Wilson v. Lincoln Federal Sav. Bank, 49A02-0212-CV-1019.

• Decision Date: 01 July 2003
• Docket Number: No. 49A02-0212-CV-1019.,49A02-0212-CV-1019.
• Parties: Bradley WILSON, Appellant-Defendant, v. LINCOLN FEDERAL SAVINGS BANK, Appellee-Plaintiff.
• Court: Indiana Appellate Court

790 N.E.2d 1042

Bradley WILSON, Appellant-Defendant, v. LINCOLN FEDERAL SAVINGS BANK, Appellee-Plaintiff.

No. 49A02-0212-CV-1019.

Court of Appeals of Indiana.

July 1, 2003.

Russell L. Jones, Natalie E. Auberry, Cohen Garelick & Glazier, Indianapolis, IN, Attorneys for Appellant.

Theodore J. Nowacki, Paul D. Vink, Bose McKinney & Evans LLP, Indianapolis, IN, Gregory W. Black, The Black Law Office, Plainfield, IN, Attorneys for Appellee.

OPINION

BAKER, Judge.

Appellant-defendant and counter-claimant Bradley Wilson appeals the trial court's grant of summary judgment in favor of appellee-plaintiff and counter-defendant Lincoln Federal Savings Bank (Lincoln), claiming that genuine issues of material fact existed with respect to Lincoln's breach of contract and its negligence regarding a mortgage loan that it made to Wilson. Specifically, Wilson argues that he was excused from performing any obligation under the contract because Lincoln failed to obtain a proper inspection of the septic system on the property as it was required to do, and that Lincoln negligently failed to procure Federal Housing Administration (FHA) insurance on the loan. Concluding that the trial court determined that Wilson had defaulted on the loan, we affirm the grant of summary judgment for Lincoln and remand this cause to the trial court for a calculation of damages.

FACTS

On September 8, 2000, Wilson submitted an offer to purchase Marian Burnett's Indianapolis residence for $95,000. The purchase agreement acceptance form signed by Burnett provided in part that Wilson agreed to purchase the Real Estate "under the following terms and conditions: House to be sold in `as is' condition—subject to F.H.A. Home Inspection and financeing [sic]." Appellant's App. p. 32. The purchase agreement was executed on September 11, 2000, and sometime thereafter, a Lincoln representative obtained information necessary for Wilson to complete a "Uniform Residential Loan Application," that he signed on September 21, 2000.

On December 6, 2000, the parties closed the transaction, whereby Lincoln loaned Wilson $94,854 for the purchase of Burnett's property. At the closing, Wilson paid the sum of $2162.26 which included his required FHA insurance premium in the amount of $2087.26 and a "lender's inspection fee" in the amount of $75. Appellant's App. p. 62, 109. The note was underwritten with the assumption that FHA insurance would become available, inasmuch as no one at Lincoln was aware of any defects on Burnett's property. After the closing, Lincoln learned that to qualify for FHA insurance, the Marion County Health Department (Health Department) was required to conduct a "loan inspection" of the septic system. Thus, Lincoln arranged this inspection for December 20, 2000.

Sometime prior to the inspection and while the FHA insurance issue was still pending, Wilson attempted to make an initial payment on the purported FHA-insured mortgage issued at closing. Wilson contended that Lincoln did not accept Wilson's initial payment because it was concerned there may be a "problem" with the FHA-insured mortgage loan. Appellant's App. p. 110. When the inspection was ultimately performed, the Health Department refused to pass the septic system and Lincoln was, therefore, unable to obtain the FHA insurance for Wilson. The Health Department determined that the septic system was defective and ordered Wilson to install a new one. He was also directed to abandon the well on the property using a state-licensed well driller—all of which was to occur prior to February 10, 2001. Wilson then learned that the Department of Housing and Urban Development (HUD) could not insure the mortgage loan from Lincoln. As a result, Lincoln offered to rewrite the mortgage loan as an uninsured conventional mortgage on no less favorable terms that required Wilson to begin payments in April 2001 rather than February 2001. This conventional loan was offered even though Lincoln would have no insurance protecting it in the event that Wilson defaulted. Wilson ultimately refused the offer of the conventional mortgage, and made no payments. However, Wilson continued to use the property as his principal dwelling.

As a result of Wilson's nonpayment, Lincoln filed its complaint in foreclosure on April 27, 2001, alleging that Wilson was required, under the terms and conditions of the mortgage loan agreement, to make monthly payments in the amount of $712.61 each, beginning February 1, 2001. Lincoln further asserted that Wilson had failed to make any payments and was, therefore, in default of the loan. Thus, Lincoln maintained that it was entitled to accelerate the loan and foreclose. Lincoln claimed that Wilson owed it $105,897.14 under the loan as of June 1, 2002. Wilson filed an answer and alleged that certain provisions in the contract excused him from all obligations under the agreement. Specifically, Wilson claimed that Lincoln had breached the duty that had required it to obtain a favorable inspection of the septic system on the property. Wilson also brought a counterclaim alleging that Lincoln had promised him an FHA-insured loan but that it had negligently failed to procure FHA insurance on the loan. Thus, Wilson contended that Lincoln was negligent and had breached the contract.

