R.P. Leasing, LLC, Robert C. Waite, and Ilene A. Waite v. Chemical Bank

Dec 11 2015, 9:13 am
ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEE
Jay P. Kennedy William G. Lavery
Steven E. Runyan Whisler & Lavery
Justin W. Leverton Elkhart, Indiana
Kroger, Gardis & Regas, LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
R.P. Leasing, LLC, Robert C. December 11, 2015
Waite, and Ilene A. Waite, Court of Appeals Case No.
Appellants-Defendants, 89A01-1412-MF-549
Appeal from the Wayne Circuit
v. Court
The Honorable David A. Kolger,
Chemical Bank, Judge
Appellee-Plaintiff. Trial Court Cause No.
89C01-1401-MF-8
Najam, Judge.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 1 of 13
Statement of the Case
[1] R.P. Leasing, Robert C. Waite, and Ilene A. Waite (collectively “R.P.
Leasing”) appeal the trial court’s grant of summary judgment to Chemical Bank
(“the Bank”). R.P. Leasing raises three issues on appeal, which we consolidate
and restate as:
1. Whether the trial court erred in granting summary
judgment to the Bank because there are genuine issues of
material fact.
2. Whether the trial court erred in not awarding attorney’s
fees to R.P. Leasing.
[2] We affirm in part, reverse in part, and remand for further proceedings.
Facts and Procedural History
[3] R.P. Leasing purchased the property located at 1865 East M-21, Owosso,
Michigan (“the Michigan property”) in December 2002 for $674,848. The
Michigan property is zoned for commercial use and contains a restaurant
building. R.P. Leasing borrowed $700,000 from the Bank to buy the Michigan
property, secured by a mortgage on the Michigan property and other property
located in Cambridge City, Indiana (“the Indiana property”). The Bank
obtained an appraisal of the Michigan property in January 2009, which valued
the property at $1,200,000 (“Bollinger Appraisal”). The mortgage contained a
power of sale clause that permitted the Bank, upon default by R.P. Leasing, to
initiate non-judicial foreclosure-by-advertisement proceedings on the property.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 2 of 13
On September 20, 2013, the Bank extended the loan to R.P. Leasing, as
evidenced by a renewal Promissory Note (“the Note”) executed by R.P.
Leasing. The Note contains a provision that it is governed by federal law and
Michigan law.
[4] In October 2013, the Bank obtained a second appraisal of the Michigan
property (“Paul Appraisal”), which valued the property at $500,000 as of
October 7, 2013. After an alleged default on the loan by R.P. Leasing, the Bank
posted a Notice of Mortgage Foreclosure Sale on the Michigan property in
December 2013. The Notice stated that, as of December 6, 2013, the principal,
interest, and late fees owed on the Note totaled $697,439. The county Sheriff
sold the Michigan property on January 8, 2014, at which time the Bank bought
the property through a “credit bid” 1 for $500,000.
[5] On January 17, 2014, the Bank filed a complaint in the Wayne Circuit Court
seeking to collect the balance due on the Note and to foreclose on the Indiana
property. The complaint alleged that, as of December 10, 2013, the principal,
interest, and late fees due on the Note totaled $716,489.39. The complaint did
1
A “credit bid” refers to a situation in which a judgment creditor (e.g., a bank holding the mortgage) is the
purchaser at its own foreclosure sale and bids the judgment instead of cash. See, e.g., Titan Loan Investment
Fund, L.P. v. Marion Hotel Partners, LLC, 891 N.E.2d 74, 76 (Ind. Ct. App. 2008), trans. denied. Such a bid is as
effective as payment in actual money would have been, and the amount of the judgment must be reduced by
the amount of the credit bid. Id. This is true under Michigan law also. See, e.g., Bank of Three Oaks v.
Lakefront Props., 444 N.W.2d 217, 218-19 (Mich. Ct. App. 1989).
