Mantooth v. Federal Land Bank of Louisville

• Citation: 528 N.E.2d 1132
• Decision Date: 03 October 1988
• Docket Number: No. 33A01-8608-CV-00208,33A01-8608-CV-00208
• Parties: E. Dale MANTOOTH and Brenda J. Mantooth, Defendants-Appellants, v. The FEDERAL LAND BANK OF LOUISVILLE and Rushville Production Credit Association, Plaintiffs-Appellees.
• Court: Court of Appeals of Indiana

Page 1132

528 N.E.2d 1132

E. Dale MANTOOTH and Brenda J. Mantooth, Defendants-Appellants, v. The FEDERAL LAND BANK OF LOUISVILLE and Rushville Production Credit Association, Plaintiffs-Appellees.

No. 33A01-8608-CV-00208.

Court of Appeals of Indiana First District.

Oct. 3, 1988.

Rehearing Denied Dec. 8, 1988.

John O. Worth, Worth Law Offices, C. Jack Clarkson, Clarkson Law Offices, Rushville, for defendants-appellants.

John E. Bator, Paul D. Ludwig, Cohen & Malad, Indianapolis, William H. Robbins, Rolfes, Garvey, Walker & Robbins, Greensburg, for the Federal Land Bank of Louisville.

Ben Blanton, Terrill D. Albright, Baker & Daniels, Indianapolis, for Production Credit Ass'n.

NEAL, Judge.

STATEMENT OF THE CASE

Defendants and countercomplainants, E. Dale Mantooth and Brenda J. Mantooth (the Mantooths), appeal an adverse judgment rendered in the Henry Circuit Court in litigation concerning the suits on debt and foreclosure of mortgages and security agreements pursued by the Federal Land Bank of Louisville (FLB) and Rushville Production Credit Association (PCA). The Mantooths filed a counterclaim against FLB and a cross-claim against PCA.

We affirm.

STATEMENT OF THE FACTS

The Mantooths were farmers and husband and wife. They began farming in 1964 and from that year until 1982 they financed their farming operation with PCA under a full proceeds loan arrangement. By that arrangement, PCA advanced loans to pay the farm operating costs, taking notes and security agreements therefor, which the Mantooths repaid with interest and fees by remitting the proceeds of the sale of farm products to PCA. Such arrangement permitted PCA to monitor the operation and protect their security and assured the Mantooths of operating capital without the necessity of maintaining substantial cash reserves. Each year an annual budget was prepared by the joint efforts of the Mantooths and PCA which included an agreed amount remitted to the Mantooths for living expenses as well as for cars, furniture, and other matters not directly connected to the farm operation.

In 1978 the Mantooths decided to expand their farm operation to include a hog confinement complex. Because PCA's lending limits were only seven years and long-term financing was desirable, PCA referred the Mantooths to FLB who loaned them approximately $215,000, taking a real estate mortgage for security. By 1982 the Mantooths' loan balance to PCA had risen to approximately $325,182 which PCA considered excessive. Negotiations were held concerning long-term refinancing and/or liquidation of at least part of the operation. Partial liquidation of the hog operation was accomplished and the entire operation was listed for sale. For a variety of reasons, including declining prices, poor production, and disease, the hog operation did not succeed. Refinancing was done with PCA who secured the same with a second mortgage on the real estate already mortgaged to FLB. By the latter part of 1982 the Mantooths defaulted on their obligations to both PCA and FLB.

On November 19, 1982, FLB filed suit against the Mantooths seeking to recover on its note and foreclose on its mortgage. PCA filed a cross-claim against the Mantooths on its second mortgage as well as on other notes, obligations, and security agreements owed to it by the Mantooths and sought to foreclose on those security agreements. The Mantooths' responsive The trial court granted summary judgment, interlocutory in nature, which awarded judgment to FLB on its note for $347,375.91, plus interest and attorney fees, and ordered the foreclosure of the mortgage. A similar interlocutory summary judgment was entered in favor of PCA for $306,603.51, plus interest in the amount of $122,002.43, and its security interests were ordered foreclosed. The affirmative defenses were set for trial, and the trial court specifically reserved final judgment on the complaint and cross-complaint until determination of the affirmative defenses. In essence, the summary judgments determined only the validity of the notes and security, and the amounts due thereon.

pleading to FLB's complaint and PCA's cross-claim contained a number of affirmative defenses. Additionally, they filed a counterclaim against FLB and a cross-claim against PCA seeking monetary damages in the sum of $10,000,000. Allegations common to the affirmative defenses, cross-claim, and the counterclaim were (1) joint venture and partnership between the Mantooths and PCA or FLB; (2) partnership or joint venture between the Mantooths, PCA and FLB; and (3) fraud and constructive fraud. In the affirmative defenses against FLB, the Mantooths additionally alleged waiver, excused payment, and an escrow agreement. In the affirmative defense against PCA they additionally alleged fraud in the inducement, payment, and lack of consideration. In their counterclaim and cross-claim the Mantooths also alleged a breach of fiduciary relationship on the part of both FLB and PCA.

