COA: Transfer of ownership for Munster redevelopment is a fair mortgage, not a sale

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A sale of property in Munster which was later transferred from the buyer to the city for redevelopment was not a sale triggering a payment clause for the original owner, but an equitable mortgage, the Court has ruled Indiana appeal.

In 2011, Munster Steel Co., Inc. entered into a real estate sale agreement with developers CPV Partners, LLC and Centennial Village, LLC for property owned by Munster Steel. He officially sold the property to developers in 2014.

The parties agreed in a subsequent sale clause of the property contract that if the developers sold “all or part or parts” of the property within two years of the sale of Munster Steel, that the developers would pay Munster Steel a subsequent royalty. “on the basis of the gross sale price, regardless of when it is paid to the buyer.”

Prior to the finalization of the sale between Munster Steel and the developers, the Munster Redevelopment Commission, Munster Development Commission and the City in 2013 determined that a redevelopment project would be in the best interest of the residents of Munster.

They then created the Ridge Road Calumet Avenue Economic Development Zone, including part of the property originally sold by Munster Steel.

The city parties reached an agreement with the developers to redevelop the economic development zone into Centennial Village. The redevelopment would consist of retail, commercial and residential spaces as well as a parking garage.

Munster Steel sued the developers in 2017, citing the after-sale provision in their agreement. She argued that the transfer of ownership between the developers and the city parties constituted a sale and triggered the retainer.

The Lake Superior Court disagreed, granting summary judgment in favor of the developers after finding that the transfer of ownership between the developers and the city parties was an equitable mortgage and not a sale.

A panel of the Indiana Court of Appeals said in Munster Steel Co., Inc. v. CPV Partners, LLC and Centennial Village, LLC, 21A-PL-1154, agreeing that the transfer was not a sale.

It also found that by admitting that the Development Agreement was unambiguous and making separate arguments that did not stand as such, Munster Steel had dropped that argument for consideration.

“Further, Munster Steel argues that the trial court erred in granting the developer’s motion for summary judgment because the intention of the parties was a question of fact properly reserved for the investigator,” wrote Chief Justice Cale Bradford in a footnote. “Whether it is true that ‘the intention of the parties’ is a question of fact for the jury or the court to determine[,]It is clear that the waiver of the argument that there was ambiguity in the development agreement also limits our examination of the intention of the parties to the four corners of the document.

With respect to the issue of equitable mortgage, the COA found that the trial court correctly concluded that the transfer of ownership at issue “did not have a gross sale price[,]”and that the structure of the transfer of ownership by the developers “was not listed as a possible example of a subsequent sale under the real estate contract”.

“The trial court was correct in concluding that according to” the language of the real estate contract, the language of the development agreement and decades of case law[,]The transfer of the property in question was “not a sale but an equitable mortgage on the property”, the COA concluded.

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