Bruce and Sybil Scheffer v. Centier Bank (mem. dec.)

MEMORANDUM DECISION Mar 12 2015, 10:09 am Mar 12 2015, 10:09 am

Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case.

ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEE Edward P. Grimmer Paul B. Poracky Daniel A. Gohdes Koransky Bouwer and Poracky, P.C. Edward P. Grimmer, P.C. Dyer, Indiana Crown Point, Indiana

IN THE COURT OF APPEALS OF INDIANA

Bruce and Sybil Scheffer, March 12, 2015

Appellants-Plaintiffs, Court of Appeals Cause No. 45A03-1410-PL-367 v. Appeal from the Lake Superior Court Cause No. 45D11-1212-PL-106 Centier Bank, Appellee-Defendant. The Honorable Diane Kavadias Schneider, Judge

Barnes, Judge. Court of Appeals of Indiana | Memorandum Decision 45A03-1410-PL-367 | March 12, 2015 Page 1 of 12

Case Summary [1] Bruce and Sybil Scheffer appeal the trial court’s denial of their motion for

summary judgment and the trial court’s grant of summary judgment in favor of

Centier Bank (“Centier”). We affirm in part, reverse in part, and remand.

Issues [2] The Scheffers raise three issues, which we consolidate and restate as:

I. whether an affidavit designated by Centier was admissible; and

II. whether the trial court properly granted Centier’s cross-motion for summary judgment and denied the Scheffers’ motion for summary judgment.

Centier raises one issue on cross-appeal, which we restate as whether it is

entitled to an award of costs and attorney fees.

Facts [3] In December 2012, the Scheffers filed a complaint against Centier Bank. The

Scheffers alleged that a 1985 loan with Centier’s predecessor, The First Bank of

Whiting, for the purchase of residential real estate was secured by a mortgage

on the property and four assignments of life insurance policies on the lives of

Bruce and Sybil. The assignments each provide: “this assignment is for the sole

purpose of using the policy as collateral security for existing or future loans

made by the assignee to the owner.” App. pp. 80, 81, 83, 84. The Scheffers

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alleged that they satisfied the loan in December 2010 but that Centier refused to

release the assignments of the life insurance policies. [4] In its answer, Centier alleged that the assignments served as collateral for

corporate debt of Scheffer, Inc., not a personal debt of the Scheffers, and that

the Scheffers were sole shareholders of that company. Centier further alleged

that Scheffer, Inc., exhausted a $1.65 million line of credit in 2009 and that an

involuntary bankruptcy was filed against the company in 2010. [5] The Scheffers filed a motion for summary judgment arguing that Centier was

required to release the assignments of the life insurance policies. Among other

evidence, the Scheffers designated their own affidavit, which alleged that, since

1985, they had owned, respectively, life insurance policies through United

Farm Bureau Family Life Insurance Company. The Scheffers also alleged that

they assigned the life insurance policies as collateral on a promissory note and

mortgage on their residential property in 1985. The Scheffers contended that

neither of them had given “any signed, written guarantee or undertaken any

personal liability to Centier Bank on the corporate debt of Scheffer, Inc. to

Centier Bank.” Id. at 77. The Scheffers did not designate any documentary

evidence showing a 1985 residential mortgage or loan with Centier or its

predecessor and did not designate the life insurance policies or documentary

evidence showing the owners of the policies. [6] Centier responded to the Scheffers’ motion for summary judgment and filed a

cross-motion for summary judgment. Centier argued that the Scheffers’ claim

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failed because the assignments related to a business loan, not a residential loan.

