Huntington Mortg. Co. v. DeBrota

• Decision Date: 06 November 1998
• Docket Number: No. 49A05-9708-CV-361,49A05-9708-CV-361
• Parties: The HUNTINGTON MORTGAGE COMPANY, Appellant-Defendant, v. Steven D. DeBROTA and Mark K. Dudley, Individually and on behalf of themselves and others similarly situated, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

Page 160

703 N.E.2d 160

The HUNTINGTON MORTGAGE COMPANY, Appellant-Defendant, v. Steven D. DeBROTA and Mark K. Dudley, Individually and on

behalf of themselves and others similarly

situated, Appellees-Plaintiffs.

No. 49A05-9708-CV-361.

Court of Appeals of Indiana.

Nov. 6, 1998.

Evan E. Steger, Kristin L. Altice, Ice Miller Donadio & Ryan, Indianapolis, for Appellant-Defendant.

Steven R. Schafer, Kroger Gardis & Regas, Indianapolis, William E. Cumberland, Mortgage Bankers Assn. of America, Washington, DC, for Amicus Curiae, Mortgage Bankers Association of America.

Theodore J. Nowacki, Bose McKinney & Evans, Indianapolis, for Amici Curiae, Indiana League of Savings Institutions, Inc. and Indiana Bankers Association, Inc.

T. Neil Bemenderfer, Mark R. Smith, Smith & Bemenderfer, Indianapolis, Richard A. Freese, Langston Frazer Sweet & Freese, Birmingham, for Appellees-Plaintiffs.

OPINION

SHARPNACK, Chief Judge.

This case comes to us on interlocutory appeal. Huntington Mortgage Company ("Huntington") appeals the trial court's denial of their motion for summary judgment in favor of the plaintiff-appellees, Steven D. Debrota and Mark K. Dudley (collectively "Appellees"). Huntington raises two issues which we restate as follows:

1) whether the Appellees were contractually obligated to pay private mortgage insurance ("PMI") premiums under the terms and conditions of their mortgage agreements with Huntington; and

2) whether the relationship between Appellees and Huntington was one that required Huntington to make certain disclosures to Appellees regarding PMI.

We reverse.

Facts

The undisputed facts follow. The Appellees each financed the purchase of homes with mortgages from Huntington, a mortgage lender and servicer. Appellees were either unable or unwilling to make down payments of 20% of the purchase price necessary to obtain conventional mortgages. The secondary mortgage market ¹ requires that when the loan-to-value ratio ("LTV") ² is 80% or greater, premiums for PMI ³ must be paid by the borrower. The Appellees each secured their mortgages with Fannie Mae/Freddie Mac Uniform Instruments. Following the execution of the mortgage agreements, the Appellees began paying the PMI premiums. Huntington forwarded these premiums to the insurance carriers who then issued the PMI policies.

The Appellees filed a class action suit against Huntington. Appellees' Amended Complaint set forth seven causes of action: (1) breach of contract; (2) suppression of material facts; (3) conversion; (4) civil conspiracy; (5) breach of fiduciary duty; (6) common law bailment; and (7) unjust enrichment. Huntington then filed a motion for summary judgment asserting that the Appellees were contractually obligated to pay PMI premiums for the life of the mortgage and that the relationship between Huntington and Appellees did not require Huntington to make certain disclosures to Appellees regarding PMI. The trial court denied Huntington's motion for summary judgment. Huntington then filed its praecipe for this interlocutory appeal.

Standard of Review

The sole issue raised for our review is whether the trial court erred in denying summary judgment. When we review a trial court's denial of a motion for summary judgment, we are bound by the same standard as the trial court. Ayres v. Indian Heights Volunteer Fire Dep't, Inc., 493 N.E.2d 1229, 1234 (Ind.1986); see T.R. 56. The appellant bears the burden of proving the trial court erred in determining that there were genuine issues of material fact or that the moving party was not entitled to judgment as a matter of law. Rosi v. Business Furniture Corp., 615 N.E.2d 431, 434 (Ind.1993). Any doubt as to the existence of an issue of material fact, or an inference to be drawn from the facts, must be resolved in favor of the nonmovant. Cowe v. Forum Group, Inc., 575 N.E.2d 630, 633 (Ind.1991). "A genuine issue of material fact exists where facts concerning an issue which would dispose of the litigation are in dispute or where the undisputed facts are capable of supporting conflicting inferences on such an issue." Scott v Bodor, Inc., 571 N.E.2d 313, 318 (Ind.Ct.App.1991).

Discussion

I.

The first issue raised is whether the Appellees were contractually obligated to pay PMI premiums under the terms and conditions of their mortgage agreements with Huntington. Appellees assert that their mortgage contracts did not require them to pay "one dollar" of PMI premiums and that it was a breach of contract for Huntington to collect the premiums. Appellees' brief, p. 17. In the alternative, they argue that they are not obligated to pay PMI once they reach 20% equity. We disagree.

