In 1971, Charles Tincher mortgaged his home to Greencastle Federal Savings Bank (hereinafter "Bank"). In 1986, his home was destroyed by fire. At that time, Tincher learned that the homeowner's policy initially issued in 1971 had been cancelled some months prior to the fire. He brought this action against Bank to recover damages by reason of the lack of insurance in two counts: the first for breach of contract, the second for negligence. From a summary judgment on both counts for Bank, Tincher appeals. We reverse.
Tincher raises two issues for review which we restate as:
Whether there is an issue of material fact as to whether Bank had a contractual duty to maintain insurance for Tincher under either the written mortgage agreement or a separate oral agreement.
Whether an issue of material fact exists as to whether Bank assumed a duty to maintain insurance and breached that duty giving rise to a cause of action in tort.
The following is a statement of the facts in the light most favorable to Tincher, the nonmovant. On March 5, 1971, Tincher purchased real estate in Stilesville, Indiana. He financed a portion of the purchase price with Bank. At the closing, Tincher and Bank executed a mortgage agreement under which Tincher agreed to "insure and keep insured all improvements now on said real estate." (Record, 349). Pursuant to Bank's instructions, Tincher purchased a homeowner's insurance policy and furnished proof of insurance with Farm Bureau Insurance. At the closing, Tincher and Bank discussed paying insurance premiums and taxes through an escrow account. They agreed that Tincher would pay the first year's premiums and after that Bank would maintain the insurance by making payments through the escrow account. Bank calculated Tincher's monthly mortgage payments to include a portion for payment of taxes and insurance.
*270 After the first premium payment, Bank maintained the insurance on the property from the escrowed funds. Tincher never received a bill for insurance premiums from Bank or Farm Bureau, although he sometimes received "notice of coverage" papers from somebody. The Bank last paid a premium on January 25, 1986.
On May 30, 1986, Bank received a check from Farm Bureau for $297.10. On the face of the check, made payable to Bank, was the notation "Refund A/C Tincher, Charles...." (Record, 276). Bank did not receive a transmittal letter with the check. Bank deposited the money in Tincher's escrow account without a search of its own records to attempt to determine why it had received the check, nor any inquiry to Farm Bureau or Tincher regarding the check. On March 4, 1987, a fire destroyed the house. Tincher called Bank to report the fire and was told that he had coverage and to call Farm Bureau. Farm Bureau informed Tincher that his policy had been cancelled. Tincher had not received notice of the cancellation.
When we review a trial court's entry of summary judgment, we are bound by the same standard as the trial court: we must consider all of the pleadings, affidavits, depositions, admissions, answers to interrogatories, and, where applicable, testimony in the light most favorable to the non-moving party in order to determine whether a genuine issue of material fact remains for resolution by the trier of fact. Ayres v. Indiana Heights Volunteer Fire Dept., Inc. (1986), Ind.,
Tincher first argues that Bank elected to maintain insurance as per the mortgage agreement, and thus assumed the contractual duty to do so. However, the clear language of the mortgage agreement does not support Tincher's claim. It is a general principle of contract law that, where the terms of a contract are not ambiguous, the construction of the contract is a matter of law. Piskorowski v. Shell Oil Co. (1980), Ind.App.,
The agreement, in pertinent part, reads:
The Mortgagor will iasure and keep insured all improvements now on said real estate or which may hereafter be placed thereon, in such amounts and against such hazards and in such companies as shall be satisfactory to the Mortgagee, said policy to be endorsed for the benefit of the Mortgagee as its interest may-appear.
If the Mortgagor shall fail to pay taxes, liens or assessments when due, or to purchase and deliver insurance, to keep the property in good repair or to perform any covenants herein, the Mortgagee, at its election may pay such taxes, liens, assessments, purchase such insurance . and perform such covenants. All sums of money so advanced by the Mort gagee, together with interest at the rate of 8% per annum from date, shall be and hereby are made a part of the mortgage debt hereby secured....
(Record, 349). The above terms are not susceptible to the interpretation that the clause that enables the Bank to perform covenants that Tincher fails to perform creates a duty for the Bank to perform such covenants. The provision simply allows Bank, if it chooses to do so, to protect its *271 security interest in the event of Tincher's breach, and to be reimbursed for its expenditures.
Tincher relies upon several cases from sister jurisdictions to support his contention that Bank assumed the contractual duty to maintain insurance. Agee v. First National Bank of Maywood (1979),
Tincher also relies heavily upon Pacheco v. Heussler (1977),
We decline to follow Savage and Pacheco to the extent that those cases may be read to hold that a mortgagee assumes the duty to insure or maintain insurance when it acts pursuant to similar clauses, and that failure to do so may render mortgagee liable for breach of contract.