Centier designated an affidavit by Brian Miller, a vice-president and “workout

officer” for Centier Bank. Id. at 136. According to Miller, Centier did not have

a loan or mortgage on the Scheffers’ residence until 2002 and that loan was paid

off in 2010. Prior to 2002, the Scheffers had a mortgage on the property

through a different bank, American Trust & Savings Bank. According to

Miller, at the time of the 1985 assignments, Centier’s predecessor only had a

business relationship with Scheffer, Inc., not the Scheffers individually. [7] The Scheffers filed a reply brief, claiming:

The only loan that Bruce and Sybil Scheffer have had with, the only promissory note they have given to, Centier Bank since the time of the assignments as collateral was the residential mortgage debt on their Wexford Road property. They paid off that loan in 2010. They are not obligated on any ‘existing or future loans’ since 2010. Upon that pay off in 2010, Centier had no right to retain the assignments as collateral. Id. at 255. The Scheffers also argued that the Miller affidavit was inadmissible

because Miller had no knowledge of the events and that Exhibit 2 of the Miller

affidavit was inadmissible hearsay. [8] Centier filed a reply noting that the Scheffers appeared to have abandoned their

argument that the 1985 assignments related to a 1985 loan and mortgage and

that the Scheffers were now arguing that the assignments were somehow related

to the 2002 loan and mortgage. Centier also argued that Miller’s affidavit was

based on his personal knowledge and review of Centier’s business records and

that it was admissible. Further, Centier argued that Exhibit 2 was admissible.

Court of Appeals of Indiana | Memorandum Decision 45A03-1410-PL-367 | March 12, 2015 Page 4 of 12 [9] The trial court granted Centier’s cross-motion for summary judgment and

denied the Scheffers’ motion for summary judgment. The trial court concluded:

[T]he language of the 2002 contract assigning the life insurance policies to the mortgage loan, submitted by Plaintiffs clearly states that the assignment of the life insurance policies is for ‘any existing or future loans.’ . . . . Therefore, Centier Bank has properly maintained the assignments of Plaintiffs’ life insurance policies to secure other loans between the Plaintiffs individually or as [Scheffer], Inc., that were entered into after the 2002 contract. Id. at 12.1 The Scheffers now appeal, and Centier cross-appeals.

Analysis I. Miller Affidavit

[10] On appeal, the Scheffers argue that the Miller Affidavit was inadmissible.

However, the Scheffers’ argument on appeal is not cogent. They contend that

Miller’s affidavit “was not based upon personal knowledge, sought to opine on

the mental impressions and motivations of person other than himself, and was

parol evidence (at best) contradictory of the language within the four corners of

the assignments.” Appellants’ Br. p. 26. The Scheffers do not specify which

statements in the affidavit were not based on Miller’s personal knowledge, do

not specify which statements opine as to mental impressions or motivations,

and do not identify the parol evidence. Indiana Appellate Rule 46(A)(8)

provides in part that the argument section of the appellant’s brief must “contain

1 The trial court appears to have misstated the designated evidence, as the assignments occurred in 1985, not 2002.

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the contentions of the appellant on the issues presented, supported by cogent

reasoning,” along with citations to the authorities, statutes, and parts of the

record relied upon, and a clear showing of how the issues and contentions in

support thereof relate to the particular facts under review. The Scheffers failed

to do so and have waived this argument. See, e.g., Reed v. Reid, 980 N.E.2d 277,

297 (Ind. 2012) (“Failure to comply with this rule results in waiver of the

argument on appeal.”). The Scheffers have failed to demonstrate that the trial

court erroneously considered the Miller Affidavit.

II. Summary Judgment

[11] The Scheffers also argue that the trial court erred by granting Centier’s cross-

motion for summary judgment and denying their motion for summary

judgment. Summary judgment is appropriate when there is no genuine issue of

material fact and the moving party is entitled to judgment as a matter of law.

Ind. Trial Rule 56. We liberally construe all designated evidentiary material in

a light most favorable to the non-moving party to determine whether there is a

genuine issue of material fact. Bradshaw v. Chandler, 916 N.E.2d 163, 166

(Ind. 2009). The party that lost in the trial court has the burden of persuading

the appellate court that the trial court erred. Id. Our review of a summary

judgment motion is limited to those materials designated to the trial court.