The counterclaim, cross-claim, and affirmative defenses were tried before an advisory jury with the Mantooths proceeding first. At the conclusion of the Mantooths evidence, the trial court granted judgment on the evidence for FLB and PCA on all of the Mantooths' affirmative defenses and portions of their counterclaim and cross-claim. The issues submitted to the advisory jury related to the Mantooths' cross-claim against PCA on fraud in the inducement. The advisory jury found damages as follows: (1) mental anguish--$3,032,000; (2) loss from breach of fiduciary relationship--$1,356,000; (3) loss of business credit--$756,000; (4) loss on account of fraud--$1,356,000; for total damages in the sum of $6,500,000.

In its lengthy and carefully drafted findings of fact and conclusions of law, the trial court declined to accept the advisory jury's findings, and after making the summary judgment final, entered judgment for FLB on its complaint, PCA on its cross-claim, and denied the Mantooths' recovery on their counterclaim and cross-claim.

Additional relevant facts will be set forth below under the appropriate heading.

ISSUES

The Mantooths present ten issues on appeal. They claim the court erred in:

I. Denying them a right to a jury trial.

II. Failing to find fraud on the part of PCA and FLB.

III. Failing to find PCA committed constructive fraud, undue influence, or breached a fiduciary duty.

IV. Denying the Mantooths' motion to amend their pleadings to conform to the evidence.

V. Failing to find a joint venture existed between the Mantooths and PCA.

VI. Granting excessive attorney fees.

VII. Failing to find PCA misused funds.

VIII. Granting judgment on the evidence to FLB and in failing to find that FLB and PCA were jointly responsible as sister organizations.

IX. Failing to rule on pending motions.

X. Making clearly erroneous findings of fact and conclusions of law not supported by the evidence.

DISCUSSION AND DECISION

Prior to discussing the issues we make some observations on the nature of the case, the findings of the advisory jury, and the burden of proof at trial, as well as the burden of an appellant to demonstrate error on appeal.

Ind. Rules of Procedure, Trial Rule 52 provides that in the case of issues tried upon the facts without a jury, or with an advisory jury, the court shall determine the facts and judgment shall be entered thereon pursuant to Ind. Rules of Procedure, Trial Rule 58. A Trial court is not bound by the answers given by an advisory jury. Greenwood v. Greenwood (3d Cir.1956) 234 F.2d 276. However, the trial court may adopt its findings. Id.

In all cases appealed to the court of appeals there exists a presumption that the trial court decided the questions presented correctly, and it is incumbent upon the appellant to rebut this presumption. State Board of Tax Commissioners v. Oliverius (1973), 156 Ind.App. 46, 294 N.E.2d 646; 2 I.L.E. Appeals Sec. 511 (1957).

This court does not weigh the evidence nor determine the credibility of the witnesses. Lawrence County Commissioners v. Chorely (1979), Ind.App., 398 N.E.2d 694. We consider only the evidence most favorable to support the judgment. Fort Wayne National Bank v. Scher (1981), Ind.App., 419 N.E.2d 1308. Only when the evidence is without conflict and leads to but one conclusion and the fact finder reaches an opposite conclusion, will this court disturb the decision. Hoosier Insurance Company, Inc. v. Mangino (1981), Ind.App., 419 N.E.2d 978, trans. denied.

The purpose of special findings is to provide the parties and the reviewing court with the theory upon which the judge decided the case in order that the right to review may be effectively preserved. Special findings are binding on the court of appeals and we cannot ignore them. In re Marriage of Huth (1982), Ind.App., 437 N.E.2d 1042. When this court reviews a case in which the trial court has rendered findings of fact and conclusions of law, we will not set aside the trial court's judgment unless it is clearly erroneous. Husted v. Gwin (1983), Ind.App., 446 N.E.2d 1361.

Stripped of all formality and legalistic phraseology, the Mantooths theorize that because they borrowed money from PCA and FLB, those institutions somehow assumed the responsibility for the success or failure of their enterprise. The Mantooths allege PCA and FLB became fiduciaries, their guardians as it were, charged with the duty of advising them on all aspects of the operation. If PCA or FLB advised incorrectly, failed to advise, or failed to lead the Mantooths safely through the economic mine fields to anticipate crop failure, disease, adverse markets, the recession of the early 1980's, and other dangers to which business enterprises are subject, they must respond in damages. Implication even exists in their argument that had PCA and FLB refused to make the loans, their business failure would never have occurred. Such theories, if embodied into a rule of law, would doubtlessly wreck the credit system, for no...