George P. Broadbent, and Plainfield Village, LP v. Fifth Third Bank , 59 N.E.3d 305 ( 2016 )

FILED
Aug 31 2016, 8:49 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Paul T. Deignan Jay Jaffe
R.C. Richmond, III Brian J. Paul
Taft Stettinius & Hollister LLP Faegre Baker Daniels LLP
Indianapolis, Indiana Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
George P. Broadbent, and August 31, 2016
Plainfield Village, LP,1 Court of Appeals Case No.
Appellants-Defendants, 32A01-1602-MF-345
Appeal from the
v. Hendricks Superior Court
The Honorable
Fifth Third Bank, Rhett M. Stuard, Judge
Appellee-Plaintiff. Trial Court Cause No.
32D02-1408-MF-307
Kirsch, Judge.
1
Plainfield Village, LP has not appeared or participated in this appeal, but we include it in the caption
because all parties of record in the trial court are parties on appeal. Ind. Appellate Rule 17(A).
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[1] George P. Broadbent (“Broadbent” or “Guarantor”) appeals the trial court’s
entry of summary judgment in favor of Fifth Third Bank (“the Bank” or
“Lender”). He raises two issues on appeal, which we restate as:
I. Whether the trial court erred when it determined that the two
payment guaranties that Broadbent signed were not ambiguous;
and
II. Whether the trial court properly calculated Broadbent’s
liability under the guaranties.
[2] We affirm.
Facts and Procedural History
[3] This case stems from two loans that the Bank issued to Plainfield Village, LP
(“Plainfield Village” or “Borrower”) for purposes of real estate development,
namely the construction of a shopping center. On June 30, 2006, the Bank
loaned Plainfield Village the following amounts: (1) $7,450,000.00
(“Construction Loan”) and (2) $1,307,000.00 (“Additional Loan”) (together,
“the Loans” or “the Notes”). Both Loans were backed by collateral, including
a mortgage on real estate, which Plainfield Village gave to the Bank.
Broadbent, who was president of Plainfield Village, executed a Payment
Guaranty2 (“Guaranty” or together, “Guaranties”) for each of the Loans. The
2
The Guaranties were a guarantee of payment, and upon default by borrower Plainfield Village, the Bank
was permitted to proceed directly against Broadbent.
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original maturity date of the Loans was June 30, 2009, but in June 2009, the
maturity date of the Loans was extended to June 30, 2014 (“Extended Maturity
Date”). Broadbent reaffirmed his Guaranties in writing in 2011 and 2013.
[4] Section 1 of the Guaranties provides that Broadbent guarantees the prompt
payment and performance when due, whether by acceleration or otherwise, of
“Liabilities,” which term refers to the principal amounts of the two Loans,
accrued interest on the Loans, and obligations under the related documents
(“Loan Documents”), including the Loan Agreements, Mortgages and Security
Agreements, Notes, and Assignment of Rents and Leases. Section 2 of the
Guaranties identifies what happens in the event of default on the Liabilities. It
states, in part:
2. LIABILITIES GUARANTEED. Subject to Section 7 below,
in the event the Borrower fails at any time to pay any part or all
of the Liabilities guaranteed when due, whether by acceleration
or otherwise, the Guarantor, upon written demand of Lender,
will pay or perform the Liabilities guaranteed in the same
manner as if they constituted a direct and primary obligation of
the Guarantor, and such obligation of the Guarantor shall be due
with costs of collection, reasonable attorneys’ fees and without
relief from valuation or appraisement laws.
Appellant’s App. at 209, 217. Section 7 of the Guaranties, which is referenced in
Section 2, conditionally limits Broadbent’s liability and provides:
7. LIMITATION. Notwithstanding anything to the contrary
herein contained, upon the extension of the Loan[s] to the
[Construction Loan and Additional Loan] Extended Maturity
Date[s] in accordance with the terms of the Loan Agreement, the
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obligations of Guarantor herein shall be limited to fifty percent
(50%) of the outstanding balance of principal and accrued
interest under the Note; provided, however, Guarantor agrees
that any reduction of the Liabilities whether prior to or after the
occurrence of an Event of Default3 (as defined in the Loan
Agreement) shall be applied first to that portion of the Liabilities
not guaranteed by Guarantor hereunder.
