Merchants Nat. Bank & Trust Co. of Indianapolis v. H.L.C. Enterprises, Inc., 1-582A107

CourtCourt of Appeals of Indiana
Citation441 N.E.2d 509
Docket NumberNo. 1-582A107,1-582A107
PartiesMERCHANTS NATIONAL BANK & TRUST COMPANY OF INDIANAPOLIS, Plaintiff-Appellant, v. H.L.C. ENTERPRISES, INC., d/b/a Trader Vic's, Herbert L. Combs and Barbara A. Combs, Defendants-Appellees.
Decision Date09 November 1982

William E. Limeberry, Wilson & Limeberry, Greenwood, for plaintiff-appellant.

Douglas W. Kessler, Gantz, Smart & Kessler, Greenwood, for defendant-appellee Barbara A. Combs.

RATLIFF, Presiding Judge.


Merchants National Bank & Trust Company of Indianapolis appeals the trial court's judgment in its action on three promissory notes, a security agreement, and foreclosure of a mortgage against H.L.C.

Enterprises, Inc., d/b/a Trader Vic's, Herbert L. Combs, and Barbara A. Combs. We reverse and remand.


In September 1976 Merchants provided a $54,000 capital loan and a $200,000 line of credit to H.L.C. secured by assets of the corporation and the personal continuing guaranty of the sole officers and stockholders of the corporation, Herbert and Barbara Combs. The corporation encountered financial difficulties beginning in December 1977, and Merchants agreed to advance additional funds to insure continued operation during a period of orderly, voluntary liquidation of the corporation so that the corporate indebtedness of approximately $200,000 owing Merchants would be repaid. On December 30, 1977, Herbert and Barbara executed a second mortgage on their family residence to renew an existing $5,000 loan and to secure an additional loan of $5,000, as well as future loans to the corporation up to a total of $30,000. On that same date the Combs also executed an owner's consent authorizing the corporation to pledge the residential real estate as collateral for corporate debts. After December 30, 1977, Merchants advanced a total of $32,302.75 to cover corporate operating expenses. The evidence of this debt was three promissory notes signed only by Herbert upon which Merchants subsequently brought this suit. As of the date of trial none of the notes had been paid, and Merchants asserted personal liability against Herbert and Barbara pursuant to the terms of the mortgage and owner's consent document. The corporation and Herbert suffered default judgments to be entered against them. Barbara, however, denied personal liability on the debt for any amount over $10,000, contending that her position was that of a collateral guarantor and that inasmuch as the document of guaranty contained no language waiving her right to receive notice of default in payment of the principal obligor's obligations and inasmuch as she received neither consideration for the mortgage nor notice that the corporation was in default in its obligations to Merchants or of the renewals of the notes, she should not be held liable for the renewals or extensions of notes executed subsequent to the document of guaranty and in excess of the original $10,000 debt. The court agreed with Barbara, entering specific findings in accord with her arguments and findings in addition that she did not intend to pledge the residence in excess of $10,000. Thus the court limited Barbara's liability upon the second mortgage to $10,000. Merchants appeals.


Was the trial court's judgment in this case contrary to law?


Merchants argues that the trial court's failure to give effect to the open-ended provision of the mortgage is against the logic, effect, and weight of the evidence in this cause and therefore that the judgment should be reversed.

