E. Point Bus. Park, LLC v. Private Real Estate Holdings, LLC

• Decision Date: 31 December 2015
• Docket Number: No. 45A05–1412–MF–584.,45A05–1412–MF–584.
• Parties: EAST POINT BUSINESS PARK, LLC, Fieldview Properties, LLC, and Karen Rusin, Appellants–Defendants, v. PRIVATE REAL ESTATE HOLDINGS, LLC, Appellee–Plaintiff.
• Court: Indiana Appellate Court

49 N.E.3d 589

EAST POINT BUSINESS PARK, LLC, Fieldview Properties, LLC, and Karen Rusin, Appellants–Defendants

v.PRIVATE REAL ESTATE HOLDINGS, LLC, Appellee–Plaintiff.

No. 45A05–1412–MF–584.

Court of Appeals of Indiana.

Dec. 31, 2015.

David J. Tipton, Densborn Blachly, LLP, Indianapolis, IN, Attorney for Appellant Fieldview Properties, LLC and Karen Rusin.

Geoffrey G. Giorgi, Giorgi & Bebekoski, LLC, Merillville, IN, Attorney for Appellant East Point Business Park, LLC.

Megan L. Craig, John R. Craig, Craig, Craig & Maroc, LLC, Crown Point, IN, Attorneys for Appellee.

Opinion

MATHIAS, Judge.

[1] Appellants–Defendants East Point Business Park, LLC (“East Point”), Fieldview Properties, LLC, (“Fieldview”) and Karen Rusin (“Rusin”) (collectively “the Defendants”) challenge the Lake Superior Court's grant of summary judgment in favor of Appellee–Plaintiff Private Real Estate Holdings, LLC (“PREH”), in PREH's foreclosure action against the Defendants.

[2] We affirm.

Facts and Procedural History

[3] East Point is a limited liability company formed for the purpose of acquiring a 124–acre parcel of real estate (“the Property”) in Crown Point, Indiana, and developing a business park for lease and eventual sale. The members of East Point are Fieldview and another group called Investors of East Point, LLC (“IEP”) IEP owns a 70% interest in East Point and Fieldview a 30% interest. While Rusin is the sole owner of Fieldview, IEP is owned by: Michael Barrett (“Barrett”), who owns a 50% interest; Sheridan Investors, LLC (“Sheridan”), which owns a 25% interest; and Lake Charles Investors, LLC (“Lake Charles”), which owns the remaining 25% interest. Sheridan is itself owned by Don and Pat Manhard, and Lake Charles by Pete and Lynn Manhard. Accordingly, Barrett owns a 35% interest in East Point, and Sheridan and Lake Charles each own a 17.5% interest.

[4] On May 1, 2006, East Point purchased the Property from Fieldview for a purchase price of $4.9 million. The purchase was financed by loans from Private–Bank (“the Bank”), an Illinois bank based in Chicago. East Point borrowed $2.2 million, and Fieldview borrowed $2.7 million. The loans were secured by promissory notes and mortgages on the Property. East Point's mortgage was listed as a primary mortgage, and Fieldview's mortgage was listed as a secondary mortgage. In addition, Rusin, Barrett, and the Manhards all personally guaranteed the loan to East Point.

[5] During the development of the Property, East Point received three loan renewals from the Bank, each extending the maturity date of the East Point loan. The first renewal extended the maturity date to March 15, 2009; the second renewal extended the maturity date to March 15, 2010; and the third renewal extended the maturity date to September 15, 2010.¹ This renewal process also involved two other loans involving the Manhards, and the Bank desired to keep the Manhards as clients.

[6] East Point's loan had an “interest reserve” feature that allowed East Point to borrow from the loan commitment to pay the interest due on the loan, thereby increasing the balance of the loan.² East Point did this to fund development costs and to pay Fieldview's two yearly loan payments of $32,500. Although the East Point loan was not formally tied to other loans via cross-collateralization, the Bank viewed the East Point loan together with the loans to Barrett and the Manhards for purposes of determining the Bank's aggregate credit exposure.

[7] The Bank funded East Point's first draw request in 2009, and East Point used the money from this draw to make three $32,500 payments on the Fieldview loans. The Bank also funded two other draw requests, the last being a $33,000 draw to pay the March 2010 Fieldview mortgage payment, which was funded on March 15, 2010, the maturity date of the East Point loan, which was later extended to September 15, 2010, as noted above.

[8] In July 2010, the Bank and East Point discussed the loan. East Point wanted the Bank to extend the maturity date once again. The Bank proposed that $500,000 of debt from one of the other Manhard loans be transferred to the East Point loan, the reason being that the loan-to-value ratio of one of the Manhard loans was too high, whereas the loan-to-value ratio of the East Point loan was within the Bank's underwriting criteria. One of East Point's agents, Tom Sherman (“Sherman”), told the Bank that shifting this debt was a problem because the East Point loan involved Barrett and Rusin in addition to the Manhards. The Bank responded that it had issues with a long-term loan renewal on the East Point loan because Barrett had an unrelated loan on property with an outstanding tax payment.

