATES, L.P., Appellee-Plaintiff/Counter Defendant.

Forty-One Associates, LLC, Appellant-Third Party Plaintiff, v. Buster Bluefield Associates, L.P. and Buster, Inc., Appellees-Third Party Defendants.

No. 02A05-0309-CV-441.

Court of Appeals of Indiana.

June 1, 2004.

Stephen L. Fink, Matthew M. Hohman, Barnes & Thornburg, Fort Wayne, IN, Attorneys for Appellant.

Robert S. Schein, Mark R. Wenzel, Max W. Hittle, Jr., Krieg DeVault LLP, Indianapolis, IN, Attorneys for Appellees.

OPINION

BAKER, Judge.

Appellant-defendant¹ Forty-One Associates (Forty-One) appeals the trial court's denial of its motion for summary judgment and entry of summary judgment in favor of appellees-plaintiffs Bluefield Associates, L.P., Buster Bluefield Associates, L.P. and Buster, Inc. (collectively "Bluefield.")² Specifically, Forty-One argues that the trial court erred in finding that the holder of an estate for years interest in real estate is not responsible for making payments on a mortgage after its estate for years terminated and in finding that Forty-One waived its right to pursue its breach of contract and waste claims against Bluefield by accepting the assignment of Bluefield's right to enforce a lease provision against Bluefield's tenant, K-Mart. Finding that the trial court properly ruled that Forty-One was responsible for the mortgage payments and that Bluefield was released from liability by the Agreement and the K-Mart lease, we affirm.³

FACTS

On January 31, 1984, Bluefield became the owner in fee simple of 30.864 acres of real estate in Fort Wayne that has improvements totaling 776,008 square feet. At the time that Bluefield purchased the Property, it was subject to the K-Mart lease, the initial term of which was set to expire on November 13, 2003. The Property was also subject to a non-recourse in rem mortgage in favor of New York Life Insurance Company. The debt secured by the mortgage was $1,115,574.00 as of January 22, 2002. Prior to this date, K-Mart made its lease payments directly to New York Life to satisfy the amounts due under the mortgage. Under the terms of the K-Mart lease and the mortgage, the parties contemplated that the payment obligations under the mortgage would be fully satisfied by November 2003, when the initial term of the K-Mart lease expired. The K-Mart lease also required K-Mart to make all necessary and appropriate repairs to the property at its sole expense when the failure to repair or maintain the property would materially impair the economic value or the usefulness of the property. Bluefield, as the lessor, had the right to enforce this provision of the lease.

On November 7, 1990, Bluefield granted to itself an estate for years interest in the property up to and including November 13, 2003, and further granted an undivided one-half remainder interest in the property to Susan Sandelman as trustee of Fundamental Companies Trust and an undivided one-half remainder interest in the property to Susan Sandelman as trustee for the Nathan Jeffrey Trust (collectively "the Trusts"). The termination date of the estate of years was the same date as the initial termination date of the K-Mart lease.

The rights and obligations of Bluefield as owner of the estate for years and of the Trusts as owner of the remainder interests, were acknowledged and reiterated in a Two Party Agreement dated October 24, 1990. Paragraph five of the two party agreement provides:

in the event of any default under the K-Mart Lease and/or under the [mortgage] occurs anytime after the date hereof to and including November 13, 2003, the last day of the Estate for Years, ... if such default is not cured by [Bluefield] on or before the fourth (4th) day prior to the expiration of such applicable cure, the Estate for Years shall terminate immediately as of the fourth (4th) day prior to the expiration of applicable cure. For such default under the K-Mart Lease and/or under the [mortgage], notwithstanding the previous agreement of [Bluefield] and Remainderman that the Estate for Years would terminate on November 13, 2003 ... the provisions of this paragraph 5 shall be self-operative and the Estate for Years shall terminate immediately as of the fourth (4th) day prior to the expiration of the applicable cure period for such default under the K-Mart Lease and/or under the [mortgage].

Appellant's App. p. 194. Paragraph six also provided that Bluefield had no power to "amend, modify, alter, change, cancel, terminate or in any manner seek to change the terms, covenants, conditions or provisions of either the K-Mart Lease and/or the [mortgage]." Appellant's App. p. 195. Moreover, paragraph seven allowed Bluefield to refinance the mortgage, provided that the term of the new mortgage ended no later than the termination date of the original mortgage. Appellant's App. p. 195.