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 3 of 13
not mention the sale of the Michigan property, and it did not state that the total
due on the Note should be offset by the prior $500,000 Michigan credit bid.
[6] On June 3, 2014, the Bank filed its motion for summary judgment, along with
the affidavit of Donald D. Levi, Vice President, Commercial Lending, of
Chemical Bank, and its designation of evidence. R.P. Leasing filed its response
on August 26, 2014, along with its designation of evidence in opposition to
summary judgment. R.P. Leasing’s designated evidence included the affidavit
of Robert C. Waite, managing member of R.P. Leasing, who stated that the
Michigan property was worth in excess of $500,000, and the Bollinger
Appraisal which said the Michigan property was worth $1.2 million in January
2009.
[7] On September 16, 2014, the Bank filed its supplemental brief in support of
summary judgment and a supplemental affidavit of Levi, both of which stated
that the amount due under the Note must be reduced by the $500,000 credit bid
the Bank made on the Michigan property. Levi’s supplemental affidavit
purported to correct the omission of the $500,000 credit bid and to recalculate
the amount due on the Note. Levi’s calculations attached to his supplemental
affidavit as Exhibit H state that the total amount due on the Note as of January
8, 2014, before applying the $500,000 credit, was $790,696.92.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 4 of 13
[8] After conducting a hearing, the trial court entered partial summary judgment 2
in favor of the Bank and entered a decree of foreclosure on the Mortgage on the
Indiana property. R.P. Leasing filed a motion to correct error in which it
argued that the grant of summary judgment was inappropriate, and it alleged
for the first time that it should be awarded attorney’s fees pursuant to Indiana
Code Section 34-52-1-1. 3 The Bank filed its response, and the trial court denied
the motion to correct error on December 16, 2014. This appeal ensued.
Discussion and Decision
Standard of Review
[9] Our standard of review of summary judgment is well-settled:
We will affirm the trial court’s decision only if no genuine issues
of material facts exist and the movant is entitled to judgment as a
matter of law. See Ind. Trial Rule 56(C). 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. Gaboury v. Ireland Rd.
Grace Brethren, Inc., 446 N.E.2d 1310, 1313 (Ind. 1983). A fact is
material for summary judgment purposes if its resolution is
decisive of either the action or a relevant secondary issue. Id. A
factual issue is genuine if those matters properly considered
2
The trial court noted that its judgment on the issues raised by the Bank’s summary judgment motion was
final and appealable pursuant to Indiana Trial Rule 54(B).
3
Although R.P. Leasing did not cite Indiana Code Section 34-52-1-1 as support for its claim, it claimed it is
entitled to fees for the same reason the mortgagor in Neu v. Gibson, 968 N.E.2d 262 (Ind. Ct. App. 2012), was
entitled to fees. We held in Neu that the mortgagor was entitled to fees pursuant to Indiana Code Section 34-
52-1-1(b). Id. at 278. That statute provides, in relevant part, that the trial court “may award attorney’s fees as
part of the cost to the prevailing party, if the court finds that either party: . . . (3) litigated the action in bad
faith.” Ind. Code § 34-52-1-1(b) (2014).
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 5 of 13
under Indiana Trial Rule 56 evidence a factual dispute requiring
the trier of fact to resolve the opposing parties’ different versions.
Id. Finally, we note that “[s]ummary judgment should not be
granted when it is necessary to weigh the evidence.” Bochnowski
v. Peoples Fed. Sav. & Loan Ass’n, 571 N.E.2d 282, 285 (Ind. 1991).
Reed v. Reid, 980 N.E.2d 277, 303 (Ind. 2012). Moreover, “[w]here material
facts conflict, or undisputed facts lead to conflicting material inferences,
summary judgment is inappropriate. This is true even if the court believes the
non-moving party will not succeed at trial. Summary judgment should not be
used as an abbreviated trial.” Harvest Life Ins. Co. v. Getche, 701 N.E.2d 871, 874
(Ind. Ct. App. 1998) (citations omitted), trans. denied.
