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

• Court: Indiana Court of Appeals
• Decided: May 10, 2017
• Docket: 49A02-1605-MF-1097
• Status: Published

Opinion

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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 1 of 8 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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 2 of 8 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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 3 of 8 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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 4 of 8 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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 5 of 8 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

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 6 of 8 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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 7 of 8 [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.

Court of Appeals of Indiana | Memorandum Decision 49A02-1605-MF-1097 | May 10, 2017 Page 8 of 8