Noblesville Redevelopment Com'n v. Noblesville Associates Ltd. Partnership
| Decision Date | 06 February 1995 |
| Docket Number | No. 29A02-9309-CV-514,29A02-9309-CV-514 |
| Citation | 646 N.E.2d 364 |
| Parties | NOBLESVILLE REDEVELOPMENT COMMISSION, Appellant-Plaintiff, v. NOBLESVILLE ASSOCIATES LIMITED PARTNERSHIP, an Indiana Limited Partnership, Joe Faulkner, Von Blankenbaker, Noblesville Development Company, an Indiana General Partnership, Mercantile Bank of St. Louis National Association, Stop One Holding Corp., Inc. and The Kroger Co., an Ohio Corp., Appellees-Defendants. |
| Court | Indiana Appellate Court |
The Noblesville Redevelopment Commission appeals the judgment on the pleadings entered in favor of the Noblesville Development Company and the Mercantile Bank of St. Louis (collectively referred to as the NDC unless a distinction is warranted) on count II of the Commission's complaint by which the Commission had sought to foreclose a lien upon real estate owned by the Noblesville Development Company. The NDC had argued, in its motion for judgment on the pleadings, that the guaranty attached to the complaint did not create a lien upon the real estate in which the NDC holds an interest and, without a lien, the Commission was not entitled to a sale of the real estate to satisfy the personal obligation of the guarantors. The trial court agreed and entered a judgment on the pleadings in favor of the NDC.
In its motion to correct error, the Commission conceded, apparently in reference to the complaint, that "there is insufficient language to foreclose a 'Lien,' " but submitted that "the incumbrance or covenant created by Section 2.3 of the Guaranty is sufficiently stated and pled to entitle the Plaintiff to proceed to Trial against all Defendants and to introduce ... evidence as to the effect of such covenant or encumbrance." In this appeal, the Commission argues that, whether or not it is labeled as a lien, the guaranty does contain what is in substance a covenant which runs with the land and that the allegations of the complaint permit relief upon this theory. We agree with the Commission that NDC's motion for judgment on the pleadings should not have been granted because, upon the well-pleaded facts, the Commission may be entitled to equitable relief. Accordingly, we reverse.
An Ind.Trial Rule 12(C) motion for judgment on the pleadings properly may be granted where there are no genuine issues of material fact. Gregory and Appel, Inc. v. Duck (1984), Ind.App., 459 N.E.2d 46, 49. A party moving for judgment on the pleadings admits the truth of the factual allegations contained in the non-moving party's pleading for purposes of the motion, and asserts that he is entitled to a judgment as a matter of law. Id.
When presented with a T.R. 12(C) motion, we accept as true, for purposes of review, the well-pleaded material facts alleged in the complaint. Culver-Union Township Ambulance Service v. Steindler (1994), Ind., 629 N.E.2d 1231, 1235; Gregory and Appel, 459 N.E.2d at 50. Since the trial rules require the pleader to attach to its complaint the written document upon which its action is premised, see T.R. 9.2(A), we may look to both the complaint and the attached contract for purposes of determining the appropriateness of the court's ruling on the motion for judgment on the pleadings. The attachment of the contract does not convert the motion to one for summary judgment. Gregory and Appel, 459 N.E.2d at 51.
As a general rule, the construction or legal effect of a contract is a question of law to be determined by the court. It is not a question of fact. Id.
We have derived these well-pleaded facts from the complaint and attached guaranty agreement. In December, 1989, the Commission, along with the Noblesville Redevelopment Authority (NRA), instituted a project to finance the acquisition and redevelopment of a designated redevelopment area, referred to in the parties' agreement as the allocation area. The project incorporated the construction of an extension of Logan Street through the City of Noblesville, Indiana. The NRA financed the costs of property acquisition and redevelopment in the allocation area by using the proceeds from the sale of bonds and repaid the bonds by using payments from a lease with the Commission. The Commission in turn made its lease payments from taxes on the real property and from the sale or lease of property in the allocation area.
Noblesville Associates Limited Partnership, Noblesville Associates Limited Partnership's general partner, and the individuals Von Blankenbaker and Joe Faulkner agreed to secure the Commission's lease payments in consideration for the NRA's issuance of the bonds, and on December 6, 1989, entered into a written guaranty agreement which was recorded on May 1, 1990. Under the terms of the agreement, the guarantors promised that if the tax increment generated from the described real estate did not equal at least $93,500.00 in 1992, the guarantors would make a supplemental payment to the Commission in the amount of the deficiency.
