Willsey v. Peoples Federal Sav. and Loan Ass'n of East Chicago

• Decision Date: 20 October 1988
• Docket Number: No. 45A04-8707-CV-210,45A04-8707-CV-210
• Citation: 529 N.E.2d 1199
• Parties: Maurice WILLSEY a/k/a Jack Willsey and Dorothy C. Willsey, Appellants, v. PEOPLES FEDERAL SAVINGS AND LOAN ASSOCIATION OF EAST CHICAGO, Indiana, a United States Corporation, Appellee.
• Court: Indiana Appellate Court

Page 1199

529 N.E.2d 1199

Maurice WILLSEY a/k/a Jack Willsey and Dorothy C. Willsey, Appellants, v. PEOPLES FEDERAL SAVINGS AND LOAN ASSOCIATION OF EAST CHICAGO, Indiana, a United States Corporation, Appellee.

No. 45A04-8707-CV-210.

Court of Appeals of Indiana Fourth District.

Oct. 20, 1988.

William J. Moran, Leonard M. Holajter, Highland, for appellants.

Steven A. Johnson, Paul B. Poracky, Spangler Jennings Spangler & Dougherty, P.C., Merillville, Thomas E. Rucinski, Sachs & Hess, P.C., Hammond, for appellee.

Theodore J. Nowacki, Bose McKinney & Evans, Indianapolis, for amicus curiae.

MILLER, Judge.

On October 6, 1982, Peoples Federal Savings and Loan Association of East Chicago, Indiana [Peoples] filed suit against Maurice Willsey and Dorothy Willsey and Joseph A. Bachleitner and Betty L. Bachleitner, seeking to foreclose a mortgage on a promissory note between Peoples and the Willseys. The Willseys filed a counterclaim for breach of contract, malicious prosecution and tortious interference with a contract. The Willseys also sought punitive damages. The trial court granted the Willseys' motion for summary judgment on Peoples' foreclosure action. An interlocutory appeal followed and this court affirmed the trial court in Peoples Fed. Sav. & Loan Ass'n v. Willsey (1984), Ind.App., 466 N.E.2d 470, trans. denied. After approximately three and a half years of discovery and continuances, the trial court granted Peoples' Motion for Summary Judgment on the Willseys' counterclaim. The Willseys' appeal the grant of summary judgment claiming the trial court erred because genuine issues of material fact remained on each of the three paragraphs of their counterclaim.

We affirm.

FACTS

The Willseys owned a home in Gary, Indiana. In 1976 they executed a note to Peoples which was secured by a mortgage on the home. The mortgage contained a due on sale clause. In September, 1981, Willseys sold their home to the Bachleitners under a conditional sale contract.

Upon learning of the sale, Peoples requested its attorney, Frank J. Bochnowski, to research the law in the area of due on sale clauses as they related to conditional sale contracts. ¹ Bochnowski concluded, in his professional judgment, the law was unsettled, but there was precedent from other jurisdictions to support the position the conditional sale contract between the Willseys and the Bachleitners triggered the due on sale clause.

Peoples had sold 95 percent of the mortgage to the Federal Home Loan Mortgage Corporation [Freddie Mac]. Bochnowski also concluded the due on sale clause could be enforced under federal regulations governing Freddie Mac transactions. After Peoples discovered the Willseys had sold the property, but before bringing the foreclosure action, Peoples repurchased the mortgage from Freddie Mac.

Peoples contacted the Willseys, informed them of its intention to accelerate the note and offered them the option of paying the balance or refinancing the note at a substantially higher rate of interest. Willseys asserted they were not in default and refused to either refinance or pay off the note. Peoples brought suit against Willseys to foreclose the mortgage and named the Bachleitners as additional defendants. The Willseys filed a counterclaim.

Cross motions for summary judgment were filed and the trial court granted partial summary judgment in favor of Willseys on Peoples' foreclosure action. This court affirmed the trial court's action on the basis the language of the contract showed the parties did not intend to prohibit a sale under a conditional sale contract. Peoples Fed Sav. & Loan Ass'n, supra.

After the trial court granted Willseys' summary judgment motion, the Bachleitners contacted the Willseys and explained the couple who had been buying their former home had defaulted and they could not afford to make two house payments (for their former home and the home purchased from the Willseys). ² The Willseys and Bachleitners agreed the Willseys would release the Bachleitners from the contract in exchange for a quit claim deed on the property and the payments already made under the contract.

The parties here then embarked on an extended discovery period involving numerous pre-trial motions, hearings and continuances. On April 11, 1986, Peoples filed a Motion for Summary Judgment which was denied. On November 10, 1986, Peoples filed a second Motion for Summary Judgment and/or Motion to Reconsider. After a hearing on this motion the trial court granted summary judgment in favor of Peoples.