Thereafter, on June 5, 2002, Lincoln filed a motion for summary judgment, contending that it was entitled to judgment as a matter of law in light of Wilson's default. Moreover, Lincoln maintained that Wilson undertook the purchase of the property knowing that he had no right to rely on inspections conducted as part of the FHA insurance process. In opposing the motion, Wilson claimed that genuine issues of material fact existed because Lincoln negligently failed to pay a mortgage insurance premium to HUD, failed to timely obtain appropriate inspections, and by invalidating the FHA mortgage. Wilson also claimed that the conventional mortgage dated February 23, 2001 contained "specific and significant differences" in the loan documents. Appellant's App. p. 98.

Following a hearing on the motion for summary judgment on October 31, 2002, the trial court determined that Lincoln was entitled to judgment as a matter of law because Wilson "is in default, [the loan] has been accelerated, and is due and owing." Appellant's App. p. 135. Wilson now appeals.

I. Standard of Review

In reviewing the grant of a motion for summary judgment, this court stands in the shoes of the trial court, applying the same standards in deciding whether to affirm or reverse summary judgment. Smith v. Allstate Ins. Co., 681 N.E.2d 220, 223 (Ind.Ct.App.1997). We do not weigh evidence, but will liberally construe the facts in the light most favorable to the nonmoving party. General Motors Corp. v. Northrop Corp., 685 N.E.2d 127, 132 (Ind.Ct.App.1997), trans. denied. Summary judgment should be granted only when the designated evidence shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). On appeal, we must determine whether there is a genuine issue of material fact and whether the trial court has correctly applied the law. City of Elkhart v. Agenda: Open Government, Inc., 683 N.E.2d 622, 625 (Ind.Ct.App. 1997), trans. denied. The party appealing the grant of summary judgment has the burden of persuading this court on appeal that the trial court's ruling was improper. Jordan v. Deery, 609 N.E.2d 1104, 1107 (Ind.1993).

If we have any doubts concerning the existence of a genuine issue of material fact, we must resolve those doubts in favor of the nonmoving party and reverse the entry of summary judgment. McGee v. Bonaventura, 605 N.E.2d 792, 793 (Ind.Ct. App.1993). A fact is material for summary judgment purposes if its resolution is decisive of either the action or a relevant secondary issue. N. Ind. Pub. Serv. Co. v. E. Chicago Sanitary Dist., 590 N.E.2d 1067, 1072 (Ind.Ct.App.1992). A factual issue is genuine if those matters properly considered under T.R. 56 evidence a factual dispute requiring the trier of fact to resolve the opposing parties' different versions. Id.

II. Wilson's Clams

A. Negligence

Wilson contends that the trial court erred in entering summary judgment because genuine issues of material fact exist regarding Lincoln's purported negligence. Specifically, Wilson argues that the FHA mortgage was never realized and effected because Lincoln failed to pay a mortgage insurance premium to HUD and it did not obtain the appropriate inspections in a timely manner.

In resolving this issue, we first note that to succeed on a negligence claim, Wilson must establish: (1) a duty owed to him by Lincoln; (2) a breach of that duty by Lincoln; and (3) an injury resulted that was proximately caused by Lincoln's breach. See Kincade v. MAC Corp., 773 N.E.2d 909, 911 (Ind.Ct.App.2002). In an attempt to establish a duty with respect to the negligence claim, Wilson asserts that Lincoln and Wilson shared a fiduciary relationship of special trust and confidence. However, a business or "arm's length" contractual relationship does not give rise to a fiduciary relationship. Comfax Corp. v. N. Am. Van Lines, Inc., 587 N.E.2d 118, 125-26 (Ind.Ct.App.1992). That is, the mere existence of a relationship between parties of bank and customer or depositor does not create a special relationship of trust and confidence. Kreighbaum v. First Nat'l Bank & Trust, 776 N.E.2d 413, 419 (Ind.Ct.App.2002). In the context of a mortgagor/mortgagee relationship, mortgages do not transform a traditional debtor-creditor relationship into a fiduciary relationship absent an intent by the parties to do so. Absent special circumstances, a lender does not owe a fiduciary duty to a borrower. Huntington Mortgage Co. v. DeBrota, 703 N.E.2d 160, 167 (Ind.Ct.App. 1998). Moreover, it must be shown that the dominant party wrongfully abused the confidence by improperly influencing the...