Metes And Bounds Legal Descriptions, As Opposed To Street Addresses, Control The Effectiveness Of Mortgages In Indiana

Lesson. So long as the legal description in a mortgage provides notice of the boundaries and location of the subject real estate, discrepancies regarding the street address are of no moment.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether the trial court should have granted Lender’s motion for summary judgment in its mortgage foreclosure action.

Vital facts. Spencer was a residential mortgage foreclosure case involving a few twists and turns. This is my fourth and final post about the opinion. For background, please click on my three prior posts: 1/23/24, 2/2/24 and 2/15/24.

Procedural history. The trial court denied Lender’s motion for summary judgment and later entered judgment for the Borrowers that essentially nullified the mortgage.

Key rules.

The Court in Spencer reminds us of some fundamentals surrounding Indiana mortgage foreclosure claims. First, a “mortgage is an interest in real property that secures a creditor's right to repayment.” This means that “an action to foreclose a mortgage is an in rem (i.e., against the property) proceeding."

Yet, upon a borrower’s default, "in addition to the remedy of an in rem action of foreclosure, a creditor may sue to establish the debtor's in personam (i.e., personal) liability for any deficiency on the debt and may enforce a judgment against the debtor's personal assets."

Among other things, “for a mortgage to be effective, it must contain a description of the land intended to be covered sufficient to identify it.” The test for determining the sufficiency of a legal description “is whether the tract intended to be mortgaged can be located with certainty by referring to the description.”

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment ruling.

Policy/rationale. To prevail on the summary judgment motion, Lender had to show Borrowers were in default under the terms of the promissory note and mortgage. Borrowers did not really contest that they were in default and in violation of the terms of the mortgage. No payments had been made for several years.

Despite Borrowers’ arguments to the contrary, the Court declined to hold that there was a “material” issue of fact (which would have prevented summary judgment) related to some confusion about the correct street address for the subject real estate. This is because the metes and bounds legal description in the relevant deeds and mortgage was consistent and put “potentially interested parties on notice as to the boundaries and location of the property.” In Indiana, legal descriptions, not street addresses (aka common addresses), generally control the enforceability of a mortgage. As such, the Court found that summary judgment as to liability must be entered, although it remanded the case back to the trial court to determine the amount of Lender’s damages, including reasonable attorney’s fees.

Related posts.

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Part of my practice involves mortgage-related litigation and title disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


Lender Permitted To Pursue Third Foreclosure Case Because The Two Prior Actions Were Dismissed “Without Prejudice”

Lesson. A lender’s motion for voluntary dismissal of a foreclosure lawsuit, without prejudice, generally leaves the door open to file a subsequent action.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether Lender’s action – its third - was barred by a voluntary motion for dismissal in a prior foreclosure action.

Vital facts. This is my third post about Spencer. For background on the case, please click on my two prior posts: 1/23/24 and 2/2/24. Again, the Spencer opinion stemmed from Lender’s third foreclosure suit. Lender terminated its first foreclosure case through a T.R. 41(A)(1)(a) voluntary motion to dismiss “without prejudice” that the trial court granted over Borrowers’ objection. Lender had filed the second case about two weeks before the first case was dismissed. Apparently due in part to title issues concerning the mortgaged real estate, Lender filed a motion to dismiss, without prejudice, under T.R. 41(A)(2). The trial court granted the motion over Borrowers’ objection that the dismissal should have been “with prejudice.”

Procedural history. Lender filed a motion for summary judgment that the trial court denied. Lender appealed following an adverse result at trial.

Key rules. Click here for Indiana Trial Rule 41(A) “Voluntary Dismissal: Effect thereof,” upon which the trial court relied in granting judgment for Borrowers at the Spencer trial.

As it relates to this case, Indiana courts have articulated that a purpose of Rule 41(A)(2), which deals with dismissals by court order, is “to eliminate evils resulting from the absolute right of a plaintiff to take a voluntary nonsuit at any stage in the proceedings before the pronouncement of judgment and after the defendant had incurred substantial expense or acquired substantial rights.”

That said, dismissals should be permitted “unless the defendant will suffer some legal prejudice other than the mere prospect of a second lawsuit.”

Holding. The Indiana Court of Appeals reversed the trial court’s decision to deny Lender’s summary judgment motion.