It is well settled that a mortgage agreement is a contract. Cobbum v. Ameritrust Nat'l Bank, Michiana, 580 N.E.2d 969, 971 (Ind.Ct.App.1991). As such, the individual parties have a right to define their mutual rights and obligations. Id. It is not within the province of this court to make a new contract for the parties or to ignore or eliminate any provisions in the instrument. Id. "The meaning of the agreement is to be ascertained by an examination of the entire contract. Particular words or paragraphs cannot be isolated from the remainder of the agreement. It must be read as a whole." In re Buntin, 496 N.E.2d 1351, 1353 (Ind.Ct.App.1986), reh'g denied, trans. denied. "It is commonly accepted that 'where other instruments are executed contemporaneously with a mortgage and are part of the same transaction, a mortgage may be modified by other instruments and all the documents are to be read together to determine and give effect to the intention of the parties.' " Merchants Nat'l Bank & Trust Co. of Indianapolis v. H.L.C. Enterprises, Inc., 441 N.E.2d 509, 512-513 (Ind.Ct.App.1982) (quoting Boyette v. Carden, 347 So.2d 759, 761 (Fla.Dist.Ct.App.1977)). The language of the mortgage and supporting instruments, unless it is ambiguous, represents the intention of the parties and is controlling. Id. at 513.

Here, the mortgage agreements entered into by both Debrota and Dudley contained the following provisions relating to the payment of PMI premiums:

"2. Funds for Taxes and Insurance. Subject to applicable law or to a written waiver by Lender, Borrower shall pay to Lender on the day monthly payments are due under the Note, until the Note is paid in full, a sum ("Funds") for: ... (e) yearly mortgage insurance premiums, if any; and (f) any sums payable by Borrower to Lender, in accordance with the provisions of paragraph 8, in lieu of the payments of mortgage insurance premiums.

* * * * *

8. Mortgage Insurance. If Lender required mortgage insurance as a condition of making the loan secured by this Security Investment, Borrower shall pay the premiums required to maintain mortgage insurance in effect.... Borrower shall pay the premiums required to maintain mortgage insurance in effect ... until the requirement for mortgage insurance ends in accordance with any written agreement between Borrower and Lender or applicable law."

Record, pp. 123-125, 130-132 (emphasis added).

We first examine the language of paragraph eight of the agreement. This paragraph clearly states that if PMI was a condition of making the loan the borrower "shall pay the premiums." Id. The Mortgage Commitment Letter setting forth the terms and conditions of Huntington's commitment to the Appellees stated the following:

"THIS COMMITMENT IS CONTINGENT UPON THE CONDITIONS AS NUMBERED BELOW:

* * * * *

(4) Receipt of the mortgage insurance approval by coverage at 22%, AT TIME OF CLOSING."

Record, pp. 137, 142. Because PMI was a condition of the loan commitment, the plain language of paragraph eight makes payment of PMI premiums a term of the agreement.

Appellees, however, take contention with the phrase "until the requirement for mortgage insurance ends in accordance with any written agreement between Borrower and Lender...." Record, pp. 125, 132. They assert that this phrase required Huntington to enter into a separate written agreement requiring the payment of PMI premiums. We find this to be a strained interpretation of the language. The most obvious meaning of the phrase is that a written agreement is required to terminate the obligation to pay PMI already established by the preceding language. The phrase plainly states that the premiums must be paid until the "requirement ... ends" by any written agreement. Id. Therefore, we conclude that the language of paragraph eight of the mortgage agreement plainly establishes an obligation to pay PMI premiums and, we find no reason to construe it otherwise.

Our interpretation of the mortgage agreement, however, does not stop with paragraph eight. We must look at the agreement as a whole to fully establish the complete agreement with respect to PMI premiums. See Buntin, 496 N.E.2d at 1353. Although paragraph eight establishes the requirement of PMI payment, paragraph two specifies when and for how long such premiums must be paid. The language of this paragraph plainly requires the premiums to be paid "until the Note is paid in full." Record, pp. 123, 130. Therefore, reading the relevant provisions of the mortgage agreement as a whole, we conclude that the agreement required the Appellees to pay PMI premiums for the life of the loan unless there was a written agreement between Huntington and the Appellees that stated otherwise. ⁴ The Appellees do not suggest, nor do we find, that there was any other written agreement relating to PMI.

Furthermore, the designated evidence demonstrates that the Appellees clearly understood that they would have to pay PMI premiums because they were not making down payments of at least 20%. ⁵ In addition, the loan documents provided to the Appellees set forth the PMI premiums required on their respective loans. This evidence affirmatively establishes that the Appellees intended to be bound by the contract term for the payment of PMI.

In determining the Appellees' rights with respect to...