Once a secured lender and its counsel have filed the complaint for foreclosure, and assuming service of process has been perfected on all parties, it’s time to reduce the lender’s claims to a judgment. Indeed, that is the purpose of filing suit.
Three methods. There are three basic ways to obtain a judgment: (1) a default judgment, (2) a motion for summary judgment and (3) a trial. I previously wrote about default judgments on August 2, 2007 and about summary judgments on November 28, 2006. On June 18, 2008, I compared those two options and concluded that, in Indiana, a summary judgment is preferable to a default judgment.
Trial. If motions for default and/or summary judgment are denied, the secured lender’s only recourse is to try the case (or settle). Mortgage foreclosure actions are equitable and, as such, are tried to the bench (see my October 23, 2009 for more on that issue). Normally, the need for a trial will stem from a common law contract defense or, more likely, a counterclaim asserted by a defendant. Typically, straight forward commercial mortgage foreclosures are ready-made for motions for summary judgment, so trials are rare.
Form of judgment. Regardless of the type of judgment, ultimately you and your counsel will want to submit a proposed judgment to the court at the time of, or immediately after, the filing of a motion for default judgment, a motion for summary judgment or any trial of the action. It is advisable to articulate findings of fact and conclusions of law upon which the judgment is based. We always attach as an exhibit to the judgment/decree a legal description of the real estate, which will be used by the sheriff’s office and in connection with the sheriff’s sale process.
One component to any Indiana foreclosure judgment will relate to the promissory note and personal liability for the debt, sometimes called an in personam judgment, to be collected from the borrower/mortgagor after the sheriff’s sale, assuming there is a deficiency. (A deficiency is the amount of money still owed after the sheriff’s sale or, in other words, the result of subtracting the sheriff’s sale price from the judgment amount.) A second component to any judgment will relate to the mortgage, sometimes called an in rem judgment, meaning that the judgment amount may be satisfied through the sale of the real estate.
Priority. The judgment will include a decree of foreclosure that details the rights and priorities of the parties to the real estate and orders the sheriff’s sale. The priority, in turn, will dictate the order of payment of any proceeds from the sheriff’s sale, a topic I discussed on January 9, 2007.
Relevant statutes. Here are some of the statutes that pertain to foreclosure judgments:
• I.C. § 32-30-10-5 “Judgment of Foreclosure; Personal Judgment; Sale of Property”
• I.C.§ 32-30-12-1 and 2 “Final Judgment Given in First Instance” and “Sale of Mortgaged Property Ordered in all Cases”
• I.C.§ 34-54-1-1 “Execution”
• I.C.§ 34-54-10-2 “Mortgage Actions”
Again, on Indiana, the custom and practice is for lender’s counsel to prepare and submit the proposed judgment/decree for the court to execute and enter. This is a critical part of the process and a necessary expense. There is important language that should be included in every decree, so ensure that your counsel is familiar with the terms of the relief provided by your loan documents and Indiana law.