By deed dated October 9, 1998, the Trusts sold to Forty-One the remainder interests in the property as well as their rights and obligations under the Two Party Agreement. On several occasions throughout the year 2000, Forty-One asked that Bluefield enforce the repair provision of the lease by requiring K-Mart to make repairs to the roof. Bluefield acknowledged that K-Mart was in default, asking K-Mart to "address their maintenance responsibility under the Lease," Appellant's App. p. 209-10, but did not file a lawsuit to enforce the maintenance provisions of the K-Mart lease. On January 10, 2002, Bluefield assigned to Forty-One the right to sue K-Mart under the K-Mart lease. In a January 15, 2002 letter discussing the Assignment, Forty-One stated, "Accordingly, Bluefield is assigning its rights to enforce the maintenance provisions of the Lease to Forty-One Associates. This Assignment is in lieu of Forty-One Associates naming Bluefield as a party to the lawsuit." Appellant's App. p. 229. On January 22, 2002, K-Mart filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. As part of the bankruptcy proceedings, K-Mart subsequently repudiated the K-Mart Lease and, consequently, stopped making payments under the mortgage. Bluefield, thereafter, failed to make any payments due under the mortgage, and New York Life declared a default. Forty-One cured the default under the mortgage to avoid foreclosure of the property.

On June 7, 2002, Bluefield filed a complaint for declaratory judgment seeking a determination of its right, title, and interest in and to the property. In particular, Bluefield requested that the trial court declare that it had no right, title, interest or estate in, and thus bore no responsibility for, the property. Forty-One responded with a counterclaim against Bluefield, alleging that Bluefield had committed waste by purportedly failing to undertake repairs to the property and that Bluefield had breached a two-party agreement between Forty-One and Bluefield by waiving K-Mart's defaults under the K-Mart lease. Forty-One also sought an order declaring that Bluefield is obligated to make payment due on the mortgage and is not entitled to receive any rent payments from the property. Forty-One also filed a third-party complaint against Buster Bluefield Associates, L.P. and Buster, Inc. to answer as to any interests they had in the subject of the action.

On January 10, 2003, Forty-One and Bluefield filed cross-motions for summary judgment. Forty-One sought partial summary judgment on its breach of contract and declaratory judgment claims. Bluefield requested summary judgment seeking a determination that Forty-One became the fee simple owner of the property as of January 22, 2002, the date K-Mart filed for bankruptcy, making Forty-One solely responsible for paying all amounts remaining due on the mortgage and that Bluefield no longer had any interest in, or responsibility for, the property. Bluefield further moved for summary judgment on Forty-One's waste and breach of contract claims, on the grounds that those claims were waived by the terms of the January 10, 2002 Assignment.

On August 5, 2003, the trial court entered findings of fact and conclusions of law granting summary judgment in favor of Bluefield and against Forty-One as to all claims. Specifically, the trial court found that Bluefield's Estate for Years terminated as of January 22, 2002, that Bluefield no longer had any interest in, or responsibility for, the property pursuant to the terms of the two-party agreement, that Forty-One became the fee simple owner of the property as of January 22, 2002, and that Forty-One was thereafter responsible for possession, control and maintenance of the property and payments of the mortgage. The trial court further concluded that the mortgage was an in rem mortgage, and, therefore, Bluefield had no personal liability under the mortgage and the Forty-One waived any rights to assert claims for breach of contract or waste against Bluefield by entering in the Assignment. Forty-One now appeals.

DISCUSSION AND DECISION

I. Standard of Review

When reviewing the grant or denial of a motion for summary judgment, we use the same standard as the trial court. Bastin v. First Indiana Bank, 694 N.E.2d 740, 743 (Ind.Ct.App.1998),trans. denied. Summary judgment is appropriate only if the designated evidence shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Hemingway v. Sandoe, 676 N.E.2d 368, 369 (Ind.Ct. App.1997). We will construe the designated evidence liberally in the light most favorable to the non-moving party. Id. We will affirm summary judgment if it is sustainable on any theory or basis found in the evidentiary matter designated to the trial court. Inlow v. Inlow, 797 N.E.2d 810, 818 (Ind.Ct.App.2003).

Construction of written contracts is generally a question of law for which summary judgment is particularly appropriate. Noble Roman's,...