Pro Hac Vice Admission In Indiana And The Role Of Local Counsel

You’re an out-of-state lawyer with a client who needs to enforce a loan in Indiana.  You’re not licensed to practice in the state, and no one in your firm is admitted in Indiana.  You don’t want to relinquish control over the case, but instead wish to be in charge of representing your long-standing client in its important matter.  What you need is to be admitted pro hac vice in the Indiana court.  

More Latin.  “Pro hac vice” in English means “for this turn; for this one temporary occasion.”  Black’s Law Dictionary.  In the legal context, the phrase refers to the limited admission to practice in a court.  Admission pro hac vice is governed by the Indiana Rules for Admission to the Bar and the Discipline of Attorneys, including specifically Rule 3, which was substantially amended in 2007. 

The 7 hoops.  Indiana’s rules require prospective pro hac vice admitees to jump through a number of hoops.  The rules mandate filings with both the Clerk of the Indiana Supreme Court ("Clerk") and with the particular trial court.  According to Rule 3(2)(a), here’s what needs to be done:

1. Hire a member of the bar of the State of Indiana to act as co-counsel and ensure he or she has an appearance on file.
2. Pay the Clerk a registration fee of $130.  See, Rule 2(b).  The registration fee must be paid annually until the proceeding has concluded.  See, Rule 3(2)(c). 
3. Provide the Clerk with a copy of the Rule 3(2)(a)(4) Verified Petition for Temporary Admission ("VPTA") that will be filed with the trial court. 
4. Procure from the Clerk a temporary admission attorney number and payment receipt. 
5. File the VPTA with the trial court, co-signed by Indiana co-counsel, setting forth the nine specific disclosures articulated in Rule 3(2)(a)(4). 
6. Obtain from the trial court an order granting the VPTA.
7. File with the Clerk a Notice of Temporary Admission that includes a statement of good standing issued by the highest court in each jurisdiction in which the attorney is admitted to practice law, a copy of the VPTA and a copy of the order granting the VPTA.   

After successfully jumping through these hoops, counsel may file an appearance in the trial court.

Further handling of the case.  Beware of Rule 3(2)(d), which mandates that all papers filed in the cause of action be co-signed by the Indiana co-counsel.  On the other hand, unless ordered by the trial court, local counsel need not be personally present for court appearances. 

Indiana's philosophy.  Here is an excellent article entitled Taking the Vice Out of Pro Hac Vice:  Temporary Admission and Local Counsel from the October, 2006 issue of Res Gestae, the official publication of the Indiana State Bar Association.  Donald R. Lundberg, the Executive Secretary of the Indiana Supreme Court Disciplinary Commission at the time, is the author.  The article describes the January 1, 2007 changes to the rules.  It also explains why Indiana co-counsel cannot be a “potted plant,” but instead must play a meaningful role in the case, particularly with written submissions.  In response to those who feel that Indiana’s procedural requirements for admission pro hac vice may be burdensome, Mr. Lundberg makes a great point:  “would you rather take the bar exam?”

The General and the Lieutenant.  My standard approach to serving as local counsel is based on the notion that, as with most cases, there needs to be a General and a Lieutenant.  Someone - one person – should be in charge, and others should follow that person’s orders.  Otherwise, the “too many cooks in the kitchen” syndrome develops, followed by reduced efficiency and increased costs to the client.  Usually, but not always, my primary purpose as local counsel is to support the out-of-state lawyer – to be a Lieutenant – regardless of the age or experience of the non-Indiana attorney.  Most good local counsel set their egos aside and do as little (or as much) as the lead counsel wants.  To me, the main objective of any out-of-state, lead attorney should be to hire a responsive, cost-effective role player with local knowledge of the law and procedures.  Certainly I’m always ready, willing and able to be lead counsel, and there are times when the referring attorney hires me to serve in that capacity.  But most of the time, out-of-state Generals simply want a local Lieutenant, which is fine with me.

(This updates my 1-1-07 post and incorporates rules effective through 1-1-11.) 

