Creditor May Repossess Collateral And Sue For Full Debt Simultaneously, And Generally Is Not Compelled To Accept Short Sale
Indiana Court Discusses Whether A Lender Was A “Bona Fide Mortgagee”

“Service Of Process” Fundamentals For The Plaintiff Lender

Earlier this year, the Indiana Court of Appeals, on the same day, issued two opinions setting aside default judgments entered in favor of lenders in mortgage foreclosure actions.  The reason - inadequate service of process on the borrowers.  The two cases were:  Elliott v. JPMorgan Chase Bank, 920 N.E.2d 793 (Ind. Ct. App. 2010) (.pdf) and Yoder v. Colonial National Mortgage, 920 N.E.2d 798 (Ind. Ct. App. 2010) (.pdf).  As I reviewed the cases, it occurred to me that a blog post about service of process could benefit workout professionals. 

Job 1.  Service of process involves the delivery of a summons and the complaint to a defendant.  (Here is a form summons.)  Service of process is a necessary and critical initial step in any loan enforcement litigation.  “Ineffective service of process prohibits a trial court from having personal jurisdiction over a defendant, and a judgment rendered without personal jurisdiction over a defendant violates due process and is void.”  Elliott v. JPMorgan Chase Bank.  Constitutional law (notice and an opportunity to be heard) is at the heart of the service of process requirements. 

Types and manner of service.  In Indiana state law, “process” is governed by the Trial Rule 4 series, which starts with Rule 4 and ends with Rule 4.17.  Loan enforcement actions typically involve service upon adult individuals and/or organizations such as limited liability companies.  Service upon individuals is governed by Rule 4.1, and service upon organizations, such as LLCs, is governed by Rule 4.6.  Organizations can be served a number of ways, most notably by service on the “registered agent” designated  with the Indiana Secretary of State

Perhaps the simplest and cheapest way to serve either an individual or an organization is by certified mail.  A sometimes more effective approach is to have service of process accomplished by the county sheriff, which is an option available to plaintiffs in every county in the State.  Service by certified mail is covered by Rule 4.11.  Service by sheriff is covered by Rule 4.12.  Service by publication is covered by Rule 4.13.

Case study – copy service.  Elliott involved the Court’s reversal of a default judgment due to defective “copy service.”  Copy service typically refers to “leaving a copy of the summons and complaint” at an individual’s dwelling, house or usual place of abode.  Rule 4.1(A)(3).  In Elliott, the county sheriff’s office served the summons by leaving a copy at the defendant’s residence.  But, there was no evidence that the sheriff complied with Rule 4.1(B)’s second step (U.S. Mail) in the two-step copy service procedure:

the person making [copy] service also shall send by first class mail, a copy of the summons without the complaint to the last known address of the person being served, and this fact shall be shown upon the return.

Case study – publication.  In Yoder, the Court reversed the default judgment because service by publication pursuant to Rule 4.13 was insufficient.  Service by publication is just that – publication of the summons and related information in a newspaper circulated where the defendant resides.  This is a last resort method of service.  Plaintiffs in Indiana really cannot utilize the service by publication option unless they have used “due diligence to locate” the defendant first so as to actually deliver the summons.  In Yoder, the Court outlined how the plaintiff’s “cursory attempt to locate [the defendant did] not constitute a diligent search.”  Before turning to service by publication, it’s advisable to consider personal delivery by the sheriff or a private process server at any last-known address that can be reasonably found either in your files, through the Secretary of State’s office (if an organization) and/or an internet search tool, such as that offered by LexisNexis. 

Client’s decision.  The manner of service (certified mail, sheriff, private process server, etc.) may be dictated by the lender’s cost tolerance and/or sense of urgency to enforce the loan (or get the defendant’s attention).  Lenders and their counsel should discuss this issue around the time they are finalizing the complaint.  More often than not, certified mail service (handled by the clerk’s office) will work.  If, however, you don’t have a good mailing address and/or have reason to believe the particular defendant may avoid signing for the package, then the potential for delay may justify the costs of hiring a process server to get the job done. 

NOTE:  For more, see my 2-2-13 post.