Loving v. Ponderosa Systems, Inc., 685S251

• Decision Date: 26 June 1985
• Docket Number: No. 685S251,685S251
• Parties: Edwin N. LOVING and Joan C. Loving, Appellants (Cross-Claimants, and Counterdefendants), v. PONDEROSA SYSTEMS, INC., Appellee (Cross-Defendant, and Counterclaimant).
• Court: Indiana Supreme Court

Page 531

479 N.E.2d 531

Edwin N. LOVING and Joan C. Loving, Appellants (Cross-Claimants, and Counterdefendants), v. PONDEROSA SYSTEMS, INC., Appellee (Cross-Defendant, and Counterclaimant).

No. 685S251.

Supreme Court of Indiana.

June 26, 1985.

Max W. Hittle, Jr., R. Matthew Neff, Krieg DeBault Alexander & Capehart, Indianapolis, and William H. Andrews, Baker, Barnhart & Andrews, Bloomington, for appellants.

James A. Strain, Stephen W. Lee, Barnes & Thornburg, Indianapolis, for appellee.

ON CIVIL PETITION TO TRANSFER

PRENTICE, Justice.

This cause is before us upon the petition of Ponderosa (Appellee) to transfer it from the Court of Appeals, First District, that court having determined the issues in favor of the Lovings (Appellants) by decision and opinion published at 444 N.E.2d 896.

Transfer is granted, and said decision and opinion of the Court of Appeals is ordered vacated.

The controversy arises out of a sale and leaseback of improved real estate (premises), the mortgage financing of the premises, the destruction or substantial damage by fire of the improvements thereon, their reconstruction by Ponderosa, and the payment of casualty insurance policy proceeds to Lovings, Ponderosa and Lovings' mortgagee (Bank) jointly.

The Court of Appeals (Judge Neal, dissenting) held that the Bank was entitled to preempt so much of the insurance proceeds as was required to pay the balance owing upon the mortgage debt and that Lovings were entitled to the windfall of such payment of their debt, while Ponderosa was required to restore the improvements without benefit of such insurance proceeds.

In June, 1972, Ponderosa sold and conveyed the premises to Lovings and simultaneously leased them from Lovings for a period of twenty-five years, and Lovings mortgaged them to the Bank to secure a loan of $230,000.00 payable in monthly installments, the final installment being due and payable August 6, 1987. Among other obligations provided by the mortgage, Lovings were required to keep the premises in good repair and insured against loss by fire, to provide the Bank with the insurance policies evidencing such insurance, and to pay the premiums thereon. Additionally, said policies were to contain mortgage clauses satisfactory to the Bank, and the Bank was given the option, in case of loss, to apply the proceeds of the insurance to the payment of the indebtedness, whether or not then due.

The terms of the lease provided that Ponderosa was obligated to repair or replace the improvements if damaged or destroyed and to keep the premises insured against fire loss, at its expense, in an amount equal to the replacement value, less certain components with which we need not be concerned, and that the policies of such insurance would be "for the benefit of and payable to [Lovings, Ponderosa and Lovings' mortgagee, if any] as their respective interests may appear." (Emphasis added.)

As a part of the transaction, Lovings and Ponderosa also executed a conditional assignment of rents by the terms of which Ponderosa subordinated its leasehold interest in the premises to the Bank.

The lease further provided:

"(b) In the event of any damage or destruction to improvements on the leased premises during the initial fifteen (15) years of this Lease, the Tenant shall forthwith repair the damages or destroyed improvements, * * * The Landlord, in such event, shall, to the extent and at the times the insurer and the Landlord's mortgagee make the proceeds of the insurance available for such purposes, reimburse the Tenant for the costs of making such repairs, restoration, rebuilding and replacements; * * * To the extent, if any, that the proceeds of insurance made available for such purposes are insufficient to pay the entire costs of making such repairs, restorations, rebuilding and replacements, the Tenant shall bear such costs. * * * "

Ponderosa procured a policy of insurance, as required by the lease, and paid the premiums thereon. Ponderosa was therein named as the party insured, and Lovings were named as additional parties insured. A "Standard Mortgage Clause" endorsement was also provided, by which the proceeds of the policy, if any accrued, were made payable to the Bank, as its "interest may appear, * * *."

In the seventh year of the lease and mortgage, on December 10, 1979, a fire severely damaged or destroyed the improvements on the premises, and Ponderosa proceeded to have them reconstructed, which reconstruction was completed on June 23, 1980.

