Bayview Loan Servicing, LLC v. Golden Foods, Inc., and Lewis R. Coulter

FILED
Sep 14 2016, 8:31 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Michael J. Cork Robert C. Beasley
Jamie B. Dameron Beasley Law Office
Bamberger, Foreman, Oswald & Hahn, Muncie, Indiana
LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Bayview Loan Servicing, LLC, September 14, 2016
Appellant-Plaintiff and Counter- Court of Appeals Case No.
Defendant, 18A02-1508-MI-1191
v. Appeal from the Delaware Circuit
Court
Golden Foods, Inc., and Lewis The Honorable Thomas A.
R. Coulter, Cannon, Jr., Judge
Appellees-Defendants and Trial Court Cause No.
Counterclaimants. 18C05-1011-MI-39
Pyle, Judge.
Statement of the Case
[1] Bayview Loan Servicing LLC (“Bayview”) appeals the trial court’s order
entering judgment in favor of Golden Foods, Inc., (“Golden Foods”) and Lewis
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Coulter (“Coulter”) on Bayview’s mortgage foreclosure claim and Golden
Food’s conversion counterclaim. Bayview argues that there is insufficient
evidence that it intended: (1) for Golden Food’s mortgage to merge with the tax
deed that Bayview purchased from M. Jewell, LLC (“Jewell”); and (2) to exert
unauthorized control over Golden Foods’ property and monthly payments.
Concluding that Bayview’s arguments are requests to reweigh the evidence and
that there is sufficient evidence that Bayview intended both the merger and the
exercise of unauthorized control, we affirm the trial court.
[2] We affirm.
Issues
1. Whether the trial court’s judgment in favor of Golden Foods
on Bayview’s mortgage foreclosure claim is contrary to law; and
2. Whether the trial court’s judgment in favor of Golden Goods
on its conversion counterclaim is clearly erroneous.
Facts
[3] Coulter is the president and sole shareholder of Golden Foods, which is an
Indiana Corporation. In 1988, he executed an adjustable rate note with
Industrial Trust and Savings Bank, (“the Note”). To secure payment for the
$113,800.00 Note, Golden Foods executed a mortgage against a commercial
property on Madison Street (“Madison Street Property”) in Muncie, which
Colter operated as a restaurant. As further security for Golden Foods’
indebtedness under the Note, Coulter and Golden Foods executed a mortgage
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against Coulter’s home on Oliver Drive, (“Oliver Drive Mortgage”).1 Both
mortgages were assigned to Bayview in 2005.2
[4] By 2008, Golden Foods had reduced the balance of the Note to $42,822.77.
However, Golden Foods had become delinquent in the payment of real estate
taxes on the Madison Street Property, which had been vacant and non-income
producing since 2006. In April 2008, Golden Foods advised Bayview that it
was unable to pay the $22,000.000 in overdue taxes on the property. A
Bayview representative recommended that Coulter: (1) submit a letter of
hardship; and (2) request that Bayview advance him the money to pay the
delinquent taxes and modify his mortgage payment to include the advance.
Coulter explained that he did not know if he could afford a payment
modification because the only money he had available to make his current
mortgage payment was his monthly retirement income. Coulter also advised
the Bayview representative that he was making repairs on the property in order
to sell it. In December 2008, Coulter sent Bayview a hardship letter, which
stated that Coulter’s only income available to pay the mortgage loan was from
Social Security.
1
Although the Oliver Street Mortgage named Golden Foods as the mortgagor, Golden Foods did not hold
title to the Oliver Street Property.
2
Bayview is a Delaware limited liability company with a Florida mailing address that has over 1,700
employees and services over 120,000 mortgage loans at any given time.
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[5] Three months later, Bayview decided not to advance Coulter the funds to pay
the delinquent taxes. Rather, Bayview decided that it would attempt to work
out a tax capitalization agreement with Golden Foods. Meanwhile, because of
the delinquent taxes, the Madison Street Property was offered at a Fall 2008 tax
sale. M. Jewell, LLC (“Jewell”) purchased the tax sale certificate for the
Madison Street Property for $8,001.00. Jewell sent notice of the sale to Golden
Foods, which immediately notified Bayview of the situation. Jewell, however,
did not send the required notice to Bayview. The redemption period was
scheduled to expire on January 6, 2009.
[6] Following the tax sale, Bayview completed an internal assessment to identify,
value, and prioritize its options regarding the Madison Street Property, which
included loan modification, foreclosure, or acquiring the property as real estate
owned property (“REO property”).3 Bayview’s internal valuation of the
Madison Street Property was $140,000.00, and Bayview had received a broker’s
price opinion that the property was in a “hot pocket area with potential.” (BLS-
412).4 Bayview’s assessment disclosed that the best option for Bayview was to
capitalize the taxes and enter into a loan modification agreement with Golden
Foods. The net present value of this scenario to Bayview was $84,676.15. The
3
Real estate owned property is property acquired by the lender in satisfaction of a debt, usually through
foreclosure. BLACK’S LAW DICTIONARY 1292 (8th ed. 2004).
4
The first two volumes of exhibits are paginated using “BLS-.”
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second best alternative for Bayview was to acquire the property as an REO
property. The net present value of this scenario to Bayview was $54,504.12.
