Lori Enfield, Richard Enfield, Marvin Enfield, Thomas E. Wilson as Guardian for Sharon Enfield, and Steuben County Treasurer v. The Farmers & Merchants State Bank (mem. dec.)
76A05-1603-MF-579
| Ind. Ct. App. | Feb 8, 2017Background
- Marvin Enfield owned ~260 acres (the Enfield Farm); he conveyed property to his son Richard by deed reserving a life estate but later claimed the deed conveyed the entire farm unknowingly.
- Richard borrowed $236,500 (Note 1) from Farmers & Merchants State Bank to purchase farmland; Marvin and Richard executed a mortgage securing Note 1 and any future obligations, with a stated "Maximum Obligation Limit" of $236,500.
- The same day, Richard executed a second note for $67,480.88 (Note 2) for farm equipment, also secured by the same mortgage; Richard later defaulted and the Bank repossessed equipment.
- The Bank sued to foreclose the mortgage based on Note 1 and moved for summary judgment; Marvin cross-moved and argued he was discharged as a surety because issuance of Note 2 materially altered his obligation and/or because of fraud.
- The trial court granted summary judgment for the Bank, entered in rem and in personam judgments against Marvin and Richard, and this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether issuance of Note 2 constituted a material alteration discharging Marvin as a surety | Note 2 increased secured principal beyond the mortgage's maximum and materially altered risk, discharging Marvin | The mortgage expressly allowed future advances and secured future notes; no alteration of Marvin’s surety obligations occurred | Court held no material alteration discharged Marvin; mortgage permitted future advances and Marvin’s obligations remained unchanged |
| Whether Bank had knowledge or participated in fraud sufficient to defeat summary judgment | Marvin asserted Richard fraudulently obtained deed to whole farm and concealed Note 2; Bank failed to initial page with Exhibit A, suggesting knowledge | Bank had no proven participation or knowledge of Richard’s alleged fraud; Exhibit A bore Marvin’s initials and no other evidence of Bank involvement | Court held Marvin failed to show Bank’s participation or knowledge of fraud; summary judgment for Bank was proper |
Key Cases Cited
- Pfenning v. Lineman, 947 N.E.2d 392 (Ind. 2011) (summary judgment standard and appellate review)
- Owen Cnty. State Bank v. Guard, 26 N.E.2d 395 (Ind. 1940) (acts by creditor, such as extension or acceptance of renewal, can discharge a surety)
- First Fed. Bank of Midwest v. Greenwalt, 42 N.E.3d 89 (Ind. Ct. App. 2015) (material alteration analysis focuses on changes to the principal debtor’s obligation)
- Keesling v. T.E.K. Partners, LLC, 861 N.E.2d 1246 (Ind. Ct. App. 2007) (examples of material alteration discharging guarantors)