Following destruction of the improvements, Ponderosa ceased paying rents to Lovings, and Lovings ceased paying mortgage payments to the Bank. The Bank filed suit upon its note and to foreclose its mortgage on June 6, 1980, naming both Lovings and Ponderosa as parties defendant, and also seeking a declaration of its entitlement to the insurance proceeds, to the extent necessary to pay the balance then owing from Lovings upon the note and mortgage. The Lovings responded with an answer to the Bank's complaint and a cross-claim against Ponderosa, seeking a declaration of rights with respect to the insurance funds, and Ponderosa also answered the Bank's complaint and filed a cross-complaint against Lovings which also sought a declaration of rights with respect to the insurance proceeds.

On June 19, 1980, the insurance company issued its draft in the sum of $472,417.00, payable to the Bank, Lovings and Ponderosa; and on July 29, 1980, the Bank, Lovings and Ponderosa entered into an agreement which, in effect, released $297,417.00 of the insurance to Ponderosa, for application to the costs of reconstruction of the improvements, and the balance of $175,000.00 to the Bank to be held by it pending determination of entitlement thereto among the parties.

On November 28, 1980, Lovings filed a motion for summary judgment, and on February 6, 1981 the Bank also filed a motion for summary judgment. No discovery was had, and, although Lovings filed an affidavit with its motion and "Statement of Facts" and a supplemental affidavit in support of the motion, those documents were largely conclusory rather than factual in nature; and the trial court made its determination upon the facts as hereinbefore related. Partial summary judgment was granted awarding $149,529.01 of the aforementioned $175,000.00 to the Bank in full satisfaction of its note and mortgage, thereby rendering its foreclosure action moot. The balance of $25,470.99 was awarded to Ponderosa for application to the cost of reconstruction, with the excess, if any, to be paid by Ponderosa to Lovings. Other issues relating to certain mechanic's liens filed by other parties and possible damages owing to Lovings by Ponderosa relative to such liens were held in abeyance pending further proceedings.

Ponderosa and Lovings both filed motions to correct errors. The motion of Lovings related to a finding of default by it, an issue with which we need not here be concerned. The motion of Ponderosa charged error in awarding the balance owing upon Lovings' mortgage paid from the insurance proceeds and, alternatively, in not awarding it a judgment against Lovings in an amount equal to the Bank's award and an equitable lien against the premises. The trial court sustained both motions to correct errors on January 26, 1982, ordered the grant of partial summary judgment vacated and proceeded to deny the summary judgment motions of both Lovings and the Bank.

Although it filed no motion to dismiss the appeal, Ponderosa, by its brief to the Court of Appeals, urges that the appeal be dismissed, and we agree that it should have been, inasmuch as the denial of a motion for summary judgment is not a final judgment from which an appeal may be taken, because no rights have been thereby foreclosed. An interlocutory appeal may sometimes be had from such denial but only in accordance with Appellate Rule 4(B)(6), as in Schideler, et al. v. Dwyer (1981), 275 Ind. 270, 417 N.E.2d 281.

The Court of Appeals erroneously held that Lovings were entitled to maintain the appeal under Trial Rule 59(F) and Appellate Rule 4(A), observing that Lovings had been prejudiced by the ruling upon the Ponderosa motion to correct errors. This would be a correct view under P-M Gas & Wash Co. v. Smith (1978), 268 Ind. 297, 301, 375 N.E.2d 592, 594, wherein the issue was whether or not a new motion to correct errors was required when relief had been granted upon an earlier motion. However, that case is not applicable here, the distinction being that here there has been no final judgment. The rights of the parties were not, thereby, determined. Rather, they were merely placed in abeyance pending further proceedings--where they would have been had the motions been denied in the first instance.

The appeal is, therefore, subject to dismissal; but inasmuch as briefing has been completed and because of the inordinate delay heretofore occasioned, we elect to determine it upon its merits.

It should be here noted that the Bank has not appealed. However, a determination of its right to apply a portion of the insurance proceeds to the payment of the Lovings' debt is essential to a determination of the issues between Lovings and Ponderosa. Unless the Bank's entitlement to the proceeds, to the extent required to pay the debt, is sustained, the funds are "available" for application to Ponderosa's cost of reconstruction, and the issues between Ponderosa and Lovings are moot.

The Court of Appeals, after a lengthy review of principles applicable for the interpretation of contracts, determined that there was no ambiguity or conflicting provisions in the documents to preclude the application of the insurance proceeds to the payment of the balance owing upon Lovings' note,...