« March 2011 | Main | May 2011 »

Catching Up With Indiana Legislation

The Indiana General Assembly is in session, and there are a handful of bills related to foreclosures and real estate.  The links below provide some of the details:

Tom Harton, of IBJ.com, has an informative piece today entitled Real estate-related bills still alive in Legislature.

As always, the Indiana Bankers Association provides great links/summaries of various banking-related bills through capwiz.com.  There appear to be six bills that could have varying degrees of impact on the Indiana foreclosure and loan enforcement process.  The links below not only summarize the bills but also take you to the actual, proposed legislative changes:

My TTD (things to do) list includes a follow-up post about which bills passed this year.  More to come....   


5-19-11:  The bill links no longer work.  See my May 19th post for updated links and what was enacted.

Identify All Defaults For Your Foreclosure Counsel

As a mortgage lender, once you decide to foreclose on your borrower’s commercial real estate loan collateral, you need to provide certain information and documentation to counsel so he or she can file suit (or perhaps negotiate a workout).  On January 16, 2007, I discussed what the lender’s “care package” for its counsel should contain, and why.

ID the breaches.  One of the items I mentioned was the identification of all defaults.  While the most common defaults are for non-payment, there may be other breaches of the loan documents.  All such defaults should be identified in the Complaint.  You can assist your lawyer, who is new to the loan, with his or her default analysis if you’re able to convey a listing of any and all contract breaches, with operative dates and perhaps even citations to loan documents.  Or, a mere recitation of the key facts/loan history will help your lawyer determine your potential rights and remedies as provided under the documents.

Notice/cure.  The nature of the breach may also bear upon whether, or to what extent, the borrower has rights to notice and an opportunity to cure.   

Breach statute.  For a handy legal citation when dealing with defaults, remember Indiana Code 32-30-10-3(a) , which states:

Subject to IC 32-30-10.5 with respect to mortgage transactions described in IC 32-30-10.5-5, if a mortgagor defaults in the performance of any condition contained in a mortgage, the mortgagee or the mortgagee's assigns may proceed in the circuit court of the county where the real estate is located to foreclose the equity of redemption contained in the mortgage.

(I.C. 32-30-10.5 deals only with residential mortgages.)

Not every commercial foreclosure case involves a matured loan or a payment default.  The more quickly your foreclosure counsel can obtain the information relative to the underlying defaults, the more efficient your counsel will be in getting the result you’re seeking.   

In Indiana, Insufficiency Of Service Of Process Is Waived Upon The Filing Of An Appearance And A Responsive Pleading

This follows up my December 17, 2010 post entitled “Service of Process” Fundamentals For The Plaintiff Lender.  In that post, I discussed how and why the delivery of a summons and complaint triggers the foreclosure process.  I also mentioned that ineffective service of process prohibits a trial court from having personal jurisdiction over a defendant.  At times, challenges with service of process result in questions about whether a plaintiff lender can or should proceed to judgment.  Today, I tackle the question of what to do about service of process once the defendant files an appearance and responds to the complaint without asserting a claim that service was insufficient.  The answer is – the adequacy of service of process should no longer be a concern.

Trial Rule 12(H)(1).  Indiana Rule of Trial Procedure 12(B)(4) recognizes the defense of “insufficiency of process.”  But, pursuant to Section (H)(1), the defense can be waived:

A defense of lack of jurisdiction over the person, . . . insufficiency of process, insufficiency of service of process, . . . is waived to the extent constitutionally permissible:
(b)  if it is neither made by motion under [Rule 12] nor included in a responsive pleading [such as an answer] . . ..

Waiver.  Trial Rule 12(H)(1) has been interpreted by the Indiana Court of Appeals in at least the following two cases:  Hill v. Ebbets Partners, 812 N.E.2d 1060 (Ind. Ct. App. 2004) and Phillips v. Great Lakes Health Congress, 354 N.E.2d 307 (Ind. Ct. App. 1976).  In Hill, the defendant on appeal contended that the trial court did not have personal jurisdiction over her because the summons was not served properly and, as such, the summary judgment entered against her was void.  The Court disagreed and cited to T.R. 12(H)(1), which “effectively requires that a party desiring to assert the defense of lack of personal jurisdiction must do so in either the answer or in a separate motion filed before the answer.”  Although service of process may not have been properly effectuated, the defendant appeared at the trial court and filed a response to the plaintiff’s claim.  Because she did not bring any jurisdictional challenge before the appeal, defendant “waived the right to raise this issue.”  Similarly, in Phillips, the Court said “where the party in question has formally appeared and elected to answer the complaint, there is no constitutional bar to the court’s jurisdiction over the person.” 

Move on.  Workout professionals and counsel prosecuting foreclosure actions may sometimes be anxious about the sufficiency of service.  In the past, I’ve had lingering questions concerning, for instance, whether we had a valid address for a targeted defendant.  But, under Indiana law, once that defendant files an appearance in the action and fails to attack the issue of service of process, either in a responsive pleading or in a separate T.R. 12(B) motion to dismiss, we can be assured that the validity of service of process is no longer an issue.  In that case, whether the defendant was actually served is irrelevant.