Id. at 213, 221.
[5] Plainfield Village failed to repay the entire outstanding balance of principal and
interest by July 10, 2014 (ten days after the Extended Maturity Dates), and on
August 15, 2014, the Bank sent written notice of default (“the Default Letter”)
to Plainfield Village and Broadbent. Id. at 229. In the Default Letter, the Bank
demanded payment in full of all of Plainfield Village’s Liabilities. On August
27, 2014, the Bank brought a lawsuit against both Plainfield Village and
Broadbent. The Bank asserted four claims: one for breach of the loan
documents, two for foreclosure on a mortgage and certain security interests,
and one for breach of the Guaranties. Id. at 32-37.
[6] In November 2014, the Bank moved for summary judgment on all claims
against Plainfield Village and Broadbent. In support of its motion, the Bank
designated the affidavit of Matthew Kirchner (“Kirchner Affidavit”), a vice
3
The term “Event of Default” is defined in Section 9 of the Loan Agreement and includes any failure of
Plainfield Village to pay any installment of principal or interest pursuant to the Loan Agreement or the Loans
within ten days after it becomes due. Appellant’s App. at 72.
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president of the Bank who had “primary responsibility for the collection of
amounts owed by Plainfield Village and Broadbent.” Appellee’s Supp. App. at 1.
Attached to the Kirchner Affidavit were various documents, including the Loan
Agreements, Construction Note, Additional Note, Mortgage, Assignment of
Rents, Contract Assignment, Financing Statements, Broadbent’s Guaranties,
and the Default Letter. The Kirchner Affidavit stated that, as of August 21,
2014, Plainfield Village owed the Bank the following amounts:
Id. at 6. Thus, the total amount due under the Loan Documents was
$7,380,115.99, plus daily-accruing interest on both the Construction Loan and
Additional Loan. In March 2015, Broadbent filed a brief in opposition to the
Bank’s motion for summary judgment, along with an affidavit of Broadbent
(“Broadbent Affidavit”).4 Appellant’s App. at 5-6, 231. In May 2015, the trial
court held a hearing and took the matter under advisement.
4
Although the Broadbent Affidavit is included in the record before us, Broadbent’s motion in opposition to
the Bank’s motion for summary judgment is not.
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[7] In or around June 2015, a buyer was found for the subject real estate, and all
parties agreed that the property would be sold for not less than $3.55 million
and further agreed that the trial court should approve the sale. Therefore, on
June 30, 2015, the court-appointed receiver over the Plainfield Village property
filed an agreed motion (“Sale Motion”) to sell the shopping center. The Sale
Motion set forth an agreement (“Consent Agreement”) between Broadbent and
the Bank that provided:
(e) . . . notwithstanding the actual dollar recoveries [the Bank]
receives from the proceeds of the Sale of the Property, [the Bank]
will credit the outstanding indebtedness owed to [the Bank] from
Plainfield Village, LP and more specifically described in the
Complaint as if [the Bank] received the sum of $4,400,000.00 (the
“Credit”).
Id. at 237. The Consent Agreement further provided that the Bank and
Broadbent “each reserve all rights as to the impact that the Credit [of $4.4
million] will have on the calculation of the liability of Broadbent to [the Bank]
under his Guarant[ies.]” Id. On July 1, 2015, the trial court approved the Sale
Motion, and the sale closed on September 28, 2015. After closing costs and the
broker’s commission were deducted, the net proceeds from the sale were
approximately $3.35 million.
[8] After the approval of the Sale Motion, the trial court granted the Bank’s request
for enlargement of time to (1) file a motion to dismiss its foreclosure claims, (2)
submit a supplemental affidavit of indebtedness, and (3) file a revised proposed
summary judgment order. Broadbent and Plainfield Village were given an
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opportunity to respond, within thirty days, to the Bank’s revised summary
judgment order. Thereafter, the trial court dismissed the Bank’s foreclosure
claims pursuant to the parties’ joint motion.
