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Indiana Receiver Sales – When And Why?

I have previously addressed the issue:  Can Indiana receivers sell the subject real estate?  That post begged the question:  When would a lender/mortgagee in a commercial foreclosure case want to pursue a receiver’s sale in the first place? 

Why?  There are a multitude of factors involved in a lender’s decision to pursue a receiver’s sale of the subject real estate.  The pros and cons are almost endless and certainly vary depending upon the lender/mortgagee, the borrower/mortgagor, the extent of any competing liens, the nature of the real estate and the purpose of the business, if any, being operated on the real estate.  With those reservations, based upon my experience and understanding, here is a list of considerations in no particular order:

  •         The mortgagee has no interest in taking title to the real estate.
  •         The mortgagee desires to quickly cut off its interest in, and thus the attendant expenses associated with, the real estate.  Costs may include real estate taxes, hazard insurance premiums and receivership expenses (for the maintenance/management of the property).
  •         The mortgagee has reason to believe that there are one or more interested buyers laying in wait.
  •         Junior lien holders have a greater chance of being paid because the receiver’s sale, due to enhanced and targeted marketing, as well as a more organized transaction, presumably would net more proceeds than a sheriff’s sale. 
  •         Similarly, a guarantor of the debt may be particularly interested in this approach as a receiver’s sale theoretically should result in a higher sale price and thus a lesser deficiency judgment for which the guarantor may be responsible.
  •         In complex cases involving multiple competing liens, the replacement of the real estate with a cash fund may trigger, simplify and expedite a global settlement of the litigation.  (Remember that a foreclosure case could last many months, meaning that a judgment and sheriff’s sale may be delayed to an indefinite period in the distant future.)

Why not?  Factors weighing against a receiver’s sale include, but are not limited to:

  •         The mortgagee desires to take ownership of the property.
  •         The real estate taxes, insurance and receivership costs are tolerable.
  •         There is no known, immediate market for the property.
  •         Attorney’s fees to obtain court authority for the receiver’s sale, and the legal counsel associated with closing the sale, are relatively high and otherwise unnecessary in a standard foreclosure case. 
  •         The foreclosure case is either uncontested, or there is a realistic possibility for some kind of settlement.
  •         Perhaps most importantly, one or more parties, particularly the owner/mortgagor, objects to the receiver’s sale.  (Objections to the sale, especially from the mortgagor, create an insurmountable obstacle in terms of obtaining court authority for the relief.)

Hybrid?  As an aside, my March 29, 2007 post In Indiana Sheriff’s Sale, Consider The Option Of Using A Private Auctioneer addressed a kind of hybrid between a receiver’s sale and a sheriff’s sale.  And, unlike receiver’s sales, there is no question as to the statutory authority for this relief, and mortgagor consent generally isn’t needed.  This option seemingly is used even more rarely than a receiver’s sale but should not be forgotten as an alternative in Indiana commercial foreclosure cases. 

Please e-mail me or post a comment if you are aware of additional factors that may go into the receiver’s sale analysis.  As always, I welcome your questions via e-mail.

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

This post should be read with post - New Marion County (Indianapolis) Sheriff's Sale Requirements.  The following check 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 my prior 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

  1. 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).
  2. Submit to sheriff:    
  • Bid form with sheriff’s fees/costs check;    
  • Deed with recorder’s fee check;    
  • Clerk return;    
  • Sales disclosure form with auditor’s fee check; and    
  • Tax Clearance Form.

Sale Day

        Attend auction at City/County Building.

After Sale

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

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

Replevin Damages: Deterioration and Loss of Use

Lesson.  In Indiana replevin cases, plaintiffs are not limited to the remedy of repossession but may also be entitled to money damages for deterioration of the property value and for loss of use.

Case cite.  Roy Bayer Trust v. Red Husky, 13 N.E.3d 415 (Ind. Ct. App. 2014).

Legal issue.  Whether the trial court abused its discretion in determining the amount of damages awarded to the plaintiff.  

Vital facts.   Roy Bayer Trust was a dispute between a lessor and a lessee of a Kenworth (semi-tractor).  The lessee defaulted under the terms of the lease.  Evidence showed that the fair market value of the Kenworth was $16,000 and that the Kenworth was sold for only $6,000 due to deterioration, which occurred while the lessee held it wrongfully post-default.  Evidence also showed that the Kenworth could have been leased to another party had the lessee not detained it, although the trial court did not consider these damages.   

Procedural history.  The Roy Bayer Trust opinion arose out of (1) the lessee’s appeal of the trial court’s summary judgment for the lessor and (2) the lessor’s cross-appeal contesting the amount of damages awarded to it by the trial court. 

Key rules. 

  • In actions to recover possession of personal property, judgment for the plaintiff may include damages for detention of such property.  Indiana Code § 32-35-2-33(2).
  • The usual measure of damages is the value of the loss of use, measured by the fair rental value.  Such damages must be reasonable in relation to the fair market value of the property, however.
  • In addition to loss of use, the court may award damages for deterioration in the value of the property while in the hands of the defendant.

Holding.  The Indiana Court of Appeals affirmed in part and remanded in part.  The Court affirmed the trial court’s summary judgment to the lessor for damages based upon the deterioration of property value.  The Court remanded the case for the trial court to determine whether the lessor was entitled to more damages for loss of use.   

Policy/rationale.  The Court believed that the damages rules above are prudent.  “The amount of damages in a replevin action must be limited to a reasonable amount-both as a general matter and in relation to the fair market value of the property.  And although the deterioration and loss of use are separate theories of recovery, we believe the total damages award is subject to a requirement of reasonableness.” 

Related posts.  What Is Replevin?