Mangold v. Ind. Dep’t of Natural Res., 756 N.E.2d 970, 973 (Ind. 2001). [12] Where a trial court enters findings of fact and conclusions thereon in granting a

motion for summary judgment, as the trial court did in this case, the entry of

specific findings and conclusions does not alter the nature of our review. Rice Court of Appeals of Indiana | Memorandum Decision 45A03-1410-PL-367 | March 12, 2015 Page 6 of 12

v. Strunk, 670 N.E.2d 1280, 1283 (Ind. 1996). In the summary judgment

context, we are not bound by the trial court’s specific findings of fact and

conclusions thereon. Id. They merely aid our review by providing us with a

statement of reasons for the trial court’s actions. Id. [13] The Scheffers argue that, pursuant to the language of the assignments, the

assignments related only to personal loans and mortgages given to the

Scheffers, not corporate loans given to Scheffer, Inc. The Scheffers note that

the assignments each provide: “this assignment is for the sole purpose of using

the policy as collateral security for existing or future loans made by the assignee

[Centier] to the owner.” App. pp. 80, 81, 83, 84 (emphasis added). According

to the Scheffers, they are the owners of the policies, and they do not have any

outstanding personal loans with Centier. Thus, the Scheffers argue that Centier

should be required to release the assignments of the life insurance policies.

Centier counters that there is no evidence of a personal residential loan or

mortgage in 1985, that at that time Centier only had a loan relationship with

Scheffers, Inc., and that the assignments provided collateral for a business loan,

not a residential loan. [14] The Scheffers designated their own affidavit that provided in part:

2. Since 1985 through present time, Bruce A. Scheffer and Sybil Scheffer, respectively, own insurance policies on their respective lives, Policy 916030 and Policy 577523 on the life of Bruce and Policy 916031 and Policy 577524 on the life of Sybil, with United Farm Bureau Family Life Insurance Company, its successors and assigns.

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3. Each of us assigned our respective life insurance policy to The First Bank of Whiting for the sole purpose to further collateralize a promissory note and mortgage loan we had on our personal residential real property commonly known as 504 Wexford Road, Valparaiso (mailing), Porter County, Indiana. App. p. 75.

[15] Centier countered by designating the Miller Affidavit, which provided in part:

4. Centier Bank had a long standing business relationship with Bruce and Sybil Scheffer and their company, [Scheffer, Inc.,] dating before 1985. Various loans and lines of credit were established over the years to assist Plaintiffs in their exclusive ownership, management and operation of [Scheffer, Inc.]. As the business of [Scheffer, Inc.] grew, Bruce and Sybil Scheffer called upon Centier Bank to provide additional loans, lines of credit and letters of credit, all of which assisted Plaintiffs’ national and international business relationships in the web auxiliary equipment marketplace. 5. On or about April 1, 2009, representatives of the Plaintiffs and [Scheffer, Inc.,] advised Centier Bank that there were no monies available to service the various loans, lines of credit and credit facilities that had been provided by the bank, such that a default of more than $3.5 million existed. . . . 6. In 1985, the relationship between Plaintiffs and their company [Scheffer, Inc.] was for business purposes only. Centier Bank did not have a residential mortgage loan on 504 Wexford Road, Valparaiso, IN with Bruce and Sybil Scheffer at that time. Id. at 136-37.

Court of Appeals of Indiana | Memorandum Decision 45A03-1410-PL-367 | March 12, 2015 Page 8 of 12 [16] Centier correctly notes that the Scheffers designated no documentary evidence

of a 1985 personal residential loan between the Scheffers and Centier or its

predecessor that could have been connected with the life insurance policy

assignments. They also designated no documentary evidence showing that they

were the owners of the life insurance policies. However, our supreme court

recently clarified that even perfunctory, self-serving affidavits are enough to

create a genuine issue of material fact for summary judgment purposes. [17] In Hughley v. State, 15 N.E.3d 1000, 1004 (Ind. 2014), our supreme court noted

that “Indiana consciously errs on the side of letting marginal cases proceed to

trial on the merits, rather than risk short-circuiting meritorious claims.” In

Hughley, a defendant responded to the State’s summary judgment motion and

designation of evidence in a civil forfeiture action by designating his own

affidavit—“albeit a perfunctory and self-serving one—that specifically

controverted the State’s prima facie case, denying under oath that the cash or

car were proceeds of or used in furtherance of drug crimes.” Hughley, 15

N.E.3d at 1004. Our supreme court concluded that the affidavit was

“sufficient, though minimally so, to raise a factual issue to be resolved at trial,