Additional facts will be given below when pertinent to the decision.

DECISION

The Willseys assert the trial court erred in concluding there were no genuine issues of material facts in dispute. ³ On April 6, 1987, the trial court entered the following Judgment:

"On November 10, 1986, Peoples Federal Savings and Loan Association of East Chicago, Indiana (Peoples) filed its second Motion for Summary Judgment and/or Motion to Reconsider incorporating its First Motion for Summary Judgment with supporting Affidavits and in Court testimony of two (2) witnesses. The Court now designates the following issues and/or claims upon which it finds no genuine issue as to any material facts:

1. On March 24, 1976 Maurice Willsey a/k/a Jack Willsey and Dorothy C. Willsey (Willseys) executed a Promissory Note and Mortgage whereby Peoples loaned Willseys Twenty Thousand Eight Hundred Dollars ($20,800.00) and in return Willseys gave Peoples a Mortgage on their real estate located at 3724 West 40th Avenue, Gary, Indiana.

2. Willseys sold said property by way of an unrecorded Contract for Conditional Sale of Real Estate to Joseph A. Bachleitner and Betty L. Bachleitner on September 14, 1981.

3. Although Willseys had failed to disclose to Peoples that they had sold their home on Land Contract and that they were no longer living in the home, Peoples learned of the Contract for Conditional Sale of the subject real estate and believed that said Contract triggered the due on sale clause contained in the mortgage.

4. Peoples had sold Ninety Five Percent (95%) of the Mortgage to Federal Home Loan Mortgage Corporation and warranted to the best of Peoples information and belief that the subject real estate was owner occupied.

5. Peoples was obligated to and did repurchase the Ninety-Five Percent (95%) of the Mortgage it had sold under the terms of its agreement with the Federal Home Loan Mortgage Corporation.

6. David A. Bochnowski, President and Chief Executive Officer of Peoples instructed the attorney for Peoples to conduct research of the law concerning the enforcement of due on sale clauses in Indiana by a Federal savings and loan association Mr. Bochnowski was informed by Peoples attorney that the applicable law in 1981 and 1982 was as follows:

a. That there were no restrictions on the enforcement of due on sale clauses in Indiana.

b. Federal regulations provided for the inclusion of due on sale clauses as a matter of contract between Peoples and its mortgagors.

c. That the general counsel of the Federal Home Loan Bank Board and Federal Home Loan Mortgage Corporation had rendered an opinion that equitable transfers such as Contract for Deed, Conditional Sale Contract and Installment Sale Contract would trigger a due on sale clause.

d. That there was no case law in Indiana interpreting the language of the due on sale clause contained in mortgages held by Peoples.

e. There was case law in Indiana which stated that there was no distinction between a Mortgage and a Land Contract and that there is an equitable transfer of ownership when a sale of real estate is made.

f. The Supreme Court of another jurisdiction had interpreted due on sale language as contained in the Willsey Mortgage and held that a Conditional Sales Contract was a breach of the due on sale clause.

g. Based on the foregoing, there would be probable cause to accelerate the maturity of the Note and Mortgage if a transfer of ownership had taken place.

7. The issue of whether or not a conditional Sales Land Contract triggered the enforcement of a due on sale clause was one of first impression in the State of Indiana at said time.

8. Peoples had probable cause to file its mortgage foreclosure upon learning of Willseys Contract for Conditional Sale of Real Estate with Bachleitner.

9. Peoples foreclosure action ended in a granting of Summary Judgment for Willseys and against Peoples.

10. Willsey filed their Counter Claim against Peoples in Four (4) Counts.

11. Throughout the course of the Mortgage agreement, Peoples accepted the monthly payments as they became due and did not breach its agreement with Willseys.

12. By filing its foreclosure action, Peoples resorted to the Courts to litigate an issue of first impression in the State of Indiana.

13. The Note and Mortgage did not contain language prohibiting Peoples from filing a foreclosure action and, therefore, there was no breach.

14. Peoples did not act maliciously in the filing of the foreclosure action and acted in good faith after researching the law of due on sale clauses in existence at that time.

15. There is no malicious prosecution when a party litigates in good faith an issue of first impression.

16. Bachleitner and his friend/realtor, Donald Trump, went to Willseys to advise Willsey of Bachleitner's financial difficulties. During the meeting, Willsey failed to inform Bachleitner that the Court had ruled in his favor regarding the foreclosure action.

17. Bachleitner, as a result of the meeting, quit-claimed his interest in the subject property back to Willseys. Willseys retained the Six Thousand Dollars ($6,000.00) down payment and with additional monthly payments received approximately Thirteen Thousand Dollars ($13,000.00) worth of funds paid by Bachleitners towards the purchase of said property and in addition retained the real estate as well.

18. Bachleitners forfeited the property and payments to Willseys due to his financial difficulties caused by...