Gordon Cummins and Richard Bizzaro v. 1st Source Bank (mem. dec.)

MEMORANDUM DECISION Pursuant to Ind. Appellate Rule 65(D), this Memorandum Decision shall not be FILED regarded as precedent or cited before any Feb 14 2019, 8:41 am court except for the purpose of establishing CLERK the defense of res judicata, collateral Indiana Supreme Court Court of Appeals estoppel, or the law of the case. and Tax Court

ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE Adam J. Sedia Jeffery A. Johnson Hoeppner, Wagner & Evans, LLP Hilary R. Johnson Merrillville, Indiana May Oberfell Lorber Mishawaka, Indiana

IN THE COURT OF APPEALS OF INDIANA

Gordon Cummins and Richard February 14, 2019 Bizzaro, Court of Appeals Case No. Appellants-Defendants, 18A-PL-911 Appeal from the St. Joseph Circuit v. Court 1st Source Bank, The Honorable John E. Broden, Judge Appellee-Plaintiff Trial Court Cause No. 71C01-1708-PL-263

May, Judge. [1] Gordon Cummins and Richard Bizzaro (collectively, “Appellants”) appeal the

trial court’s entry of summary judgment in favor of 1st Source Bank (“Bank”).

Appellants present two issues:

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1) Whether the trial court erred when it entered summary judgment against Bizzaro as to liability under the guaranty despite Bizzaro’s designation of evidence supporting his denial that he executed the guaranty; and

2) Whether the trial court erred when it entered summary judgment as to damages because Bizzaro and Cummins created a genuine issue of material fact regarding the reasonableness of Bank’s efforts to mitigate the damages.

We affirm in part, 1 reverse in part, and remand.

Facts and Procedural History [2] On March 7, 2017, All Resort Coach, Inc. (“All Resort”) entered into an

agreement (“Lease”) with Bank to lease a “2017 Freightliner Turtle Top

Odyssey XL 31 Passenger” bus (“Bus”). (App. Vol. II at 115.) Bizzaro, on

behalf of All Resort, signed the “Master Equipment Lease Agreement[,]” (id. at

106), and the “Equipment Lease Supplement – TRAC[.]” (Id. at 111.) To

secure the amounts due under the Lease, Appellants in their individual

capacities each separately signed a “Guaranty of Payment.” (Id. at 21, 23.)

Both guaranties provided the signatory would “unconditionally guarantee[ ] to

Bank the full and prompt payment and performance when due of all

Obligations due and to become due to Bank.” (Id. at 21, 23.)

1 Cummins does not challenge the trial court’s entry of summary judgment against him as to liability. We accordingly summarily affirm the trial court’s ruling as to Cummins’ liability.

Court of Appeals of Indiana | Memorandum Decision 18A-PL-911 | February 14, 2019 Page 2 of 12 [3] On April 28, 2017, All Resort filed for bankruptcy. All Resort defaulted on the

Lease. On August 2, 2017, Bank sent notice to Appellants the Lease account

was in default. Bank also sent a “Demand and Acceleration Notice” to

Appellants informing them the “remaining unpaid lease balance and

indebtedness . . . [were] immediately due and payable[.]” (Id. at 25.) The

amount due, “as of August 14, 2017[, was] $216,660.83.” (Id.) Appellants did

not cure the default. [4] In the Bankruptcy Court, Bank filed a “Motion to Terminate the Automatic

Stay or For Adequate Protection.” (Id. at 100.) Therein, Bank requested the

Bankruptcy Court “terminate the automatic stay to allow [Bank] to exercise its

rights in the Bus as an Owner and Lessor, including the right to recover

possession of the Bus and to terminate the Debtor’s leasehold interest.” (Id. at

103.) The Bankruptcy Court granted Bank’s motion. Bank repossessed Bus

and advertised it for sale. Bank received three offers for Bus and sold it to the

highest bidder for $137,500. [5] Bank filed a complaint seeking to enforce the guaranties signed by Appellants.

On September 29, 2017, Bank filed a motion for summary judgment but it was

denied for failure to follow local rules. On October 30, 2017, Appellants filed

an answer and a motion to extend their time to respond to the motion for

summary judgment. The trial court granted Appellants’ motion and vacated its

denial of Bank’s motion for summary judgment. On November 30, 2017,

Appellants filed their response to Bank’s motion for summary judgment. Both

Appellants and Bank designated evidence.