[9] On September 8, 2010, East Point submitted another draw request to the Bank for $32,500 to pay the Fieldview loan payment. Although the loan had not yet matured, and funds were available in the loan commitment, the Bank did not fund the draw request, nor did the Bank respond to the request or provide East Point with an explanation of the failure to fund the requested draw.

[10] On September 10, 2010, five days before the maturity date of the East Point loan, Sherman and Tom Manhard met with the Bank's loan officers. The East Point offer was modified to include payment of Barrett's outstanding property taxes. East Point's proposal also included transferring $300,000 of debt to East Point with an eighteen-month extension of the maturity date with an option for an additional eighteen-month extension. It also proposed eliminating the interest reserve and draw feature, thereby requiring East Point to make its payments from funds other than the loan itself.

[11] East Point contends that the Bank agreed to this renewal, as evidenced by the Bank's asset report, which states: “Pape and Ahern [the Bank's agents] met with [the] Manhards on 09/10/10 and they have agreed to [the] plan above and bank needs to formalize the proposal above.” Appellants' App. p. 1350. However, the alleged renewal agreement was never reduced to writing.

[12] On November 29, 2010, the Bank made an internal report indicating that it was “scrapping” the proposed East Point loan renewal. On December 10, 2010, the Bank sent a demand letter to East Point and its guarantors, declaring that the loan was in default due to the maturation date having passed, and demanded payment of the balance of the loan within ten days. The Bank subsequently presented a pre-negotiation agreement to East Point and its guarantors, which contained a provision stating, “Borrower acknowledges and agrees that Lender is not in default under any of Lender's obligations contained in the Loan Documents,” and “Borrower acknowledges and agrees that Lender has ... performed all of Lender's obligations and agreements ... that all actions taken to date by Lender ... have been reasonable ... in good faith, and within lender's rights under the loan documents and applicable law.” Appellants' App. pp. 1216, 1218. East Point and its guarantors refused to sign this agreement and sent a revised version of the agreement to the Bank. The Bank never signed the revised agreement and filed suit against East Point and its guarantors on February 15, 2011.

[13] After filing suit, the Bank made a joint forbearance proposal to East Point and two of the other Manhard loans. The Bank's proposal called for cross-defaults among the three loans and their guarantors, and called for Fieldview to assign its mortgage to the Bank as security for Rusin's guarantee of the East Point loan. The borrowers rejected the Bank's proposals.

[14] The Bank subsequently settled with the Manhards and Barrett under agreements that provided that the Manhards and Barrett would pay $350,000 to settle their liability with the Bank as guarantors of the East Point loan. One provision of the settlement agreements provided that the Manhards and Barrett, or any entity they controlled:

Shall not, directly or indirectly, provide any loans, capital contributions or financial assistance to East Point, Fieldview or IEP; contest, delay, hinder, interfere with or otherwise affect the prosecution of the Foreclosure Action; provide any assistance to East Point in contesting, delaying or hindering the Foreclosure Action; consent to, approve or acquiesce in any amendment to the Operating Agreement of East Point or IEP which is in any manner adverse to the Bank; and sell, assign, transfer, encumber or consent to any transfer of any interest in East Point or IEP.

Appellants' App. pp. 1223, 1362, 1371. After signing the settlement agreements, Barrett and the Manhards notified Rusin that they were resigning their management roles at East Point. On September 26, 2011, the Bank dismissed Barrett and the Manhards from the suit. The remaining defendants were East Point, Fieldview, and Rusin. Since Rusin was the sole owner of Fieldview, and Fieldview the only non-settling owner of East Point, the remaining defendant is effectively Rusin. Fieldview filed a counterclaim on May 18, 2011, alleging tortious interference with the contract and inducement of breach of contract, breach of contract, and abuse of process. Fieldview also sought to foreclose on its secondary mortgage on the Property.

[15] On September 27, 2012, the Bank sold the East Point loan to PREH, who was substituted as the plaintiff. On July 20, 2013, PREH filed a motion for summary judgment. The trial court granted the Defendants several extensions of time to file a reply to PREH's motion for summary judgment. The last of the trial court's orders on the subject provided that “Defendants' Response to the Motion for Summary Judgment shall be due three (3) days after the conclusion of the deposition of Private Bank and Trust, Co., unless otherwise agreed by the Parties or Ordered by the Court.” Appellants' App. pp. 636–37. The Defendants' counsel then filed a Notice to the Court of Agreed Briefing Schedule on Motion for Summary Judgment. Id. at 641. In this notice, the Defendants stated that the parties...