John M. Abbott, LLC, Class Representative and All Others Similarly Situated v. Lake City Bank
14 N.E.3d 53
| Ind. Ct. App. | 2014Background
- John M. Abbott, LLC (Abbott LLC) obtained a $150,000 commercial loan from Lake City Bank; John Abbott signed the promissory note on behalf of Abbott LLC.
- The Note specified monthly payments, a variable interest rate tied to a Five Year Treasury Bill index, and stated: "The annual interest rate for this Note is computed on a 365/360 basis" with an explanatory description of the 365/360 method.
- Borrowers in a related foreclosure action asserted class claims that the Bank breached the Note by using the 365/360 calculation, which yields a higher effective interest cost than a straight "per annum" calculation.
- The trial court granted the Bank's motion for summary judgment, finding the Note unambiguous and harmonizing the payment/interest provisions. Abbott LLC appealed.
- The Court of Appeals reviewed de novo, concluded the Note was not ambiguous as a matter of law, rejected Abbott LLC's extrinsic‑evidence and adhesion/unconscionability arguments, and affirmed summary judgment for the Bank.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Note is ambiguous because it says "annual interest rate is computed on a 365/360 basis," allegedly conflicting with "per annum" rate wording | The phrase creates ambiguity: 365/360 increases the effective rate and conflicts with the stated "per annum" interest rate; extrinsic evidence shows meaning | The Note’s language and immediately following explanatory clause plainly define the 365/360 method for computing periodic interest payments; the variable rate paragraph sets the annual rate tied to an index | Court held no ambiguity; the clause is an inartful but clear specification of the method for computing interest payments and can be harmonized with the rate paragraph; summary judgment affirmed |
| Whether the Note is an unconscionable contract of adhesion permitting extrinsic evidence or other relief | The Note is a standard form and imposed by superior bargaining power, so it should be scrutinized and extrinsic evidence considered | Borrowers are presumed to understand and assent to signed contract terms; Abbott presented no evidence they signed unwillingly or were unaware of terms | Court held Abbott failed to show unconscionability or adhesive coercion; extrinsic evidence offered years later does not reflect intent at formation |
Key Cases Cited
- Kreisler & Kreisler, LLC v. Nat’l City Bank, 657 F.3d 729 (6th Cir. 2011) (upholding 365/360 method against challenge)
- Bank of Am. v. Shelbourne Dev. Grp., Inc., 732 F. Supp. 2d 809 (N.D. Ill. 2010) (finding no conflict between “per annum” and 365/360 method)
- JNT Props., LLC v. KeyBank Nat’l Ass’n, 981 N.E.2d 804 (Ohio 2012) (holding similar note unambiguous; explanatory clause defines method of computing payments)
- Claire’s Boutiques, Inc. v. Brownsburg Station Partners LLC, 997 N.E.2d 1093 (Ind. Ct. App. 2013) (court cannot rewrite contracts; plain‑meaning rule)
- Sanford v. Castleton Health Care Ctr., LLC, 813 N.E.2d 411 (Ind. Ct. App. 2004) (parties presumed to understand and assent to signed contract terms)