[9] On October 9, 2015, the Bank submitted a revised proposed summary judgment
order, and it also filed, in support of summary judgment, a Supplemental
Affidavit of Jonathan Nadybal (“Nadybal Affidavit”), a vice president of the
Bank, who had primary responsibility at the Bank for collection of amounts
owed by Plainfield Village and Broadbent. The Nadybal Affidavit reflected
that, as of September 27, 2015, the day before the September 28 sale, the
amounts owed under the Loan Documents were:
Id. at 283. Thus, the total amount due under the Loan Documents was
$7,534,169.03, plus daily-accruing interest on both the Construction Loan and
Additional Loan.
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[10] On October 13, the trial court entered summary judgment in favor of the Bank
and against Plainfield Village.5 Id. at 9-10. However, in November 2015, the
parties filed an agreed motion for a status conference, and because the trial
court’s summary judgment ruling was issued before the thirty days had run for
Broadbent and Plainfield Village to respond to the Bank’s revised summary
judgment order, the trial court set aside its October 13, 2015 summary
judgment order in December 2015 and gave Broadbent and Plainfield Village
thirty days to respond to the Bank’s proposed summary judgment order. In
January 2016, Broadbent and Plainfield Village submitted a proposed order that
denied the Bank’s request for summary judgment.
[11] On January 22, 2016, the trial court issued Findings of Fact, Conclusions of
Law and Order Granting Summary Judgment, finding for the Bank and against
Broadbent and Plainfield Village. The trial court found that the indebtedness
owed to the Bank by Plainfield Village as of September 27, 2015, the day before
the sale, was $7,534,169.03, in addition to accruing per diem interest on the
Notes. Id. at 20 (citing Nadybal Affidavit). It also found that, pursuant to
Guaranties,
Broadbent is liable for fifty percent of the principal and accrued
interest owed by Borrower under the Notes prior to any
reduction by virtue of the Credit, with such reduction applied
5
A copy of the October 13, 2015 summary judgment order is not included in the record before us, but the
chronological case summary indicates that judgment was entered against Plainfield Village only. Appellant’s
App. at 10.
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first to that portion of the principal and accrued interest not
guaranteed by Broadbent.
Id. (emphasis in original).
[12] The trial court concluded that the Notes and other Loan Documents, including
the Guaranties, “are unambiguous contracts,” and it calculated Broadbent’s
obligation to the Bank as follows:
12. Prior to the application of the Credit, pursuant to the terms
of Guaranty, Broadbent owed [the Bank] fifty-percent (50%) of
the $7,534,169.03 of principal and accrued interest as of
September 27, 2015, which was the amount of $3,767,084.52.
Pursuant to the terms of the Guaranty, the Credit is applied first to
the fifty-percent (50%) of the $7,534,169.03 principal and accrued
interest not guaranteed by Broadbent, which eliminates that other
fifty-percent (50%) and leaves $632,915.49 of Credit remaining to
reduce the [G]uaranty obligation of Broadbent. The Broadbent
Guaranty obligation of $3,767,084.52 is therefore reduced by the
remaining credit of $632,915.49 to leave a net amount owed by
Broadbent to [the Bank] of $3,134,169.03 plus interest accruing
after September 27, 2015.
Id. at 23-24 (emphasis added). The trial court entered judgment in favor of the
Bank in the amount of $3,134,169.03, along with interest accruing from
September 27, 2015 to the date of the entry of the trial court’s judgment, for a
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total of $3,179,700.75, plus post-judgment interest accruing at the statutory rate
of 8% per annum. Id. at 25. Broadbent now appeals.6
Discussion and Decision
[13] We review the grant or denial of summary judgment de novo. SPCP Grp.,
L.L.C. v. Dolson, Inc., 934 N.E.2d 771, 775 (Ind. Ct. App. 2010). In so doing,
we stand in the same position as the trial court and must determine whether the
designated evidence shows there is no genuine issue as to any material fact and
the moving party is entitled to judgment as a matter of law. Ind. Trial Rule
56(C). In making this determination, we construe the evidence in a light most
favorable to the non-moving party and resolve all doubts as to the existence of a
genuine factual issue against the moving party. SPCP Grp., L.L.C., 934 N.E.2d
at 775.