Issue One: Genuine Issues of Material Fact
[10] R.P. Leasing alleges that the trial court erred in granting summary judgment to
the Bank because there is conflicting designated evidence and there are genuine
issues of material fact on: (1) the fair market value of the Michigan property at
the time of sale, and (2) the true amount of indebtedness on the Note.
[11] The fair market value of the Michigan property at the time of sale is a material
issue in this case because, under Michigan law, 4 it is a defense to a deficiency
4
Michigan law governs the foreclosure proceedings in this case. The Bank is attempting to collect on a debt
that arose out of the execution of the Note, which states that, to the extent federal law does not govern, it is
governed by Michigan law. See, e.g., Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1162 (Ind. 2002)
(“Indiana choice-of-law provisions generally favor contractual stipulations as to governing law.”); Hoehn v.
Hoehn, 716 N.E.2d 479, 484 (Ind. Ct. App. 1999) (“Parties may generally choose the law that will govern
their agreements.”) (citations omitted). Federal law does not address foreclosure-by-advertisement
proceedings such as these, and so Michigan law applies.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 6 of 13
claim (such as the one the Bank brought in the instant case) that the property
sold and applied against the Note was sold for less than fair market value.
Mich. Comp. Laws § 600.3280 (2014). Thus, if R.P. Leasing could show that
the fair market value of the Michigan property was more than the $500,000
credit bid, then, as a matter of Michigan law, the set-off applied to the Note
would be the fair market value rather than the lesser amount of $500,000. Id.[12] Both parties designated evidence regarding the fair market value of the
Michigan property, and that evidence conflicts. The Bank submitted the Levi
Affidavit and the Paul Appraisal to show that the fair market value of the
property at the time of sale was $500,000. R.P. Leasing submitted the 2009
Bollinger Appraisal to show the value was possibly as high as $1.2 million and
the Waite Affidavit to show that the property’s fair market value was more than
$500,000 at the time of sale in 2014.
[13] There are three methods or approaches by appraisers to reach the market value
of real estate: (1) the current cost of reproducing the property less depreciation;
(2) the market data approach, or the value indicated by recent sales of
comparable properties in the market, and (3) the income approach, or the value
which the property’s net earning power will support based on the capitalization
of net income. State Highway Comm’n v. Jones, 363 N.E.2d 1024, 1024 (Ind. Ct.
App. 1977). The three approaches to reaching market value are usually
combined and have been judicially approved. Id.; see State v. Bishop, 800 N.E.2d
918 (Ind. 2003).
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 7 of 13
[14] The Bollinger Appraisal was five years old. A valid appraisal should be current
and, at least, approximate the time of sale. But the Bollinger Appraisal does not
indicate the current cost of reproducing the property or include recent sales of
comparable properties in the market. And the property was leased to a
restaurant when it was appraised in January 2009, but it was vacant when it
was sold at the Sheriff’s sale in January 2014. Thus, the appraisal does not
account for a vacant building with no actual income stream or include the
current market rent for a restaurant or other potential use, which would indicate
the value based on the capitalization of actual or potential net income. In sum,
none of the three approaches to value is current. The data and calculations
underlying the 2009 Bollinger Appraisal are stale and have been superseded
with the passage of time by more recent information not in the record. See, e.g.,
In re Featherworks Corp., 25 B.R. 634, 642 (Bankr. E.D.N.Y. 1982) (holding that
an appraisal of real property two years old cannot be deemed probative of its
present value), aff’d, 36 B.R. 460 (E.D.N.Y. 1984). As such, the 2009 Bollinger
appraisal does not support a reasonable inference that the fair market value is
the same or even approximately the same at the time of sale in 2014. For
summary judgment purposes, such an appraisal has no probative value. “In
summary judgment proceedings, . . . [t]he probative value of each piece of
evidence is . . . to be determined without setting weight or credibility.” Ramon
v. Glenroy Const. Co., Inc., 609 N.E.2d 1123, 1127 (Ind. Ct. App. 1993) (citing
Burke v. Capello, 520 N.E.2d 439, 440 (Ind. 1988)), trans. denied. Thus, we hold
as a matter of law that the five-year-old Bollinger Appraisal did not create a
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 8 of 13
genuine issue of material fact with respect to the fair market value of the
Michigan property at the time of sale.