and thus to defeat the State’s summary-judgment motion.” Id. The trier of fact

was required to “resolve the parties’ differing accounts of the truth” and

“reconcile the credibility of those two accounts.” Id. at 1004-05. [18] The court noted that the “Defendant may very well lose such a credibility

contest” and that “the State’s circumstantial evidence, though not conclusive, is

certainly compelling.” Id. at 1005. However, summary judgment “may not be

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used as a substitute for trial in determining factual disputes,” and it “is not

appropriate merely because the non-movant appears unlikely to prevail at trial.”

Id. Thus, even though the defendant’s designated evidence was thin, it was

enough to preclude summary judgment for the State.2 Id. [19] That seems to be the case here. The Scheffers have not designated any evidence

to contravene Centier’s claims beyond what appears to be a self-serving

affidavit. They presented no documentation as to the alleged 1985 mortgage

and no copies of the life insurance policies showing the owner of the policies.

However, given the guidance in Hughley, we believe the razor thin affidavits are

enough. Should they be? Our supreme court says, “Yes.” [20] The Scheffers’ affidavit, although lacking any documentary support, was

enough to create a genuine issue of material fact as to whether the assignments

related to a 1985 mortgage on their personal residence rather than loans to their

business, Scheffer, Inc. Consequently, summary judgment to Centier was

improper.

2 [1] Our supreme court addressed the concern of an unscrupulous litigant filing a perjurous affidavit and noted that an oath, subject to penalties for perjury, was “an adequate deterrent against false testimony—hence the Rule 56(C) requirement to designate evidence, and not merely rest on unsworn pleadings.” Hughley, 15 N.E.3d at 1005.

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III. Cross-Appeal

[21] On cross-appeal, Centier argues that it is entitled to an award of costs and

attorney fees. Centier notes that it requested costs and attorney fees in its cross-

motion for summary judgment pursuant to Indiana Code Section 34-52-1-1 but

that the trial court did not address the argument. Centier further requests costs

and attorney fees pursuant to Indiana Appellate Rule 66(E). [22] In general, Indiana adheres to the “American Rule” that each party pays for its

own attorney fees, absent agreement or statute to the contrary. Knowledge A-Z,

Inc. v. Sentry Ins., 891 N.E.2d 581, 585 (Ind. Ct. App. 2008), trans. denied. A

court may award attorney fees to the prevailing party if the court finds that a

party either “brought the action or defense on a claim or defense that is

frivolous, unreasonable, or groundless” or continued to litigate after its “defense

clearly became frivolous, unreasonable, or groundless” or “litigated the action

in bad faith.” Ind. Code § 34-52-1-1(b). Similarly, on appeal, we “may assess

damages if an appeal . . . is frivolous or in bad faith. Damages shall be in the

Court’s discretion and may include attorneys’ fees.” Ind. Appellate Rule 66(E).

Our discretion “is limited to instances ‘when an appeal is permeated with

meritlessness, bad faith, frivolity, harassment, vexatiousness, or purpose of

delay.’” Knowledge A-Z, 891 N.E.2d at 586. Given our resolution of the

Scheffers’ appeal, we cannot say that Centier is entitled to costs and attorney

fees under either Indiana Code Section 34-52-1-1 or Indiana Appellate Rule

66(E).

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Conclusion [23] The Scheffers failed to demonstrate that the trial court erroneously considered

the Miller affidavit. Further, the trial court’s grant of summary judgment to

Centier was improper because genuine issues of material fact exist. We affirm

the trial court’s denial of the Scheffers’ motion for summary judgment but

reverse the trial court’s grant of summary judgment to Centier. Further, we

cannot say that Centier is entitled to costs or attorney fees at this time. We

remand for proceedings consistent with this opinion. [24] Affirmed in part, reversed in part, and remanded.

May, J., and Pyle, J., concur.

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