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A trial court did not abuse its discretion when it granted a motion from a receiver and contractors to set aside a stipulated order in a case involving liens and a property sale, the Court of Appeals of Indiana has ruled.
Porter Hospital, which does business as Northwest Health-Porter, sold property in Valparaiso to NWI Medical Realty. The contract included use restrictions to prevent future development on or use of the property that would “harm and materially impact” the hospital’s business and operation of nearby medical facilities.
During contract negotiations, NWI brought in TRK Valpo as a potential future developer.
The Porter County Recorder’s Office recorded a special warranty deed regarding the sale in July 2016, but the use restrictions weren’t attached.
NWI sold the property to TRK in 2017, and TRK began to develop the property.
The hospital learned in 2021 that TRK intended to lease, use or convey space in the property to one or more physician groups in competition with the hospital, which expressed concerns to TRK that it was or would be violating the use restrictions.
Separately, after TRK allegedly failed to pay contractors for work on the property, multiple contractors recorded mechanic’s liens against the property.
Imboden filed a complaint in Porter Superior Court II in September 2021 for, in part, foreclosure of its lien and named TRK and other contractors with liens on the property as defendants.
Shortly after, the hospital filed a complaint in Porter Superior Court V against TRK seeking injunctive relief. The hospital alleged TRK was violating the use restrictions.
TRK was the only defendant in the complaint, and the same attorney represented the company in both actions.
In the lien case, Imboden requested the court appoint a receiver to take possession of the property and improvements, and the court appointed Paul Chael as receiver. The court’s order noted TRK “did not object to the appointment of a receiver.”
In the injunction action, the hospital and TRK filed a joint motion for entry of a stipulated order for final judgment and permanent injunction in December 2021.
The parties agreed the restrictive covenants run with the property and that they continue to be valid and enforceable upon TRK, and that the covenants apply to the parties and their respective successors, successors-in-title, assigns, heirs, lessees, agents, employees and invitees.
The court entered the stipulated order in January 2022.
The receiver filed a motion in December 2021 for authorization from the court to sell the property.
The hospital’s counsel and the receiver exchanged emails in February 2022, which is when the receiver was made aware of the judgment in the injunction action between the hospital and TRK.
The court granted the receiver’s motion to sell the property in February 2022.
In the injunction action, the receiver filed a motion for relief from the judgment regarding the stipulated order, alleging in part that it didn’t receive notice of the stipulated order until the exchange of emails and that the interests of the plaintiffs in the liens action were “adversely affected” by the stipulated order.
The hospital argued the receiver was a non-party to the injunction action and didn’t file a motion to intervene.
The receiver filed a motion to intervene in the injunction action, which the court granted.
The receiver and some of the contractors then filed motions to consolidate the two actions, which the courts granted.
Some of the mechanic’s lien claimants joined the receiver’s motion to set aside the stipulated order, which the court granted. But the court has not yet considered whether the use restrictions will apply to a sale by the receiver.
On appeal, the hospital reiterated its argument that a non-party shouldn’t be allowed to attack the stipulated order under Trial Rule 60(B) and that the receiver and mechanic’s lien claimants were required to demonstrate evidence of fraud in order to set aside the stipulated order.
The hospital also argued the stipulated order merely enforces use restrictions, which were agreed to years prior.
But the Court of Appeals was not convinced, ruling the trial court didn’t abuse its discretion by granting the motion to set aside the stipulated order.
The Court of Appeals cited the trial court’s order, which in part said: “All parties to this action shall cooperate with the receiver and accommodate the receiver’s right to possess this property hereby placed in his control under the authority and jurisdiction of this Court, and shall not impair or disturb the receiver’s rights to possession and control of this property while this action remains pending before this Court.”
TRK was a party to the lien foreclosure action and thus had a duty not to impair or disturb the receiver’s rights to the property, the Court of Appeals ruled.
“By stipulating to the injunction on the Property, which was under the control of the Receiver, TRK failed to comply with Porter Superior Court II’s order,” the opinion says.
The hospital argued the injunction action resulted in an “in personam” judgment that was applicable only to TRK, while the lien action was “in rem” action that impacted the property itself.
But the Court of Appeals said the argument was “unpersuasive.”
The Court of Appeals also noted Trial Rules 19 and 21, though not mentioned by the parties, are “pertinent to the circumstances.”
Judge Elizabeth Tavitas wrote the opinion. Judges Nancy Vaidik and Peter Foley concurred.
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