« February 2020 | Main | April 2020 »

Governor Holcomb's Executive Order 20-06: How Does It Affect Indiana Foreclosures?

On March 19, 2020, Indiana's Governor handed down his Order for Temporary Prohibition on Evictions and Foreclosures.  With regard to mortgage foreclosures, here's what it says in pertinent part (italics added):

WHEREAS, the adverse economic impacts of COVID-19 … on Hoosiers … include … hindering their ability to pay … mortgages, which could potentially result in creditors … initiating foreclosure … proceedings to remove them from their homes;

WHEREAS, to avoid the serious health, welfare, and safety consequences that may result if Hoosiers are … removed from their homes during this emergency, it is reasonable and necessary to suspend laws relating to real property (including breach of … mortgages, etc.), to control the occupancy of premises in … Indiana, and to impose a moratorium on … foreclosures;

WHEREAS, … HUD, in an effort to provide immediate relief to … homeowners … will temporarily suspend all foreclosures …;

NOW, THEREFORE … [the Governor orders] that:

  1. No … foreclosure actions or proceedings involving residential real estate real estate … may be initiated … until the state of emergency has been terminated….
  2. No provision contained in this … Order shall be construed as relieving any individual of their obligations … to make mortgage payments, or to comply with any other obligation(s) that an individual may have under a … mortgage.


  1. Order 20-06 applies only to consumer/residential mortgage foreclosures - not commercial foreclosures.
  2. Lenders cannot file a mortgage foreclosure complaint (start a lawsuit) against a homeowner until the Governor terminates this order.
  3. Despite the Order, Borrowers must continue to make mortgage loan payments. 

Gray Area

    A question I have relates to the Order's use of the term "proceedings."  For example, paraphrasing Paragraph 1:  "no foreclosure proceedings may be initiated."  This part of the Order is subject to interpretation, and the courts ultimately will decide what it means.  It seems to me that the Order effectively suspends all residential foreclosure (sheriff's) sales.  On the other hand, in a pending residential foreclosure case, the Order arguably does not prohibit a party from filing a motion.  But, the Order may prevent the court from holding a hearing on the motion or from ruling on the motion.  To that end, in connection with a pending case it would be wise to investigate whether any county-specific orders exist or to simply call the court's office to determine how the judge has decided to apply the Order.          


Force Majeure And The COVID-19 Pandemic: Impact On Indiana Notes and Mortgages

  1. What does force majeure mean?

A “force majeure” is “[a]n event or effect that can be neither anticipated nor controlled” and “prevents someone from doing or completing something that he or she had agreed or officially planned to do.” Black’s Law Dictionary (11th ed. 2019). 

  1. What is the typical applicability of force majeure?

The purpose of a force majeure provision is to allocate the risk of loss if performance is impossible or impractical due to a force majeure event.  Black’s Law Dictionary (11th ed. 2019).  A force majeure clause in a contract will usually define various events that excuse or delay certain obligations of a party should these events occur.  In short, force majeure is a defense to a contract breach – it’s an excuse for a failure to perform.

  1. What is an example of a force majeure contract provision?

Here is a example:  “Force Majeure shall mean strikes, lockouts, flood, fire, acts of war, weather, acts of God and other events beyond the control of the Borrower.”  I am not aware of the use of force majeure clauses in promissory notes.  The same goes for mortgages.  Force majeure provisions are more often the subject of commercial leases, sales agreements, and construction contracts in which there are performance qualifiers.  For example, force majeure clauses related to construction obligations in construction loan agreements are common. 

Under Indiana law, the “scope and effect” of a force majeure clause centers on the specific language of the provision.  Specialty Foods of Indiana, Inc. v. City of S. Bend, 997 N.E.2d 23, 27 (Ind. Ct. App. 2013).  Courts are not permitted to “rewrite the contract or interpret it in a manner which the parties never intended.”  Id.  Importantly, “[a] force majeure clause is not intended to buffer a party against the normal risks of a contract. Murdock & Sons Const., Inc. v. Goheen Gen. Const., Inc., 461 F.3d 837, 843 (7th Cir. 2006).  Thus, a party’s nonperformance due to economic hardship is insufficient to trigger a force majeure provision.  § 77:31.  Force Majeure clauses, 30 Williston on Contracts § 77:31 (4th ed.). 

