« May 2011 | Main | July 2011 »

Foreclosure News Sites

I was on vacation last week and have been catching up this week.  I hope that next week I'm able to post about the Indiana Supreme Court's recent opinion in Gibraltar Financial, which opinion reversed the Court of Appeals decision about which I discussed this past February

Meanwhile, I thought I'd provide links to two pretty good websites that regularly supply foreclosure news.  Most foreclosure news relates directly to residential issues, but both of these sites deal at times (and in places) with commercial matters:

Topix.com

Foreclosurewarehouse.com

The Topix site is what regularly feeds the news on the right side of my home page. 

IBJ.com's Cory Schouten writes real estate blog Property Lines, which is a cool little site that provides local news and insight into the Indianapolis real estate market, with an emphasis on commercial matters.  Shouten's blog also is permanently linked along the right side of my home page.

Thanks for reading, and please never hesitate to email me or post comments about Indiana commercial foreclosure issues.  I love this stuff. 

 


Technical Notice Irregularity Doesn’t Invalidate Sheriff’s Sale In Recent Case

There are all sorts of technical requirements associated with a sheriff’s sale in Indiana.  Ind. Code § 32-29-7-3(c)-(h) outlines some of them, including the notice rules.  The county civil sheriff’s offices typically handle many of the requirements after the lender praecipes for a sale.  Although lenders and counsel should undertake reasonable efforts to monitor and assist the sheriff, the fact is that you’re at the mercy of the sheriff to ensure that certain procedures are followed.  Seemingly 99.9% of the time the sheriffs do their jobs and do them well. 

The challenge.  From time to time, borrowers will challenge the legitimacy of a sheriff’s sale.  Gee v. Green Tree Servicing, LLC, 2010 Ind. App. LEXIS 1904 (Ind. Ct. App. 2010) (click and save for .pdf) is one of those cases.  The borrower/mortgagor specifically attacked the validity of the notice given.  The issue was: 

Whether the sheriff’s sale was procedurally deficient because the sheriff posted notice of the sale not at the permanent county courthouse but at the county’s temporary court offices.

The irregularity.  About the time that the sheriff’s sale was to occur in Gee, repairs were ongoing at the Grant County courthouse.  Three of Grant County’s four courts had relocated to temporary courtrooms in another county office building.  A bulletin board was located next to the door to the temporary courtroom.  The employee of the county sheriff’s department, who was responsible for conducting sheriff’s sales and arranging for statutory notice of such sales, testified that, after the court moved, she began posting statutory notice on the bulletin board at the temporary courtroom rather than the bulletin board at the courthouse.  Indeed for a period of time notices were not published on the permanent courthouse bulletin board. 

The rule.  The controlling statute is Ind. Code § 32-29-7-3(e), which states:

The sheriff also shall post written or printed notices of the sale at the door of the courthouse of each county in which the real estate is located. 

The operative statutory language in Gee was “at the door of the courthouse.” 

What’s a courthouse?  The opinion tackled the question of what the word “courthouse” means.  Is it a particular building or is it any building housing trial courts?  Indiana statutes do not define the term.  The Court turned to Black’s Law Dictionary, which defined a courthouse as the “building where the judge or judges convene to adjudicate disputes and administer justice.”  Based on that definition, the Court concluded that the “plain meaning of the statute applies to the temporary courtrooms . . ..”  The Court of Appeals therefore affirmed the trial court’s holding that, under the circumstances, the sheriff substantially complied with Ind. Code § 32-29-7-3(e) and that the borrower’s motion to set aside the sale should be denied.  The sale was not “procedurally irregular.”

Cover the bases.  As a side note, the Court posed the question of whether the sheriff should have posted notice of the sale at both the temporary courtroom and the permanent courthouse.  Because the borrower did not officially raise that issue in her appeal, the Court did not address it.  But, it seems to be advisable for sheriffs to post notices at all functioning courthouses in the county.  Indeed, Grant County began to post notices at both locations due to the challenge in Gee.

Gee is a reminder that there are a number of hoops through which a lender and a civil sheriff’s office must jump in order to perfect a sheriff’s sale.  Gee also illustrates that the General Assembly has built into Indiana’s judicial/statutory mortgage foreclosure system several procedural protections for borrowers/mortgagors that, by design, cause the real estate repossession process to take time.


Prejudgment Possession (Replevin) of Equipment Permitted Under Indiana Law

This post falls in line with those of January 31, 2009, December 7, 2010, and January 6, 2011 regarding Indiana’s remedy of replevin, including the right to prejudgment possession of personal property loan collateral.  The Indiana Court of Appeals’ decision in Deere v. New Holland, 2010 Ind. App. LEXIS 1899 (Ind. Ct. App. 2010) (click and save for .pdf) supports the proposition that prejudgment repossession is available in Indiana.  The Court also held that the creditor’s lien survived the debtor’s transfer of the property.

What happened.  The creditor in Deere held a perfected security interest in farm equipment.  The original debtor traded the equipment to another business, which relied upon statements of third parties that the creditor’s lien had been satisfied.  The successor business – the defendant in the suit – did not contact the creditor to verify whether the liens had been released.  There was a default under the applicable security agreement, and the amount due under the agreement was accelerated as a result.  As is often the case, the agreement provided the creditor with the right to recover the equipment upon the default.  The case surrounded the defendant’s (the subsequent owner of the equipment) objection to the creditor’s effort to repossess.

Repossession rules.  The Court in Deere reiterated that, upon a default, creditors have the right to take possession of the collateral securing their claim.  See Indiana Code § 26-1-9.1-601(a) and 609(a)(1).  Significant to Deere, “a security agreement is effective against purchasers of the collateral.”  I.C. § 26-1-9.1-201(a).  Depending upon the circumstances, repossession can occur through self-help or, as in Deere, a suit for replevin.  An Indiana replevin action is a “speedy statutory remedy designed to allow one to recover possession of property wrongfully held or detained as well as any damages incidental to detention.”  A plaintiff/creditor must prove:  (1) it has the right to possession, (2) that the property is unlawfully detained, and (3) that the defendant wrongfully holds possession.  The Court concluded, based upon undisputed facts, that the creditor was entitled to possession, use and disposition of the equipment pending final adjudication of the claims of the parties.

Notice of lien.  The real meaty issue in Deere related to the defendant’s belief, based upon representations made by third parties, that the creditor’s liens had been satisfied.  Indeed proof showed that such representations occurred.  Nevertheless, the evidence was undisputed that the defendant had actual notice that the prior lien existed at a point in time, and the defendant never contacted the creditor to confirm the alleged satisfaction of the lien. 

BFP defense?  The court translated the defendant’s argument as “raising an affirmative defense that it was a bona fide purchaser because it relied in good faith on the information it gleaned from [third parties].”  I have written about the bona fide purchaser defense on a handful of occasions, including on October 4, 2009 when I discussed how actual knowledge defeats Indiana’s bona fide purchaser doctrine.  This knowledge was fatal in the Deere case.  The defendant had actual notice of the perfected security interest in the equipment.  Any reliance on statements by third parties with respect to the satisfaction of liens “simply was not reasonable”: 

As a general rule, we find that it is unreasonable to rely on the statements of third parties – or the [original] debtor – about the current status of security interests.

The lesson for parties acquiring equipment that may be subject to a security interest is to conduct an independent investigation into the status of any liens.  Relying on written or oral representations by the seller will not protect parties from a creditor’s action to foreclose the lien.  From the creditors’ perspective, in cases of clear defaults, Indiana law generally allows repossession (and liquidation) of personal property loan collateral before the entry of judgment.