Attached to the agreement is the legal description of real estate referred to in the guaranty agreement as the Nationwise parcel, a part of which the NRA intended to acquire for roadway purposes. The guaranty agreement contemplates a reduction in payment by the guarantors should they not acquire the remainder of the Nationwise parcel. The relationship of the parties with respect to the parcels identified in the attached Schedule C, the parcels upon which the covenants are to run, is not described in either the complaint or the guaranty agreement.
There was no tax increment in 1992. Therefore, the guarantors owed the Commission a supplemental payment in the amount of $93,500.00. The guarantors made no payment, despite a written demand by the Commission, and stated that they did not have the present ability to pay the guaranty payments.
Noblesville Development Company, an Indiana General Partnership, admits that it is the fee simple owner of the real estate described in Schedule C of the guaranty agreement. Mercantile Bank is the first lienholder against the real estate by virtue of a mortgage dated July 9, 1991, as described in rhetorical paragraph 7 of the complaint. According to the complaint, both defendants had actual knowledge of the existence of the guaranty before they acquired their respective interests in the real estate.
"Running" real covenants have the incident of being enforceable in suits at law by or against those who have succeeded to an estate in real property. Under Indiana real property law, the burden of making payment may "run" with the ownership of land. See e.g. Conduitt v. Ross (1885), 102 Ind. 166, 26 N.E. 198; Fair Building Co. v. Wineman Realty Co. (1927), 87 Ind.App. 520, 156 N.E. 433.
Analysis of a real covenant involves two inquiries: (1) is the covenant one which, under any circumstances, may run with the land; and (2) was it the intention of the parties as expressed in the agreement that it should run. Ross, 102 Ind. at 168, 26 N.E. 198. "A covenant may contain apt words to make it a continuing covenant; yet, if its nature or the subject-matter of it is such that it does not concern some interest or estate in land, either existing or created by it, it cannot run with the land." Id. at 169, 26 N.E. 198. Running covenants are contracts but they are also, or at least operate as, either a conveyance or grant or as a reservation of title. B. Gavit, Covenants Running with the Land, 5 Ind.L.J. 432 (1929-1930). Traditionally, a covenant imposing an affirmative burden is said to run with the land if the covenantors intend it to run; the covenant touches and concerns the land; and there is privity of estate. See generally, Moseley v. Bishop (1984), Ind.App., 470 N.E.2d 773, 776.
We agree with the parties that the contract at issue here is not ambiguous on the matter of the parties' intent. The covenanting parties objectively intended the burden to pay the tax increment to be enforceable against remote grantees. A continuing covenant may exist without the words "assigns" or "grantees" but when these or equivalent words are used, they become persuasive of the intent of the parties. Conduitt v. Ross (1885), 102 Ind. 166, 170-1, 26 N.E. 198. Cf. Restatement of Property § 531 cmt. c (1944) (If promise purports to bind by use of such words as "successors" or "assigns" little question can arise as to the existence of the necessary intention). Section 2.4 of the guaranty agreement provides that the "Guaranty shall be binding upon any successor in interest to the Guarantor particularly in regard to the following described real estate: (See Schedule C)." Section 4.1 reads:
The obligations of the Guarantor under this Guaranty Agreement shall arise absolutely and unconditionally when the Bonds shall have been issued, sold and delivered by the Authority. This Guaranty Agreement shall bind the successors, assigns and legal representatives of the Guarantor.
The express language of the agreement is persuasive of the parties' intent.
Notwithstanding this language, the NDC argues that, because the covenant expressly states that it binds "successor[s] in interest" and neither appellee-defendant precisely meets the legal definition of successor in interest, the parties did not intend to bind NDC, a remote grantee of the original covenantor. The terms "successors in interest" and "successors to the estate" appear throughout the cases and treatises which deal with real covenants. This is so because the basis of transfer of a real covenant is succession to a particular estate in land. See e.g. C. Clark, Real Covenants and Other Interests Which "Run With Land" 93, 112 (2d 3d. 1947) (Grantor and grantee are in successive relationship of estate). See also, Restatement of Property § 530 cmt. b (word "succe...
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