JAFFRI v. THRASHER BUSCHMANN & VOELKEL, P.C.
Filing
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ORDER granting 17 Motion for Judgment on the Pleadings. Plaintiff's Amended Complaint is dismissed with prejudice. Final judgment shall issue in a separate entry. Signed by Magistrate Judge Mark J. Dinsmore on 3/10/2015. (CBU)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
TRACEY JAFFRI Individually and on behalf
of all others similarly situated,
Plaintiff,
vs.
THRASHER BUSCHMANN & VOELKEL,
P.C.,
Defendant.
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No. 1:14-cv-01704-TWP-MJD
ORDER ON DEFENDANT’S MOTION FOR JUDGMENT ON THE PLEADINGS
This matter comes before the Court on Defendant’s Motion for Judgment on the
Pleadings. [Dkt. 17.] For the reasons set forth below, the Court GRANTS Defendant’s motion.
I.
Background
Tracey Jaffri (“Plaintiff”) is an Indiana resident who lives in a subdivision managed by
the Huntwick Community Association, Inc. (“Huntwick”). [Dkt. 12 ¶¶ 3, 6 (Pl.’s Am. Compl.).]
Homeowners in the subdivision are subject to the Declaration of Covenants, Conditions and
Restrictions of Huntwick (the “Huntwick Covenants” or the “Covenants”). [Dkt. 15-1.] Among
other provisions, the Covenants require homeowners such as Plaintiff to pay homeowners’
association fees in the form of “Regular Assessments” and “Special Assessments” as imposed by
Huntwick’s Board of Directors. [Id. ¶¶ 7.2, 7.3.]
Plaintiff became delinquent on her payment of these fees and eventually owed Huntwick
$144.00. [Dkt. 24 at 1.] Huntwick then arranged for a local law firm, Thrasher Buschmann &
Voelkel, P.C. (“Defendant”), to try to collect the delinquent fees. [See Dkt. 12 ¶¶ 4,6.] Defendant
did not file a lawsuit against Plaintiff, [Dkt. 12 ¶ 1], but on August 21, 2014, Defendant sent
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Plaintiff a dunning letter. [Dkt. 12-1.] The letter first sought to collect the $144.00 in
homeowners’ assessments that Plaintiff owed to Huntwick. [Id. at 1.] The letter then also
attempted to collect $125.00 in attorney’s fees that Defendant had incurred in its efforts to collect
the assessments. [Id.]
The request for attorney’s fees is the basis for this lawsuit. On October 19, 2014, Plaintiff
filed suit in this Court alleging that Defendant’s attempt to collect attorney’s fees violated the
Fair Debt Collection Practices Act (“FDCPA”). [Dkt. 1.] Plaintiff then amended her complaint to
add allegations on behalf of a purported class of similarly situated homeowners. [Dkt. 12.]
Plaintiff’s amended complaint alleges that Defendant violated §§ 1692e(2)(A),
1692e(2)(B), 1692e(10), and 1692f of the FDCPA. The first two provisions state that it is a
violation of the FDCPA to falsely represent “(A) the character, amount, or legal status of any
debt;” or “(B) any services rendered or compensation which may be lawfully received by any
debt collector for the collection of a debt.” 15 U.S.C.A. § 1692e(2). The third provision states
that it is a violation of the FDCPA to use “any false representation or deceptive means to collect
or attempt to collect any debt or to obtain information concerning a consumer.” Id. § 1692e(10).
The final provision states a debt collector may not attempt to collect “any amount (including any
interest, fee, charge, or expense incidental to the principal obligation) unless such amount is
expressly authorized by the agreement creating the debt or permitted by law.” Id. § 1692f(1).
Plaintiff’s allegations rest on her contention that the contract governing collection of the
assessments at issue does not permit recovery of attorney’s fees unless and until a lawsuit has
been filed against the debtor. [Dkt. 24 at 2.] Defendant in this case did not file such a lawsuit,
and Plaintiff thus argues that Defendant’s request for attorney’s fees misrepresented the amount
2
of the debt at issue; deceived Plaintiff about the amount owned; and constituted an attempt to
recover amounts that were not expressly authorized by the agreement creating the debt.
On January 16, 2015, Defendant answered Plaintiff’s amended complaint. [Dkt. 15.]
Three weeks later, Defendant moved for judgment on the pleadings. [Dkt. 17.] Defendant
contends that the Huntwick Covenants provide for collection of attorney’s fees during debt
collection efforts regardless of whether a lawsuit has been filed against the debtor. [See Dkt. 18.]
Defendant therefore argues that its attempt to collect such fees without filing a lawsuit against
Plaintiff was authorized by the agreement creating the debt and did not misrepresent the amount
of the debt owed. [See id.] As such, it contends that its conduct did not violate the FDCPA.
The parties consented to the Magistrate Judge’s jurisdiction “to hear and render a final
decision regarding Defendant’s motion for judgment on the pleadings,” [Dkt. 19], and the motion
was referred to the undersigned for that purpose. [Dkt. 27] The parties also agree that the
dispositive issue is whether the Huntwick Covenants permit the recovery of attorney’s fees only
after a lawsuit has been filed, as Plaintiff contends, or whether the Covenants allow the recovery
of attorney’s fees even when no lawsuit has been filed, as Defendant contends. [See Dkt. 24 at 2
& n.1.] If the former, then Defendant’s motion must be denied; if the latter, then Defendant is
entitled to an entry of judgment on the pleadings.
II.
Discussion
Rule 12(c) allows the parties to move for judgment after the close of the pleadings. Fed.