Policy/rationale. Borrowers asserted that the prior Rule 41 dismissal either did or should have operated as a dismissal “with prejudice” that barred the third action. In the end, the Rule 41 argument failed because Section (A)(1), which deals with dismissals entered without the need for a court order, did not apply. Section (A)(2) did, however, apply. Lender, in the second action, asked for leave to dismiss without prejudice, and the trial court granted the request. Despite what may have been compelling arguments to the contrary, the trial court’s order of dismissal without prejudice was “not a judgment on the merits of the dismissed claims … [and did] not bar a future case raising those same claims.” The Court of Appeals concluded that the “parties stand as if the prior suit had never been filed, restored to their original positions, free to file the suit again. [Borrowers] offer no compelling reason to abrogate that long settled principle.”

Related posts.

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Part of my practice involves representing parties in foreclosure-related litigation. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


One Indiana Square (aka Regions Tower) Subject Of Foreclosure Action

Various media outlets are reporting that our firm's office building in downtown Indianapolis is being foreclosed upon.  (We're just a tenant and paying our rent, so this isn't our fault!)  The articles, in part, suggest looming problems with the office building sector of commercial real estate.

Here are links to a couple stories:  IBJ.com and Yahoo.com.

To see a copy of the foreclosure complaint, click here  

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I represent parties involved in disputes about loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

 


Lengthy, Multi-Case Foreclosure Conflict Insufficient To Establish Lender Had Unclean Hands

Lesson. In Indiana, the equitable defense of unclean hands requires proof of intentional misconduct.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether Lender had unclean hands that precluded foreclosure.

Vital facts. Spencer was the subject of last week’s post, so click here for background about the case. Beginning in 2013, Lender filed, and then for a variety of reasons, dismissed two prior foreclosures before pursuing this one in 2020. As it relates to this post, the trial court made the following finding:

[Lender] has sought foreclosure of the 12.47 acres in equity, but, it has not done equity at all, nor does [Lender] have clean hands. [Lender] filed multiple lawsuits, voluntarily dismissed the 2014 case because it could not provide an appropriate address for the property secured by the mortgage, secured a judgment in rem against the mobile home, failed and refused to sell the mobile home in 2017, failed to make claims for vandalism of the mobile home, which was or clearly should have been disclosed by the inspections, and in short acted with unclean hands throughout the matter.

Procedural history. The trial court entered judgment for the Borrowers that essentially voided the mortgage. Lender appealed the court’s prior denial of its summary judgment motion.

Key rules.

Indiana common law is well settled that the "unclean-hands doctrine is an equitable tenet that demands one who seeks equitable relief to be free of wrongdoing in the matter before the court." The doctrine’s purpose “is to prevent a party from reaping benefits from his or her misconduct."

To establish the defense, “the alleged wrongdoing must be intentional and must have an immediate and necessary relation to the matter being litigated." Indiana courts apply the doctrine “with reluctance and scrutiny."

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment ruling on the issue of liability.

Policy/rationale.

The Court rejected the finding of unclean hands that “appear[ed] to stray beyond the boundaries of the evidentiary record.” This suggest that at least a portion of the trial court’s decision may not have come from any evidence admitted at the trial. Furthermore, Lender’s procedural posture was, in part, due to “discretionary determinations” made by prior trial courts. Perhaps most importantly, despite Lender’s “conduct in the prior cases [being] no model of efficient litigation practices, we do not find factual support that its actions constitute intentional misconduct.”

Related posts.

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I represent parties in disputes arising out of secured loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


Prior Replevin Of Manufactured Home Did Not Render Mortgage Fully Satisfied As To the Underlying Land

Lesson. If a security interest involves both real and personal property, then the secured party may accept certain of the collateral in partial satisfaction of the obligation it secures.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether, under Indiana Code § 26-1-9.1-620(g), Borrowers’ mortgage obligation was fully satisfied as a result of a prior replevin judgment related to a manufactured home located on the mortgaged real estate.

Vital facts. Spencer was seemingly a straightforward residential mortgage foreclosure case arising out of a payment default. There was no dispute that Borrowers had failed to make payments on their loan for several years. This particular case, however, was Lender’s third stop on a long and winding road in pursuit of relief.

Lender terminated its first foreclosure case through a Trial Rule 41(A)(1)(a) voluntary motion to dismiss “without prejudice.” Lender had filed the second case about two weeks before the first case was dismissed. This second case had counts to foreclose on the mortgaged real estate and for replevin of a manufactured home situated on that real estate. The court denied summary judgment as to the real estate but granted summary judgment as to the manufactured home.