[7] After considering the options, Bayview drafted and proposed a Loan
Adjustment Agreement (LAA) to Golden Foods. Pursuant to the terms of the
LAA, Golden Foods had to make a $1,000.00 down payment and a $1,218.55
monthly payment.5 With the additional capitalization, Bayview agreed to
redeem the Madison Street Property from the tax sale and include
approximately $12,900.00 to fund the new escrow account for future taxes and
insurance. Coulter signed the LAA individually and on behalf of Golden
Foods and returned it to Bayview with the $1,000.00 fee on December 26, 2008.
According to the LAA, which Bayview never signed, the first payment was due
February 1, 2009.
[8] In the meantime, although Bayview knew the redemption deadline for the
Madison Street Property was January 6, 2009, Bayview failed to redeem the
property. Therefore, Jewell immediately filed a petition for issuance of a tax
deed. Realizing that if the tax sale was not set aside, Golden Foods would lose
title, and Bayview would likely be liable for damages, Bayview hired Indiana
counsel Jason Lueking (“Lueking”) to defend its interests and intervene in the
tax sale proceeding. Lueking immediately noticed that Jewell had failed to give
the required notice to Bayview. Therefore, both Bayview and Golden Foods
5
Although the LAA decreased Golden Foods’ monthly mortgage payment to Bayview from $859.67 to
$396.50, the payment also included an $822.05 monthly escrow payment for taxes and insurance.
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had the right to object to the issuance of the tax deed and to seek to set aside the
tax sale. With these rights in mind, Lueking entered into negotiations with
Jewell.
[9] During the course of the negotiations, Lueking structured a deal to change
Bayview’s status from mortgage lienholder of the Madison Street Property to
fee simple owner. Specifically, Lueking’s settlement draft passed title of the
Madison Street Property directly from Jewell to IB Property Holdings (“IB
Property”), which is a subsidiary of Bayview that takes title to REO Properties
acquired through either foreclosure or a deed in lieu of foreclosure.6 When title
is passed to IB Property, the property is sold, and any sale proceeds are kept by
the lender. This differs from a foreclosure where any excess funds become the
property of the borrower. Lueking did not advise Golden Foods about these
negotiations with Jewell or suggest that Golden Foods obtain counsel.
[10] In April 2009, Bayview expressed concerns to Lueking about taking title to the
Madison Street Property in its name or in the name of IB Property. Bayview
was considering an alternative structure, which would have given the tax title
deed directly to Jewell. Jewell would then have quitclaimed the property to
6
“A deed in lieu of foreclosure is an alternative to foreclosure. In a deed in lieu of foreclosure, the property
owner gives the property to the lender voluntarily in exchange for the lender canceling the loan. The item
transferred is the deed to the property. The lender promises not to initiate foreclosure proceedings and to
terminate any foreclosure proceedings already underway. The lender may or may not agree to forgive any
deficiency balance that results from the sale of the property.” www.bills.com/a-deed-in-lieu-of-foreclosure-
vs-a-short-sale. (last visited 8/23/2016).
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Golden Foods. This alternative would have returned Bayview and Golden
Foods to the relationship contemplated by the LAA. Lueking revised the
settlement documents to reflect this structure for the transaction and provided
them to Lawrence Halpern, Bayview’s vice president and in-house counsel
(“Halpern”). However, these documents were never presented to Jewell.
[11] Rather, in May 2009, Lueking sent a revised settlement agreement to Jewell.
This agreement had the tax certificate and tax title deed going directly to
Bayview. In an email, Lueking explained to Jewell’s attorney that the
“transaction [was] similar to a deed in lieu of foreclosure from [Bayview’s]
perspective.” (Bayview Ex. 49). Halpern was copied on Lueking’s email to
Jewell’s attorney. Lueking understood that a deed in lieu of foreclosure meant
that Bayview was acquiring title to and equity in the property rather than
initiating foreclosure proceedings. Both Lueking and Bayview Vice President
of Commercial Servicing, Jo Ann Snyder (“Snyder”),7 knew that a deed in lieu
of foreclosure would extinguish Golden Foods’ underlying debt unless the
parties contemporaneously executed documentation to establish a residual
financial obligation on the borrower. However, no such documentation was
ever prepared or submitted to Golden Foods.
[12] On June 4, 2009, before finalizing the agreement with Jewell, Bayview ran
another internal assessment, which revealed that the Madison Street Property
7
Snyder was not involved in the settlement negotiation process with Jewell. Rather her sole involvement in
the case involved signing affidavits in support of Bayview’s summary judgment motion.
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had a present value of $64,933.74 to Bayview if Bayview took the property as
an REO property. This value was based on Bayview’s $140,000 valuation of
the Madison Street Property minus Bayview’s invested funds, which included
the $42,822.77 mortgage principal at the time of the LAA and the $32,469.75
paid to Jewell. Bayview Vice President Gyselle Piedra (“Piedra”) authorized
the settlement agreement, which Bayview signed that day.
[13] That same day, Bayview employee, Juan Gonzalez (“Gonzalez”), told Coulter
that Bayview was going to pay the delinquent taxes on the Madison Street
Property and that Coulter could proceed with his plans to sell it. Four days
later, Gonzalez told Coulter that the taxes had been paid but did not mention
that Bayview had taken title to the property. Bayview also continued to send
Golden Foods monthly LAA statements.
