MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Sep 26 2017, 8:11 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Abraham Murphy JAMES E. CHALFANT
Abraham Murphy Attorney at Law, Jennifer L. Graham
LLC Indianapolis, Indiana
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Michael Fish, September 26, 2017
Appellant-Plaintiff, Court of Appeals Case No.
49A02-1702-MF-213
v. Appeal from the Marion Superior
Court
2444 Acquisitions, LLC; El Sol The Honorable Michael D. Keele,
Also Rises, Inc.; El Sol De Tala, Judge
Inc.; Viva Management Services, Trial Court Cause No.
Inc.; Quality Leasing Company; 49D07-1103-MF-10806
Ruben Pazmino; Javier
Amezcua; and James E.
Chalfant,1
1
Although the instant appeal only concerns Appellant-Plaintiff Michael Fish’s claims that relate to Appellee-
Defendant James E. Chalfant, we nonetheless include all of the parties included in Fish’s original complaint
in this caption because a party below is a party on appeal. See Appellate Rule 17(A) (providing that “[a]
party of record in the trial court … shall be a party on appeal”).
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Appellees-Defendants.
Bradford, Judge.
Case Summary
[1] In August of 2007, Appellant-Plaintiff Michael Fish executed a Secured
Promissory Note with 2444 Acquisitions, LLC (“the 2007 Note”). Under the
terms of the 2007 Note, Fish agreed to loan 2444 Acquisitions the sum of
$220,000.00 and 2444 Acquisitions agreed to repay the loan in a single lump
sum payment on or before September 14, 2017. Appellee-Defendant James E.
Chalfant personally guaranteed repayment of the 2007 Note. In November of
2008, Fish executed a second Secured Promissory Note with 2444 Acquisitions
(“the 2008 Note”). Under the terms of the 2008 Note, Fish agreed to lend 2444
Acquisitions the sum of $220,976.68, with interest. The terms of the 2008 Note
indicated that the loan was to be repaid by monthly installments over a term of
approximately three years with a final balloon payment due on December 1,
2011.
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[2] Fish subsequently alleged that 2444 Acquisitions failed to repay the funds
associated with the 2008 Note according to the Note’s terms. In filing the
underlying lawsuit, Fish claimed that Chalfant’s guaranty of the 2007 Note also
applies to the 2008 Note. The trial court found otherwise, and granted
summary judgment in favor of Chalfant. Because we agree with the trial court,
we affirm.
Facts and Procedural History
[3] In August of 2007, Chalfant, on behalf of and in his position as a Managing
Member of 2444 Acquisitions, executed the 2007 Note with Fish. Pursuant to
the terms of the 2007 Note, Fish agreed to lend 2444 Acquisitions the sum of
$220,000.00. Also pursuant to the terms of the 2007 Note, 2444 Acquisitions
agreed to pay back the $220,000.00 in a single lump sum payment “on or before
September 14, 2007.” Appellant’s App. Vol. II, p. 36. The terms of the 2007
Note did not include any express conditions as to interest.
[4] On August 3, 2007, Chalfant signed a Guaranty of Payment (“the Guaranty”)
in which he personally guaranteed “the full and prompt payment to [Fish] of
that certain Secured Promissory Note of Two Hundred Twenty Thousand
Dollars, made by [2444 Acquisitions] in favor of [Fish].” Appellant’s App. Vol.
II, p. 39. The terms of the Guaranty indicated that it “shall remain in full force
and effect until any and all indebtedness due [Fish] has been fully paid.”
Appellant’s App. Vol. II, p. 36. The terms of the Guaranty also indicated that it
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was to be “construed according to the law of the State of Indiana.” Appellant’s
App. Vol. II, p. 40.
[5] On November 25, 2008, Chalfant, again on behalf of and in his position as a
Managing Member of 2444 Acquisitions, executed the 2008 Note with Fish.
Pursuant to the terms of the 2008 Note, Fish agreed to lend 2444 Acquisitions
the sum of $220,976.68, “with interest at the rate of 12.2314 percent per
annum.” Appellant’s App. Vol. II, p. 58. The loan was to be repaid
in equal monthly installment[s] of $3,200.00 commencing on
December 1, 2008 and continuing thereafter until November 1,
2011. A balloon payment of the then outstanding principal shall
be due on December 1, 2011, less a credit equal to the difference
between the interest that has accrued under this Note and the
amount of interest that would have accrued if interest is
calculated at the rate of 10 percent per annum.
Appellant’s App. Vol. II, p. 58. Chalfant did not execute a new Guaranty at the
time the 2008 Note was executed.
