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Judgment Lien And Mortgage Lien Governed By Different Statutes Of Limitations

In Welch v. Heavelin, 2009 Ind. App. LEXIS 2518 (Ind. Ct. App. 2009) (.pdf) , mortgagor tried to defeat mortgagees’ foreclosure action by asserting the ten-year judgment lien statute of limitations defense.  The Indiana Court of Appeals rejected the mortgagor’s position and explained that the mortgagees sought to enforce a mortgage lien not a judgment lien.   

Creation of lien.  Husband and Wife were divorced in 1993.  In the divorce decree, the court awarded Husband certain real estate but required Husband to pay Wife money.  Husband’s payment obligation was secured by a mortgage on the real estate.  Husband/mortgagor did not pay the monetary obligation called for under the divorce decree, but Wife never enforced the mortgage.  She passed away in 2003, and her heirs were assigned the mortgage and therefore became the mortgagees.  They filed a foreclosure action in 2008, fifteen years after the creation of the mortgage. 

Mortgagor’s defense.  Husband/mortgagor, based upon Ind. Code § 34-55-9-2, claimed that the foreclosure action was time-barred because the lien expired after ten years, or in 2003.  The Court noted, however, that I.C. § 34-55-9-2 applies only to judgment liens or, more specifically, lien created by judgments for the recovery of money.  I wrote about this ten-year judgment lien statute on November 13, 2008. The mortgagees did not sue to foreclose a judgment lien.  They sued to foreclose the mortgage lien.   The statute upon which Husband/mortgagor relied therefore did not apply. 

Mortgage lien statute of limitations.  The Court concluded that the mortgagees’ foreclosure action was not time-barred because the mortgage was filed within twenty years of the creation of the mortgage lien.  The Court cited to I.C. § 32-28-4-1 for the proposition that an action to foreclose a mortgage made to secure payment of money is controlled by a twenty-year statute:

(b)  An action may not be brought or maintained in the courts of Indiana to foreclose a mortgage . . . if the last installment of the debt secured by the mortgage . . . as shown by the record of the mortgage . . . has been due more than ten (10) years.  However, a lien or mortgage described in this section that was created before September 1, 1982, expires twenty (20) years after the time the last installment becomes due, and an action may not be brought to foreclose the mortgage . . . when the last installment has been due more than twenty (20) years.

20 years?  Given the nature of the lien, the Court correctly relied upon I.C. § 32-28-4-1.  But, I’ve been unable to reconcile the Court’s conclusion with the statute’s clear language regarding a ten-year limitations period.  The mortgage in Welch was created after September 1, 1982 (December, 1993 to be exact).  The twenty-year limitations period is limited to mortgages created before September 1, 1982.   

What’s missing?  I do not intend to be critical or otherwise disrespectful to the Court.  Perhaps the opinion does not fully articulate all of the relevant facts, which is not unusual.  For example, the specific terms of the subject mortgage, including when (or whether) the last installment of the debt secured by the mortgage was due, are variables in I.C. § 32-28-4-1(b) not addressed in the opinion.  With the help of my colleague Blaire Henley, the only explanation I’ve been able to come up with relates to Section 2 of I.C. § 32-28-4, which states in relevant part:

if the record of a mortgage or lien . . . does not show when the debt or the last installment of the debt secured by the mortgage or lien becomes due, the mortgage or vendor’s lien expires twenty (20) years after the date on which the mortgage or lien is executed.

Application of I.C.§ 32-28-4-2 gets the Court to the twenty-year limitations period and thus justifies the Court’s ruling in favor of the mortgagees.  (Section 2 was not cited in the opinion, however.)  Please post a comment, e-mail me or call me if you have any knowledge about the Welch case specifically or the Court’s treatment of these statutes generally.  Also, for more on statutes of limitations, please refer to my March 9, 2009 post.  

For purposes of this post, it is important to understand that Indiana has statutes of limitation applicable to many different causes of action, and the limitation periods can be different.  In Welch, the Court properly articulated that the statute of limitations for a mortgage lien suit may be different than a suit based upon a judgment lien.  Although matters like those in Welch will rarely arise in a commercial mortgage foreclosures, secured lenders and their counsel still need to be acquainted with some of these issues, particularly to the extent priority disputes may arise.