[14] The very next day, the agreed order directing the tax deed to be issued was
entered, and the tax deed was issued to Bayview on July 8, 2009. In August
2009, Gonzales issued an order to secure the unoccupied Madison Street
Property, winterize the pipes, and change the locks. Bayview still did not
advise Coulter that it had acquired title to the property. Golden Foods began
making the $1,218.55 per month LAA payments in November 2009. Golden
Foods made ten payments on the LAA, all of which Bayview accepted even
though Bayview had never signed the LAA.
[15] Golden Foods did not learn that Bayview had acquired title to the Madison
Street Property until Bayview filed a complaint to quiet title to the property in
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November 2010. In the complaint, Bayview stated that in July 2009, Bayview
had obtained a tax deed to the Madison Street Property and had recorded it.
Bayview alleged that its interest and title to this property was “superior to all
persons who have an interest therein,” and that the purpose of the action was to
“quiet title to the Real Estate as against the world.” (App. 2).
[16] Golden Foods filed an answer wherein it alleged that Bayview had represented
to Golden Foods that Bayview had redeemed the Madison Street Property and
that Bayview had accepted Golden Foods’ $1,218.55 monthly payments
pursuant to the LAA. Golden Foods also alleged that Bayview had covertly
acquired title to the Madison Street Property without notifying Golden Foods.
Golden Foods raised the affirmative defenses of actual and constructive fraud,
unjust enrichment, and estoppel. Golden Foods also filed a counterclaim
alleging that Bayview breached its agreement to redeem the real estate;
breached its duties as Golden Foods’ agent; committed criminal conversion
when it exerted unauthorized control over Golden Foods’ funds and rights in
the Madison Street Property; and fraudulently procured the tax deed.
[17] In May 2012, Bayview filed a second amended complaint wherein it added
Coulter as a defendant and added mortgage foreclosure of both Madison Street
and Oliver Street Properties and related claims. The following month, Golden
Foods responded as follows:
71. [Bayview] converted and exerted unauthorized control over
the rights of Golden Foods in the Madison Street Real Estate by
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failing to redeem the Madison Street Real Estate and acquiring
title for itself.
* * *
73. The Plaintiff has further converted and exercised
unauthorized control over the monies paid to [Bayview] by
Golden Foods since December 15, 2008.
(App. 103).
[18] In March 2013, Bayview filed a motion for partial summary judgment on the
grounds that there were no genuine issues as to any material fact with respect to
Bayview’s quiet title action and Golden Foods’ criminal conversion action.
The trial court granted Bayview’s motion on the quiet title claim but denied the
motion on Golden Foods’ conversion claim.
[19] In March 2015, the trial court held a bench trial on the remaining claims, which
included Bayview’s mortgage foreclosure claim and Golden Foods’ conversion
claim. Bayview did not call its two senior managers, Halpern and Piedra, to
testify. After a trial that included the evidence set forth above, the trial court
issued a detailed twenty-seven-page order with 168 findings of fact and
conclusions, which provides in relevant part as follows:
Conversion of Madison Street Property
* * *
70. So to summarize the actions of Bayview in connection with
the Tax Sale Proceedings:
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a. Bayview had breached its undertaking to redeem the
Madison Street Property by the redemption deadline, and
was faced with the prospect of not only losing its lien, but
incurring liability to Golden Foods;
b. Since there was a statutory defect in the tax sale
proceedings, both Bayview and Golden Foods had the
right to have it set aside;
c. Bayview told Coulter they would look into it, and
waive late charges until the matter was resolved;
d. Lueking, as Bayview’s counsel, then undertook
settlement negotiations;
e. Lueking knew that Golden Foods was a party, and
should have been served with documents filed in the Tax
Sale Proceeding, but he failed to do so;
f. Although Lueking felt that the interests of Golden
Foods and Bayview were initially aligned, he soon
determined that they had become adverse when Bayview
began contemplating taking title without notice to Golden
Foods and Coulter; however, Lueking never advised
Coulter or Golden Foods to engage separate counsel;
g. Once the financial terms were established for the
settlement with M. Jewell, Lueking and Bayview knew
that the settlement structure was up to them and within
their control;
h. Lueking knew of settlement structures that were
available and would have preserved the
mortgagor/mortgagee relationship and the terms in the
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proposed LAA; however, these structures were rejected in
favor of Bayview acquiring title in its own name;
i. Bayview took title to the Madison Street Property,
without providing Golden Foods with any documentation
of the transaction;
j. Bayview assured Golden Foods that the tax situation
had been resolved, but did not discuss that Bayview had
taken title; and
k. This result was in the best interests of Bayview, and
contrary to the best interests of its former borrower,
Golden Foods.
71. Bayview was acting in a dominant position – from a
knowledge, financial strength, and control point of view. This
position was exploited for its own benefit.
72. Lueking and Halpern knew or should have known that
Bayview had no legal right to take title to the Madison Street
Property without notice, and without due process.
73. Bayview actively and purposely concealed the fact that it had
taken title to the Madison Street Property from Coulter and
Golden Foods. It must be remembered that key decision makers
for Bayview – Lueking and Halpern – are attorneys, with
expertise in the area of real estate and mortgage lending – and
they were fully aware of the nature of the relationship that
existed between the parties and the precarious situation created
by Bayview’s failure to timely redeem the taxes. Although the
initial failure to serve Golden Foods in the Tax Sale Proceeding
may have been inadvertent, by the time they were making the
decision to take title, they were fully aware that Golden Foods
had no knowledge of their contemplated actions, and they quite
clearly decided to keep it that way.
