Because PNC Bank was able to show that the requisite provisions of Indiana Code 32-30-5-1 have been satisfied and it did not relinquish its right to the appointment of a receiver, the trial court order denying PNC’s request for appointment of a receiver was an error, the Indiana Court of Appeals concluded.
In June 2004, the bank and LA Development entered into a loan agreement, with obligations due to the bank secured by two mortgages. In the fall of 2008, LA Development needed more money to complete a housing development; INTA LLC agreed to advance $705,000 to LA Development. A three-party closing occurred between LA Development, INTA and PNC Bank, which included a subordination agreement that made all liens, mortgages, encumbrances, security interests and assignments of every kind granted to the bank subordinated and made secondary to those of INTA.
Two years later, PNC filed a complaint for damages to foreclose on the mortgages and for appointment of receiver against LA Development, INTA, and two individuals who guaranteed the loans. At issue on interlocutory appeal is the denial by the trial court to appoint a receiver.
PNC argued that it satisfied the requirements of I.C. 32-30-5-1(4)(B) and (C), which required the trial court to appoint a receiver. INTA maintained that the bank relinquished its right to the mandatory appointment of a receiver in the subordination agreement.
The Court of Appeals found the subordination agreement is ambiguous, so the judges looked to the parties’ intent when construing the agreement and the other closing documents. The argument that the bank subordinated all of its default rights and remedies in the mortgages by signing the subordination agreement, as INTA argued, can’t be reconciled with the language in the forbearance agreement signed on the same date and at the same closing, wrote Senior Judge Carr Darden.
Also, the extrinsic evidence shows that the parties didn’t intend to subordinate all rights and remedies. The bank foreclosed on the housing development, which INTA concedes is authorized.
“If the Bank waived all of its enforcement rights and remedies under the mortgages by executing the Subordination Agreement, then the right to foreclose on Harrison Crossing would be included. Either the Bank subordinated all of its enforcement rights and remedies in the mortgages or it did not. INTA cannot pick and choose which rights and remedies the Bank subordinated to support its argument,” Darden wrote.
The judges ordered the trial court grant PNC’s request for the appointment of a receiver.