[6] On March 18, 2011, Fish filed a complaint in the trial court, alleging a number
of counts against a number of parties. With regard to Chalfant, Fish alleged
that Chalfant breached his Guaranty because his Guaranty extended to cover
the funds loaned to 2444 Acquisitions in connection to the 2008 Note. On
August 23, 2016, Fish filed a motion for summary judgment which related only
to his claim against Chalfant. On November 16, 2016, Chalfant filed a cross-
motion for summary judgment. Fish responded to Chalfant’s motion on
December 12, 2016.
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[7] The trial court conducted a hearing on the parties’ competing summary
judgment motions on December 14, 2016. At the conclusion of the hearing, the
trial court took the matter under advisement. On January 3, 2017, the trial
court issued an order granting summary judgment in favor of Chalfant. This
appeal follows.
Discussion and Decision
[8] Fish contends that the trial court erred in granting summary judgment in favor
of Chalfant. We disagree.
I. Standard of Review
[9] Pursuant to Rule 56(C) of the Indiana Rules of Trial Procedure, summary
judgment is appropriate when there are no genuine issues of material fact and
when the moving party is entitled to judgment as a matter of law. Heritage Dev.
of Ind., Inc. v. Opportunity Options, Inc., 773 N.E.2d 881, 887 (Ind. Ct. App.
2002).
“On appeal from the denial of a motion for summary judgment,
we apply the same standard applicable in the trial court.
Summary judgment is appropriate only if there is no genuine
issue as to any material fact and the moving party is entitled to
judgment as a matter of law. Ind. Trial Rule 56(C). We
therefore must determine whether the record reveals a genuine
issue of material fact and whether the trial court correctly applied
the law. A genuine issue of material fact exists where facts
concerning an issue, which would dispose of the litigation are in
dispute, or where the undisputed material facts are capable of
supporting conflicting inferences on such an issue. If the material
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facts are not in dispute, our review is limited to determining
whether the trial court correctly applied the law to the undisputed
facts. When there are no disputed facts with regard to a motion
for summary judgment and the question presented is a pure
question of law, we review the matter de novo.”
Clary v. Lite Machines Corp., 850 N.E.2d 423, 430 (Ind. Ct. App. 2006) (quoting
Bd. of Tr. of Ball State Univ. v. Strain, 771 N.E.2d 78, 81-82 (Ind. Ct. App. 2002)
(internal quotation marks and some citations omitted)).
A party seeking summary judgment bears the burden to make a
prima facie showing that there are no genuine issues of material
fact and that the party is entitled to judgment as a matter of law.
American Management, Inc. v. MIF Realty, L.P., 666 N.E.2d 424,
428 (Ind. Ct. App. 1996). Once the moving party satisfies this
burden through evidence designated to the trial court pursuant to
Trial Rule 56, the non-moving party may not rest on its
pleadings, but must designate specific facts demonstrating the
existence of a genuine issue for trial. Id.
Heritage Dev., 773 N.E.2d at 888 (emphasis added). “On appeal, the trial court’s
order granting or denying a motion for summary judgment is cloaked with a
presumption of validity.” Van Kirk v. Miller, 869 N.E.2d 534, 540 (Ind. Ct.
App. 2007), trans. denied. However, we are not limited to reviewing the trial
court’s reasons for granting or denying summary judgment but rather may
affirm the trial court’s ruling if it is sustainable on any theory found in the
evidence designated to the trial court. See Alva Elec., Inc. v. Evansville-
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Vanderburgh Sch. Corp., 7 N.E.3d 263, 267 (Ind. 2014) (citing Wagner v. Yates,
912 N.E.2d 805, 811 (Ind. 2009)).
[10] Further, “[t]he fact that the parties made cross motions for summary judgment
does not alter our standard of review. MacGill v. Reid, 850 N.E.2d 926, 928-29
(Ind. Ct. App. 2006) (citing Hartford Acc. & Indem. Co. v. Dana Corp., 690 N.E.2d
285, 291 (Ind. Ct. App. 1997), trans. denied). “When considering cross motions
for summary judgment, we consider each motion separately, construing the
facts most favorably to the non-moving party in each instance and determine
whether the moving party is entitled to judgment as a matter of law.” Id. at 929
(citing Hartford, 690 N.E.2d at 291).
II. Overview of Law Relating to a Guaranty
[11] In S-Mart, Inc. v. Sweetwater Coffee Co., Ltd., 744 N.E.2d 580 (Ind. Ct. App.
2001), we set forth a detailed recitation of the law relating to a guaranty. In
doing so, we stated the following:
A guaranty is defined as “a promise to answer for the debt,
default, or miscarriage of another person.” 38 AM. JUR. 2d
Guaranty § 1 (1999). It “is an agreement collateral to the debt
itself” and represents a “conditional promise” whereby the
guarantor promises to pay only if the principal debtor fails to pay.