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74. After they had acquired title, Bayview continued to mislead
Coulter and Golden Foods. When Gonzalez called Coulter in
June after they had signed the settlement agreement, all he said
was that the taxes had been taken care of – there was no mention
that Bayview had also taken title.
75. Bayview continued to send routine documents to Golden
Foods, creating the impression that they had made good on their
obligations to redeem the taxes. They sent year end interest and
real estate tax statements, and monthly statements. From all
appearances, Coulter and Golden Foods had every reason to
believe the mortgage and the LAA were in effect. Until, of
course, Bayview filed for Quiet Title.
76. Bayview converted the rights of Golden Foods in and to the
Madison Street Property. It was in control of the settlement
structure. They contemplated a structure that would have
maintained title in Golden Foods together with the equity
therein. They rejected this structure and instead used a structure
to take title for itself.
Statutory Elements of Theft and Conversion
* * *
82. The evidence before the Court establishes that Bayview
knowingly or intentionally exercised unauthorized control over
Golden Foods’ rights and interest in the Madison Street Property
by acquiring title for itself without the knowledge or consent of
Coulter or Golden Foods when it had the control, the ability, and
the duty, on identical financial terms, to structure the M. Jewell
settlement so as to preserve the mortgagor/mortgagee
relationship under the terms of the LAA.
83. Golden Foods is entitled to recover under the Crime Victim’s
Recovery Act (“CVRA”) an amount not to exceed three (3) times
the actual damages suffered, together with the costs of the action
and reasonable attorney fees. Ind. Code 34-24-3-1.
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* * *
88. [T]he Court . . . adopts a market value for the Madison
Street Property at the time of taking by Bayview of $147,500.00.
89. [T]he ‘invested’ amount of Bayview was the unpaid principal
as recited in the LAA of $42,822.77, and the settlement paid to
M. Jewell of $32,469.75, for a total of $75,292.52. Accordingly,
the value of equity converted by Bayview is $72,207.00, and
Golden Foods is entitled to judgment in this amount.
90. Golden Foods is also entitled to recover Enhanced Damages
under the CVRA in the amount of $50,000.
Merger and Extinguishment of Note and Mortgage
91. Bayview has continued to pursue its original claim to Quiet
Title, and a partial summary judgment of Quiet Title has been
entered in favor of Bayview.
92. Bayview nonetheless seeks foreclosure of the mortgage on
the Madison Street Property and the mortgage on the Oliver
Street Property, and judgments on the Note and Guaranty for
any deficiency.
93. All of these requests are contrary to the understanding of
Halpern and Lueking, attorneys sophisticated in real estate
lending law, that the Tax Title Deed was being treated as a deed
of lieu of foreclosure with no intended residual financial
obligation on the part of Coulter or Golden Foods.
94. Notwithstanding, Bayview claims that it was not their intent
for there to be a merger of the mortgage and indebtedness into
the Tax Title Deed. There is no credible evidence to support this.
* * *
97. Here, there is abundant, compelling evidence that this is
exactly what Bayview intended to accomplish – acquire title as a
deed in lieu of foreclosure, with no residual financial obligation
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for Golden Foods, and secure its right, title and interest as
superior to all persons, including Coulter and Golden Foods.
98. There is simply no evidence to support the anti-merger
contention of Bayview. The only evidence before the Court is
that Bayveiw was acting and intended to act as the title owner,
not mortgagee, by taking the Tax Deed as similar to a deed in
lieu of foreclosure, and not requiring any additional
documentation to preserve a future claim for residual liability
against Golden Foods and Coulter.
99. This intent is further established by Bayview securing
possession of the property and changing locks, and asserting
since the date that the Tax Deed was issued that Bayview’s right,
title, and interests in the Madison Street Property were superior
to all other persons, including Golden Foods and Coulter. . . .
Bayview’s consistent claim that its right, title and interest is
superior to any interest of Golden Foods is inherently
inconsistent with the “anti-merger” argument of Bayview that the
mortgagor/mortgagee relationship was presented such that
Golden Foods held title, and Bayview held only a lien.
100. Bayview also acted as owner, not mortgagee, after it
acquired title. On August 21, 2009, Gonzalez issued orders to
“SECURE THE ABOVE PROPERTY, CHANGE LOCKS
AND WINTERIZE.” Trial Ex. 17 BLS-36. . . . There is no
indication that anyone at Bayview first attempted to contact
Golden Foods, a necessary predicate to entering upon the
premises if Bayview was acting under the terms of the mortgage
as it now claims. . . .
* * *
105. Without so much as an advance telephone call to Coulter,
Bayview then filed this Quiet Title action on November 29, 2010.
It did not sue as mortgagee.
106. Bayview initiated this action in a single count as a “MI”
action (and not “MF”) to Quiet Title to the Madison Street
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Property in November 2010. Lueking claims that he did not also
sue on the Note and LAA to keep the case “simple.”
107. Lueking also expected that, if Bayview prevailed in its quiet
title action, Bayview would have sold the property as an REO
property, “they would have the money,” and then “closed the
file.” Tr. 559-60. This of course is the same result as taking the
property by way of a deed in lieu of foreclosure.