[14] A party seeking summary judgment bears the burden to make a prima facie
showing that there are no genuine issues of material fact and that the party is
entitled to judgment as a matter of law. Riviera Plaza Invs., LLC v. Wells Fargo
Bank, N.A., 10 N.E.3d 541, 545 (Ind. Ct. App. 2014). Once the moving party
satisfies this burden through evidence designated to the trial court, the non-
moving party may not rest on its pleadings, but must designate specific facts
demonstrating the existence of a genuine issue for trial. Id. A trial court’s grant
6
Neither Broadbent nor Plainfield Village sought a stay, and according to the Bank, “[p]roceedings
supplemental are ongoing.” Appellee’s Br. at 4.
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of summary judgment is “clothed with a presumption of validity,” and the
appellant bears the burden of demonstrating that the trial court erred. Id.[15] Interpretation of the language in a contract is a question of law especially suited
for summary judgment proceedings. Hepburn v. Tri-County Bank, 842 N.E.2d
378, 384 (Ind. Ct. App. 2006), trans. denied. We review questions of law de
novo, and therefore we give no deference to the trial court’s interpretation. Id.Our goal is to give effect to the intent of the parties as expressed within the four
corners of the document. Id. We may not construe unambiguous language to
give it anything other than its clear, obvious meaning, and we may not add
provisions to a contract that were not placed there by the parties. Id. Rather,
we determine the meaning of a contract from an examination of all of its
provisions, without giving special emphasis to any word, phrase or paragraph.
Id. We must read a contract as a whole and may not interpret individual
sections in a manner that would cause them to conflict. Id.[16] In this case, the Bank and Broadbent do not disagree about the material facts.
They agreed that Broadbent executed the Guaranties, the Guaranties are valid
and enforceable, and Broadbent did not perform his contractual obligations
under them and is in default. The inquiry is not whether Broadbent owes the
Bank money, but, rather, how much he owes pursuant to the terms of the
Guaranties.
[17] A guaranty is a conditional promise to answer for a debt or default of another
person, such that the guarantor promises to pay only if the debtor/borrower
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fails to pay. TW Gen. Contracting Servs., Inc. v. First Farmers Bank & Trust, 904
N.E.2d 1285, 1288 (Ind. Ct. App. 2009). The interpretation of a guaranty is
governed by the same rules applicable to other contracts. Id. We must give
effect to the intentions of the parties, which are to be ascertained from the
language of the contract in light of the surrounding circumstances. Id.; Noble
Roman’s, Inc. v. Ward, 760 N.E.2d 1132, 1138 (Ind. Ct. App. 2002).
Generally, the nature and extent of a guarantor’s liability
depends upon the terms of the contract, and a guarantor cannot
be made liable beyond the terms of the guaranty. Nevertheless,
the terms of a guaranty should neither be so narrowly interpreted
as to frustrate the obvious intent of the parties, nor so loosely
interpreted as to relieve the guarantor of a liability fairly within
their terms.
TW Gen. Contracting Servs., Inc., 904 N.E.2d at 1288 (quoting Bruno v. Wells
Fargo Bank, N.A., 850 N.E.2d 940, 945-46 (Ind. Ct. App. 2006)). If the court
finds that any term is ambiguous, then the parties may introduce extrinsic
evidence of its meaning, and the interpretation of that term becomes a question
of fact. Beradi v. Hardware Wholesalers, Inc., 625 N.E.2d 1259, 1261 (Ind. Ct.
App. 1993), trans. denied. A word or a phrase is ambiguous if reasonable people
could differ as to its meaning. Id. However, a contract term is not ambiguous
merely because the parties disagree about the term’s meaning. Simon Prop. Grp.,
L.P. v. Mich. Sporting Goods Distribs., Inc., 837 N.E.2d 1058, 1070 (Ind. Ct. App.
2005), trans. denied.