R. Civ. P. 12(c). Courts review such motions under the same standards that apply when
reviewing a motion under Fed. R. Civ. P. 12(b)(6). Hayes v. City of Chicago, 670 F.3d 810, 813
(7th Cir. 2012). The Court must thus take all well-pleaded allegations as true and draw all
reasonable inferences in favor of the non-movant. Id. The Court will grant judgment in the
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defendant’s favor if the plaintiff’s complaint does not “set[] forth facts sufficient to support a
cognizable legal theory.” Laborers Local 236, AFL-CIO v. Walker, 749 F.3d 628, 632 (7th Cir.
2014) (quotation omitted).
Under Rule 12(c), the Court may consider only the pleadings. N. Indiana Gun & Outdoor
Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998). “The pleadings include the
complaint, the answer, and any written instruments attached as exhibits.” Id. If a conflict exists
between the allegations in the complaint or the answer and any attached exhibit, then “the exhibit
trumps the allegations.” Id. at 454.
The parties in this case do not contest the relevant facts giving rise to this litigation. [See,
e.g., Dkt. 24 at 2.] Further, Defendant’s amended answer included as an exhibit the Huntwick
Covenants that are in dispute. [Dkt. 15-5.] The Court may thus consider the Huntwick Covenants
and assess whether they support Plaintiff’s claim that Defendant was not entitled to seek
attorney’s fees when it sent the dunning letter. If so, then Plaintiff’s complaint states a
“cognizable legal theory,” and the Court will deny Defendant’s motion; if not, then Plaintiff’s
complaint does not state such a cognizable legal theory, and the Court will grant Defendant’s
motion. See Laborers Local 236, 749 F.3d at 632.
A. Applicable Law
The Court must first determine which body of law governs the interpretation of the
Huntwick Covenants. In this case, the Court has federal question jurisdiction based on an alleged
violation of the FDCPA. Courts exercising federal question jurisdiction typically apply the
choice-of-law rules of federal common law. See, e.g., Corporacion Venezolana de Fomento v.
Vintero Sales Corp., 629 F.2d 786, 795 (2d Cir. 1980) (“This is a federal question case, however,
and it is appropriate that we apply a federal common law choice-of-law rule in order to decide
which of the concerned jurisdiction’s substantive law of fraud . . . should govern.”).
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Federal common law endorses the choice-of-law analysis set out in the Restatement
(Second) of Conflict of Laws. In re ATA Airlines, Inc., No. 08-03675-BHL-11, 2009 WL
701728, at *4 (Bankr. S.D. Ind. Mar. 16, 2009) (citing Eli Lilly Do Brasil, Ltda. v. Fed. Express
Corp., 502 F.3d 78, 81 (2d Cir. 2007)). Under this approach, a court will give effect to a
contract’s choice of law provision unless 1) “the chosen state has no substantial relationship to
the parties or the transaction and there is no reasonable basis for the parties’ choice;” or 2) the
“application of the law of the chosen state would be contrary to a fundamental policy of a state
which has a materially greater interest than the chosen state.” Id. (quoting Restatement (Second)
of Conflict of Laws § 187)).
The Huntwick Covenants provide that they “shall be governed by and construed in
accordance with the laws of the State of Indiana.” [Dkt. 15-1 ¶ 12.5.] Neither party has argued
that the choice of Indiana law is unreasonable or that application of Indiana law would be
contrary to the policy of another state. [See Dkts. 18 & 24.] Further, Defendant relies on Indiana
law in its brief, and Plaintiff does not contest this choice of law. [See Dkt. 18 at 5-6; Dkt. 24.]
The Court thus concludes that Indiana law governs the interpretation of the Huntwick
Covenants. 1
B. Indiana Law of Contract Interpretation
The Huntwick Covenants are a set of restrictive covenants that run with the land within
the Huntwick subdivision. [See Dkt. 15-1 at 1-2.] Neither party disputes that the Covenants are
1
By arguing that Indiana law applies to interpretation of the Huntwick Covenants, the parties have also waived any
argument that a different body of law governs that issue. Cf. McCoy v. Iberdrola Renewables, Inc., 760 F.3d 674,
684 (7th Cir.), reh’g denied, 769 F.3d 535 (7th Cir. 2014) (noting in a diversity case that the “choice of law issue
may be waived . . . if a party fails to assert it”). More generally, “[c]ourts do not worry about conflict of laws unless
the parties disagree on which state’s law applies.” Wood v. Mid-Valley Inc., 942 F.2d 425, 427 (7th Cir. 1991).
Because the parties in this case agree that Indiana law applies, the Court will not disturb that agreement. Accord
Fieldturf Int'l, Inc., Fieldturf, Inc. v. Triexe Mangement Grp., Inc., No. 03 C 3512, 2004 WL 866494, at *4 (N.D. Ill.
Apr. 16, 2004) (concluding in federal question case that, “[b]ecause the parties have not argued the choice of law
question, the Court will not disturb plaintiffs’ assumption that Illinois law applies”).
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binding on Plaintiff and Huntwick, [see Dkts. 18 & 24], and in Indiana, restrictive covenants are
express contracts that courts interpret in the same manner as any other contract. Johnson v.
Dawson, 856 N.E.2d 769, 772 (Ind. Ct. App. 2006) (“Because covenants are a form of express
contract, we apply the same rules of construction.”).
Interpretation of a contract is a matter of law for decision by the court. Tate v. Secura
Ins., 587 N.E.2d 665, 668 (Ind. 1992). If the terms of the contract are clear and unambiguous,
then the contract is binding on the parties and the court need only apply the terms of the contract.