108. The court finds and concludes that the 1988 mortgage and
note were merged into the Tax Deed as a matter of law.
109. This further discharged Coulter as guarantor, and
discharged the purported Oliver Street Mortgage.
110. Bayview would not be entitled to foreclose on the Oliver
Street Mortgage in any event. Said mortgage was improperly
executed, and was not signed by Coulter as Mortgagor and
owner of the property – rather, Golden Foods signed in such
capacity and it did not hold title to the property.
Conversion of Coulter’s Funds
* * *
112. [I]t appeared to Coulter and Golden Foods that Bayview
had made good on its promise to “take care of the situation,” and
once notified in June 2009, that it had been resolved, began
making monthly payments in the amount of $1,218.55. Golden
Foods made ten payments that were accepted by Bayview in
2009 and 2010. . . .
113. Despite the fact that Bayview considered that it had
acquired title as comparable to a deed in lieu, secured possession
of the property, failed to sign the Loan Adjustment Agreement,
and otherwise acted as owner of the property, it continued to
send documents to Golden Foods as if the Loan Adjustment
Agreement had been executed and Golden Foods was still the
title holder. To the extent Golden Foods was willing to make
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monthly payments, ignorant of the fact that the Loan Adjustment
Agreement had never been signed, Bayview profited and was not
at risk as it held title to the property.
114. The passage of time was also beneficial to Bayview.
Lueking knew Golden Foods’ appeal rights were limited to 60
days from issuance of the Tax Deed, but that it could be
extended up to 2 years if “due process” implications were
involved. Tr. 557.
115. As shown above, the Note and Mortgage were merged and
extinguished by the acts of Bayview, and the LAA was never in
effect and was never even signed by Bayview. (Trial Ex. 72,
Request for Admission No. 3, admits that never signed) By
nonetheless sending monthly notices, Bayview was inducing
Coulter to make payments under false pretenses.
116. Bayview exerted unauthorized control over Coulter’s funds
through false pretenses.
117. Coulter is entitled to judgment against Bayview for the
funds converted, $12,185.50.
118. Under the CVRA, Coulter is also entitled to recover costs
and attorney fees.
119. Coulter is also entitled to recover enhanced damages under
the CVRA in the amount of $24,000.00.
Failure to Call Halpern and Piedra
120. As noted above, the only two (2) senior officers of Bayview
that were involved from the time Bayview decided to take title
and up until it filed suit to quiet title were Piedra and Halpern.
121. Snyder was not involved until asked to sign affidavits in this
litigation. Bayview deliberately chose to rely on a witness with
no personal knowledge of the events leading up [to] this
litigation.
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122. Piedra and Halpern were the only senior officers with
personal knowledge of the decisions that were made on behalf of
Bayview but were not called, even though they are still employed
by Bayview.
123. If such was the case, these officers could have been called to
testify that they did not intend for the Tax Deed to constitute a
deed in lieu of foreclosure, and that they intended that the Note,
Mortgage, and unsigned LAA to be the governing documents
between the parties. They were not called to so testify. No one
with personal knowledge of Bayview’s intent testified that there were any
funds due to Bayview from Golden Foods.
* * *
127. The failure to call Halpern and/or Piedra raises an
inference that their testimony would have been adverse to the
positions asserted by Bayview herein.
* * *
Judgment
It is Therefore Ordered, Adjudged and Decreed that judgment is
entered in favor of Golden Foods and against Bayview on
Golden Foods’ claim that Bayview converted the rights and
interest of Golden Foods in the Madison Street Property, and
Golden Foods shall have and recover against Bayview a
judgment in the amount of $72,207.00 in compensatory damages,
and $50.000.00 in additional damages under Ind. Code 34-24-3-
1.
It is Further Ordered, Adjudged and Decreed that judgment is
entered in favor of Coulter and against Bayview on Coulter’s
claim that Bayview converted the monthly payments made by
him, and Coulter shall have and recover against Bayview
judgment in the amount of $12,185.50 in compensatory damages,
and $24,000 in additional damages under Ind. Code 34-24-3-1.
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* * *
It is Further Ordered, Adjudged and Decreed that judgment is
entered against Bayview and in favor of Golden Foods on all
other claims of Bayview, and Bayview is Ordered to execute a
Release of the Oliver Street Mortgage within thirty (30) days of
the date hereof.
(App. 57-84). Bayview now appeals.
Decision
[20] Bayview appeals the judgment in favor of Golden Foods and argues that: (1)
the trial court’s judgment in favor of Golden Foods on Bayview’s mortgage
foreclosure claim is contrary to law; and (2) the trial court’s judgment that
Bayview converted Golden Foods’ rights and interest in the Madison Street
Property and Coulter’s monthly payments on the LAA is clearly erroneous.
We address each of its contentions in turn.
[21] The trial court entered findings of fact and conclusions thereon at Bayview’s
request. In reviewing findings of fact and conclusions of law, we apply a two-
tiered standard of review by first determining whether the evidence supports the
findings and then whether the findings support the judgment. Weigel v. Weigel,
24 N.E.3d 1007, 1010 (Ind. Ct. App. 2015), reh’g denied. The trial court’s
findings and judgment will be set aside only if they are clearly erroneous.
