First Financial Bank, N.A. v. Craig W. Johnson (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), this
FILED
Memorandum Decision shall not be regarded as May 10 2017, 9:49 am
precedent or cited before any court except for the
CLERK
purpose of establishing the defense of res judicata, Indiana Supreme Court
Court of Appeals
collateral estoppel, or the law of the case. and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Jeffrey J. Hanneken R.C. Richmond, III
Nathan H. Blaske Richard A. Kempf
Graydon Head & Ritchey LLP Paul T. Deignan
Cincinnati, Ohio Taft Stettinius & Hollister LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
First Financial Bank, N.A., May 10, 2017
Appellant-Defendant, Court of Appeals Case No.
49A02-1605-MF-1097
v. Appeal from the Marion Superior
Court.
The Honorable David J. Dreyer,
Craig W. Johnson, Judge.
Appellee-Cross Defendant. Trial Court Cause No.
49D10-1506-MF-21307
Sharpnack, Senior Judge
Statement of the Case
[1] First Financial Bank, N.A., appeals from a summary judgment for Craig W.
Johnson. We affirm.
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Issues
[2] First Financial presents four issues which we state as:
I. Whether First Financial was required to make a demand
for payment to Johnson to trigger his obligation under the
Guaranty.
II. Whether Johnson waived any right to a demand by First
Financial.
III. Whether First Financial’s filing of a lawsuit met the
demand requirement.
IV. Whether the trial court could properly enter summary
judgment in favor of Johnson.
Facts and Procedural History
[3] Raceway Market Land, LLC and Meridian Marketplace, LLC are parties to a
promissory note securing a loan from Irwin Bank and Trust Company. Craig
Johnson was the guarantor for payment by Raceway and Meridian. In June
2015, Beal Bank, USA, as successor in interest to Irwin Bank and Trust
Company, filed a foreclosure action against Raceway, Meridian, Johnson, and
First Financial.
[4] First Financial, who is a second lienholder on the real and personal property
that is the subject of Beal Bank’s foreclosure action, filed its answer, cross
claims, and counterclaim. First Financial subsequently filed a motion for
summary judgment on its cross claims and counterclaim. Following a hearing,
the trial court granted in part First Financial’s motion as to Meridian
Marketplace and Raceway Market Land but denied its motion as to Johnson.
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The trial court also determined that there was no just reason for delay and
directed entry of judgment for Johnson, and this appeal followed.
Discussion and Decision
[5] On appeal from a summary judgment, we apply the same standard of review as
the trial court: summary judgment is appropriate only where the designated
evidentiary matter shows there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law. Young v. Hood’s
Gardens, Inc., 24 N.E.3d 421, 423-24 (Ind. 2015); see also Ind. Trial Rule 56(C).
Appellate review of a summary judgment is limited to those materials
designated to the trial court. Sheehan Const. Co, Inc. v. Cont’l Cas. Co., 938
N.E.2d 685, 688 (Ind. 2010). All facts and reasonable inferences drawn from
those facts are construed in favor of the nonmovant. Id. The moving party
bears the burden of making a prima facie showing that there are no genuine
issues of material fact and that it is entitled to judgment as a matter of law; once
the movant has satisfied this burden, the burden shifts to the nonmoving party
to set forth specific facts showing the existence of a genuine issue of material
fact. Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267, 1270 (Ind.
2009).
I. Guarantor’s Right to Demand
[6] In the order on summary judgment, as adopted by the trial court, it was
determined that “[First Financial] failed to demand payment from Johnson as
required by the terms of the Commercial Guaranty.” Appellant’s App. p. 203.
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First Financial contends that the trial court erred by determining that it was
required to make a demand to Johnson for payment in order to trigger his
obligation as the Guarantor.
[7] The interpretation of a guaranty is governed by the same rules applicable to
other contracts. Paul v. Home Bank SB, 953 N.E.2d 497, 503 (Ind. Ct. App.
2011). If a contract provision is unambiguous, it is conclusive upon the parties
and the courts, and its terms will be given their plain and ordinary meaning.
State Farm Fire & Cas. Co. v. Riddell Nat’l Bank, 984 N.E.2d 655, 657 (Ind. Ct.
App. 2013), trans. denied. More specifically, 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 meaning. Paul, 953 N.E.2d at 503. Nonetheless, a guarantor is a
favorite in the law and is not bound beyond the strict terms of the guaranty. Id.
[8] The first paragraph of the Guaranty signed by Johnson provides, “Guarantor
will make any payments to Lender or its order, on demand, in legal tender of
the United States of America . . . .” Appellant’s App. at 43 (emphasis added).
Thus, the terms of the Guaranty plainly dictate that Johnson will make
payment once payment is demanded. In addition, Johnson stated in his
affidavit that at no time did he receive a demand for payment from First
Financial. Id. at 193. First Financial does not refute this evidence.