Id. Under Indiana law, three parties are required to execute a
guaranty agreement: the obligor or principal debtor, the obligee
or creditor, and the guarantor or surety. [Kordick v. Merchants
Nat’l Bank & Trust Co. of Indpls., 496 N.E.2d 119, 124 (Ind. Ct.
App. 1986)]. A continuing guaranty is defined as a guaranty
that:
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“contemplates a future course of dealing
encompassing a series of transactions.... [A] contract
is continuing if it contemplates a future course of
dealing during an indefinite period, or if it is intended
to cover a series of transactions or succession of
credits, or if its purpose is to give to the principal
debtor a standing credit to be used by him from time
to time. A continuing guaranty covers all
transactions, including those arising in the future,
which are within the contemplation of the
agreement.”
38 AM. JUR. 2d Guaranty § 20 (1999) (emphasis added); see also
Vidimos, Inc. v. Vidimos, 456 N.E.2d 455, 458 (Ind. Ct. App. 1983)
(“continuing guaranty is not limited to single transaction, but
contemplates a future course of dealing encompassing a series of
transactions”). Moreover, a continuing guaranty “is not limited
in time or amount and is operative until revoked.” 49 AM. JUR.
2d Landlord and Tenant § 819 (1995).
The rules governing the interpretation and construction of
contracts generally apply to the interpretation and construction of
a guaranty contract. [Kordick, 496 N.E.2d at 123]. The extent of
a guarantor’s liability is determined by the terms of his or her
contract. Id. The terms of a guaranty should neither be so
narrowly interpreted as to frustrate the obvious intent of the
parties, nor so loosely interpreted as to relieve the guarantor of a
liability fairly within its terms. Id. The contract of a guarantor is
to be construed based upon the intent of the parties, which is
ascertained from the instrument itself read in light of the
surrounding circumstances. Skrypek v. St. Joseph Valley Bank, 469
N.E.2d 774, 776 (Ind. Ct. App. 1984); Orange-Co., Inc. v. Brown,
181 Ind. App. 536, 393 N.E.2d 192, 195 (1979).
A guarantor’s liability will not be extended by implication
beyond the terms of his or her contract. Goeke v. Merchants Nat’l
Bank & Trust Co. of Indianapolis, 467 N.E.2d 760, 765 (Ind. Ct.
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App. 1984), trans. denied (1985). “A guarantor is a favorite in the
law and is not bound beyond the strict terms of the engagement.
Moreover, a guaranty of a particular debt does not extend to
other indebtedness not within the manifest intention of the
parties.” Id.
Under Indiana common-law principles, when parties cause a
material alteration of an underlying obligation without the
consent of the guarantor, the guarantor is discharged from further
liability whether the change is to his or her injury or benefit.
Goeke, 467 N.E.2d at 765. In Yin v. Society Nat’l Bank Indiana, 665
N.E.2d 58, 64 (Ind. Ct. App. 1996), trans. denied (1997), the court
summarized the following rules relating to material alteration of
a guaranty:
“‘Guarantors and sureties are exonerated if the
creditor by any act, done without their consent, alters
the obligation of the principal in any respect or
impairs or suspends the remedy for its enforcement.’
Farmers Loan & Trust Co. v. Letsinger, 652 N.E.2d 63,
66 [(Ind. 1995)] (quoting Weed Sewing Machine Co. v.
Winchel, 107 Ind. 260, 7 N.E. 881 (1886)); see also 2
WHITE & SUMMERS, § 16-10 at 106 (‘The law has
traditionally held that conduct by the creditor which
increases the surety’s risk discharges the surety or
reduces the surety’s obligation pro rata.’). Moreover,
when the principal and obligee cause a material
alteration of the underlying obligation without the
consent of the guarantor, the guarantor is discharged
from further liability. Cunningham v. Mid State Bank,
544 N.E.2d 530, 534 (Ind. Ct. App. 1989), reh. denied,
trans. denied; Merchants Nat’l Bank and Trust Co. v.
Lewark, 503 N.E.2d 415, 416 (Ind. Ct. App. 1987),
reh. denied, trans. denied. A material alteration which
will effect a discharge of the guarantor must be a
change which alters the legal identity of the
principal’s contract, substantially increases the risk of
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loss to the guarantor, or places the guarantor in a
different position. Cunningham, 544 N.E.2d at 534.
The change must be binding. Houin v. Bremen State
Bank, 495 N.E.2d 753, 759 (Ind. Ct. App. 1986).”