Trustcorp Mortgage Co. v. Metro Mortgage Co., 867 N.E.2d 203, 212 (Ind. Ct. App. 2007). In
contrast, if the contract is ambiguous, then the interpretation depends on the nature of the
ambiguity: if the ambiguity exists because of extrinsic facts, then the court must allow the factfinder to construe the contract; if, on the other hand, “the ambiguity arises because of the
language used in the contract and not because of extrinsic facts, its construction is purely a
question of law to be determined by the trial court.” Id.
The parties in this case contest only the meaning of the contractual language in the
Huntwick Covenants themselves; they do not contest any extrinsic facts related to the
Covenants. 2 [See Dkts. 18 & 24.] Thus, whether the contract is deemed clear or ambiguous is
irrelevant: its interpretation is a matter of law that the Court may appropriately decide at this
stage of litigation. See Trustcorp, 867 N.E.2d 203; see also Eskew v. Cornett, 744 N.E.2d 954,
957 (Ind. Ct. App. 2001) (affirming trial court’s entry of judgment on the pleadings in dispute
over contractual interpretation).
2
Defendant briefly alleges in its reply brief that its interpretation is “consistent with common industry practice.”
[Dkt. 26 at 8.] Defendant, however, offers no elaboration or support for this contention, and Defendant did not raise
this argument in its opening brief. This argument is therefore waived, and the Court need not address it. See, e.g.,
F.T.C. v. World Media Brokers, 415 F.3d 758, 766 (7th Cir. 2005).
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When interpreting a contract, Indiana courts “begin with the plain language of the
contract, reading it in context and, whenever possible, construing it so as to render each word,
phrase, and term meaningful, unambiguous, and harmonious with the whole.” Citimortgage, Inc.
v. Barabas, 975 N.E.2d 805, 813 (Ind. 2012). The primary goal is to “ascertain and give effect to
the parties’ intent as reasonably manifested by the language of the agreement.” Reuille v. E.E.
Brandenberger Const., Inc., 888 N.E.2d 770, 771 (Ind. 2008). This intent “must be determined
from the specific language used,” and “[s]pecific words and phrases cannot be read exclusive of
other contractual provisions.” Johnson, 856 N.E.2d at 773. Indiana courts must also consider the
entirety of the contract, id., and may look to dictionary definitions or a disputed term’s common
meaning for guidance. See, e.g., Reuille, 888 N.E.2d at 771 (citing Black’s Law Dictionary);
Travelers, 715 N.E.2d at 937 (citing Webster’s New World Dictionary); THQ Venture v. SW,
Inc., 444 N.E.2d 335, 338 (Ind. Ct. App. 1983) (“Words used in a contract must be given their
common meaning[.]”). The Court now applies these rules to the Covenants at issue.
C. Analysis
The parties primarily dispute the meaning of Paragraphs 7.6 and 7.7. As described below,
the Court agrees with Plaintiff’s interpretation of Paragraph 7.6, but also agrees with Defendant’s
interpretation of Paragraph 7.7. Further, because Paragraph 7.7 provides a basis for Defendant to
seek the fees at issue in this case, the Court concludes that Defendant’s attempt to collect the fees
did not violate the FDCPA.
1. Paragraph 7.6
The parties devote the majority of their briefs to Paragraph 7.6. That provision sets out
the consequences for homeowners such as Plaintiff who fail to pay the Regular or Special
Assessments imposed by the Huntwick Board of Directors. It specifically provides:
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7.6 Failure of Owner to Pay Assessments.
(i) No Owner may exempt himself from paying Regular Assessments and
Special Assessments due to such Owner’s nonuse of the Common Areas or
abandonment of the Residence Unit or lot belonging to such Owner. If any Owner
shall fail, refuse or neglect to make any payment of any assessment when due, the
lien for such assessment (as described in Paragraph 7.7 below) may be foreclosed
by the Board of Directors of the Association for and on behalf of the Association
as a mortgage on real property or as otherwise provided by law. In any action to
foreclose the lien for an assessment, the Owner and any occupant of the
Residence Unit shall be jointly and severally liable for the payment to the
Association on the first day of each month of reasonable rental for such Residence
Unit, and the Board of Directors shall be entitled to the appointment of a receiver
for the purpose of preserving the Residence Unit or Lot, and to collect the rentals
and other profits therefrom for the benefit of the Association to be applied to the
unpaid assessments. The Board of Directors of the Association, at its option, may
in the alternative bring suit to recover a money judgment for any unpaid
assessment without foreclosing or waiving the lien securing the same. In any
action to recover an assessment, whether by foreclosure or otherwise, the Board
of Directors of the Association, for and on behalf of the Association, shall be
entitled to recover from the Owner of the respective Lot costs and expenses of
such action incurred (including but not limited to attorneys fees) and interest from
the date such assessments were due until paid.
[Dkt. 15-1 ¶ 7.6.]
As noted above, Defendant contends that the Huntwick Covenants allow Defendant to
attempt to collect attorney’s fees regardless of whether a lawsuit has been filed against a
delinquent homeowner. [Dkt. 18 at 7.] Defendant focuses on the last sentence of Paragraph 7.6
and notes that it gives Huntwick “the right to recover ‘costs and expenses . . . incurred (including
but not limited to attorneys [sic] fees)’ in ‘any action to recover an assessment, whether by
foreclosure or otherwise.” [Dkt. 18 at 7 (emphasis original) (quoting Dkt. 15-1 ¶ 7.6).]
