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FOR PUBLICATION

ATTORNEYS FOR APPELLANT: JAMES H. HANSON Scopelitis, Garvin, Light & Hanson Indianapolis, Indiana

ATTORNEY FOR APPELLEE: HOLLY ZIEMER Old National Bancorp Counsel Evansville, Indiana

IN THE COURT OF APPEALS OF INDIANA
PHILLIP A. LEONARD, Appellant-Plaintiff, vs. OLD NATIONAL BANK CORPORATION, Appellee-Defendant. ) ) ) ) ) ) ) ) )

No. 89A04-0504-CV-205

APPEAL FROM THE WAYNE SUPERIOR COURT The Honorable P. Thomas Snow, Judge Cause No. 89D01-9809-CP-146

November 21, 2005 OPINION - FOR PUBLICATION

BAKER, Judge

Appellant-plaintiff Phillip A. Leonard appeals the trial court's judgment in favor of appellee-defendant Old National Bank Corporation, f/k/a People's Loan & Trust Bank (Bank). Specifically, Leonard asserts that the trial court erred in finding that the Bank did not intend to cancel a debt for which Leonard was a guarantor. Finding that it was not clearly erroneous for the court to determine that Form 1099-C, as an informational filing, did not operate to cancel the debt, we affirm the judgment of the trial court. FACTS In 1994, Leonard was a fifty percent owner of Tile & Mastic, Inc., an Indiana corporation. Leonard's brother Steve owned the other fifty percent of the business. The Bank provided Tile & Mastic with a line of credit in 1992, and Leonard and Steve personally guaranteed the Tile & Mastic loan to the Bank. The loan was renewed on April 20, 1994, and Leonard renewed his personal guaranty. On September 22, 1994, Leonard sold his fifty percent share of Tile & Mastic to Steve, and in December 1994, Tile & Mastic filed for bankruptcy and defaulted on the Bank's loan. Tile & Mastic's bankruptcy was dismissed rather than discharged on April 12, 1995, after its assets were sold to a third party and it ceased doing business. In January 1996, the Bank issued IRS Form 1099-C, Cancellation of Debt, regarding Tile & Mastic's uncollected loan balance. Judy Scholl, the Bank's Loan Operations Supervisor at that time, issued Form 1099-C as a result of Tile & Mastic's bankruptcy proceedings. The 1099-C listed April 12, 1995--the date on which bankruptcy was dismissed--in the box entitled "Date canceled." Appellant's App. p. 15.

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In April 1997, Leonard received a notice from a collection agency concerning his guaranty obligation on the Tile & Mastic debt. Leonard contacted Philip Hirschfeld, Executive Vice President of the Bank, concerning the notice. On May 30, 1997, Leonard met with Hirschfeld, and the two entered into a Repayment Agreement (Agreement), wherein Leonard was to pay $17,000 to the Bank in exchange for the Bank releasing Leonard from his obligation as a guarantor. After paying the $17,000 in full, Leonard discovered the January 1996 Form 1099-C. On September 17, 1998, Leonard filed his complaint against the Bank, alleging material misrepresentation and failure of consideration. The bench trial was held on September 15, 2004. On February 16, 2005, the trial court issued its judgment in favor of the Bank, finding that Leonard had not sustained his burden of proof regarding material misrepresentation and failure of consideration and that he had not presented sufficient evidence to support a claim of mutual mistake of fact. Leonard now appeals. DISCUSSION AND DECISION Leonard contends that the trial court erred in granting judgment to the Bank. Specifically, his argument is that the issuance of Form 1099-C rendered the Tile & Mastic debt uncollectible; thus, the trial court should not have examined the Bank's intent in issuing the 1099-C because the Agreement was executed under a mutual mistake of fact and without consideration. The trial court issued a sua sponte memorandum that contained specific findings of fact and conclusions of law after a bench trial. Thus, we review the judgment under Trial Rule 52(A), and we will not set aside the findings or judgment unless clearly erroneous, and 3

due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses. A judgment is clearly erroneous when there is no evidence supporting the findings or the findings fail to support the judgment and when the trial court applies the wrong legal standard to properly-found facts. While findings of fact are reviewed under the clearly erroneous standard, appellate courts do not defer to conclusions of law, which are reviewed de novo. Fraley v. Minger, 829 N.E.2d 476, 482 (Ind. 2005). Leonard initially argues that the filing of Form 1099-C canceled the Tile & Mastic debt by operation of law, so it was therefore improper for the trial court to reach the question of the Bank's intent in filing that document. Federal law requires every financial institution to send a copy of Form 1099-C to a debtor and to the IRS when discharging, in whole or in part, the indebtedness of any person. 26 U.S.C.

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