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I. Ambiguity Issue
[18] In its findings of fact and conclusions thereon, the trial court determined that
the Guaranties are unambiguous contracts. Appellant’s App. at 23 (Conclusion
No. 9). Broadbent claims that this was error and that the Guaranties are
ambiguous. More specifically, he asserts that Section 7 is ambiguous. It reads:
7. LIMITATION. Notwithstanding anything to the contrary
herein contained, upon the extension of the Loan[s] to the
[Construction Loan and Additional Loan] Extended Maturity
Date[s] in accordance with the terms of the Loan Agreement, the
obligations of Guarantor herein shall be limited to fifty percent
(50%) of the outstanding balance of principal and accrued interest
under the Note; provided, however, Guarantor agrees that any
reduction of the Liabilities whether prior to or after the
occurrence of an Event of Default (as defined in the Loan
Agreement) shall be applied first to that portion of the Liabilities
not guaranteed by Guarantor hereunder.
Appellant’s App. at 213, 221 (emphasis added). Broadbent asserts that Section 7
is ambiguous because although the Guaranties limit his liability to fifty percent
of the outstanding balance, “they do not state when that ‘outstanding balance’ is
to be determined.” Appellant’s Br. at 9. He suggests that there are a number of
possibilities for when that balance is to be determined, including: (1) the initial
2009 maturity date for the Loans; (2) the June 2014 Extended Maturity Date;
(3) ten days after that, when Plainfield Village failed to pay and Default
occurred; (4) when suit was filed; or (5) after the real property was sold.
Broadbent maintains that, therefore, a question of fact exists, and summary
judgment was improper.
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[19] In support, Broadbent refers us to his Affidavit, which he attached to his
opposition to the Bank’s motion for summary judgment. In it, he stated:
6. It was my understanding when I signed the Guaranties, and
it is my understanding now, that once the maturity date of the
Loans was extended to the Extended Maturity Date, my liability
under the Guaranties would be limited to an amount equal to
fifty percent (50%) of the outstanding balance of principal and
accrued but unpaid interest due under the Notes, determined after
the Mortgaged Property had been sold in order to know what the
actual unpaid balances are, if any.
Appellant’s App. at 232 (emphasis added). On appeal, Broadbent argues that his
intent when signing the Guaranties was that his liability as a guarantor would
be limited to fifty percent of the outstanding balance of principal and interest
“determined after all payments on the debt . . . had been applied[.]” Appellant’s
Br. at 10.
[20] The Bank maintains that the trial court correctly determined that the
Guaranties are unambiguous, and that, therefore, extrinsic evidence of
Broadbent’s understanding of the Guaranties – here, his Affidavit – is not to be
considered. Appellee’s Br. at 12 (citing Skrypek v. St. Joseph Valley Bank, 469
N.E.2d 774, 777 (Ind. Ct. App. 1984) (extrinsic evidence is inadmissible where
there is no ambiguity in contract language)). We agree.
[21] Here, as the Bank states, “The [G]uaranties do provide when the outstanding
balance is to be determined: upon [the Bank]’s written demand.” Id. at 9.
Section 2, identifying Broadbent’s Liabilities, provides:
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2. LIABILITIES GUARANTEED. Subject to Section 7 below,
in the event the Borrower fails at any time to pay any part or all
of the Liabilities guaranteed when due, whether by acceleration
or otherwise, the Guarantor, upon written demand of Lender, will pay
or perform the Liabilities guaranteed in the same manner as if they
constituted a direct and primary obligation of the Guarantor, and
such obligation of the Guarantor shall be due with costs of collection,
reasonable attorneys’ fees and without relief from valuation or
appraisement laws.
Appellant’s App. at 209, 217 (emphasis added). Under that Section, when
Broadbent failed to pay his Liabilities, ten days after the Extended Maturity
Date, Section 2 obligated Broadbent to pay Liabilities upon the Bank’s written
demand, which initially was in August 2014, and “such obligation shall be
due,” along with accruing interest, costs of collection, and reasonable attorneys’
fees. Id.