Defendant attaches special significance to the term “otherwise.” [See id. at 7-8.] It notes
that the Supreme Court has previously construed a statute that imposed a tax on bank deposits
“subject to payment by check or draft, or represented by certificates of deposit or otherwise.” [Id.
at 6 (quoting Oulton v. German Sav. & Loan Soc., 84 U.S. 109, 110 (1872).] The Supreme Court
determined that the term “otherwise” meant “any other means which could possibly make the
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depositor a holder or user, or give him credit upon the moneys which were deposited with the
bank.” Oulton, 84 U.S. at 114. Defendant thus concludes that the term “otherwise” in the
Huntwick Covenants must also mean “any other means.” [Dkt. 18 at 8.] Defendant would
therefore read Paragraph 7.6 as allowing for the recovery of attorney’s fees whenever such fees
are incurred to recover a debt, whether the recovery is accomplished “by foreclosure” or “by any
other means.” [See id.] This interpretation, in turn, implies that a lawsuit is not a pre-requisite to
recovering fees. Defendant would thus be free to recover its fees for any sort of attempt to collect
Plaintiff’s assessments, regardless of whether Defendant chose to attempt the collection by filing
a lawsuit.
The word “otherwise,” however, must be read in the context of the contract. See, e.g.,
Citimortgage, 975 N.E.2d at 813 (“We begin with the plain language of the contract, reading it in
context[.]”). The last sentence of Paragraph 7.6 reads as follows:
In any action to recover an assessment, whether by foreclosure or otherwise,
the Board of Directors of the Association, for and on behalf of the Association,
shall be entitled to recover from the Owner of the respective Lot costs and
expenses of such action incurred (including but not limited to attorneys fees) and
interest from the date such assessments were due until paid.
[Dkt. 15-1 ¶ 7.6 (emphasis added).] The beginning of the sentence indicates that the term
“otherwise” modifies the word “action.” The rest of the sentence then confirms this
interpretation by noting that recovery is limited to the costs and expenses incurred in
“such action.” Defendant may thus be correct that “otherwise” is an expansive term, but
its connection to the word “action” limits the extent of that term. “Otherwise,” as used
here, does not mean “by any other means” in general; rather, it means “by any other
means” constituting an “action.” The Court must thus interpret the term “action.”
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Plaintiff argues that the term “action” means “lawsuit,” such that Defendant is
entitled to recover attorney’s fees only if it files a lawsuit against Plaintiff. [Dkt. 24 at 4.]
In reply, Defendant contends that the term “action” is more general in that it simply
means “a thing done” or “the process of doing something.” [Dkt. 26 at 2-3.]
As noted above, dictionary definitions can help explain the terms of a contract,
see, e.g., Reuille, 888 N.E.2d 7 at 771, and both parties in this case cite definitions of the
term “action.” [Dkt. 24 at 4; Dkt. 26 at 3.] Defendant cites the Merriam-Webster
Dictionary for the proposition that “action” means “the accomplishment of a thing
usually over a period of time, in stages, or with the possibility of repetition” or “a thing
done.” [Dkt. 26 at 2-3 (quoting Merriam-Webster Dictionary, http://www.merriamwebster.com/dictionary/action (last visited Feb. 18 2015)).] Plaintiff counters with the
observation that Merriam-Webster’s first definition of action is “the initiating of a
proceeding in a court of justice by which one demands or enforces one’s right; also: the
proceeding itself.” [Dkt. 24 at 4 (quoting Merriam-Webster Dictionary,
http://www.merriam-webster.com/dictionary/action (last visited Feb. 7 2015)).] Black’s
Law Dictionary similarly provides multiple definitions: it defines “action” both as a
general term meaning “[t]he process of doing something” or “[a] thing done,” but also as
a specific term meaning “[a] civil or criminal judicial proceeding.” Black’s Law
Dictionary (10th ed. 2014).
Standing alone, these competing definitions of “action” provide little clarity. To
resolve any resulting ambiguity, the Court looks to the context in which the term “action”
is used. See, e.g., Citimortgage, 975 N.E.2d at 813 (Ind. 2012). Paragraph 7.6 sets out
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two ways in which the Huntwick Board may attempt to force payment of homeowners’
assessments. The first option is foreclosure:
If any Owner shall fail, refuse or neglect to make any payment of any assessment
when due, the lien for such assessment (as described in Paragraph 7.7 below) may
be foreclosed by the Board of Directors of the Association for and on behalf of
the Association as a mortgage on real property or as otherwise provided by law.
[Dkt. 15-1 ¶ 7.6.] In Indiana, such a foreclosure by a homeowners association requires the
filing of a lawsuit. Ind. Code § 32-28-14-8(a). (“A homeowners association may enforce
a homeowners association lien by filing a complaint in the circuit or superior court of the
county where the real estate that is the subject of the lien is located.”). The Huntwick
Covenants then add that “[i]n any action to foreclose the lien for an assessment, the
Owner and any occupant of the Residence Unit shall be jointly and severally liable for
the payment to the Association.” [Dkt. 15-1 ¶ 7.6.] The Covenants thus connect the term
“action” to a lawsuit to foreclose the lien.
The Covenants then provide a second option to force payment:
The Board of Directors of the Association, at its option, may in the alternative
bring suit to recover a money judgment for any unpaid assessment without
foreclosing or waiving the lien securing the same.
[Id.] The term “suit” in this context is connected to the recovery of a “money judgment,”
and hence plainly contemplates the filing of a lawsuit.