Indiana’s Requirement For Pre-Sale Payment Of Delinquent Property Taxes

Distressed loans secured by commercial property often involve delinquent real estate taxes.  Workout professionals should remain mindful of this possibility as they analyze their collateral and make decisions concerning the enforcement of the loan.  Questions I’m frequently asked are whether the lender should pay the real estate taxes and, if so, when. 

Prior procedure.  Indiana law historically required the plaintiff/lender, assuming it was the winning bidder at the sheriff’s sale, to pay any delinquent real estate taxes immediately after the sale.  In the case of a cash bidder (third party), taxes would be paid off the top or, in other words, the county treasurer got the first cut of the sale proceeds.   

2011.  In recent years, we noticed that some county sheriff’s offices started to require the plaintiff/lender to pay delinquent real estate taxes before the sale.  This has now become a formal, statutory requirement by virtue of Ind. Code § 32-29-7-8.5 “Requirements for Payment of Property Taxes and Real Estate Costs Before Sheriff’s Sale.”  The statute states, in pertinent part, that “the party that filed the praecipe for the sheriff’s sale shall pay . . . all delinquent property taxes, special assessments, penalties, and interest that are due and owing on the property on the date of the sheriff’s sale.”  A failure to pay will result in the cancellation of the sale.

Policing the issue?  Beginning in January 2011 in Marion County (Indianapolis), the Treasurer, in conjunction with the Sheriff, requires that a Tax Clearance Form (.pdf) be (a) completed by the party requesting the sale, (b) stamped by the Treasurer’s Office and (c) then submitted to the Sheriff’s Office with the written bid.  The form must be stamped regardless of whether delinquent taxes were ever an issue.  Lender’s counsel needs to complete the information at the top of the form (the date of the sheriff’s sale, file number, owner, address and parcel number), as well as the contact information at the bottom of the form.  The Treasurer’s Office completes everything else.  Note that one form needs to be completed for each parcel number (i.e. 4 parcels, 4 forms). 

As I’ve said on this blog many times, please be sure to confer with the particular county sheriff’s office in advance because rules and procedures may vary by county.  Perhaps other counties will follow Marion County’s lead in terms of documenting the status of the real estate taxes.  For now, call ahead to see what is needed. 

Timing.  At last week’s Marion County sales, we were able to submit payment for delinquent property taxes and obtain the stamped clearance form on the same day.  The better approach would be to allow yourself and your foreclosure counsel a few days before the sale to address the matter in case there are problems or the Treasurer’s Office is congested.  Without the stamped form, the Sheriff will not hold the sale.  It is my understanding that the Treasurer may set up an e-mail address so these forms can be submitted and completed via e-mail.  I will provide more information as it becomes available. 

Build into judgment.  Since I.C. § 32-29-7-8.5 now requires real estate taxes to be satisfied before the sale, the amount of any delinquent real estate taxes that either have been or will be paid by the lender should be an item of damages identified in the judgment.  Before the statutory change, borrowers theoretically could attack that damage figure as being speculative.  Some borrowers claimed that, because the lender had not actually incurred the loss at the time of the entry of judgment, courts could not award the damages.  Hypothetically, the borrower might later pay the taxes or a third-party buyer might pay the taxes.  Now, because the foreclosing lender is compelled to advance the taxes, courts in turn should be compelled to include such losses in the calculation of damages.

Plan ahead.  In the past, delinquent real estate taxes may have popped onto the lender’s radar in the days leading up to the sheriff’s sale.  Now, that issue should be addressed at the time of the filing of a motion for default judgment, motion for summary judgment or trial.  Lenders and their foreclosure counsel should make it their routine practice, when calculating the debt, to verify with the county treasurer the status of the real estate taxes generally and the amount of any delinquent real estate taxes specifically.  (As an aside, delinquent taxes frequently are identified in a title commitment.)   

For more on this subject, please see my November 16 and November 24, 2010 posts that deal with tax sales.