  1. Does the COVID-19 pandemic constitute an “act of God?”

As of 1894, the answer in Indiana would be no.  See Gear v. Gray, 10 Ind. App. 428, 37 N.E. 1059 (1894).  An “act of God” is defined as “[a]n overwhelming, unpredictable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado.”  Black’s Law Dictionary (11th ed. 2019).  Although the virus itself is arguably a natural event, the government-imposed restrictions that would actually inhibit a party from completing its contractual obligations arguably do not satisfy the definition of an act of God.  Gear, 37 N.E. at 1061 (holding that the closing of a school due to a diphtheria outbreak was not an act of God).  Certainly this area of the law could evolve in the wake of the current pandemic.  

  1. Does the COVID-19 pandemic constitute an “event beyond the control of the borrower?”

We are aware of no Indiana case law on this, but we believe that the answer would be yes, depending upon the particular performance qualifier in the contract.

  1. Would a governmental shutdown order constitute an event beyond the control of the borrower?

We are aware of no Indiana case law on this but believe that the answer would be yes, again depending upon the particular performance qualifier in the contract.

  1. Is force majeure limited to situations in which a contract contains a provision?  In other words, is it only an express contract right?

Indiana law is clear that the answer is yes.  Force majeure should only arise if the parties’ contract has expressly provided for it.

  1. Can the force majeure defense be “read into” a contract or will the excuse apply as a matter of law?

As Indiana law currently stands, force majeure should not apply in the absence of a contract provision.  This rule would appear to be the prevailing view across the country, although certainly each state has its own set of rules, and we have not performed exhaustive research at this point.  According to our limited research, if a contract does not contain a force majeure clause, then a party cannot use force majeure to excuse a breach of its contractual obligations.  Metals Res. Grp. Ltd., 293 A.D.2d at 418.  (“The parties’ integrated agreement contained no force majeure provision, much less one specifying the occurrence that defendant would now have treated as a force majeure, and, accordingly, there is no basis for a force majeure defense.”).

  1. Can a force majeure defense be read into a promissory note?  

No.  See 7 and 8 above.

  1. Can a force majeure defense be read into a mortgage?

It shouldn’t.  See 7 and 8 above.  However, mortgages generally are governed by principles of equity, and it is not inconceivable that a judge might consider applying force majeure to certain performance-related covenants in a mortgage in the wake of the COVID-19 pandemic.  For example, if the mortgage requires real estate taxes to be current, but the county treasurer’s office is unable to accept payments, then the policy behind force majeure might excuse such a breach.  A pure loan payment default is another matter, however.


I'd like to thank my colleague David Patton for the legal research that formed the basis of this post. 

Please remember that we represent parties in disputes arising out of loans.  Please call me at 317-639-6151 or email me at [email protected] to discuss an engagement.  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.

Boone County Courts COVID-19 Order

If and to the extent you have any cases pending in Boone County, Indiana (my home county), please see the following order entered by the Indiana Supreme Court:  Boone County Order.

As to Marion County (where I work), my understanding is the Court's Executive Committee will be providing an update later this afternoon.  As of 3/13/20, click here for Marion County's press release.  

Indiana State Bar Association: COVID-19 Updates for the Legal Community

To: Indiana State Bar Association Members

From:  Indiana State Bar Assocaition

Date:  3/16/20


In response to the COVID-19 outbreak, the Supreme Court has ordered trial courts to implement relevant portions of Continuity of Operations Planning (such as postponing jury trials, allowing for remote hearings, and keeping only essential staff in courthouses).

Trial courts are being directed to petition the Supreme Court through Administrative Rule 17 to carry out operational changes. AR 17 provides the framework for trial courts to put operational changes in place in the face of an emergency. Indiana Chief Justice Loretta Rush has already signed orders allowing for adjustments to jury trials, hearings, and other business practices as requested by counties. The Supreme Court is prioritizing review of any AR 17 petitions filed.