Together, then, the preceding sentences set out two ways in which Huntwick may
recover the unpaid homeowners fees: 1) a lawsuit to foreclose and 2) a lawsuit for a
money judgment. Immediately following these two provisions for lawsuits, the
Covenants then state:
In any action to recover an assessment, whether by foreclosure or otherwise, the
Board of Directors of the Association, for and on behalf of the Association, shall
be entitled to recover from the Owner of the respective Lot costs and expenses of
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such action incurred (including but not limited to attorneys fees) and interest from
the date such assessments were due until paid.
[Dkt. 15-1 ¶ 7.6.] The phrase “foreclosure or otherwise” thus refers to the two previouslydelineated methods by which Huntwick may force payment: namely, a lawsuit to
foreclose or a lawsuit for a money judgment. Also, because the phrase “foreclosure or
otherwise” is used to explain the term “action,” the two options to force payment thus
also define the scope of the term “action.” In this context, then, “action” means a lawsuit
to foreclose or a lawsuit for a money judgment.
The structure of Paragraph 7.6 therefore supports Plaintiff’s interpretation of the
contract. The dictionary definitions of “action” may differ, 3 but the context in which the
term is used in this case indicates that the “action” at issue must be one of two sorts of
lawsuits. Hence, the provision for attorney’s fees “[i]n any action” is also constrained to
situations involving the filing of a lawsuit, such that Paragraph 7.6 does not entitle
Defendant to seek its attorney’s fees without first filing a lawsuit against Plaintiff.
The terms accompanying the phrase “attorney’s fees” are consistent with this
conclusion. The last sentence of Paragraph 7.6 provides that Huntwick may “recover” the
“costs and expenses of such action incurred (including but not limited to attorneys
fees)[.]” [Dkt. 15-1 ¶ 7.6.] As Plaintiff notes, [Dkt. 24 at 5], “recover” is a word closely
associated with litigation. See, e.g., Black’s Law Dictionary (10th ed. 2014) (defining
“recover” as “[t]o get back or regain in full or in equivalence,” “[t]o obtain (relief) by
3
The dictionary definitions may not create as much ambiguity as Defendant would suggest. Although Black’s Law
Dictionary does define “action” as “[t]he process of doing something” or “[a] thing done,” it also notes that “[t]he
terms ‘action’ and ‘suit’ are nearly if not quite synonymous.” Black's Law Dictionary (10th ed. 2014). Any
remaining distinction is a relic from the historical division of law and equity, see id., and today, the fact that the two
are “nearly . . . synonymous” supports the interpretation that the term “action” in the Huntwick Covenants means
“lawsuit.”
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judgment or other legal process,” “[t]o obtain (a judgment) in one’s favor,” or “to
succeed in a lawsuit or other legal proceeding”). Similarly, the term “‘costs’ is a term of
art with specific legal meaning.” Wiley v. McShane, 875 N.E.2d 273, 276 (Ind. Ct. App.
2007) (citations omitted). In particular, “costs” include “only filing fees and statutory
witness fees,” id., such that the term “costs” is also closely associated with litigation. The
juxtaposition of the phrase “attorneys fees” with the terms “recover” and “costs” thus
strengthens the conclusion that Paragraph 7.6 allows Huntwick to seek such fees only
when a lawsuit has actually been filed. 4
As noted above, Indiana courts also define contractual terms by reference to their
common meaning. See, e.g., THQ Venture, 444 N.E.2d at 338 (Ind. Ct. App. 1983) (“Words used
in a contract must be given their common meaning unless, from the entire contract and the
subject matter thereof, it is clear that some other meaning was intended”). As is relevant here,
Indiana courts have expressly recognized that the commonly accepted meaning of the term
“action” is a lawsuit. Pathman Const. Co. v. Knox Cnty. Hosp. Ass’n, 164 326 N.E.2d 844, 854
(Ind. App. 1975) (“The term ‘action’ in its usual sense, at least its usual legal sense, means a suit
brought in court, a formal complaint within the jurisdiction of a court of law.”). 5 This
4
In its reply, Defendant notes that Plaintiff “suggests that the inclusion of ‘costs’ as recoverable expenses precludes
attorney’s fees outside of litigation, but she does not explain why the inclusion of certain charges incurred only
during litigation prevents the inclusion of certain other charges incurred before litigation.” [Dkt. 26 at 4.] Indiana
courts, however, acknowledge and apply the interpretive canon expressio unius est exclusio alterius. See, e.g.,
Januchowski v. N. Indiana Commuter Transp. Dist., 905 N.E.2d 1041, 1049 (Ind. Ct. App. 2009). The enumeration
of litigation-specific specific expenses in Paragraph 7.6 thus supports a finding that expenses unrelated to litigation
are in fact excluded from this paragraph.
5
The Indiana courts are hardly alone in this understanding. See, e.g., Horkey v. J.V.D.B. & Associates, Inc., 333
F.3d 769, 775 (7th Cir. 2003) (quoting Black’s Law Dictionary 28 (6th ed.1990)) (“An ‘action’ ‘in its usual legal
sense means a lawsuit brought in a court.’”); Heneghan v. Sekula, 536 N.E.2d 963, 966 (Ill. App. Ct. 1989) (quoting
Black’s Law Dictionary 26 (5th ed. 1979)) (“The ordinary and popular meaning of the term ‘action’ includes ‘all the
formal proceedings in a court of justice attendant upon the demand of a right made by one person of another in such
court, including an adjudication upon the right and its enforcement or denial by the court.’”); see also Republic
Tobacco Co. v. N. Atl. Trading Co., 381 F.3d 717, 730 (7th Cir. 2004) (noting that “legal action” “can only be
intended to mean some sort of lawsuit,” as opposed to “any activity of a lawyer”). The Federal Rules of Civil
Procedure and the Indiana Trial Rules are also consistent with this understanding of the term “action.” See Fed. R.