[15] The Bank also questions the “sufficiency” of the Waite Affidavit as evidence of
the fair market value of the Michigan property. 5 Appellee’s Br. at 10-12. As the
Bank notes, Waite’s affidavit merely stated his opinion that “the Michigan real
estate fair market value was in excess of $500,000, and that the Michigan real
estate did not sell for its fair market value.” Appellant’s App. at 60. Of course,
Indiana Trial Rule 56(E) provides that “[s]upporting and opposing affidavits
shall be made on personal knowledge, shall set forth such facts as would be
admissible in evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated therein.” Thus, “[t]he assertion of
conclusions of law or opinion by one not shown to be qualified to testify to such
will not suffice.” Miller v. NBD Bank, N.A., 701 N.E.2d 282, 286 (Ind. Ct. App.
1998).
[16] However, it is well settled that “[t]he owner of real estate is assumed to possess
sufficient acquaintance with it to estimate the value of the property[,] although
his knowledge of the subject matter would not qualify him if he were not the
owner.” Jordan v. Talaga, 532 N.E.2d 1174, 1188 (Ind. Ct. App. 1989) (citation
5
We note that the Bank failed to file any motion to strike or object to the admission of the Waite Affidavit
during the summary judgment proceedings, and, thus, waived on appeal any claim that the affidavit is
inadmissible. See, e.g., Paramo v. Edwards, 563 N.E.2d 595, 600 (Ind. 1990) (“A complaining party has a duty
to direct the trial court’s attention to a defective affidavit, and failure to raise an objection constitutes
waiver.”).
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 9 of 13
omitted), trans. denied. Even a perfunctory and self-serving affidavit is
minimally sufficient to raise a factual issue to be resolved at trial and thus defeat
summary judgment. Hughley v. State, 15 N.E.3d 1000, 1004 (Ind. 2014). Waite
affirmed that he was an owner of the Michigan property and that, in his
opinion, the value of the property at the time of sale was in excess of $500,000.
Under the Hughley standard, this is “sufficient, though minimally so, to raise a
factual issue to be resolved at trial, and thus to defeat the . . . summary
judgment motion.” Id.[17] The Bank also argues that R.P. Leasing would have had the burden of proof
under Michigan law to prove its defense at trial, i.e., that the fair market value
of the Michigan property was more than $500,000, and the Bank claims R.P.
Leasing failed to meet that burden on summary judgment. Appellee’s Br. at 9-
12. But, in so arguing, the Bank ignores our summary judgment standard of
review 6 and, instead, asks us to weigh the evidence. It is true that R.P. Leasing
had the “burden of asserting its affirmative defenses in a summary judgment
proceeding.” Abbott v. Bates, 670 N.E.2d 916, 920 n.1 (Ind. Ct. App. 1996).
Here, that burden required R.P. Leasing to designate evidence in opposition to
the Bank’s evidence of the fair market value of the Michigan property. Id. R.P.
Leasing designated such evidence by submitting the Waite Affidavit. Although
6
While Michigan law does apply to the substantive aspects of the foreclosure sale in this case, Indiana law
governs the procedural aspects, such as the summary judgment standard of review. See, e.g., Homer v.