Apparently due in part to some title issues surrounding the mortgaged real estate, Lender filed a motion to dismiss the claim against the real estate in the second case, without prejudice, under T.R. 41(A)(2). The trial court granted the motion over Borrowers’ objection, which asserted that the dismissal should be “with prejudice.”

Lender later filed this third suit, once again seeking to foreclose on the mortgaged real estate.

Procedural history. Lender filed a motion for summary judgment. The trial court denied the motion. Following a bench trial, the court entered judgment for Borrowers that essentially nullified the mortgage and erased the debt.

Key rules.

I.C. § 26-1-9.1-620(g), which is part of the Uniform Commercial Code (UCC), states: "In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures."

However, I.C. § 26-1-9.1-604(a) states:

If a security agreement covers both personal and real property, a secured party may proceed:

(1) under IC 26-1-9.1-601 through IC 26-1-9.1-628 as to the personal property without prejudicing any rights with respect to the real property; or

(2) as to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of IC 26-1-9.1-601 through IC 26-1-9.1-628 do not apply.

Indiana courts have decided, based on Section 604(a), that if a security interest involves both real and personal property, Section 620 does not apply. In other words, secured parties may accept collateral in partial satisfaction of the obligation it secures.

Holding. The Indiana Court of Appeals reversed the trial court’s denial of summary judgment on the issue of liability (foreclosure).

Policy/rationale. Borrowers contended, based on I.C. § 26-1-9.1-620(g), that the replevin judgment against the manufactured home operated to fully satisfy Borrowers’ debt. But, the security agreement (mortgage) covered both the manufactured home, which constitutes personal property, and the real estate. The Court therefore rejected Borrowers’ theory based on Section 604(a), stating: “Section 620 does not apply to the instant matter and cannot serve as a sufficient basis for concluding that [Lender] was precluded from foreclosing on the Real Estate.”

Note: This is the first of what I expect to be four posts about Spencer. There were other arguments made by Borrowers and rules to address.
Related posts.

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I represent parties in disputes arising out of secured loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


Assignee Of Judgment Unable To Pursue Collection Absent Order Substituting Parties

Happy New Year. Forgive me for the extended break in the action here. Year-end projects, holidays, a bout of the flu, etc. prevented me from writing recently.

Lesson. If you’re an assignee of a judgment, file a motion for substitution of party, with supporting evidence, which establishes that you own the judgment that you seek to enforce.

Case cite. H & S Fin. Inc. v. Parnell, 214 N.E.3d 1030 (Ind. Ct. App. 2023)

Legal issue. Whether a purported judgment creditor’s motion for proceedings supplemental was properly denied.

Vital facts. In 2022, the purported assignee of a judgment initiated proceedings supplemental to enforce a 2003 judgment. Importantly, the purported assignee did not first obtain an order establishing that it was the current owner of the judgment.

Procedural history. The trial court interestingly (and erroneously) found that “the statute of limitations to execute on the judgment would have expired” in 2014, ten years post-judgment. The upshot was that the motion for proceedings supplemental was denied. Purported assignee appealed.

Key rules. Indiana Code 34-55-9-2(2) states that money judgments constitute a lien upon the judgment debtor’s real estate until the expiration of ten years after the judgment. Those liens expire after ten years.

However, the judgment itself never truly “expires” under Indiana law. Indeed, judgments survive for ten additional years, and proceedings supplemental are available to enforce the judgment during that period.

It is only after twenty years that Indiana judgments are presumed to be satisfied under I.C. 34-11-2-12. That presumption must be pleaded by the judgment debtor through the assertion of payment. However, the presumption can be rebutted by the judgment creditor with evidence of non-payment.

The more relevant rule to Parnell was Indiana Trial Rule 69(E), which says that proceedings supplemental may be enforced by verified motion alleging that "the plaintiff owns the described judgment against the defendant."

Holding. The Indiana Court of Appeals dismissed the purported judgment assignee’s appeal.

Policy/rationale. The Court concluded that assignee had not been substituted as a party and, as such, had not established that it owned the judgment. Thus, the fatal flaw of assignee’s case was not that the pro supp was late. Rather, it was because the assignee did not first obtain an order for substitution of party. The assignee did not establish by affidavit or verified motion that it owned the judgment (i.e. that it was the actual assignee) as required by Trial Rule 69(E).

Related posts.

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Part of my practice involves post-judgment enforcement matters. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.