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understanding reinforces the conclusion that the term “action” is synonymous with litigation.
The Court thus finds it unlikely that the drafters of the Huntwick Covenants intended to impart a
different meaning to the term “action,” and, in its efforts to “give effect to the parties’ intent,”
see Reuille, 888 N.E.2d at 771 (Ind. 2008), the Court concludes that it should construe the term
“action” to mean “lawsuit.”
Finally, the Court notes that the meaning of a contract’s terms “must be
determined from the contract read in its entirety.” Johnson, 856 N.E.2d at 773. In this
case, the term “action” appears not only in Paragraph 7.6, but also in Paragraph 12.1,
which reads as follows:
12.1 Right of Enforcement
Violation or threatened violation of any of the covenants, conditions or
restrictions enumerated in this Declaration or in a Plat of any part of the Real
Estate now or hereafter recorded in the office of the Recorder of Hendricks
County, Indiana shall be grounds for an action by Developer, the Association,
any Owner and all persons or entities claiming under them, against the person or
entity violating or threatening to violate any such covenants, conditions or
restrictions. Available relief in any such action shall include recovery of damages
or other sums due for such violation, injunctive relief against any such violation
or threated violation, declaratory relief and the recovery of costs and attorneys
fees reasonably incurred by any party successfully enforcing such covenants,
conditions and restrictions; provided, however, that neither Developer, any Owner
nor the Association shall be liable for damages of any kind to any person for
failing or neglecting for any reason to enforce any such covenants, conditions or
restrictions.
[Dkt. 15-1 ¶ 12.1 (bold emphasis added).] Under the terms of this paragraph, Huntwick
may pursue “an action” for “recovery of damages,” for “injunctive relief,” for
“declaratory relief,” and for “the recovery of costs and attorneys fees.” [Id.] This range of
Civ. P. 2 (“There is one form of action—the civil action”); id. 3 (“A civil action is commenced by filing a complaint
with the court.”); Ind. R. Trial P. 2(a) (“There shall be one [1] form of action to be known as ‘civil action.’”); id. 3
(“A civil action is commenced by filing with the court a complaint or such equivalent pleading or document as may
be specified by statute[.]”).
14
relief plainly indicates that the term “action” involves the filing of a lawsuit. Further, the
Court may infer that the drafters of the Covenants intended that the term “action” in
Paragraph 12.1 carry the same meaning as the term “action” in Paragraph 7.6. See, e.g.,
Stagg Indus. Dev. Corp. v. Gencorp, Inc., No. EV 99-0119-C M/H, 2000 WL 1428669, at
*4 (S.D. Ind. May 26, 2000) (citing George S. May Int’l Co. v. King, 629 N.E.2d 257,
260 (Ind. Ct. App. 1994)) (“[W]hen parties use or refer to the same term in two different
clauses, courts should presume they intend for the term to have the same meaning in both
clauses.”) Reading the Huntwick Covenants as a whole thus confirms that the term
“action” in Paragraph 7.6 refers only to the filing of a lawsuit. Because Defendant in this
case did not file such a suit, the Court concludes that Paragraph 7.6 did not entitle
Defendant to seek its attorney’s fees.
This conclusion, however, does not end the analysis. Defendant contends that
Paragraph 7.7 provides an independent basis for seeking attorney’s fees, regardless of the
interpretation of Paragraph 7.6. [Dkt. 18 at 9.] The Court now considers this argument.
2. Paragraph 7.7
As with Paragraph 7.6, the Court begins with the language of Paragraph 7.7:
7.7 Creation of Lien and Personal Obligation
All Regular Assessments and Special Assessments, together with interest, costs
of collection and attorneys’ fees, shall be a continuing lien upon the Lot against
which such assessment is made prior to all other liens except only (i) tax liens on
any Lot in favor of any unit of government or special taxing district and (ii) the
lien of any first mortgage of record. Each such assessment, together with
interest, costs of collection and attorneys’ fees, shall also be the personal
obligation of the Owner of the Lot at the time such assessment became due
and payable. Where the Owner constitutes more than one person, the liability of
such persons shall be joint and several. The personal obligation for delinquent
assessments (as distinguished from the lien upon the Lot) shall not pass to such
Owner’s successors in title unless expressly assumed by them. The Association,
upon request of a proposed Mortgagee or proposed purchaser having a contractual
15
right to purchase a Lot, shall furnish to such Mortgagee or purchaser a statement
setting forth the amount of any unpaid Regular or Special Assessments or other
charges against the Lot. Such statement shall be binding upon the Association as
of the date of such statement.
[Dkt. 15-1 ¶ 7.7.]
The plain language of this provision indicates that Huntwick is entitled to collect
attorney’s fees from a delinquent home owner regardless of whether a lawsuit has been
filed. As described above, the term “action” in the context of the Huntwick Covenants is
synonymous with litigation, but Paragraph 7.7 contains no reference to “actions” of any
kind, nor does Paragraph 7.7 use others terms such as “suit” or “proceeding” that might
be connected to litigation. In fact, as Defendant notes, the paragraph “says absolutely
nothing about litigation.” [Dkt. 18 at 9.]
