U.S. Aircraft Financing, Inc. v. Jankovich

• Decision Date: 21 July 1980
• Docket Number: No. 3-877A196,3-877A196
• Citation: 407 N.E.2d 287
• Parties: 29 UCC Rep.Serv. 708 U. S. AIRCRAFT FINANCING, INC., an Indiana Corporation, Appellant-Defendant, v. Nick JANKOVICH and Paul Jankovich, Individually and as partners doing business as Calumet Aviation Company, Appellees-Plaintiffs, and City of Gary by and through its Board of Aviation Commissioners, Appellee-Intervenor.
• Court: Indiana Appellate Court

Page 287

407 N.E.2d 287

29 UCC Rep.Serv. 708

U. S. AIRCRAFT FINANCING, INC., an Indiana Corporation Appellant-Defendant, v. Nick JANKOVICH and Paul Jankovich, Individually and as partners doing business as Calumet Aviation Company, Appellees-Plaintiffs and City of Gary by and through its Board of Aviation Commissioners, Appellee-Intervenor.

No. 3-877A196.

Court of Appeals of Indiana, Fourth District.

July 21, 1980.

William F. Kane, Jr., Lucas, Clifford, Kane & Holcomb, Merrillville, for appellant-defendant.

Douglas M. Grimes, Gary, for appellees-plaintiffs.

CHIPMAN, Judge.

This is an action for breach of a conditional sales contract. In 1965 Nick and Paul Jankovich d/b/a Calumet Aviation Company (Jankovich) sold to U. S. Aircraft Financing, Inc. (U. S. Aircraft) an airport business at the Gary Municipal Airport. U. S. Aircraft subsequently breached the contract and Jankovich brought suit in 1974. Following a bench trial the court entered judgment for Jankovich and ordered a strict forfeiture. We reverse.

The contract conveyed to U. S. Aircraft all real and personal property of Calumet Aviation Company at the Gary airport for $300,000. The personal property included tools, equipment, fixtures and office furniture. The real property conveyed was limited to two large hangars, a number of "T" hangars and other structures. The land upon which these buildings were located belonged to the Gary Municipal Airport. Jankovich had a Ground Base Operator's Lease and Fueling Agreement with the Airport Authority which permitted Calumet Aviation to operate its business at the airport. These agreements were assigned to U. S. Aircraft at the time the sales contract was executed. In 1968 the Lease and Fueling Agreement were renegotiated between U.S. Aircraft and the City of Gary.

U. S. Aircraft began experiencing financial difficulties in 1972. Its monthly payments to Jankovich were irregular and for a number of months only interest was paid on the contract. There is also evidence U. S. Aircraft breached the contract by failing to pay taxes and insurance premiums. Shortly after the institution of this suit in October, 1974, Jankovich posted a $300,000 bond and was granted possession of the property. In 1975 the City of Gary intervened and pursuant to its request a receiver pendente lite was appointed. The receivership was approved by the Third District of this Court. U.S. Aircraft Financing, Inc. v. Jankovich, (1977) Ind.App., 365 N.E.2d 783.

The issues necessary to our resolution of this appeal are as follows:

I. Was the City of Gary properly allowed to intervene?

II. Whether the judgment of the trial court was contrary to law in that:

A) Jankovich waived strict compliance with the contract's default provisions;

B) the judgment constitutes an excessive forfeiture;

C) U. S. Aircraft was improperly ordered to transfer all interest in the Fixed Base Operator's Lease and Fueling Agreement;

D) the award of $30,000 in attorney's fees was an abuse of discretion?

I. INTERVENTION

U. S. Aircraft contends the City of Gary's motion to intervene was improperly granted for three reasons: 1) the motion did not state specific grounds therefor; 2) the City had no direct substantial interest in the subject matter of the suit between Jankovich and U. S. Aircraft, and 3) there is no common question of law or fact between the City's claims and the suit between the other two parties. The brief of the appellee ignores these contentions; the issue is not even mentioned in the entire eight pages of the brief. Thus we may reverse if appellant has made a prima facie showing of reversible error. Jahn v. Jahn, (1979) Ind.App., 385 N.E.2d 488. This rule, however, is solely for the benefit of this court, Ligon Specialized Haulers, Inc. v. Hott, (1979) Ind.App., 384 N.E.2d 1071, and we have decided to address the merits.

For its first contention U. S. Aircraft argues the motion should have been denied because it did not include a statement of grounds in support of intervention. Ind.Rules of Procedure, Trial Rule 24(C) specifically requires that a motion to intervene "shall state the grounds therefor . . . ." In the strictest sense the City of Gary's motion did not comply with this requirement. However, a multiple page document which set forth its claims against U. S. Aircraft and Jankovich was attached to the motion. Although the preferred practice would have been for the City to briefly list the bases for its intervention in the motion itself, the attached document more than complied with the requirements of T.R. 24(C).

