« November 2018 | Main | January 2019 »

Tune Up To Indiana Commercial Foreclosure Law

Over the last couple weeks, I've been working with the good folks at Typepad to "tune up" my blog.  You'll notice the new look and feel, which generally mirrors that of my Firm's website. I've fixed several links that were outdated, and I've added a new mortgage servicing category.

What I'm most excited about are the mobile and search features:

    1.  I'm now mobile friendly, which means that the site reads much better on a smartphone or tablet.  

    2. I also now have a custom Google search engine at the top of my right sidebar.  The results are limited to my blog (albeit with a few ads that unfortunately appear at the start).  After the ads, the search supplies links to prior posts.  When I started in 2006, my vision included a site where you could research Indiana foreclosure-related issues.  The prior search function was somewhat inadequate, but the new application works great and captures all applicable content about which I've written over the last 12+ years.  Please note that the search results are delivered in a pop-up window.   

Happy New Year to you and yours, and thanks for reading.

John

 


Borrower’s Failure To Prove Actual Damages Leads To Summary Judgment In RESPA Case

Lesson. A mortgage loan servicer in a RESPA case can successfully defend the matter if it can show that it did not injure the borrower/mortgagor, even if the defendant did not adequately respond to the qualified written request (QWR).

Case cite. Linderman v. U.S. Bank, 887 F.3d 319 (7th Cir. 2018)

Legal issue. Whether Borrower’s alleged non-receipt of a Servicer’s QWR response caused or aggravated her alleged injuries.

Vital facts. Plaintiff Borrower bought a house in 2004 and lived there with multiple family members. Borrower’s mother later asked her to move out, at which point Borrower stopped paying on her mortgage loan. In 2014, the last remaining family member moved out of the house, leaving it vacant and subject to vandalism. The vandalism produced insurance money that went to Defendant mortgage loan servicer (Servicer) to be held in escrow. Servicer disbursed a portion of the insurance proceeds to pay a contractor, which later abandoned the job due to fears over being paid in full for its work. In 2015, the house was vandalized twice more and was further damaged from a storm. Borrower sent Servicer a letter on September 5, 2015 asking about the status of her loan and how the 2014 insurance money was being handled. Servicer sent a response ten days later, but Borrower said she never received it. Borrower claimed that suffered from depression and anxiety arising out of the issues with her house, as well as problems from divorce, foreclosure proceedings and money concerns.

Procedural history. Based upon the assertion that she did not receive the letter response from Servicer, Borrower filed suit against Servicer in federal court under the Real Estate Settlement Procedures Act (RESPA). The U.S. District Court for the Southern District of Indiana granted summary judgment for Servicer, and Borrower appealed to the Seventh Circuit Court of Appeals.

Key rules. For purposes of their decisions, both the district court and the Seventh Circuit in Linderman assumed that Borrower’s September 5, 2015 letter to Servicer constituted a QWR under RESPA, 12 USC 2605(e)(1)(B). The Linderman opinion also assumed that Servicer breached RESPA based upon Borrower’s allegation that she did not receive the letter response, even though RESPA, including specifically 12 CFR 1024.11, provides that the mailing of a timely and properly-addressed response to a QWR likely satisfies the requirements under the statute – whether or not the response is received. Even with these favorable assumptions, Borrower still lost.

RESPA requires servicers upon receipt of a QWR to, among other things, (a) correct errors in records or (b) provide appropriate information if no error needs fixing. Section 2605(e)(2)(A-B). RESPA also requires servicers to refrain for sixty days from taking steps that would jeopardize a borrower’s credit rating. Section 2605(e)(3). But to ultimately prevail on a claim for money damages, a borrower still must prove “actual damages” under Section 2605(f)(1)(A) – something Borrower failed to do in Linderman.

Holding. The Seventh Circuit affirmed the summary judgment for Servicer.