Instead, Paragraph 7.7 simply states that, as soon as an assessment becomes due, a
homeowner has a “personal obligation” to pay the assessment, “together with interest,
costs of collection and attorneys’ fees[.]” [Dkt. 15-1 ¶ 7.7.] The triggering event for the
recovery of fees under this paragraph therefore is not the commencement of an “action”
or any other sort of litigation; rather, the fees are recoverable as soon as the homeowner
is late in payment of her assessments. In Plaintiff’s case, then, the obligation to pay
attorney’s fees attached as soon as Plaintiff fell behind on her assessments. At that time—
and without any further action—Defendant was entitled to seek payment of the
assessments, payment of the collection costs, and, most importantly, payment of its
attorney’s fees. Its attempts to collect those fees was thus authorized by the underlying
Covenants and did not violate the FDCPA.
Plaintiff disputes this interpretation of Paragraph 7.7. She first contends that
Paragraph 7.7 “does not deal with when attorney fees are owed[.]” [Dkt. 24 at 7
16
(emphasis original); see also id. (“It does not, as Defendant suggest, say when attorney
fees are owed.”).]
This argument is plainly incorrect: Paragraph 7.7 by its terms states that all
assessments, “together with interest, costs of collection and attorneys’ fees, shall also be
the personal obligation of the Owner of the Lot at the time such assessment became
due and payable.” [Dkt. 15-1 ¶ 7.7 (emphasis added).] The Paragraph thus explicitly
states that attorney’s fees are recoverable from the date that a homeowner becomes
delinquent in paying her assessments, and the Court must give effect to this clear
language. See, e.g., Trustcorp, 867 N.E.2d at 212 (“The unambiguous language of a
contract is conclusive upon the parties to the contract and upon the courts.”).
Plaintiff then contends that Paragraph 7.7 is not an independent basis for
entitlement to attorney’s fees. [Dkt. 24 at 7.] She argues that Paragraph 7.7 only describes
the manner in which fees owed “pursuant to other paragraphs,” such as Paragraph 7.6,
become both a lien on the lot and a personal obligation of the homeowner. [Id.]
This arguments is backwards. Paragraph 7.6 states:
If any Owner shall fail, refuse or neglect to make any payment of any assessment
when due, the lien for such assessment (as described in Paragraph 7.7 below)
may be foreclosed by the Board of Directors of the Association for and on behalf
of the Association as a mortgage on real property or as otherwise provided by
law.
[Dkt. 15-1 ¶ 7.6.] This paragraph thus provides that the lien enforced through a
foreclosure or other lawsuit is created “as described in Paragraph 7.7.” Hence, it is
Paragraph 7.7—rather than 7.6—that creates the homeowner’s obligation to pay
assessments, costs of collection, and attorney’s fees. And, as described above, Paragraph
7.7 creates this obligation without any reference to litigation. Thus, Paragraph 7.6 may
17
give Huntwick the option to foreclose on the lien by filing a lawsuit, but Paragraph 7.7
creates an obligation to pay costs of collection and attorney’s fees that is independent of
any foreclosure or other lawsuit.
Plaintiff also attempts to use the term “costs” to link Paragraph 7.7’s obligation to
pay fees to Paragraph 7.6’s requirement of litigation. [Dkt. 24 at 7.] She notes that
Paragraph 7.7 provides for recovery of all assessments, “together with interest, costs of
collection and attorneys’ fees.” [Dkt. 15-1 ¶ 7.7 (emphasis added).] She then contends
that because the “term ‘costs’ . . . is a term linked solely with litigation,” the provision for
attorney’s fees in connection with “costs of collection” must also contemplate litigation.
[Dkt. 24 at 7.]
Plaintiff’s argument ignores the distinction between the term “costs” as used in
Paragraph 7.6 and the term “costs of collection” as used in Paragraph 7.7. 6 This
distinction is significant: In Paragraph 7.6, the Covenants provide for recovery of “costs”
incurred in “such action.” [Dkt. 15-1 ¶ 7.6.] As explained above, the term “action” in the
Covenants means the filing of a lawsuit and only the filing of a lawsuit. Thus, the term
“costs” refers to amounts paid in connection with a lawsuit.
In Paragraph 7.7, however, the drafters of the Covenants did not use the term
“costs;” they instead used the term “costs of collection.” They thus chose a term different
than that which they had previously used to refer to litigation. This, in turn, implies that
the term “costs of collection” is not constrained to litigation, such that the term provides
for collection of costs outside of litigation. The reference to attorney’s fees in conjunction
6
Indeed, Plaintiff’s argument reads the words “of collection” entirely out of the contract. Such a reading is
inconsistent with the basic principle that courts interpret contracts “so as to render each word, phrase, and term
meaningful[.]” Citimortgage, 975 N.E.2d at 813.
18
with “costs of collection” therefore implies that, pursuant to Paragraph 7.7, attorney’s
fees are also recoverable outside of litigation.
The common understandings of the term “costs” and “costs of collection” are
consistent with this analysis. As explained above, the term “costs” is a term of art that is
closely connected with litigation. See, e.g., Wiley v. McShane, 875 N.E.2d at 276
(defining “costs” as “only filing fees and statutory witness fees”). The term “costs of
collection,” in contrast, is broader. Black’s Law Dictionary, for instance, defines “costs
of collection” as “[e]xpenses incurred in receiving payment of a note; esp., attorney’s
fees incurred in the effort to collect a note.” Black’s Law Dictionary (10th ed. 2014). It
thus defines “costs of collection” without reference to litigation, but still contemplates
that the term includes fees for an attorney’s work.