Barton v. Barton, 47 N.E.3d 368, 373 (Ind. Ct. App. 2015), trans. denied; see also
Ind. Trial Rule 52(A) (“[T]he court on appeal shall not set aside the findings or
judgment unless clearly erroneous, and due regard shall be given to the
opportunity of the trial court to judge the credibility of the witnesses.”).
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Findings are clearly erroneous when the record contains no facts to support
them either directly or by inference. Campbell v. Campbell, 993 N.E.2d 2d 205,
209 (Ind. Ct. App. 2013), trans. denied. A judgment is clearly erroneous if it
applies the wrong legal standard to properly found facts. Id. To determine that
a finding or conclusion is clearly erroneous, our review of the evidence must
leave us with the firm conviction that a mistake has been made. Id.
1. Mortgage Foreclosure
[22] At the outset, we note that Bayview, the party with the burden of proof on the
mortgage foreclosure claim, is appealing from a negative judgment on this issue
and will prevail only if it establishes that the judgment is contrary to law. See
Helmuth v. Distance Learning Sys. Ind. Inc., 837 N.E.2d 1085, 1089 (Ind. Ct. App.
2005). A judgment is contrary to law when the evidence is without conflict and
all reasonable inferences to be drawn from the evidence lead only to one
conclusion but the trial court reached a different conclusion. Id.
[23] The first issue is whether the trial court’s judgment in favor of Golden Foods on
Bayview’s mortgage foreclosure claim is contrary to law. A typical real estate
mortgage transaction includes two entities: (1) the mortgagee, which is
typically a bank or mortgage company that holds the mortgage which serves as
a lien on the property; and (2) the mortgagor, which is typically the homeowner
who holds the legal title with the right of redemption. Citizens State Bank of New
Castle v. Countryside Home Loans, Inc., 949 N.E.2d 1195, 1197 (Ind. 2011). When
one of the entities acquires both the mortgage lien and the legal title to the
property, the two interests are said to merge. Id. Specifically, the mortgage
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merges with the legal title, and the mortgage lien is thereby extinguished. Id.
The key factor in deciding whether merger has occurred is determining what the
parties, primarily the mortgagee, intended. Deutsche Bank Nat’l Trust Co. v. Mark
Dill Plumbing Co., 908 N.E.2d 1273, 1274 (Ind. Ct. App. 2009).8
[24] Bayview argues that the trial court erred in “denying [its] mortgage foreclosure
action.” (Bayview’s Br. 40). Specifically, Bayview argues that it “did not
intend to merge the Madison Street Mortgage into its tax deed, so the trial
court’s merger finding is clearly erroneous and legal error.” (Bayview’s Br. 40).
Golden Foods responds that, “[t]here is overwhelming evidence that, just as the
trial court found . . . , Bayview clearly intended to take title and extinguish the
underlying mortgage and note when it surreptitiously acquired title.” (Golden
Foods’ Br. 17).
[25] Our review of the evidence reveals that after rejecting an alternative that would
have returned Bayview and Golden Foods to the relationship contemplated by
the LAA, Bayview sent a revised settlement agreement to Jewell in May 2009.
In an accompanying email, Leuking explained to Jewell’s attorney that, from
Bayview’s perspective, the transaction was similar to a deed in lieu of
8
Merger will not occur, however, and the lien will be preserved, where merger would harm
the interests of the mortgagee. The underlying purpose of this anti-merger rule is to protect
the mortgagee’s priority. Id. Specifically, the rule guarantees the mortgagee’s priority in any
proceeds. Id. Therefore, where there are no junior lienholders, the anti-merger doctrine does
not apply. American Family Mut. Ins. Co. v. Welton, 926 F. Supp. 811, 817 (S.D. Ind. 1996)
(applying Indiana law). Because there are no junior lienholders in this case, the anti-merger
rule does not apply.
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foreclosure, where the property owner gives the property deed to the lender and
the lender agrees not to initiate foreclosure proceedings. Both Leuking and a
Bayview Vice President knew that the settlement agreement would extinguish
Golden Foods’ underlying debt unless the parties contemporaneously executed
documentation to establish a residual financial obligation on the borrower.
However, no such documentation was ever prepared or submitted to Golden
Foods. The month after the tax deed was issued to Bayview, Gonzalez issued
an order to secure the Madison Street Property, which included changing the
locks and winterizing the pipes. One year later, Bayview filed a complaint to
quiet title to the property wherein it alleged that its interest and title to the
property was superior to all, including Golden Foods and Coulter.
[26] This evidence supports the trial court’s conclusion that Bayview intended to
acquire title to the Madison Street Property as a deed in lieu of foreclosure with
no residual obligation for Golden Foods. The evidence further supports the
trial court’s conclusion that the Madison Street Mortgage merged into the tax
deed. The trial court’s judgment is not contrary to law. 9
9
Bayview raises three additional arguments related to the merger issue. Specifically, Bayview
first argues that the trial court erred in finding that Bayview’s failure to call Halpern and/or
Piedra as witnesses at trial raised an inference that their testimony would have been adverse to
Bayview’s position at trial. However, we need not address whether this finding is erroneous
because we have held that “even an erroneous finding is not fatal to the trial court’s judgment
if the remaining valid findings and conclusions support the judgment, rendering the erroneous
finding superfluous and harmless as a matter of law.” Curley v. Lake Cnty. Bd. of Elections and
Registration, 896 N.E.2d 24, 32 (Ind. Ct. App. 2008). Here, several of the trial court’s
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2. Conversion
[27] Bayview further argues that there is insufficient evidence to support the trial
court’s conclusion that Bayview committed criminal conversion. Bayview’s
argument is two-fold. Bayview first contends that “the trial court erred by
applying a tort instead of a contract standard.” (Bayview’s Br. iii). Bayview
further contends that even if tort law applies, there is insufficient evidence to
support the trial court’s conclusion that it committed criminal conversion. We
address each of Bayview’s contentions in turn.