Indiana Real Estate Taxes And Sheriff's Sales

Today, in the wake of new statutory language for 2011 -- Ind. Code 32-29-7-8.5 -- I revised  and re-posted three prior articles related to Indiana sheriff's sales and the role of delinquent real estate taxes in such sales.  I'll try to bring things together in a separate post next week and comment upon this week's experience with Marion County's brand-spanking-new Tax Clearance Form.  More to come.... 

Sheriff's Sale Checklist - Marion County (Indianapolis) Illustration - Revised

This follows-up my August 14, 2009 post - New Marion County (Indianapolis) Sheriff's Sale Requirements- and fulfills my promise, while presenting at last last year's foreclosure CLE/seminar, to provide a sale checklist.  The following list includes many of the key steps but is not an exhaustive list of considerations.  So, please make sure you and your counsel independently review the applicable statutes and rules as you prepare for your own sale.  Please also glance at last week's post - Indiana Sheriff's Sales: Local Rules, Customs and Practices Control - for further advice/tips. 

Upon Entry Of Judgment/Pre-Sale

1. Praecipe for sale at clerk’s office; submit first page of complaint/two copies of judgment. 
2. Obtain sale date and sale number from sheriff.
3. Submit notice of sheriff’s sale to sheriff.
4. Request bidding instructions from client.
5. Obtain sale data sheet from sheriff.
6. Prepare bid form.
7. Obtain check for sheriff’s costs/sale fees.
8. Draft sheriff’s deed and request check for recorder’s fee.
9. Draft clerk’s return.
10.  Draft sales disclosure and request check for auditor’s fee.
11.  Obtain statement for any delinquent real estate taxes from treasurer’s office.
12.  Request check from client to treasurer for any delinquent taxes. 

Day Before Sale

13.  If applicable, pay any delinquent taxes and secure receipt from treasurer; obtain stamped Tax Clearance Form from treasurer (regardless of whether there were any delinquent taxes).
14.  Submit to sheriff:
    (a) Bid form with sheriff’s fees/costs check;
    (b) Deed with recorder’s fee check;
    (c) Clerk return;
    (d) Sales disclosure form with auditor’s fee check; and
    (e) Tax Clearance Form.

Sale Day

15.  Attend auction at City/County Building. 

After Sale

16.  If client purchases, obtain all file-marked conveyance documents and clerk’s return.
17.  If third party purchases, obtain check for sale proceeds from sheriff.

(This revises/updates my 3-7-10 post.)

Note:  Initiating Marion County (Indianapolis) Sheriff's Sales

Statutory Disposition of Foreclosure Sale Proceeds

When foreclosing on a borrower’s loan collateral, it’s no secret that banks and commercial lending institutions ultimately are seeking money.  Normally, they hope to dispose of the collateral and, ideally, become whole from the proceeds of the sale.  A senior lien holder will obtain most, but not all, of any such proceeds.  In Indiana, statutes govern specifically who gets the cash.

Mortgages.  Ind. Code § 32-30-10 outlines the procedures for mortgage foreclosure actions.  The distribution of proceeds from a judicial sale are statutorily mandated.  First Federal Savings Bank v. Hartley, 799 N.E.2d 36, 40 (Ind. Ct. App. 2003).  According to I.C. § 32-30-10-14, which should be used as a template when preparing the section of any proposed foreclosure decree/order dealing with the disposition of sheriff’s sale proceeds, the money must be applied as follows:

1.  Sale expenses.  The first payout is to the civil sheriff for its fees and notice/advertising costs.  A sheriff’s sale in Indiana costs a few hundred dollars.  Under certain circumstances, Indiana law allows a mortgage foreclosure sale to be conducted by a private auctioneer, and the fees of the auctioneer would be a part of this payout.

2.  Senior mortgage debt.  The payment of the outstanding principal, interest and costs to the senior lien holder comes second.  This almost always will be the full, accelerated debt as articulated in the judgment.  (2010 statutory revisions did away with post-sale payment of taxes.  If the senior mortgagee prepaid any delinquent real estate taxes, its counsel should attempt to build those losses into the judgment.) 