Court of Appeals of Indiana | Memorandum Decision 18A-PL-911 | February 14, 2019 Page 3 of 12 [6] As to liability under the guaranty, Appellants contended neither had a “specific

recollection” of signing the guaranty paperwork. (App. Vol. II at 69, 96, 98.)

Bizzaro further asserted his signature was “not in fact [his] signature, but a

stamped signature [and he] did not sign the alleged guaranty, nor did [he] stamp

his signature . . . and [he did] not recall ever giving anyone authorization to sign

or stamp [his] signature on any guaranty to 1st Source.” (Id. at 99.) [7] Then, as to damages, Appellants contended Bank had not properly mitigated its

damages. Appellants designated evidence Bus had been appraised to have a

value between $229,200 to $234,200. Appellants both asserted, based on their

“long experience in the transportation industry . . . buses do not depreciate

upon sale or lease in the same immediate way that personal vehicles do.” (Id.

at 70, 97, 99.) [8] On January 24, 2018, the trial court held a hearing wherein counsel for both

parties presented argument based on the designated evidence. The trial court

concluded:

6. The Court FINDS that the issue of [Bank’s] obligation under the law to mitigate its damages is moot as [Bank] did indeed sell the bus and apply all the relevant sales proceeds to the debt owed by [Appellants].

7. Turning next to [Appellants’] assertion that they do not recall signing the guaranties in question or do not recall authorizing the use of a signature stamp, the Court finds the case of Harper v. Kampschaefer, 549 N.E.2d 1067 (Ind. Ct. App. 1990) to be persuasive. The Court in Harper held that “a plaintiff’s testimony that she could not recall a discussion regarding the

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existence of a dangerous condition does not ‘contradict’ other deponents’ testimony establishing that such a discussion occurred.” Harper, at 1070.

8. In the present case, the Court FINDS that [Appellants’] hazy memories about whether or not they signed or authorized the signing of the absolute guaranties are not sufficient to contradict or create a question of fact in regard to the authenticity of the documents attached to [Bank’s] Complaint evidencing the existence of [Appellants’] signatures on the absolute guaranties.

(Id. at 198) (emphasis in original). [9] The trial court granted Bank’s motion for summary judgment and found

Appellants to be “obligated to 1st Source Bank, jointly and severally, with

respect to their unconditional Guaranties of Payment in the sum of One

Hundred Nine Thousand One Hundred Nineteen and 32/100 Dollars

($109,119.32), plus interest, expenses, and attorneys’ fees.” (Appealed Order at

1.)

Discussion and Decision [10] Our standard of review for summary judgment is well-established:

We review summary judgment de novo, applying the same standard as the trial court: “Drawing all reasonable inferences in favor of . . . the non-moving parties, summary judgment is appropriate ‘if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’” Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A

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fact is ‘material’ if its resolution would affect the outcome of the case, and an issue is ‘genuine’ if a trier of fact is required to resolve the parties’ differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences.” Id. (internal citations omitted).

The initial burden is on the summary-judgment movant to “demonstrate the absence of any genuine issue of fact as to a determinative issue,” at which point the burden shifts to the non- movant to “come forward with contrary evidence” showing an issue for the trier of fact. Id. at 761-62 (internal quotation marks and substitution omitted). And “[a]lthough the non-moving party has the burden on appeal of persuading us that the grant of summary judgment was erroneous, we carefully assess the trial court’s decision to ensure that he was not improperly denied his day in court.” McSwane v. Bloomington Hosp. & Healthcare Sys., 916 N.E.2d 906, 909-10 (Ind. 2009) (internal quotation marks omitted).

Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). Therefore, for the trial court to properly grant summary judgment, the movants must have “made a prima facie showing that their designated evidence negated an element of the nonmovants’ claims, and, in response, the nonmovants must have failed to designate evidence to establish a genuine issue of material fact.” Cox v. Mayerstein-Burnell Co., Inc., 19 N.E.3d 799, 804 (Ind. Ct. App. 2014). We will affirm a trial court’s decision on summary judgment if it is sustainable on any theory or basis found in the evidentiary matter designated to the trial court. United Rural Elec. Membership Corp. v. Ind. Mich. Power Co., 648 N.E.2d 1194, 1196 (Ind. Ct. App. 1995), trans. denied. Court of Appeals of Indiana | Memorandum Decision 18A-PL-911 | February 14, 2019 Page 6 of 12 [11] At issue here are guaranties that appear to be signed by Appellants in their

individual capacities to secure the lease for All Resort. A guaranty is defined as

“an undertaking by a guarantor to answer for payment of some debt, or

performance of some contract, of another person in the event of default.” 38

Am. Jur. 2d Guaranty § 1 (2019). A guaranty is “a conditional promise to pay

because the guarantor promises to pay only on the condition that the principal

debtor fails to pay and is immediately enforceable if that event occurs.” Id. [12] “The rules governing the interpretation and construction of contracts generally

apply to the interpretation and construction of a guaranty contract.” S-Mart,

Inc. v. Sweetwater Coffee Co., 744 N.E.2d 580, 585 (Ind. Ct. App. 2001), trans.

denied. The guarantor’s liability is determined by the terms of the contract. Id.

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 its terms. The contract of a guarantor is to be construed based upon the intent of the parties, which is ascertained from the instrument itself read in light of the surrounding circumstances.

Id. at 585-86 (internal citations omitted). [13] Here, the trial court granted summary judgment in favor of Bank because it

found Appellants had executed unconditional guaranties, Bank’s “obligation

under the law to mitigate its damages [wa]s moot as [Bank] did indeed sell the

bus and apply all the relevant sales proceeds to the debt[,]” (App. Vol. II at

198), and Appellants’ “hazy memories[,]” (id.), did not create a question of fact.

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Signatures [14] Bizzaro contends a genuine issue of material fact exists as to whether he had

signed the guaranty. A signature on a written instrument is “deemed to be

established and the instrument, if otherwise admissible, shall be deemed

admitted into evidence in the action without proving its execution unless

execution be denied under oath in the responsive pleading or by an affidavit[.]”

T.R. 9.2(B) (emphasis added). “Trial Rule 9.2 does not conclusively establish

the genuineness of a signature.” Miller v. NBD Bank, N.A., 701 N.E.2d 282, 285

(Ind. Ct. App. 1998). It merely establishes the instrument and deems it

admitted if the signature is not denied. T.R. 9.2(B). Therefore, Bizzaro’s

signature on the guaranty instrument is admissible without further proof that he

signed it, provided he does not deny doing so. However, Bizzaro did deny

signing it and designated an affidavit to that effect. [15] Affidavits designated at summary judgment “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.” Ind. Trial Rule 56(E). Bizzaro submitted an affidavit, with his

brief in opposition to Bank’s motion for summary judgment, denying his

signature on the guaranty. [16] Bank asserts Bizzaro, in his affidavit, merely states he did not recall affixing, or

causing to have affixed, his signature to the guaranty and that such a statement

“was not a denial under oath.” (Br. of Appellee at 13.) However, Bizzaro filed

an affidavit denying not just his memory of signing the guaranty but also

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alleging he “did not sign the alleged guaranty, nor did [he] stamp [his] signature

on the alleged guaranty, and [he] do[es] not recall ever giving anyone

authorization to sign or stamp [his] signature on any guaranty to 1st Source.”

(App. Vol. II at 99.) [17] A “perfunctory and self-serving” affidavit is enough to overcome a motion for

summary judgment if the affidavit presents sufficient evidence “to raise a

factual issue to be resolved at trial.” Hughley, 15 N.E.3d at 1004. While Bank

may have further evidence to dispute Bizzaro’s account, the evidence Bizzaro

designated is sufficient to overcome summary judgment. See Miller, 701 N.E.2d

at 287 (questions regarding the genuineness of a signature, even if affidavits are

presented that could lead one to doubt that genuineness, are a question of fact

for the fact-finder). Accordingly, we reverse the grant of summary judgment to

the Bank as to Bizzaro’s liability under the guaranty, and we remand for further

proceedings as to the authenticity of Bizzaro’s signature on the document.

Mitigation [18] Appellants also challenge the trial court’s entry of summary judgment for Bank

as to the amount of damages due to Bank under the guaranty. Appellants assert

Bank was required to mitigate its damages in the same manner it would have

been required to do if collecting from All Resort and Bank did not reasonably

mitigate damages because Bank sold Bus for approximately $100,000 less than

its appraised value.

