Lake Mortg. Co., Inc. v. Federal Nat. Mortg. Ass'n, 3--273A23

• Decision Date: 26 March 1974
• Docket Number: No. 3--273A23,3--273A23
• Citation: 308 N.E.2d 739,159 Ind.App. 605
• Parties: LAKE MORTGAGE COMPANY, INC., and Nick Roman, Jr., Receiver, (Third-Party Defendants Below), Appellants, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, a Corporation Organized and Existing Under the Laws of the United States, (Plaintiff Below); Thomas E. Schmal and Betty L. Schmal, Husband and Wife, (Defendants and Cross-Plaintiffs Below); James Ernst and Joyce Ernst, Husband and Wife, (Defendants, Third-Party Plaintiffs and Cross-Plaintiffs Below), Appellees.
• Court: Indiana Appellate Court

Page 739

308 N.E.2d 739

159 Ind.App. 605

LAKE MORTGAGE COMPANY, INC., and Nick Roman, Jr., Receiver, (Third-Party Defendants Below), Appellants, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION, a Corporation

Organized and Existing Under the Laws of the

United States, (Plaintiff Below);

Thomas E. Schmal and Betty L. Schmal, Husband and Wife,

(Defendants and Cross-Plaintiffs Below);

James Ernst and Joyce Ernst, Husband and Wife, (Defendants,

Third-Party Plaintiffs and Cross-Plaintiffs

Below), Appellees.

No. 3--273A23.

Court of Appeals of Indiana, Third District.

March 26, 1974.

Rehearing Denied May 8, 1974.

Fred M. Cuppy, Gerald K. Hrebec, Thomas, Burke, Dyerly & Cuppy, Gary, for appellants.

Albert C. Hand, Michael L. Muenich, Hand & Muenich, Hammond, for James and Joyce Ernst.

William F. Carroll, Carroll, Barber & Sorbello, Crown Point, for Thomas E. and Betty L. Schmal.

HOFFMAN, Chief Judge.

This is an appeal by third-party defendants-appellants Lake Mortgage Company, Inc. (Mortgage Co.) and Nick Roman, Jr., receiver, from the granting of a new trial on a motion to correct errors filed by defendants cross-plaintiffs and third-party plaintiffs-appellees James and Joyce Ernst.

On December 1, 1970, plaintiff Federal National Mortgage Association (Federal) filed a complaint for foreclosure of a mortgage on certain properly 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 property 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 Mortgage Co. and the Schmals. 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.

Count I of the Ernsts' amended third-party complaint and cross-claim alleged, inter alia, that the Ernsts were the equitable owners of the real estate in question and that they had purchased the real estate from the Schmals under the terms of a real estate land contract; that by reason of representations and actions on the part of the Schmals and Mortgage Co., the Ernsts took possession of the real estate and made payments thereon with the knowledge of Schmals and Mortgage Co.; and 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.

Count III alleged, inter alia, that the Ernsts deposited in escrow with the Schmals, Mortgage Co. and attorney William Carroll, as trustee, a sum totaling $1,200, which sum was based upon certain arrangements among the parties for possible settlement of the dispute; that the Ernsts were required to borrow the monies deposited in escrow and were liable therefor; and that notwithstanding the failure of the parties to settle the dispute, the Schmals, Mortgage Co. and William Carroll, trustee, wilfully failed and refused upon demand to return such sums.

Count V alleged, inter alia, that an order had been obtained from the court appointing Nick Roman, Jr., as receiver for the protection of the property; that the Schmals, Mortgage Co. and Roman at all times knew that the Ernsts wanted and attempted to pay monies due on the mortgage; that at no time after December 1, 1970, did the receiver contact the Ernsts in an attempt to carry out his duties under the receivership; that the receiver permitted the Ernsts to remain in possession of the real estate; that the Schmals filed an affidavit for possession of the real estate; that the court approved such affidavit and set bond in the amount of $2,000, which the Ernsts were unable to pay; and that thereafter the Schmals evicted the Ernsts from the real estate. Count V further alleged that Roman, as receiver, made no objection to the Schmals' affidavit for immediate possession and did not object to the Ernsts' eviction in accordance with a certain arrangement between the Schmals, Mortgage Co. and Roman; and that by reason of the actions of the abovementioned parties, the Ernsts were wrongfully evicted and suffered damage thereby.

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 on its complaint for foreclosure.

Thomas Schmal and the Ernsts filed separate motions 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.'

On December 19, 1972, Mortgage Co. and Roman filed a motion requesting the trial court to clarify its ruling ordering a new trial by entering special findings of fact upon each material issue or element of the claim or defense upon which the new trial was granted. The trial court denied the motion and stated that 'the evidence in this case may indicate that Nick Roman, Jr., Receiver herein, may not have discharged his duties fully * * *.' 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 servicing 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...