On appeal we presume that the trial court has correctly decided the case and indulge all reasonable presumptions in favor of the trial court's action. State v. Kuespert, (1980) Ind.App., 411 N.E.2d 435, 438. We presume nothing in favor of the appellant; it is his burden to show clearly that the trial court erred. Id.; English Coal Co., Inc. v. Durcholz, (1981) Ind.App., 422 N.E.2d 302, 307, trans. denied. "In considering the sufficiency of the findings of fact and conclusions of law to sustain the decision," we are bound by the rule "that this court must accept ultimate facts as stated by the trial court if there is evidence to sustain them, ..." (Footnote omitted.) Miller v. Ortman, (1956) 235 Ind. 641, 665, 136 N.E.2d 17, 31. In order for the court on appeal to set aside the findings or judgment, such must be clearly erroneous. Indiana Rules of Procedure, Trial Rule 52(A)(3); Town & Country Mutual Insurance Co. v. Savage, (1981) Ind.App., 421 N.E.2d 704, 707. A finding is clearly erroneous only if the evidence is uncontradicted and will support no reasonable inference in favor of the finding. Masson Cheese Corp. v. Valley Lea Dairies, Inc., (1980) Ind.App., 411 N.E.2d 716, 718, trans. denied. Under the same rules a judgment will be set aside as clearly erroneous when, although there is evidence to support the trial court's findings and decision, the record leaves the reviewing court with a definite and firm conviction that a mistake has been committed. Moore v. Moriarty, (1981) Ind.App., 415 N.E.2d 779, 781; Arnold v. Dirrim, (1979) Ind.App., 398 N.E.2d 442, 446; Young v. Bryan, (1977) Ind.App., 368 N.E.2d 1, 2, aff'd Ind.App., 368 N.E.2d 3, trans. denied. We hold that several of the trial court's findings, hence its conclusions, are clearly erroneous.

The evidence in this case shows that on December 30, 1977, Herbert and Barbara Combs signed a second mortgage on their home in favor of Merchants to secure a note for $10,000 with a provision for future indebtedness of the parties jointly or severally up to an amount of $30,000. The seventh provision of that mortgage reads as follows:

"SEVENTH. That it is contemplated that the mortgagee may make future advances to the mortgagors, in which event this mortgage shall secure the payment of any and all future advances and of any additional amount, provided that at no time shall the total amount owed by the mortgagors to this mortgagee and secured by this mortgage from said mortgagors to said mortgagee, exceed the sum of $30,000.00 and provided further that such future advances are equally secured and to the same extent as the amount originally advanced on the security of this mortgage. The mortgagee at its option may accept a renewal note, or notes, at any time for any portion of the indebtedness hereby secured and may extend the time for the payment of any part of said indebtedness without affecting the security of this mortgage in any manner.

This Mortgage shall also secure the payment of any other liabilities, joint, several, direct, indirect, or otherwise, of Mortgagors to the holder of this Mortgage."

Record at 554. On that same date Herbert and Barbara personally executed the following owner's consent form authorizing H.L.C. to pledge their mortgage as security for its debts:




The undersigned hereby authorizes H.L.C. Enterprises, Inc. (herein called Debtor) to hypothecate, pledge and/or deliver the real estate mortgage described below belonging to the undersigned, and the undersigned agrees that when so hypothecated, pledged and/or delivered said real estate mortgage shall be collateral to secure any present or future indebtedness, obligation or liability howsoever evidenced, owing by Debtor to you, or any extension or renewal thereof, hereby consenting to the extension or renewal from time to time of any such indebtedness, obligation or liability, and waiving any notice of such indebtedness, obligation, liability, extension or renewal. The undersigned further agrees that said real estate mortgage shall be subject to disposition in accordance with the terms and conditions of the instruments evidencing such indebtedness, obligations and liabilities and/or the direction of Debtor.

A second real estate mortgage on certain real estate commonly known as 469 Lawnwood, Johnson County, Greenwood, Indiana more particularly described as follows: Lot 159, Colonial Meadows, 6th Section, Plat Book 7, Page 22.

Executed and dated at Indianapolis, Indiana, this 30 day of Dec., 1977.

/s/ Herbert L. Combs

Herbert L. Combs"

Record at 26.

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." Boyette v. Carden, (1977) Fla.App., 347 So.2d 759, 761. Accord 59 C.J.S. Mortgages Sec. 156, at 208 (1949). As is true in the interpretation of all written agreements, the language of the mortgage and supporting instruments, unless it is ambiguous, represents the intention of the parties and is controlling. Kimbell Foods, Inc. v. Republic National Bank of Dallas, (5th Cir.1977) 557 F.2d 491, 496, aff'd 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711. In the absence of fraud or overreaching, it is these objective, written materials, rather than the parties' subjective understandings, which are controlling. Id. No allegations of fraud, overreaching, or unconscionable conduct are present in this case. While parol evidence, then, is admissible to explain the facts and circumstances surrounding the agreement, it must not be used to vary or contradict the written covenant. Lamoille County...

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