However, there remains a question as to whether Tincher and Bank had a separate oral agreement upon which Tincher may base his action for breach of contract. The trial court found that the parol evidence rule prevents consideration of the agreement. The parol evidence rule excludes any extrinsic proof of prior or contemporaneous oral agreements offered to vary or contradict a written agreement. Creech v. LaPorte Production Credit Association (1981), Ind.App.,
However, cases from other jurisdictions hold that the parol evidence rule is inapplicable where, pursuant to a mortgage agreement, the mortgagor has the duty to insure, but the parties make a separate oral agreement that the mortgagee will actually procure or renew the insurance for the mortgagor. Painter v. Twinsburg Banking Co. (1949),
The above cases are consistent with Indiana case law interpreting the parol evidence rule. Kruse, Kruse & Miklosko v. Beedy (1976),
Where parties enter into a written agreement, their rights must be controlled thereby, and, in the absence of fraud or mistake, evidence of prior or contemporaneous collateral agreements on the same subject matter, varying, modifying, or contradicting the written agreement, is inadmissible.
* * * % L #
The above-mentioned general rule is not, however, violated by allowing testimony of a distinct collateral or contemporaneous oral agreement which is not in conflict with the terms of the written instrument. To admit evidence of a preliminary or contemporaneous oral agreement in an action on a contract or other written instrument, it must be consistent with the instrument and must not tend to vary or contradict its terms, and the terms of the oral agreement must be independent of those expressed in the writing, even though it may relate to the same subject matter.
The inference most favorable to Tincher is that the terms of the oral agreement required Bank to act as Tincher's agent in the maintenance of insurance. Such an agreement does not contradict his duty under the mortgage agreement to procure and maintain insurance. It is a separate contract made in order to facilitate the exercise of that duty. There is an issue of material fact regarding whether there was consideration to support the oral agreement. See Painter,
Nor does the the Statute of Frauds, I1.C. § 32-2-1-1 prohibit enforcement of the oral agreement. That section provides:
No action shall be brought in any of the following cases:
% * * * * a
Fifth. Upon any agreement that is not to be performed within one (1) year from the making thereof....
* %* * # * *
Unless the promise, contract or agreement upon which such action shall be brought ... shall be in writing, and signed by the party to be charged therewith....
The agreement in question falls under the category of an agreement that is not to be performed within one year from the making thereof, because, by its express terms, the oral agreement required Tincher to provide insurance for the first year. See Hinkle v. Fisher (1875),
The doctrine of promissory estoppel consists of four elements and is applicable where there is:
(1) a promise, (2) which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character, (8) which does, in fact, induce such action or forbearance, and (4) injustice can only be avoided by enforcement of the promise.
Id. Tincher claims that Bank promised to maintain the insurance and did so for fifteen years. Clearly, the evidence and inferences most favorable to Tincher support the application of the doctrine of promissory estoppel.
*273 Tincher also takes issue with the grant of summary judgment on count II of his amended complaint. In particular, he disagrees with the trial court's finding that Bank owed him no duty in tort. We find that a material issue of fact exists with regard to whether Bank had a duty to renew and maintain insurance for Tincher.
Under Indiana law, "a duty may be imposed upon one who, by affirmative conduct or agreement, assumes to act, even gratuitously, for another." Nalls v. Blank (1991), Ind.App.,
Tincher's deposition testimony suffices to raise an issue of material fact. He alleged that Bank assumed the duty to maintain insurance both through the oral agreement made at the closing and Bank's subsequent conduct during the fifteen years between the execution of the mortgage and the fire that destroyed his house. In addition, Tincher testified that he paid money into an escrow account, which Bank used to pay insurance premiums when due as well as to renew the policy over the course of fifteen years. Tincher also testified that he did not receive monthly premium statements, although he did receive occasional statements indicating coverage.
A case from a sister jurisdiction involving similar facts supports our decision. In Agee v. First National Bank of Maywood (1979),
Bank's reliance upon Lather v. Berg (1988) Ind.App.,
An actor is liable for his negligent performance if he has undertaken to perform a legal duty owned by the other ... on behalf of and in lieu of that other. Liability does not arise in the situation when one undertakes to perform functions coordinate to-or even duplicative of-activities imposed on another by a legal duty, but rather the situation in which one actually undertakes to perform for the other the legal duty itself.
Id. at 766. In Lather, the court affirmed a summary judgment holding that, as a matter of law, defendants had not assumed the duty to prevent an intoxicated minor from driving his own car. Id. The uncontro-verted evidence revealed that, although the defendants attempted to take the minor's keys, they were not successful. Furthermore, the minor retained an extra set of keys and resisted defendants' attempts to restrain him from driving. At no time did the defendants take control of the car.
If Bank did assume the duty to maintain insurance, there is also a material question of fact regarding whether Bank breached its duty by allowing the coverage to lapse without notifying Tincher or taking any other steps to maintain a policy after it had received the refund check. Bank contends *274 that the refund check did not put it on notice of the cancellation because the check did not specify that the policy had been cancelled. In addition, Bank relies upon deposition testimony that it often received refunds for clients who had changed or otherwise altered their coverage. However, whether Bank reasonably should have taken steps to investigate the purpose. of the refund in order to discharge with care its duty to maintain insurance is a question of fact, and given the evidence and inferences most favorable to Tincher, the trier of fact could determine that the Bank is liable.
For the above mentioned reasons, we reverse the order of the trial court granting summary judgment on both counts of Tincher's amended complaint and remand for further proceedings consistent with this opinion. 1
REVERSED and REMANDED.
Notes
. Appellee's Petition to Strike Reply Brief is denied.