Accordingly, the trial court did not err in determining that First Financial was
required to make a demand for payment to Johnson in order to trigger his
obligations under the Guaranty and that it failed to do so.
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II. Waiver of Demand
[9] First Financial next argues that even if Johnson was entitled to a demand for
payment to trigger his guarantor responsibilities, he had waived that right. In
making this argument, First Financial points to the section of the Guaranty
entitled “Guarantor’s Waivers” that provides:
Except as prohibited by applicable law, Guarantor waives any
right to require Lender (A) to continue lending money or to
extend other credit to Borrower; (B) to make any presentment,
protest, demand, or notice of any kind, including notice of any
nonpayment of the Indebtedness or of any nonpayment related to
any collateral, or notice of any action or nonaction on the part of
Borrower, Lender, any surety, endorser, or other guarantor in
connection with the Indebtedness or in connection with the
creation of new or additional loans or obligations; (C) to resort
for payment or to proceed directly or at once against any person,
including Borrower or any other guarantor; (D) to proceed
directly against or exhaust any collateral held by Lender from
Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale
of personal property security held by Lender from Borrower or to
comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within
Lender’s power; or (G) to commit any act or omission of any
kind, or at any time, with respect to any matter whatsoever.
Id. at 44.
[10] We are mindful that contracts are to be read as a whole, and courts should
construe the language in a contract so as not to render any words, phrases, or
terms ineffective or meaningless. State Farm Fire & Cas. Co., 984 N.E.2d at 658.
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Further, courts should attempt to harmonize the provisions of a contract rather
than interpret the provisions as conflicting. Id.
[11] Accordingly, we endeavor to harmonize these two provisions. The language of
the waiver provision clearly concerns the Guarantor’s (Johnson) waiver of
certain actions taken by the Lender (First Financial) against the Borrower
(Meridian Marketplace and Raceway Market Land) and others. For example,
in subsection (A) Johnson waives the right to require First Financial to lend
more money to Meridian Marketplace and Raceway Market Land. In
subsections (C) and (D), Johnson waives the right to require First Financial to
proceed against Meridian Marketplace and Raceway Market Land or another
guarantor, or to exhaust any collateral held by First Financial before Johnson
would be obligated to perform as Guarantor. Similarly, subsection (B), the
section upon which First Financial focuses its argument, can reasonably be read
to waive Johnson’s right to require First Financial to make a demand upon or
provide notice of nonpayment or notice of any action to Meridian Marketplace
and Raceway Market Land or other guarantor prior to requiring Johnson to
fulfill his obligations under the Guaranty.
[12] Indeed, when the waiver provision is read in conjunction with the demand
provision, it is clear that Johnson is waiving First Financial’s demand upon
Meridian Marketplace and Raceway Market Land as a condition to an action
against Johnson. This is a common practice and is a reasonable waiver by
Johnson as Guarantor. To determine otherwise would be contradictory
because the Guaranty would require First Financial to demand payment from
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Johnson yet have Johnson waiving demand for payment in the same
instrument. Therefore, the trial court did not err in finding that Johnson had
not waived his right to demand for payment.
III. Lawsuit as Demand
[13] In the alternative, First Financial asserts that its cross claim, wherein Johnson
was named as a party defendant, is a demand for payment. In making this
argument, First Financial presumes that Johnson waived his right to demand;
however, as discussed in the previous issue, Johnson did not waive his right to
demand for payment.
[14] Pursuant to the terms of the first paragraph of the Guaranty, and as discussed
supra, Johnson’s obligation to pay as Guarantor does not arise unless and until
First Financial demands payment. First Financial failed to make a demand for
payment from Johnson under the Guaranty prior to filing suit. Therefore, First
Financial’s lawsuit alleging nonpayment is premature because Johnson has
neither been asked to pay nor has failed to pay. First Financial’s lawsuit cannot
serve as a demand because demand for payment is a condition that must be met
prior to filing suit. We find no error.
IV. Entry of Summary Judgment
[15] As its final assertion of error, First Financial claims that the trial court erred by
entering summary judgment for Johnson instead of denying First Financial’s
motion or dismissing the case without prejudice.
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[16] Indiana Trial Rule 56(B) provides that “[w]hen any party has moved for
summary judgment, the court may grant summary judgment for any other party
upon the issues raised by the motion although no motion for summary
judgment is filed by such party.” Thus, the trial court acted appropriately under
the trial rules.
[17] In addition, under these facts, it was proper for the trial court to enter summary
judgment for Johnson because First Financial failed to make a demand for
payment under the Guaranty.
[18] Lastly, to the extent that First Financial is seeking an advisory opinion, we
must decline the request. This Court does not issue advisory opinions. INS
Investigations Bureau, Inc. v. Lee, 709 N.E.2d 736, 742 (Ind. Ct. App. 1999), trans.
denied.
Conclusion
[19] For the reasons stated, we conclude the trial court properly entered summary
judgment for Johnson.
[20] Affirmed.
Barnes, J., and Pyle, J., concur.
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