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Indiana Court Of Appeals Clarifies Bond Requirement In Corvette Receivership

Burelli v. Martin, 130 N.E.3d 661 (Ind. Ct. App. 2019) approved the appointment of a receiver to sell an expensive item of personal property, subject to the posting of a bond.  

At a judgment creditor’s request, the trial court appointed a receiver under I.C. 32-30-5-1(1) and (2) to sell a multi-million dollar Corvette to satisfy the debts of the owners of the Corvette.  Those sections are:

    (1): In an action by a vendor to vacate a fraudulent purchase of property or by a creditor to subject any property or fund to the creditor's claim.  [The judgment creditor alleged the Corvette was subject to his claim.]

    (2): In actions between partners or persons jointly interested in any property or fund.  [ The judgment creditor and the Corvette’s co-owners were all jointly interested in the Corvette, and the proceeds from its sale.]

The Court of Appeals affirmed the appointment a receiver. 

However, the Court reversed the trial court for failing to require the receiver to post a bond.  Although the parties apparently had stipulated to a $2.5 million insurance policy on the car, the insurance did not meet the bond obligation. 

The Court held that the insurance policy only protected the receivership property (the Corvette).  The statutory requirement for a bond (Section 3), on the other hand, insures the receiver’s conduct.  The Court expanded on the point of the receiver's personal liability:

When a receiver breaches his duty by acting outside his statutory authority or orders of the appointing court or is guilty of negligence and misconduct in administering the receivership, he is personally liable for any loss to any interested party.  A receiver must therefore post a bond to secure that obligation.

The Court remanded the case to the trial court to amend the receivership order to require the receiver to post “an appropriate bond to secure [the receiver’s] oath to faithfully discharge his duties.”  The Court expressed no opinion on what would be an appropriate amount, however.

See Also:  Standards And Duties Applicable To Indiana Receivers

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I represent parties involved with receiverships, including receivers themselves.  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.


Status Of Indiana Sheriff's Sales

For what it's worth, the Marion County (Indianapolis) Civil Sheriff's Office announced last week that its May 2020 sale has been cancelled.  (The sheriff previously cancelled the April sale.)  The email from Marion County indicated that the June 2020 sale is still a go - at least for now.  The Marion County situation seems to be consistent with both our Governor's order and the CARES Act, Sections 4022 and 4023, to the extent those apply to a particular case.  

Always remain mindful that, although the Indiana Code covers the fundamentals of the sheriff's sale process, the specific procedures vary by county.  Local rules, customs, and practices control.  There is a saying in Indiana that there are 92 counties and therefore 92 different sets of rules applicable to sheriff's sales.  My point is that, if you have questions, you should call the local civil sheriff's office to confirm the status of its foreclosure sale activities (publications, notices, sales, etc.)  during the COVID-19 pandemic.  


The Federal CARES Act - Multifamily Properties With Federally Backed Loans

Here is a verbatim quote of Section 4023:

FORBEARANCE OF RESIDENTIAL MORTGAGE LOAN PAYMENTS FOR MULTIFAMILY PROPERTIES WITH FEDERALLY BACKED LOANS

(a) IN GENERAL.—During the covered period, a multifamily borrower with a Federally backed multifamily mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID–19 emergency may request a forbearance under the terms set forth in this section.

(b) REQUEST FOR RELIEF.—A multifamily borrower with a Federally backed multifamily mortgage loan that  was current on its payments as of February 1, 2020, may submit an oral or written request for forbearance under subsection (a) to the borrower’s servicer affirming that the multifamily borrower is experiencing a financial hardship during the COVID–19 emergency.

(c) FORBEARANCE PERIOD.—

    (1) IN GENERAL.—Upon receipt of an oral or written request for forbearance from a multifamily borrower, a servicer shall—

        (A) document the financial hardship;

        (B) provide the forbearance for up to 30 days; and

        (C) extend the forbearance for up to 2 additional 30 day periods upon the request of the borrower provided that, the borrower’s request for an extension is made during the covered period, and, at least 15 days prior to the end of the forbearance period described under subparagraph (B).

    (2) RIGHT TO DISCONTINUE.—A multifamily borrower shall have the option to discontinue the forbearance at any time.