By using the term “costs of collection” rather than “costs,” the drafters of the
Huntwick Covenants in Paragraph 7.7 thus chose to use a term that is commonly
understood to encompass situations other than litigation. Moreover, they chose not to use
the term that they had elsewhere used to refer only to litigation. The choice of these
different terms carries an implicit intent to confer different meanings. Cf. Stagg Indus.,
2000 WL 1428669, at *4 (“[W]hen parties use or refer to the same term in two different
clauses, courts should presume they intend for the term to have the same meaning in both
clauses.”). The Court thus concludes that the term “costs of collection” supports an
interpretation of Paragraph 7.7 that allows for collection of attorney’s fees outside
litigation.
Plaintiff nonetheless argues that this interpretation of Paragraph 7.7 is erroneous
because it “would render the final sentence of paragraph 7.6(i) unnecessary and
19
meaningless.” [Dkt. 24 at 8.] This, in turn, would violate the rule that courts should
“construe contractual provisions so as to harmonize the agreement, and so as not to
render any terms ineffective or meaningless.” See Johnson, 856 N.E.2d at 773.
The final sentence of Paragraph 7.6 reads as follows:
In any action to recover an assessment, whether by foreclosure or otherwise, the
Board of Directors of the Association, for and on behalf of the Association, shall
be entitled to recover from the Owner of the respective Lot costs and expenses of
such action incurred (including but not limited to attorneys fees) and interest from
the date such assessments were due until paid.
[Dkt. 15-1 ¶ 7.6.] The sentence thus provides for the recovery of costs, expenses and
attorney’s fees incurred in “such action.” [Id.] As explained above, the term “action”
refers to a lawsuit to foreclose or a lawsuit for a money judgment. Hence, the final
sentence of Paragraph 7.6 provides for recovery of costs and attorney’s fees in litigation.
Plaintiff thus contends that if Paragraph 7.7 is read to provide an independent right to
attorney’s fees, then Paragraph 7.6 has no purpose. [Dkt. 24 at 8.]
As Defendant points out, [Dkt. 26 at 8], however, Plaintiff’s proposed
interpretation fares no better. Plaintiff contends (and the Court previously concluded) that
Paragraph 7.6 applies only to litigation. If, as Plaintiff now argues, Paragraph 7.6 sets
forth the exclusive situation in which attorney’s fees are recoverable, then it is
unnecessary for Paragraph 7.7 to also impose liability for “attorneys’ fees . . . at the time
such assessment becomes due and payable.” [Dkt. 15-1 ¶ 7.7 (emphasis added).] After
all, a homeowner at such a time would not yet face a lawsuit seeking the assessments.
Plaintiff’s contention that fees can only be recovered in litigation is thus inconsistent with
Paragraph 7.7’s imposition of liability for fees at the time that the assessments initially
become due.
20
As a result, both of the interpretations discussed above would render the
Huntwick Covenants duplicative or internally inconsistent. The preference for
interpretations that avoid such duplication or inconsistency thus carries little weight in
this case, and the Court will adhere to its previous conclusion that Paragraph 7.7 does in
fact provide for recovery of attorney’s fees even outside of litigation.
Finally, the Court notes that this interpretation of Paragraph 7.7 is consistent with
the overall goal of “giv[ing] effect to the parties’ intent as reasonably manifested by the
language of the agreement.” Reuille, 888 N.E.2d at 771. Paragraph 7.7 plainly states that
a homeowner who does not pay his assessment is liable for attorney’s fees “at the time
such assessment becomes due and payable.” [Dkt. 15-1 ¶ 7.7.] If, as Plaintiff contends,
Paragraph 7.6 then restricts recovery of these fees only to situations in which a lawsuit
has been filed, the contract creates an incentive to manufacture litigation that might
otherwise never materialize. As Defendant notes, this result is “absurd.” [Dkt. 26 at 6.]
Creating such unnecessary litigation would benefit no one but the lawyers recovering the
fees, and the Court cannot accept that the drafters of the Covenants intended this result.
The Court therefore concludes once again that Paragraph 7.7 authorizes the recovery of
attorney’s fees independent of whether any lawsuit has been filed against the delinquent
homeowner.
For these reasons, the Court finds that Paragraph 7.7 of the Huntwick Covenants
expressly authorized the collection of attorney’s fees such as those that Defendant sought
to collect in this case. Defendant’s attempt to collect these fees therefore did not
constitute an attempt to collect an amount unauthorized by the agreement creating
Plaintiff’s debt and was therefore not a false representation. As such, Defendant’s letter
21
did not violate §§ 1692e(2)(A), 1692e(2)(B), 1692e(10), or 1692f of the FDCPA, and
Plaintiff cannot prove any set of facts that would support the claims in her amended
complaint. The Court accordingly GRANTS Defendant’s motion for judgment on the
pleadings.
III.
Conclusion
For the reasons set forth above, the Court GRANTS Defendant’s Motion for Judgment
on the Pleadings. [Dkt. 17.] Plaintiff’s Amended Complaint, [Dkt. 12], is dismissed with
prejudice. Final judgment shall issue in a separate entry.
Date: 03/10/2015
Distribution:
Raymond L. Faust
HOUSE REYNOLDS & FAUST LLP
rfaust@housereynoldsfaust.com
Briane M. House
HOUSE REYNOLDS & FAUST LLP
bhouse@housereynoldsfaust.com
Robert E. Duff
INDIANA CONSUMER LAW GROUP
robert@robertdufflaw.com
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