Policy/rationale. Borrower contended that Servicer’s alleged lack of response to the QWR aggravated her house, family and financial-related problems, but the Court found that “she did not explain how.” The Court reasoned that “the ongoing foreclosure and need of money for repairs,” and not the alleged lack of response to the QWR, contributed to Borrower’s mental issues. Importantly, RESPA “does not require a servicer to pay money in response to a [QWR].” The Court went on to preach that Borrower may have had state law tort or contract remedies available to her that she did not pursue against various parties. “The sole claim in this [federal court suit] is that [Servicer] injured her by not adequately responding to her letter. That claim fails for the reasons we have given.”

Related posts.

__________

My practice includes defending lenders, as well as their mortgage loan servicers, in federal court cases brought by borrowers. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.


Indiana County Clerk Liable To Judgment Creditor For Bail Bond Proceeds Released To Judgment Debtor

Lesson. Following the entry of a money judgment, there may be innocent third parties who have money in their possession that they owe to the defendant (aka judgment debtor). If any such third party receives notice of the plaintiff’s (judgment creditor’s) post-judgment claim to such money, the third party should hold the money until the court determines the judgment creditor’s rights to the proceeds. If a third party (known as a garnishee-defendant) pays such money to the judgment debtor, the third party can be liable to the judgment creditor for the amount of money turned over. 

Case cite. Garner v. Kempf, 93 N.E3d 109 (Ind. 2018).

Legal issue. Whether Indiana law permits a judgment creditor to garnish a bail bond that the judgment debtor posted in an unrelated criminal case.

Vital facts. A judgment debtor tendered a cash bail bond in a criminal matter, which was unrelated to the civil matter where the judgment was entered. The judgment creditor tried to garnish the bond to satisfy the unpaid judgment. The clerk of the criminal court, who was named as a garnishee-defendant during proceedings supplemental in the civil case, released the funds to the judgment debtor’s criminal defense attorney. The judgment creditor pursued a claim against the clerk for the amount of the released proceeds.

Procedural history. The trial court ruled that the bond was not subject to garnishment. The judgment creditor appealed all the way to the Indiana Supreme Court, which issued the very comprehensive Garner opinion that is the subject of today’s post.

Key rules.

  1. Court clerks are subject to garnishment proceedings.
  2. The court that issues the underlying judgment retains jurisdiction over proceedings supplemental, even if there is a parallel action in another court.
  3. When a garnishee-defendant receives a summons, it becomes “accountable to the plaintiff in the action for the amount of money, property, or credits in the garnishee’s possession or due and owing from the garnishee to the defendant.”
  4. “In effect, upon serving the summons, the judgment-creditor secures a lien on the defendant-debtor’s property then held by the garnishee-defendant.”
  5. The garnishee-defendant is liable for paying out funds inconsistent with this lien.

Holding. The Indiana Supreme Court reversed the trial court and held that the clerk was an eligible garnishee-defendant and that the civil judgment was a lien on the criminal bond. The Court went on to find that the clerk was liable to the judgment creditor because the clerk distributed the proceeds before the civil court determined the parties’ rights to them.

Policy/rationale. In Garner, the clerk’s main contention was that she was protected by a separate criminal court order that released the bond to the defendant’s attorney. But the clerk had already received a summons from the civil court in connection with the judgment creditor’s proceedings supplemental. The clerk failed to inform the criminal court of the lien on the bond created by the summons. The Indiana Supreme Court reasoned that the clerk had a duty to hold the cash pending a determination of the judgment creditor’s right to the proceeds to satisfy the judgment. When the criminal judge approved of the defendant’s request to use the cash bond proceeds to pay his defense lawyer, “those proceeds were no longer encumbered to ensure [the defendant’s] appearance at his criminal trial,” at which point the proceeds became subject to the judgment creditor’s preexisting garnishment lien. Since the clerk released the money before the civil court determined the plaintiff/judgment-creditor’s right to the proceeds, the clerk became liable to the creditor for that amount. Please note that Justice David wrote a dissenting opinion that focused on the criminal law aspects of the matters at hand.

Related posts.

__________
I represent judgment creditors and lenders in commercial collection actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenlawyers.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.