[28] Bayview first argues that Golden Foods is attempting to “‘up the ante’ by
repackaging their breach of contract claim as one for criminal conversion.”
(Bayview’s Br. 13). Bayview is correct that “a party may not restyle a breach-
of-contract claim as a tort simply to obtain additional damages.” French-Tex
remaining and uncontested conclusions independently support its judgment that the trial court
did not err in ruling against Bayview on its mortgage foreclosure action.
Bayview also argues that the trial court “committed legal error in finding Bayview’s Oliver
Drive Mortgage [was] invalid due to a Scrivener’s Error.” (Bayview’s Br. 50). Again, we
need not address whether this finding is erroneous because the trial court’s alternative finding
that the merger of the mortgage and tax deed discharged the Oliver Street Mortgage, which
Bayview does not contest, supports the demise of this mortgage. See id.
Lastly, Bayview argues that the trial court erred in finding that none of the witnesses had
personal knowledge of the amount due on the Madison Street Mortgage. Golden Foods
responds that this was not a trial court finding. Rather, according to Golden Foods, the trial
court found that no one with knowledge of Bayview’s intent testified that there were any funds
due to Bayview from Golden Foods. We agree with Golden Foods and further conclude that
even if the trial court had made such a finding, such information is irrelevant where Bayview
does not challenge the amount of damages.
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Cleaners, Inc. v. Cafaro Co., 893 N.E.2d 1156, 1167 (Ind. Ct. App. 2008). Tort
law should not interfere where the source of a party’s duty to another arises
from a contract. JPMCC 2006-CIBC14 Eads Parkway LLC v. DBL Axel, LLC, 977
N.E.2d 354, 364 (Ind. Ct. App. 2012), reh’g denied, trans. denied. The Indiana
Legislature did not intend to criminalize bona fide contract disputes. Id. For
example in French-Tex, a tenant alleged that its landlord had committed
conversion by overcharging the tenant for its share of real estate taxes due
under the lease. The trial court concluded, and this Court agreed, that the
tenant’s claim constituted a bona fide contract dispute and not a claim for
conversion. French-Tex, 893 N.E.2d at 1166-67.
[29] However, to the extent that a plaintiff’s interests have been invaded beyond
mere failure to fulfill contractual obligations, a tort remedy should be available.
Greg Allen Const. Co. v. Estelle, 798 N.E.2d 171, 173 (Ind. 2003), reh’g denied. For
example, in Auto Liquidation Center, Inc. v. Chaca, 47 N.E.3d 650 (Ind. Ct. App.
2015), the Center repossessed Chaca’s car because it erroneously believed that
Chaca had missed a payment. Only after the Center learned that Chaca was
current on his payments, did it claim to have repossessed the car because Chaca
had disconnected the vehicle’s GPS devices, which the Center had installed.
After learning that the GPS was disconnected because it was damaging the car
and that Chaca’s mechanic would re-install it, the Center refused to give Chaca
either the car or his belongings. Based on these facts, this Court concluded that
there was evidence that the “misunderstanding morphed into an intentional
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unauthorized taking of [Chaca’s] property.” Id. at 655. We therefore affirmed
the criminal conversion verdict against the Center. Id.
[30] Here, Bayview and Golden Foods entered into a contractual relationship in
2005 when mortgages were assigned to Bayview. After Golden Foods became
delinquent on the Madison Street Property’s taxes, the property was purchased
by Jewell at a tax sale. Bayview told Golden Foods it would redeem the
property and subsequently discussed, drafted, and sent an LAA to Golden
Foods. Although Golden Foods signed the LAA, Bayview never did. Then,
when Bayview failed to timely redeem the property, and Jewell was issued the
tax deed, Bayview entered into negotiations with Jewell regarding the property.
Golden Foods was not a party to the negotiation or the settlement. Eventually,
Bayview took title to the property without telling Golden Foods. Although
Bayview had title to the property and had never signed the LAA, Bayview then
accepted ten LAA payments from Golden Foods. This evidence reveals that
Bayview went beyond merely failing to fulfill its contractual obligation, and that
a tort remedy should be available. Stated differently, as in Chaca, the
contractual relationship between Bayview and Golden Foods morphed into a
tort.
[31] Having concluded that tort law applies in this case, we now turn to Bayview’s
argument that there is insufficient evidence to support the trial court’s
conclusion that it committed criminal conversion. INDIANA CODE § 35-43-4-3
provides that a “person who knowingly or intentionally exerts unauthorized
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control over the property of another commits criminal conversion.” A person
engages in conduct intentionally if, when he engages in the conduct, it is his
conscious objective to do so. IND. CODE § 35-41-2-2. A person engages in
conduct knowingly if, when he engages in the conduct, he is aware of a high
probability that he is doing so. Id. Exerting control over property means to
obtain, take, or possess property. IND. CODE § 35-42-4-1. Control is
“unauthorized” if it is exerted without the other person’s consent, in a manner
or to an extent other than to which the other party has consented, or by creating
or confirming a false impression in the other person. I. C. § 35-43-4-1.