[22] It is well-settled that courts must read contracts, including guaranties, as a
whole and give effect to all provisions. Hepburn, 842 N.E.2d at 384. Therefore,
we reject Broadbent’s position that effectively asks us to read Section 7 in
isolation. Section 2 is “[s]ubject to” Section 7, and, indeed, the two Sections
are interrelated. Appellant’s App. at 209, 217. Section 2 identifies Broadbent’s
obligation to pay the Bank upon the Bank’s demand, and Section 7 limits the
amount that Broadbent must pay, namely it reduces his obligation on the
unpaid debts from one-hundred percent to an amount not to exceed fifty
percent of the outstanding balance of principal and accruing interest. We find
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no error in the trial court’s determination that the Guaranties were
unambiguous contracts.
II. Calculation of Broadbent’s Obligations
[23] Broadbent claims that the trial court’s calculation of the amount he owed on the
Loans was erroneous, as it “ignored the language of Section 7[,]” and,
therefore, the judgment should be reversed. Appellant’s Br. at 13. At its core,
Broadbent’s dispute is how and when the $4.4 million Credit was applied to
outstanding Liabilities.
[24] In calculating what Broadbent owed, the trial court determined that Section 7
unambiguously limited Broadbent’s liability, as Guarantor, to fifty percent of
the outstanding balance of principal and accrued interest, and, further, it
required that any credit (here, the agreed $4.4 million for the sale of the
property) be applied, first, to the non-guaranteed fifty percent portion of the
Loans, and to the extent that that credit exceeded the non-guaranteed portion,
then to Broadbent’s guaranteed fifty percent portion. Applying those
determinations to the figures, the trial court initially divided $7,534,169.03
(amount owed as of September 27, 2015) in half because, pursuant to Section 7,
Broadbent was responsible for only fifty percent, or $3,767,084.52. Next,
pursuant to the language of Section 7, the trial court applied the agreed-upon
$4.4 million Credit to the non-guaranteed half. Because the Credit exceeded
the non-guaranteed portion by $632,915.49, that excess Credit then was applied
to reduce Broadbent’s fifty-percent portion ($3,767,804.52), such that he was
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left owing the Bank $3,134,169.03, in addition to per diem interest, as well as
post-judgment interest.
[25] Broadbent suggests that on January 22, 2015, when the trial court entered
summary judgment for the Bank and against Broadbent, the outstanding
balance of principal and interest was $3,179,700.757 and that his fifty percent of
that was $1,589,850.38. He maintains that Section 7 “contemplates the
application of payments . . . from the sale of the property to establish the
outstanding balance of principal and interest” and, thereafter, that figure should
be divided in half to arrive at his fifty percent. Id. at 15. That is, Broadbent
asserts that the $4.4 million Credit should be applied before the $7,534,169.03 is
divided in half, rather than applying it after the $7,534,169.03 is divided 50/50
between guaranteed and non-guaranteed portions. We cannot agree.
[26] Broadbent’s proposal that the $4.4 million Credit be applied to the total amount
owed on the Loans is contrary to the language of Section 7, which expressly
limits Broadbent’s liability to fifty percent “provided, however,” that “any
reduction of the Liabilities . . . shall be applied first to that portion of the
Liabilities not guaranteed by Guarantor hereunder.” Appellant’s App. at 213, 221
(emphasis added). Indeed, Broadbent’s reading would apply the Credit to both
the non-guaranteed and guaranteed portions, and it would leave the Bank with
$1,589,850.38 in non-guaranteed loans, which is not consistent with Section 7’s
7
$7,534,169.03 - $4,400,000 credit = $3,134,169.03 + per diem interest on Loans = $3,179,700.75.
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provision that all reductions in Liabilities – here, the $4.4 million – would first
be applied to the portion not guaranteed by Broadbent.
[27] Finding that the trial court properly interpreted the Guaranties and applied the
Guaranties’ terms to calculate Broadbent’s liability and that no genuine issue of
material fact exists, we affirm the trial court’s grant of summary judgment in
favor of the Bank.
[28] Affirmed.
[29] Riley, J., and Pyle, J., concur.
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