Excerpts of the Court of Appeals Opinion follow:
S-Mart is an Indiana
corporation engaged in the sale of motor fuels. Iqbal is an Illinois resident
doing business in Indiana and is the sole member and manager of M&U and the
president and majority shareholder of SGTC II.
On or about March 7, 2007,
S-M-1 Acquisition Corporation (“S-M-1”) and S-Mart entered into a motor fuel
sales agreement, and Iqbal signed a personal guaranty. S-M-1 failed to pay for
motor fuel delivered by S-Mart pursuant to the agreement, and, on October 23,
2008, S-Mart filed suit against S-M-1, Ali Ahmed, and Iqbal to recover the
payment. On April 14, 2009, the trial court entered summary judgment in favor
of S-Mart.
On October 1,
2009, Iqbal, together with M&U and SGTC II (entities created by Iqbal)
entered into a settlement agreement pertaining to the judgment entered in the
2008 litigation. As part of the agreement, Iqbal, individually and as the sole
member of M&U and as the president of SGTC II, executed a promissory note
and agreement to purchase motor fuel. Also as part of the agreement, M&U
secured the obligations under the promissory note and motor fuel agreement by
granting a mortgage and security agreement in real estate owned by M&U.
On January 27,
2010, after Iqbal, M&U and SGTC II breached the settlement agreement,
S-Mart filed a complaint seeking to enforce the settlement agreement, foreclose
the mortgage, and collect damages for breach of the motor fuel agreement. On
March 22, 2010, S-Mart filed a motion for summary judgment, which the trial
granted on June 28, 2010. Among other things, the trial ordered that the
mortgaged property owned by M&U be sold in a sheriff’s sale and that the
proceeds be paid to S-Mart. Neither S-Mart’s motion for summary judgment nor
the trial court’s order specifically mentioned real estate taxes on the
property, presumably because prior to July 1, 2010, pursuant to Indiana Code §
32-30-10-14, real estate taxes were collected by the sheriff and paid as a
prioritized expense of sale. However, on July 1, 2010, the Indiana Code was
amended by Indiana Code § 32-29-7-8.5(a). The new statute required the party
that files a praecipe for a sheriff’s sale to pay all delinquent taxes prior to
the sale.
On July 19,
2010, S-Mart filed its first praecipe for sheriff’s sale, and a sheriff’s sale
was scheduled for October 7, 2010. As required by Indiana Code § 32-29-7-8.5,
S-Mart paid delinquent real estate taxes which were assessed while M&U
owned the real estate. The payment of the taxes by S-Mart was both necessary to
avoid the property being sold at a tax sale and to preserve S-Mart’s interest
in the property.
On September
23, 2010, S-Mart filed its “Motion to Amend Judgment to Add Post Judgment
Payment of Real Estate Taxes Secured by Mortgage.” (App. 3). None of the
defendants responded to the motion, and on September 28, 2010, the trial court
entered an “Order Amending Judgment to Add Post Judgment Payment of Real Estate
Taxes Secured by Mortgage.” Id.
On October 6,
2010, M&U filed a Chapter 11 bankruptcy. Thus, the scheduled sheriff’s sale
of the mortgaged property was stayed. However, on December 1, 2011, the
bankruptcy court issued an order granting relief from the stay and authorizing
the sale of the mortgaged property at a second sheriff’s sale.
On December
13, 2011, S-Mart filed a second praecipe for sheriff’s sale. On February 27,
2012, S-Mart was once again required by Indiana Code § 32-20-7-8.5 to pay
delinquent taxes (owed on November 2010, May 2011, and November 2011) in order
to preserve its rights. A sheriff’s sale was scheduled for and completed on
March 7, 2012.
On March 1,
2012, S-Mart filed a “Second Motion to Add Post-Judgment Payment of Real Estate
Taxes Secured by Mortgage.” (App. 58). This time, M&U and SGTC II objected
and a hearing was held on their objection. The trial court subsequently granted
S-Mart’s motion and entered judgment on October 1, 2012.
The defendants
now appeal.
DISCUSSION AND
DECISION
1. Obligation
to Pay Real Estate Taxes
M&U
contends that it is not liable for the payment of real estate taxes on the
mortgaged property under Indiana Code § 32-29-7-8.5(a), which states that
before the date of a sheriff’s sale of property the party that filed the
praecipe for the sheriff’s sale shall pay “all delinquent property taxes,
special assessments, penalties, and interest that are due and owing on the
property on the date of the sheriff’s sale.”
M&U’s
contention is fundamentally flawed. In order for the property taxes to be
delinquent, M&U, as owner of the mortgaged property, must have already
failed to meet its statutory obligation to pay real estate taxes assessed on
the property. Otherwise, the taxes would not be delinquent, and S-Mart would
not have had to pay the taxes to preserve its interest in the property. Indiana
Code § 6-1.1-2-4(a) states that “the owner of any real property on the
assessment date of a year is liable for the taxes imposed for that year on the
property . . . .”
Thus, M&U
had a statutory obligation to pay the real property taxes assessed on the
mortgage property that it owned. M&U additionally had a contractual duty
under the mortgage agreement to pay the taxes. Nothing in Indiana Code §
32-29-7-8.5(a) prevents a party from recovering taxes that it paid in the name
of another. In short, the trial court did not err in determining that M&U
was responsible for payment of the taxes.
2. Equitable
Authority of the Trial Court
The defendants
contend that S-Mart’s motion to amend the judgment was untimely and that the
trial court lacked authority to rule on the motion. The defendants argue that
the trial court’s summary judgment order was a final judgment that could not be
amended more than thirty days after entry unless a party filed a timely motion
to correct error. (Br. 10) (citing Indiana Trial Rules 52(B) and (59(C)).
M&U and SGTC II conclude that the trial court could not amend the judgment
because S-Mart’s motion for a second motion to amend the judgment was filed
outside the thirty-day deadline.
In Songer
v. Civitas Bank, 771 N.E.2d 61, 69 (Ind. 2002), our Supreme Court held that
foreclosure actions are essentially equitable. We subsequently held in Farm
Credit Services of Mid-America, FLCA v. Tucker, 792 N.E.2d 565, 569 (Ind.
Ct. App. 2003) that when a court acts in equity in a foreclosure action, it is
not bound “‘by strict rules of law’” and “‘looks beneath the rigid rules,’
exercising its ‘power to prevent strict legal rules from working injustice.’” Id.
(quoting Wabash Valley Coach Co. v. Turner, 221 Ind. 52, 46 N.E.2d 212,
217 (1943), cert. denied). We further held that “a court of equity has
the power to require that to be done which should have been done.” Id.
Here, the
defendants do not claim that M&U paid the taxes on the mortgaged property
that it owned. Indeed, when S-Mart filed its first motion to amend the judgment
to recoup its payment of M&U’s taxes, the defendants did not contest the
motion. It was not until S-Mart was forced to file a second motion that M&U
and SGTC II objected to the amendment to the judgment. When the trial court
granted the two motions to amend the judgment, it accounted for a post-judgment
statutory change that required S-Mart to protect its rights by paying taxes
that M&U neglected to pay. In granting the motions, the trial court
accounted for damages that could not have been anticipated at the time S-Mart
filed its summary judgment motion and the trial court entered its initial
judgment thereon.1 Under Tucker, we conclude that
the trial court was not prevented by legal rules from requiring as a matter of
equity “that to be done which should have been done.”