At the Supreme Court, attendance at oral arguments will be limited to the attorneys and parties in the case; the public is encouraged to watch the live webcasts.

The Office of Judicial Administration has already put in place social distancing and telework options for its employees.

In a press release just issued, Chief Justice Rush reported that she is monitoring the situation with guidance from the Indiana State Department of Health. She explained, “The Indiana Supreme Court will continue to hold oral arguments (subject to change), review cases, and accept filings—while taking proper measures to reduce exposure of COVID-19. We also know our trial court judges across the state are focused on ensuring essential court functions continue while being mindful of the safety of their communities. The Judicial Branch has avenues in place to ensure court operations at all levels continue.”

Indiana Department of Health COVID-19 page
Indiana Supreme Court COVID-19 update page
Indiana State Bar Association COVID-19 page for the legal community
Webinar: COVID-19 Guidance for Individuals & Employers, presented by the Indianapolis Bar Association
Indiana Lawyer Coronavirus Update

Indiana State Bar Association Meetings & Events
ISBA staff began working remotely today, March 16, effectively closing the office space to meetings and visitors. In addition, all in-person events scheduled for March have been cancelled. We will keep you updated on events scheduled for April and May.

In the meantime, business will carry on, but virtually. Feel free to e-mail or call just as you have always done (click here for a staff directory). Although we won’t be able to answer calls directly, we will return them within 24 hours. We remain committed to serving your needs each day.

Indiana Supreme Court Negates Reasonableness Test For Statute Of Limitations

Three cases.  On February 17, 2020, Indiana’s highest court issued opinions in two cases dealing with the statute of limitations applicable to “closed account” notes or, in other words, installment contracts with a maturity date.  Here are links to the two opinions:

A third case, Stroud v. Stone, 122 N.E.3d 825 (Ind. Ct. App. 2019), which followed Alialy, was not on appeal but effectively was overturned. 

Background.  For information on the cases and how the law developed before the Supreme Court’s decisions, click on these posts:

Nature of notes.  Both Blair and Alialy involved an installment contract (required a series of payments) that had a maturity date (stated when the full balance was due).   The notes in the two cases also had discretionary acceleration clauses, which gave “the lender the option to immediately demand payment on the full loan amount if the borrower fail[ed] to pay one or more installments.” 

Not all notes have maturity dates or optional acceleration clauses, so the Court’s rulings do not apply to all loans.  For example, see:  Indiana’s Statute Of Limitations For “Open Account” Claims: Supplier’s Case Too Late.  Always be sure to study the language in the note.  Having said that, I believe the vast majority of promissory notes secured by real estate mortgages are “closed” and have optional acceleration provisions. 

Accrual dates.  As previously reported here, the length of the statute (six years) was not the issue.  When the clock on the six years starts ticking – the “accrual date” – was.  The Court in Blair studied Indiana’s two applicable statutes, Ind. Code 34-11-2-9 and Ind. Code 26-1-3.1-118(a), and concluded that “three events [trigger] the accrual of a cause of action for payment upon a promissory notice containing an optional acceleration clause:” 

  1. A lender can sue for a missed payment within six years of a borrower’s default;
  2. Upon a missed payment, a lender can exercise its option to accelerate, “fast-forward to the note’s maturity date,” and sue for the full balance owed within six years of acceleration; or
  3. A lender can chose not to accelerate and sue for the entire amount owed within six years of maturity.

The “reasonableness test” is now gone. 

Bar dates.  Looking at the three scenarios above, here is my view of when an action would be barred:

  1. No bar. The lender could, but does not have to, sue within six years of a missed payment.  See 2 and 3.
  2. Barred if no suit filed within six years of acceleration.  
  3. Barred if no suit filed within six years of maturity.

Outcome.  Interestingly, to illustrate how the Court apparently buried for good the “reasonableness test,” theoretically a lender would have 36 years to file suit under a standard 30-year mortgage loan, even if the borrower never made a single payment.  (Mortgages are governed by different statutes, however.)  It’s hard to argue with the Court’s logic, which is based upon pretty clear language in the two statutes.  Unless the General Assembly takes action, this matter is closed. 

I represent parties in disputes arising out of loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. 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.