Bayview Loan Servicing, LLC v. Golden Foods, Inc., and Lewis R. Coulter
2016 Ind. App. LEXIS 340
| Ind. Ct. App. | 2016Background
- Golden Foods (borrower) executed a 1988 note secured by a Madison Street commercial mortgage and an Oliver Drive mortgage; both mortgages were assigned to Bayview in 2005.
- Golden Foods fell behind on real-estate taxes for the Madison Street Property; Jewell purchased the tax certificate at sale and failed to give required notice to Bayview; redemption period expired and Jewell sought a tax deed.
- Bayview contemplated several options (redeem/tax-capitalize and modify loan, foreclose, or acquire as REO) and drafted a Loan Adjustment Agreement (LAA) that Golden Foods signed but Bayview never executed; Bayview decided instead to negotiate with Jewell to acquire title.
- Bayview’s counsel negotiated a settlement that resulted in the tax deed being issued to Bayview (treated by Bayview’s counsel as like a deed in lieu of foreclosure); Bayview then took control of the property (changed locks, winterized), did not notify Golden Foods, and accepted monthly payments under the unsigned LAA for ten months.
- Golden Foods and Coulter sued; the trial court found Bayview intentionally took title (merging/extinguishing the mortgage and note), committed conversion of Golden Foods’ property rights (awarded compensatory and enhanced CVRA damages), and converted Coulter’s monthly payments.
Issues
| Issue | Plaintiff's Argument (Bayview) | Defendant's Argument (Golden Foods / Coulter) | Held |
|---|---|---|---|
| Whether mortgage merged into tax deed, extinguishing Bayview’s foreclosure rights | Bayview: did not intend merger; retained mortgage lien and may foreclose | Golden Foods: Bayview intended to take title as deed in lieu and extinguish mortgage | Court: Held merger occurred; Bayview intended title acquisition like deed in lieu; foreclosure denied |
| Whether Bayview’s conduct was tort (conversion) vs. contract breach | Bayview: dispute is contractual; cannot be repackaged as conversion | Golden Foods: Bayview’s concealment and taking of title plus accepting payments created unauthorized control beyond contract | Court: Held tort remedy available; conduct morphed into conversion |
| Whether evidence supports criminal conversion of property rights (Madison St.) | Bayview: insufficient evidence of intentional/knowing unauthorized control | Golden Foods: Bayview knowingly acquired title without notice, acted as owner, concealed transaction | Court: Held sufficient evidence of knowing/intentionally unauthorized control; conversion proven |
| Whether evidence supports conversion of Coulter’s monthly payments | Bayview: payments were contractual (LAA) and Bayview had right to collect | Coulter: Bayview induced payments by creating false impression while acting as owner and not signing LAA | Court: Held Bayview exerted unauthorized control over payments; awarded compensatory and enhanced CVRA damages |
Key Cases Cited
- Citizens State Bank of New Castle v. Countryside Home Loans, 949 N.E.2d 1195 (Ind. 2011) (explains merger of mortgage and title and extinguishment of lien)
- Deutsche Bank Nat’l Trust Co. v. Mark Dill Plumbing Co., 908 N.E.2d 1273 (Ind. Ct. App.) (focuses on intent of parties as key to merger analysis)
- French-Tex Cleaners, Inc. v. Cafaro Co., 893 N.E.2d 1156 (Ind. Ct. App.) (contract disputes should not be recast as torts absent invasion beyond contractual duties)
- Auto Liquidation Ctr., Inc. v. Chaca, 47 N.E.3d 650 (Ind. Ct. App.) (holding that an initial contractual misunderstanding can morph into intentional unauthorized taking supporting conversion)
- Wysocki v. Johnson, 18 N.E.3d 600 (Ind. 2014) (plaintiff may recover under CVRA by proving criminal elements by a preponderance)
- JPMCC 2006-CIBC14 Eads Parkway LLC v. DBL Axel, LLC, 977 N.E.2d 354 (Ind. Ct. App.) (tort law should not displace contractual obligations unless conduct transcends contract)