Indiana State Courts Moving Ahead With Electronic Filing

Indiana’s state court electronic system has gone from a crawl to baby steps.  The grand plan is for a state-wide e-filing system by the end of 2018:

IBJ.com:   Indiana courts push ahead with shift to e-filing system

The Indiana Lawyer.com:  6 counties next in line for trial court e-filing

The federal court system has had e-filing for years through Pacer (Public Access to Court Electronic Records), which “allows users to obtain case and docket information online from federal appellate, district, and bankruptcy courts….”  Indiana’s system presumably will have the same mission, except that Pacer charges a minimal fee for access to certain court documents.  Indiana’s service will be free. 

E-filing is great for lawyers, their staffs and, as a result, their clients, because pleadings and other court papers can be filed over the internet instead of delivering paper to the courthouse.  An added benefit is that these court filings can be accessed by anyone at any time.  Stephen Creason, chief counsel of the state Attorney General office’s appeals division, told The Indiana Lawyer: 

Essentially the clerk's office doors are going to be open electronically, on the Internet, 24-7, 365 days a year, at no cost….  So, the public can find out what the business of the courts is and what is going on in the court system.

As 2015 comes to a close, I’d like to wish you a Happy New Year.  Thanks for checking in this year.

Proving A Lender Is Entitled To Enforce An Electronic Promissory Note

Lesson.  Electronic promissory notes are valid and enforceable.  But, proof of standing to enforce such a note, including standing as an assignee, can be tricky. 

Case cite.  Good v. Wells Fargo, 18 N.E.3d 618 (Ind. Ct. Appl. 2014).

Legal issue.  Whether the plaintiff lender, an assignee, was entitled to enforce an electronic promissory note executed by the defendant borrower or, in other words, whether the lender/assignee had standing to obtain a judgment against the borrower.

Vital facts.  Borrower executed an electronic note in favor of Synergy, which note secured a mortgage.  The terms of the note provided that, upon transfer, it would be recorded with a registry maintained by MERS, a party that was the subject of several posts in 2012 related to mortgages (see below).  As with certain mortgages, the note in Good identified MERS as the lender’s (here, Synergy’s) nominee.  After the borrower defaulted, MERS assigned the note to Wells Fargo - the plaintiff in Good. 

Procedural history.  Wells Fargo filed a mortgage foreclosure action and moved for a summary judgment.  Its supporting affidavit, which is detailed in the opinion, attempted to establish that Wells Fargo owned the noted and was entitled to enforce it.  The trial court granted summary judgment, but the borrower, who contended that the Wells Fargo lacked standing, appealed the trial court’s ruling. 

Key rules.  The Indiana Court of Appeals in Good stated that the note was an electronic record authorized by the federal ESIGN Act, 15 U.S.C. 7001 et seq.  That Act should be read in conjunction with Indiana’s UCC, Article 3, including Ind. Code 26-1-3.1-301(1), as previously discussed here (see below).  Section 7021 of the ESIGN Act discusses transferable records, and subsection (b) specifically deals with “control” of the record.  See also, 15 U.S.C. 7021(c) regarding “authoritative” copies and transfers.  Like many federal statutes, the particulars are dense, so lenders and their counsel should review the provisions in detail before filing suit and moving for summary judgment.  Fortunately, the Court summarizes many of the key provisions in its opinion.  Generally, a person having “control” of a transferable record (a note) is the “holder” under the UCC.  Unlike with paper notes, “possession” is irrelevant to electronic notes. 

Holding.  The Court reversed the trial court’s summary judgment for Wells Fargo.  The Court concluded that Wells Fargo had not shown in its supporting affidavit that it controlled the note for purposes of Section 7021(b) and, as such, did not establish “its status as holder for purposes of the UCC.”

Policy/rationale.  Ultimately, the Good case was about a proof problem.  Wells Fargo failed to provide “reasonable proof” that it was in control of the note.  The Court did not reject the idea of electronic notes or the concept of lending on transferable records.  Indeed the opinion operates as a set of instructions for lenders and their counsel to construct summary judgment affidavits, including “proof [that] may include access to the authoritative copy of the transferable records and related business records sufficient to review the terms of the transferable record and to establish the identity of the person having control of the transferable record.”  Again, control, not possession, is the operative fact.   

Related posts.

• Indiana Supreme Court Concludes That MERS Is Merely The Agent Of The Actual Mortgagee
• Promissory Notes “Endorsed In Blank” Are Perfectly Fine
• Proving You’re The Holder Of The Note
• Conclusory Statements About Payment Default Doom Lender’s Motion For Summary Judgment

Indianapolis Star Series: Blight Inc. - Examining Indiana's Tax Sale System

The Indianapolis Star recently ran a series entitled "Blight Inc." that tackled the issue of "how our government helps investors profit from neighborhood decay."  The series has eight separate in-depth articles written by reporter Brian Eason.  All of the work can be accessed via IndyStar.com at this link: Bright Inc.  Mr. Eason and I’m sure others at the Star clearly worked hard in putting together a thorough investigation and analysis of Indiana’s real estate tax enforcement system.

Because I sometimes write about tax sales (see Category to right), I thought my readers and other surfers might want to know about the series.  Lots to read.  It’s impossible for me to comment in any detail on such a big project as Blight Inc. other than to point out that the series, in part, highlights a county’s struggle with, on the one hand, the need to collect delinquent real estate taxes and, on the other hand, the need to rehabilitate (or raze) abandoned properties.  Here is a quote from the last article in the series that summarizes the problem, according to the Star:

The Star’s investigation into abandoned housing revealed how Indiana’s tax sale system is undermining both public and private efforts to rehab distressed neighborhoods. The Star found that county treasurers across the state repeatedly sold run-down houses to investors who did not want them, and later let them go back to tax sale. Meanwhile, the system allowed a handful of large investors to amass hundreds of houses from county sales. But in the absence of any requirements that they rehab the homes, many have fallen further into disrepair, costing the city millions of dollars in code enforcement, maintenance and emergency runs.

As an aside, interestingly, the Star quoted state Sen. Jim Merritt, R-Indianapolis who suggested blight could curtailed by making Indiana a non-judicial foreclosure state:

Merritt pointed to another culprit [of blight] — the length of the state’s mortgage foreclosure process, which he thinks contributed to the huge number of vacant properties following the housing crisis. He wants to move Indiana away from its judicial foreclosure process toward a [faster] non-judicial system, as is used in both California and Texas.

Due in part to the Star’s work, Indiana lawmakers will be looking at reforming Indiana’s tax sale system.  The nature of the reforms is not altogether clear or settled.  If and to the extent changes to Indiana’s tax sale or foreclosure systems are made, particularly if they effect commercial real estate, I’ll write about them here.

What remains unclear to me is how a county can collect delinquent taxes without publicly auctioning off the subject real estate to the highest bidder, whoever that may be.  While I agree that abandoned housing and blight (even commercial property blight) are serious problems, I’m not fully convinced that the tax sale system is to blame.