[32] A person who suffers a pecuniary loss as the result of a conversion pursuant to
INDIANA CODE § 35-43-4-3 is entitled to bring a civil action under the Crime
Victims Relief Act (“CVRA”) for damages in an amount not to exceed three
times his actual damages, plus costs and attorney fees. I.C. § 34-24-3-1. The
claimant need only prove the elements of the criminal conduct by a
preponderance of the evidence. Wysocki v. Johnson, 18 N.E.3d 600, 606 (Ind.
2014). Where a defendant’s conduct may constitute an intentional tort as well
as lead to liability under the CVRA, the plaintiff is free to “place all [his] eggs in
the CVRA basket and take [his] chances on the fact-finders’ assessment of
criminality in exchange for the assurance of recovering costs and attorney fees if
[he] prevail[s].” Id. at 605-06.10
10
This is what Golden Foods did in this case. Before trial, Golden Foods and Coulter withdrew the punitive
damages claim and explained that they intended to pursue their right of recovery solely under the CVRA.
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[33] Bayview contends that that there is insufficient evidence that it committed
criminal conversion of either the Madison Street Property or Golden Foods’
LAA payments. Golden Foods and Coulter respond that the “evidence is
overwhelming that Bayview knowingly and intentionally embarked upon a
calculated course of conduct to surreptitiously take Golden Foods’ Madison
Street Property for its own use and benefit, and then purposely create[] a false
impression in Coulter and Golden Foods that the relationship contemplated by
the LAA was in place in order to induce them to make monthly payments.”
(Golden Foods’ Br. 27). According to Golden Foods, Bayview’s actions
constitute conversion. We agree with Golden Foods.
[34] Our review of the evidence reveals that after Jewell acquired the tax deed to the
property, Bayview structured a deal to acquire the property and change
Bayview’s status from mortgage lienholder to fee simple owner. Specifically,
Leuking drafted a settlement agreement, which Piedra authorized, that passed
the tax deed directly to Bayview. Four days later, Gonzalez told Coulter that
the Madison Street Property taxes had been paid but failed to mention that
Bayview had taken title to the property. In the meantime, Coulter, who
believed that Bayview had settled the situation with Jewell and that the LAA
was in effect, began making the $1,218.55 monthly payment to Bayview.
Although Bayview now held title to the property and had never signed the
LAA, Bayview accepted Coulter’s payments for ten months until it filed a
complaint to quiet title to the property. This evidence supports the trial court’s
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conclusion that Bayview converted the Madison Street Property as well as
Coulter’s LAA payments. The trial court’s judgment is not clearly erroneous. 11
[35] Affirmed.
[36] Baker, J., and Bradford, J., concur.
11
Bayview also argues that because it did not commit criminal conversion, application of the Indiana
[CVRA] is improper. Having concluded that there is sufficient evidence to support the trial court’s
conclusion that Bayview committed criminal conversion, we need not address this issue. We further note
that Bayview does not challenge the amount of damages awarded pursuant to this statute.
Bayview raises two additional arguments that are related to the conversion issue. Specifically, Bayview first
argues that the “trial court’s finding that Golden Foods was not guilty of unclean hands is clearly erroneous.”
(Bayview’s Br. 25). Specifically, Bayview alleges that Golden Foods had unclean hands because Coulter
misrepresented his income in his hardship letter to Bayview. The unclean hands doctrine is an equitable
tenet that demands one who seeks equitable relief to be free of wrong doing in the matter before the court.
Ruder v. Ohio Valley Wholesale, Inc.,736 N.E.2d 776, 780 (Ind. Ct. App. 2000). In addition, the alleged
wrongdoing must have an immediate and necessary relation to the matter being litigated. Id. The purpose of
the unclean hands doctrine is to prevent a party from reaping benefits from his misconduct. Id. at 781. Here,
because Golden Foods was not seeking equitable relief, the unclean hands doctrine does not apply. Further,
Coulter’s alleged misrepresentation regarding his income had no immediate and necessary relation to
whether: (1) the mortgage and tax deed merged; or (2) Bayview committed criminal conversion. The
unclean hands doctrine simply does not apply in this case, and the trial court’s finding in this regard is not
clearly erroneous.
Bayview also argues that the trial court erred in calculating Golden Foods’ equity in the Madison Street
Property. Specifically, Bayview contends that the trial court “failed to take into account the outstanding
interest due Bayview at the time of the LAA as well as the real estate taxes for 2008, payable in 2009.”
(Bayview’s Br. 33-34). The total reduction sought by Bayview was $9,545.60, which included $7,200.90 in
real estate taxes and $2,344.79 in interest and other fees. Bayview, however, has waived appellate review of
this issue because it failed to raise it at trial. See McBride v. Monroe County Office of Family and Children, 798
N.E.2d 185, 194 (Ind. Ct. App. 2003) (explaining that an issue raised for the first time on appeal is waived).
Wavier notwithstanding, we note that Leuking testified at trial that Delaware County had “agreed to go
ahead and waive the 2008 [taxes] payable in 2009.” (Tr. 503). We find no error here.
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