Court of Appeals of Indiana | Memorandum Decision 18A-PL-911 | February 14, 2019 Page 9 of 12 [19] Bank counters that it has no duty to mitigate its damages because Appellants

signed unconditional guaranties. 2 Bank concedes, however, that it did attempt

to mitigate damages by regaining possession of Bus from the bankruptcy

proceedings and selling it “in a commercially reasonable manner.” (Br. of

Appellees at 11.) [20] The trial court determined that, regardless whether Bank had a duty to mitigate,

Bank did in fact attempt to mitigate damages. A duty to exercise care and skill

may be imposed on one who, by affirmative conduct, assumes to act, even

gratuitously, for another. Masick v. McColly Realtors, Inc., 858 N.E.2d 682, 692

(Ind. Ct. App. 2006). The actor must specifically undertake to perform the task

he is charged with having performed negligently, for without actual assumption

of the undertaking there can be no correlative legal duty to perform the

undertaking carefully. Id. In other words, the assumption of a duty creates a

special relationship between the parties and a corresponding duty to act in a

reasonably prudent manner. Id. The existence and extent of such duty are

ordinarily questions for the trier of fact, but when there is no genuine issue of

material fact, assumption of a duty may be determined as a matter of law. Id.

2 Bank cites Kruse v. Nat’l Bank of Indianapolis, 815 N.E.2d 137 (Ind. Ct. App. 2004), in support of its assertion that it has no duty to mitigate damages. To be sure, the Kruse panel did state Kruse “ha[d] not raised a genuine issue of material fact as to [National Bank of Indianapolis’] failure to mitigate damages[,]” id. at 151, but we found no legal holding therein about a creditor not having a duty regarding mitigation. Rather, the panel restated Kruse’s argument that a creditor does not have to “attempt collection from the principal debtor before looking to the guarantor.” Id. at 150 (quoting McEntire v. Indiana Nat’l Bank, 471 N.E.2d 1216, 1223 (Ind. Ct. App. 1984), reh’g denied, trans. denied). Thereafter, the panel held Kruse had “failed to designate any evidence to factually support his assertion that NBI did not attempt to mitigate its damages.” Id. Therefore, Kruse is unpersuasive as to the issue for which Bank cites it.

Court of Appeals of Indiana | Memorandum Decision 18A-PL-911 | February 14, 2019 Page 10 of 12 [21] Here, although Bank asserts it did not have a duty to mitigate, it, in fact,

undertook steps to mitigate its damages. Bank accordingly either had or

assumed a “duty to exercise care and skill.” See id. Accordingly, Bank had an

obligation to act reasonably when mitigating damages, see id., and “[a] party’s

reasonableness in mitigating damages is a question for the trier of fact[.]”

Fischer v. Heymann, 12 N.E.3d 867, 870 (Ind. 2014), reh’g denied. Appellants

designated evidence wherein they asserted the value of the bus was between

$229,200 to $234,200. Appellants contend Bank did not act reasonably when it

sold the bus for $137,500. This contention is enough to create a genuine issue

of material fact as to whether Bank acted reasonably in its mitigation efforts.

See id. Therefore, the trial court erred when it entered summary judgment for

Bank on the issue of damages.

Conclusion [22] Because the designation of Bizzaro’s affidavit offering an alternate version of

the facts is sufficient to defeat summary judgment as to Bizzaro, we reverse and

remand for the trial court to conduct a trial as to Bizzaro’s liability under the

guaranty. Cummins has not asserted an argument on appeal as to his liability

under the guaranty, such that the trial court’s summary judgment to Bank on

that issue stands. Appellants’ designation of evidence created a genuine issue of

material fact regarding the damages due under the guaranty because, regardless

whether Bank had a duty to mitigate damages, Bank assumed the duty and was

required to do so in a reasonable manner. Accordingly, we affirm the entry of

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summary judgment for liability against Cummins, reverse the entry of summary

judgment for liability against Bizzaro, reverse the entry of summary judgment

as to damages against Appellants, and remand to the trial court for proceedings

consistent with this opinion. [23] Affirmed in part, reversed in part, and remanded.

Baker, J., and Robb, J., concur.

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