The Indiana Trial Rules permit two types of intervention: intervention of right under T.R. 24(A) and permissive intervention pursuant to T.R. 24(B). U. S. Aircraft's second contention concerns intervention of right while its third argument is addressed to permissive intervention. We have examined the record and determined the City of Gary was properly permitted to intervene under T.R. 24(A).

For a party to be allowed to intervene under 24(A)(2) it must show it has a right or interest in the property or transaction which is the subject matter of the suit and that it is not adequately represented by either party. The latter criterion was clearly met by the City; its motion asserted claims against both U. S. Aircraft and Jankovich. The City also established a significant interest in the subject of the suit. A perusal of the record reveals the City of Gary maintains no fueling or maintenance facilities at the airport. These functions are performed by private companies pursuant to ground base operator's leases. At the time of the City's intervention there were two ground base operators at the airport, the smaller of which did not contribute substantially to the airport's operation. To state the obvious, the personal and real property covered by the sales contract was essential to the performance of fueling and maintenance services by U. S. Aircraft. The City of Gary clearly had a substantial interest in the continued performance of these services. The City therefore had an interest in the subject matter of this suit and was properly permitted to intervene pursuant to T.R. 24(A)(2).

II A. WAIVER

U. S. Aircraft argues the court erred in enforcing the default provisions of the contract because it claims Jankovich waived strict compliance with the contractual provisions by accepting late and irregular payments. Jankovich says the default provisions were not waived.

It is the law that once a seller accepts irregular or late payments without protest the seller waives strict enforcement of the contract. Snyder v. International Harvester Credit Corp., (1970) 147 Ind.App. 364, 261 N.E.2d 71; Pierce v. Yochum, (1975) 164 Ind.App. 443, 330 N.E.2d 102. However, if the seller subsequently notifies the buyer he will no longer tolerate anything less than full compliance and will insist upon exercising his rights under the contract unless the default is paid within a reasonable time the waiver is no longer effective. Nelson v. Butcher, (1976) Ind.App., 352 N.E.2d 106; Pierce v. Yochum, supra.

We do not believe Jankovich waived strict compliance with the contract. U. S. Aircraft was given permission by Jankovich to make three payments of interest only during a period of financial stress. After the three months had elapsed, however, U. S. Aircraft continued to make late and irregular payments of interest only. Although Jankovich accepted these payments, the acceptance was not without protest. During this period two letters were sent to U. S. Aircraft's President. Both letters complained of the lack of payment on the principal and contained language such as, "we are not in a position to tolerate this problem any longer," and "we are going to have to take the necessary action to protect our interest at the airport." In light of these letters it is difficult to say Jankovich waived any right to enforce the contract.

Even if we were to hold Jankovich had at one time waived strict enforcement of the contract, a third letter may constitute the notice required of a seller who seeks to enforce contractual rights after a waiver. This letter, dated August 5, 1974, states Jankovich's intention to enforce the default provisions of the contract unless the contract is paid in full. If this letter had been delivered to U. S. Aircraft it clearly would have negated any previous waiver by Jankovich. Nelson v. Butcher, supra; Pierce v. Yochum, supra. However, the letter was sent to George Martin who at one time was the sole stockholder in U. S. Aircraft. Apparently there was never a formal assignment of Mr. Martin's interest to the present owners of the company. At any rate, the current President of U. S. Aircraft testified U. S. Aircraft never received this notice. If this were true, it is arguable that Jankovich should be held to have waived the default provisions of the contract.

The question, however, is rendered academic by other breaches by U. S. Aircraft. The record reveals U. S. Aircraft failed to adequately insure the property and pay taxes as required by the contract. Thus, even if we were to hold Jankovich waived his right to strictly enforce the contract by accepting late and irregular payments, the other breaches by U. S. Aircraft are more than sufficient grounds to support the action by Jankovich.

II B. EXCESSIVE FORFEITURE

Having determined Jankovich had not waived any right to sue under the contract we now turn our attention to the remedy granted by the trial court. It is vigorously contended by U. S. Aircraft that the trial court's ordering of strict forfeiture constituted an excessive forfeiture and is void under Skendzel v. Marshall, (1973) 261 Ind. 226, 301 N.E.2d 641. Appellee Jankovich's response is that Skendzel does not apply to this fact situation. We do not accept Jankovich's position and agree with U. S. Aircraft.

Before discussing the forfeiture itself it is necessary to note the unique situation presented by this contract....