Guzulaitis, 567 N.E.2d 153, 156 (Ind. Ct. App. 1991) (“When the parties to a contract agree on the law which
should control the contract, we will give effect to their agreement. At the same time, Indiana procedural law
applies.”) (citations omitted), trans. denied.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 10 of 13
the Bank believes that evidence is insufficient, it is not the court’s role to weigh
the evidence on a motion for summary judgment. Viewing the facts in the light
most favorable to R.P. Leasing, as we must, see, e.g., Jobes v. Tokheim Corp., 657
N.E.2d 145, 147 (Ind. Ct. App. 1995), there is conflicting evidence on a
material issue of the fair market value of the Michigan property, making
summary judgment inappropriate in this case, see Reed, 980 N.E.2d at 303.
[18] R.P. Leasing also correctly points out that there is conflicting designated
evidence on the material issue of the true amount of the indebtedness owing on
the Note. The Bank’s own documents state that the total amount due on the
Note is anywhere from $697,439.00 to $790,696.00, all within a period of a
little over one month. 7 Such conflicting evidence also precludes summary
judgment. Id.
[19] Because there is conflicting designated evidence on the material issues of the
fair market value of the Michigan property and the true amount of the
7
The Bank’s December 6, 2013, Notice of Mortgage Foreclosure Sale stated that the total amount of
principle, interest and late fees due on the Note as of that date was $697,439. The Bank’s Complaint and
Levi's first Affidavit stated that the total principle, interest and late fees due on the Note as of December 10,
2013, was $716,489.38, an increase of $19,050 in just the four days since the date of the foreclosure notice.
The Bank's Loan Transaction History stated that the loan balance due as of December 31, 2013, was
$697,439.54, a decrease of approximately $19,050 in the twenty-one days since the date in the Complaint.
And Exhibit H of Levi’s Supplemental Affidavit dated March 29, 2015, states that the total principle, interest,
and late fees due as of January 8, 2015, (and before the $500,000 credit was applied) was $790,696.92. This
latter figure is $74,207.54 more than the total amount due as alleged in the Complaint less than thirty days
earlier. And it is a $93,257.92 increase of the total amount due as stated in the Notice of Mortgage
Foreclosure just a little over thirty days earlier.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 11 of 13
indebtedness on the Note, the trial court erred in granting summary judgment
to the Bank.
Issue Two: Attorney’s Fees
[20] R.P. Leasing claims that it is entitled to attorney’s fees because the Bank’s late
disclosure of the existence of the credit bid for the Michigan property
constitutes litigation in bad faith pursuant to Indiana Code Section 34-52-1-1.
R.P. Leasing’s claim fails for two reasons. First, R.P. Leasing waived its claim
for attorney’s fees by failing to raise that issue until its motion to correct error. 8
Troxel v. Troxel, 737 N.E.2d 745, 752 (Ind. 2000) (“A party may not raise an
issue for the first time in a motion to correct error or on appeal.”). Second,
even if R.P. Leasing had timely raised the attorney’s fee claim, it was not the
“prevailing party” on summary judgment, as required by the statute for an
award of attorney’s fees. Ind. Code § 34-52-1-1(b); see also French v. State Farm
Fire & Cas. Co., 950 N.E.2d 303, 315 (Ind. Ct. App. 2011) (holding neither party
prevailed when summary judgment was denied and case was remanded for
trial), trans. denied. The trial court did not err in denying R.P. Leasing’s request
for attorney’s fees.
8
R.P. Leasing did not, as it claims in its reply brief, “litigat[e] this issue [of attorney’s fees] during the
summary judgment proceedings,” Appellant’s Reply Br. at 8; rather, the first time it requested fees was in its
motion to correct error.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 12 of 13
[21] In sum, we affirm the trial court’s denial of attorney’s fees. However, we
reverse the trial court’s grant of summary judgment to the Bank, and we
remand this cause for proceedings not inconsistent with this opinion.
[22] Affirmed in part, reversed in part, and remanded for further proceedings.
May, J., and Barnes, J., concur.
Court of Appeals of Indiana | Opinion 89A01-1412-MF-549 | December 11, 2015 Page 13 of 13