3.  Junior liens.  Any payments of amounts owed to any junior lien holders are next, in accordance with their legal priority and as articulated in the court's decree.

4.  Surplus to mortgagor.  Lastly, if any sale proceeds remain, that "surplus must be paid to the clerk of the court to be transferred, as the court directs, to the mortgage debtor, mortgage debtor's heirs, or other persons assigned by the mortgage debtor." 

Security Interests.  The disposition of collateral under Indiana’s UCC, Article 9.1 (Secured Transactions), is slightly different and will depend upon the nature of the collateral.  Article 9.1 should be reviewed in detail for each specific case and the particular collateral in question, because there are many different rules that could apply.  With certain collateral (accounts receivable, for instance), disposition by sale normally will not occur.  On the other hand, sales of tangible personal property collateral, like inventory or equipment, are common.  I.C. § 26-1-9.1-610 speaks to disposing of collateral after default.  Unlike with mortgages, in Indiana a judicial sale of personal property collateral is not required.  Lenders may choose to conduct the sale privately, although it may make sense to group the personal property with any real estate that is being sold at a sheriff’s sale.  I.C. § 26-1-9.1-615 governs how to apply the proceeds: 

1.  Sale Expenses.  First, proceeds are applied to the reasonable expenses of retaking, holding, preparing for disposition and reasonable attorney’s fees and expenses incurred by the secured party.  This would include payment of the sheriff’s fees if the civil sheriff is conducting the sale, or to private auctioneers upon a private sale.

2.  The Debt.  Second, payment goes to the satisfaction of the obligation secured by the security interest.

3.  Junior Liens.  The third payment, if any, would be for the satisfaction of the obligation secured by any subordinate security interest.

4.  Debtor.  Finally, any remaining proceeds go to the debtor.

So, if and to the extent there are cash proceeds from an Indiana foreclosure sale of loan collateral, the debt of the plaintiff lender will not be satisfied until after the sale-related expenses are reimbursed.  Also, lenders should not receive a windfall from a sale because the borrower generally receives any surplus, but that normally is a very remote possibility.    

(This revises/updates my 1-9-07 post.)

(Tax) Lessons Learned From A Marion County (Indianapolis) Sheriff's Sale

In February of 2010, I wrote about Indiana Sheriff's Sales - Local Rules, Customs and Practices Control.  For secured lenders and their counsel preparing for a mortgage foreclosure sale in Marion County (Indianapolis), Indiana, I thought I'd expand upon that post and convey a handful of things about which I was reminded during recent experiences.  I'm directing this post mainly to plaintiffs/first mortgagees, who hold a judgment/foreclosure decree and who are "first in line" to make a judgment bid (credit bid) at the sale.  Because this post discusses cash that bidders must bring to the sale, however, the information will also be relevant to junior lien holders seeking to bid.   

Pre-sale sheriff's notice.  About fifteen days before a sheriff's sale, the Civil Sheriff's Office will send to the lawyer for the plaintiff/first mortgagee a sheet outlining certain information about the sale.  Click here for an example notice.  The notice includes such data as the sale number, the court cause number, the names of the plaintiff and the plaintiff's attorney, the parcel number and, perhaps most importantly, the current judgment amount, including interest, upon which the plaintiff is entitled to make a credit bid.  Finally, the notice lists the sale fees/costs and, as in my case, any delinquent property taxes.

Deposit.  Pursuant to Marion County's custom and practice, in order to perfect a bid, the plaintiff/bidder must deposit with the sheriff a check for the user fee, sheriff fee and advertising cost, which in my client's case was $608.40. The sale fees/costs must be paid to the "Marion County Sheriff."   (Remember that junior lien holders or third parties also must have on deposit with the sheriff’s personnel a certified check or cashiers check equal to or in excess of the amount of any bid submitted.)  