Furthermore, 49 AM. JUR. 2d Landlord and Tenant § 822 (1995)
(emphasis added) states that:
“A material alteration or departure from the contract
of guaranty of a lease, without the guarantor’s
consent, will discharge the guarantor, whether or not
the guarantor is prejudiced thereby. The guarantor and
the surety have a right to stand upon the terms of the
contract, and if they do not assent to any variation of it, and
a material variation is made, it is fatal to recovery against
them. This rule is fully applicable to sureties on leases.
A material alteration of a lease within the meaning of
such rule occurs where an agreement is made
between the lessor and lessee changing the terms of
the lease, or the time for the payment or rent, or in
some cases the amount of the rent payable.”
S-Mart, 744 N.E.2d at 585-86 (emphasis in original).
III. Analysis
[12] In Keesling v. T.E.K. Partners, LLC, 861 N.E.2d 1246, 1253 (Ind. Ct. App. 2007),
the trial court found that a second note, which was executed without the notice
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and consent of one of the accommodation parties 2, “was merely given to
evidence the current amount of monies then due and owing under the original
note and extend the due date for payment of the original note.” (internal record
quotation omitted). On review, we concluded otherwise. Id. at 1253-55.
Specifically, we found that the terms of the second note capitalized interest due
on the original note and converted it to principal in the second note. Id. at
1253-54. The second note also increased the principal draws beyond the
amount that was contemplated by the original note. Id. at 1254. By increasing
the principal and potential liability beyond that which was original
contemplated by the accommodation parties, the second note increased the
guarantor’s potential liability. As such, we concluded that that the terms of the
second note constituted a material alteration of the original obligation. Id. at
1254-55.
[13] Like in Keesling, the 2008 Note was not merely an extension of the 2007 Note,
but rather constituted a material alteration of the 2007 Note. Pursuant to the
terms of the 2007 Note, Fish agreed to lend 2444 Acquisitions the sum of
$220,000.00. Also pursuant to the terms of the 2007 Note, 2444 Acquisitions
agreed to pay back the $220,000.00 in a single lump sum payment “on or before
September 14, 2007.” Appellant’s App. Vol. II, p. 36. The terms of the 2007
Note did not include any express conditions as to interest. Pursuant to the
2
An accommodation party is one who signs an instrument “for the purpose of incurring liability on the
instrument without being a direct beneficiary of the value given for the instrument[.]” See Ind. Code § 26-1-
3.1-419.
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terms of the 2008 Note, Fish agreed to lend 2444 Acquisitions the sum of
$220,976.68, “with interest at the rate of 12.2314 percent per annum.”
Appellant’s App. Vol. II, p. 58. The loan was to be repaid
“in equal monthly installment[s] of $3,200.00 commencing on
December 1, 2008 and continuing thereafter until November 1,
2011. A balloon payment of the then outstanding principal shall
be due on December 1, 2011, less a credit equal to the difference
between the interest that has accrued under this Note and the
amount of interest that would have accrued if interest is
calculated at the rate of 10 percent per annum.”
Appellant’s App. Vol. II, p. 58.
[14] The differences between the terms of the 2007 Note and the 2008 Note
increased potential liability by $976.68 plus annual interest in the amount of
12.2314 percent of the outstanding balance of the loan. In addition, not only
did the 2008 Note increase the potential liability beyond that which was
originally contemplated by Chalfant, it also extended the time period under
which he could potentially continue to be liable for 2444 Acquisitions’s debt.
Under the terms of the 2007 Note, the debt was to be paid in full within
approximately one month of the loan. Under the terms of the 2008 Note, the
debt was not to be paid in full until December of 2011, or approximately a
period of three years. The terms of the 2008 Note constituted a material
alteration of the terms of the 2007 Note.
[15] Moreover, to the extent that Fish argues that the guaranty at issue constituted a
continuing guaranty, we reiterate that “[a] continuing guarantee encompasses
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all transactions, including those arising in the future, that are within the
contemplation of the agreement.” S-Mart, 744 N.E.2d at 587 (citing 38 AM.
JUR. 2D Guaranty § 20 (1999)). However, nothing in the language of the
Guaranty indicates that Chalfant contemplated or agreed for the Guaranty to
apply to any future transactions which would extend his potential liability
beyond the $220,000 that was memorialized in the Guaranty and the 2007
Note. The Guaranty therefore, should not be read as a continuing guaranty.
[16] For these reasons, we conclude that the trial court did not err in granting
summary judgment in favor of Chalfant. As such, we affirm the judgment of
the trial court.
[17] The judgment of the trial court is affirmed.
May, J., and Barnes, J., concur.
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Michael Fish v. 2444 Acquisitions, LLC El Sol Also Rises, Inc. El Sol De Tala, Inc. Viva Managment Services, Inc. Quality Leasing Company Ruben Pazmino Javier Amezcua (mem. dec.)
Combined Opinion