INDIANA APPELLATE COURT AFFIRMS JUDGMENT WHICH LIMITED DAMAGES AND ATTORNEYS’ FEES IN FORECLOSURE JUDGMENT

The Court of Appeals of Indiana affirmed a circuit court judgment wherein the trial court refused to award the lender, Frank Garber, $78,803.57 in late fees, costs and attorneys’ fees against Robert Blair for damages resulting from Blair’s default under the terms of a note and mortgage. Garber v. Blair, 224 N.E.3d 970, *2, *6 (Ind. Ct. App. 2023)[i]. Blair executed a $180,000 note and mortgage in conjunction with his purchase of a house owned by Garber. [ii]

The note and mortgage provided for monthly installment payments and called for penalties for late installment payments, failure to timely pay taxes and failure to timely secure and maintain insurance. After purchasing the property Blair was unable to secure insurance due to an insurance claim which remained pending at the time of purchase. Eventually he secured insurance, but he then accidentally allowed the insurance to lapse for three months. He also paid property taxes late. Despite these undisputed defaults, Garber did not notify Blair of these defaults or seek penalties provided for in the note.

More than a year later, Blair failed to make his December 2021 and January 2022 installment payments. Garber hired an attorney who sent a demand letter to Blair seeking $17,800 for late fees, costs and expenses from the earlier breaches and the two missed payments.[iii] Alternatively, the letter sought $140,800 which, in addition to late fees, costs and expenses, included the outstanding principal due on the note. Blair contested the amounts sought and sent Garber’s attorney a check for $2,000 to cover late fees and costs. Garber did not respond to Blair’s letter disputing the amounts due nor did he cash the $2,000 check. Months later Blair tried to sell the house to his son, but the sale could not be completed due to the dispute as to the amounts due.

Blair sued Garber for breach of contract and interference with a prospective business relationship and Garber responded with a counterclaim for foreclosure and breach. Ultimately, Blair was able to sell the house to his son, so he dismissed his complaint, but Garber’s counterclaim remained pending. The court conducted an evidentiary hearing on damages sought in the counterclaim and awarded Garber $3,200 in late fees and/or penalties and $5,000 in attorneys’ fees despite Garber’s request for $17,800 in late fees/penalties and $61,003.57 in attorneys’ fees.[iv] The court entered a judgment against Blair for $105,200 based on outstanding principal of $97,000, late fees/penalties of $3,200 and attorneys’ fees of $5,000.[v] Garber appealed.

On appeal Garber argued the trial court “misinterpreted the parties’ mortgage and Note and grossly undercalculated his damages.” The appellate court disagreed explaining that it was Garber who fundamentally misinterpreted “the plain language of the parties’ agreement” by trying to deduct late charges and penalties from Blair’s installment payments contrary to the express terms of the note.[vi] The Court also refused to review the trial court’s finding that Garber was estopped from seeking “any penalties incurred prior to November 1, 2021” by his failure timely notify Blair of the penalties and provide an opportunity to cure. The Court concluded Garber waived the issue by failing to brief it and affirmed the judgment amount of $100,200, plus attorneys’ fees.

Lastly, the Court affirmed the attorney fee award of $5,000 agreeing with the trial court’s conclusion that Garber’s request for $61,003.57 in attorneys’ fees was “grossly disproportionate to the amount truly in controversy.”[vii] The Court explained the parties agreed on the principal due, so the dispute only pertained to the penalties which the court found to be $3,200.  Based on this amount, a fee award in excess of $60,000 was unreasonable. The Court reiterated that a trial court could consider the amount in controversy in its determination of a reasonable fee award. Finally, the Court explained that it would be unjust to award fees for legal expenses incurred in an attempt to recover amounts that were not due under the parties’ agreement. The Court elaborated that Garber’s attorney engaged in collection efforts and sought amounts that were not due based on a misinterpretation of the note terms. A fee award for those efforts was not justified.

[i] The Court issued an unpublished memorandum decision rather than a written opinion in this case. Therefore, the decision is non-precedential and can only be relied upon “for persuasive value” and/or “to establish res judicata, collateral estoppel or law of the case.” Ind. Appellate Rule 65(D).

[ii] Garber, at *1. Future references to this case are to this citation until indicated otherwise.

[iii] Garber, at *2. Future references to this case are to this citation until indicated otherwise.

[iv] Garber, at *3-4.

[v] Garber, at *4. Future references to this case are to this citation until indicated otherwise.

[vi] Garber, at *5. Future references to this case are to this citation until indicated otherwise.

[vii] Garber, at *6. Future references to this case are to this citation until indicated otherwise.