Taxes.  Beginning in 2011, Ind. Code 32-29-7-8.5 mandates that any delinquent real estate taxes, which by the way include delinquent sewer lien fees, be paid by the plaintiff/senior mortgagee before the sale.  In the past, checks for taxes were tendered with the sale bid, or in some counties taxes could be paid by the successful bidder after the sale.  Now (2011), Indiana statute requires the taxes to be current by the date of the sale, or the sale will be cancelled.  Proof of payment can come from a receipt from the County Treasurer's office.  However, in Marion County (Indianapolis), local procedure dictates that a Tax Clearance Form, stamped by the Treasurer's office, be provided to the sheriff with the presale bid package.      

Source of delinquent tax figure.  Without boring you with the details, I've learned the hard way that delinquent tax figures provided by the sheriff's office on its presale notice often are slightly inaccurate.  I would recommend that lenders or their lawyers go directly to the county treasurer's office in order to confirm (in writing, if possible) the amount of any delinquent taxes or fees. 

(This updates/revises my 12-15-08 post.)

Possessory Interest Key To Indiana Replevin (Repossession) Action

In my January 31, 2009 post “What is Replevin?”, I discussed the fundamentals of an Indiana claim for replevin, which is the judicial process to repossess personal property or, in the context of this blog, to foreclose upon non-real estate loan collateral.  I cited to the Whittington opinion by Judge McKinney from the Southern District of Indiana.  In 2010, the Seventh Circuit affirmed Judge McKinney’s opinion in Whittington v. Indianapolis Motor Speedway Foundation, 2010 U.S. App. LEXIS 7524 (7th Cir. 2010) (.pdf ).  Whittington did not involve a loan enforcement action but is interesting and informative for lenders nonetheless. 

Car trouble.  The plaintiff in Whittington sought a court order granting him possession of an antique race car that he transferred to the Indianapolis Motor Speedway’s Hall of Fame Museum in the 1980’s.  The plaintiff claimed that he loaned the car to the museum.  The museum contended that plaintiff donated the car.  The transfer was not documented, and the witness testimony was in dispute.  The Seventh Circuit lectured that it was:

handicapped . . . by the lack of documentation with respect to the nature of the transaction . . ..  [T]he lesson for [the plaintiff] should be that an unwritten contract is not worth the paper it isn’t written on.

(Remember that written memorialization is a very important aspect to any transaction of any significance.)

The basics.  Indiana case law provides that, to succeed on a claim for replevin, a plaintiff must prove (1) his right to title or possession, (2) that the property is unlawfully detained and (3) that the defendant wrongfully holds possession of the property.  Indiana also has a statute governing replevin at Ind. Code § 32-35-2.  The initial burden of proof is on the person seeking repossession – for purposes of this blog, the lender/creditor.  As noted by the Court, “the plaintiff must prove his right to possession on the strength of his own title, not merely the weakness of the defendant’s title or right to possession.” 

Possessory right.  The Court stated that having a present possessory interest in the property/car was an essential element to the replevin claim.  In loan enforcement actions involving non-real estate collateral, the right to possession element should be a non-issue by virtue of the security agreement between the creditor and debtor, and/or the UCC’s enforcement sections (I.C. 26-1-9.1-601 through 628).  My working understanding is that the “right to possession” facts necessary for a replevin action are satisfied by the terms of the loan or, more specifically, the secured lender’s/creditor’s remedies upon a default.  (For some background, see my December 7, 2010 post.)  Absent such a possessory interest, a replevin action will fail, as it did in Whittington.

Collateral only.  After analyzing all the evidence, the Seventh Circuit in Whittington concluded that the plaintiff failed to establish by a preponderance of the evidence that he possessed an existing property right in the antique car.  Upon a default, to repossess and ultimately liquidate most non-real estate loan collateral in Indiana, asset-based lenders and their legal counsel need to be armed with the necessary contractual repossession right found in most if not all security agreements.  This involves, in short, some kind of documented collateral pledge and is the premise upon which any replevin action is based.  Without this, any non-real estate assets of the borrower/debtor will not be subject to immediate repossession until the judgment execution process occurs, which process (including proceedings supplemental) is a substantially different and less effective method of collection.