(d) RENTER PROTECTIONS DURING FORBEARANCE PERIOD.—A multifamily borrower that receives a forbearance under this section may not, for the duration of the forbearance—

    (1) evict or initiate the eviction of a tenant from a dwelling unit located in or on the applicable property solely for nonpayment of rent or other fees or charges; or

    (2) charge any late fees, penalties, or other charges to a tenant described in paragraph (1) for late payment of rent.

(e) NOTICE.—A multifamily borrower that receives a forbearance under this section—

    (1) may not require a tenant to vacate a dwelling unit located in or on the applicable property before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate; and

    (2) may not issue a notice to vacate under paragraph (1) until after the expiration of the forbearance.

(f) DEFINITIONS.—In this section:

    (1) APPLICABLE PROPERTY.—The term “applicable property”, with respect to a Federally backed multifamily mortgage loan, means the residential multifamily property against which the mortgage loan is secured by a lien.

    (2) FEDERALLY BACKED MULTIFAMILY MORTGAGE LOAN.—The term “Federally backed multifamily mortgage loan” includes any loan (other than temporary financing such as a construction loan) that—

        (A) is secured by a first or subordinate lien on residential multifamily real property designed principally for the occupancy of 5 or more families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and

        (B) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development or a housing or related program administered by any other such officer or agency, or is purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

    (3) MULTIFAMILY BORROWER.—the term “multifamily borrower” means a borrower of a residential mortgage loan that is secured by a lien against a property comprising 5 or more dwelling units.

    (4) COVID–19 EMERGENCY.—The term “COVID–19 emergency” means the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.).

    (5) COVERED PERIOD.—The term “covered period” means the period beginning on the date of enactment of this Act and ending on the sooner of—

        (A) the termination date of the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.); or

        (B) December 31, 2020.

A Few Thoughts:

  1. Section 4023 applies to a limited set of commercial mortgage loans that are "federally backed" and that essentially are related to apartments.  
  2. Borrowers might be entitled to an automatic 30-day "forbearance" and two more automatic 30-day "forbearance" periods upon a written request, which documents a financial hardship.
  3. The borrower must have been current as of 2/1/20.
  4. The law does not apply to construction loans.
  5. "Forbearance" is not defined.

The Federal CARES Act - Consumer/Residential Mortgage Loans

Here is a verbatim quote of Section 4022:

FORECLOSURE MORATORIUM AND CONSUMER RIGHT TO REQUEST FORBEARANCE

(a) DEFINITIONS.—In this section:

    (1) COVID–19 EMERGENCY.—The term “COVID–19 emergency” means the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.).

    (2) FEDERALLY BACKED MORTGAGE LOAN.—The term “Federally backed mortgage loan” includes any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is—(A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.);

        (B) insured under section 255 of the National Housing Act (12 U.S.C. 1715z–20);

        (C) guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z–13a, 1715z–13b);

        (D) guaranteed or insured by the Department of Veterans Affairs;

        (E) guaranteed or insured by the Department of Agriculture;

        (F) made by the Department of Agriculture;    or

        (G) purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

(b) FORBEARANCE.—

    (1) IN GENERAL.—During the covered period, a borrower with a Federally backed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID–19 emergency may request forbearance on the Federally backed mortgage loan, regardless of delinquency status, by—

        (A) submitting a request to the borrower’s servicer; and

        (B) affirming that the borrower is experiencing a financial hardship during the COVID–19 emergency.

    (2) DURATION OF FORBEARANCE.—Upon a request by a borrower for forbearance under paragraph (1), such forbearance shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower, provided that, at the borrower’s request, either the initial or extended period of forbearance may be shortened.

    (3) ACCRUAL OF INTEREST OR FEES.—During a period of forbearance described in this subsection, no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract, shall accrue on the borrower’s account.

(c) REQUIREMENTS FOR SERVICERS.—

    (1) IN GENERAL.—Upon receiving a request for forbearance from a borrower under subsection (b), the servicer shall with no additional documentation required other than the borrower’s attestation to a financial hardship caused by the COVID–19 emergency and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection with the forbearance, provide the forbearance for up to 180 days, which may be extended for an additional period of up to 180 days at the request of the borrower, provided that, the borrower’s request for an extension is made during the covered period, and, at the borrower’s request, either the initial or extended period of forbearance may be shortened.

    (2) FORECLOSURE MORATORIUM.—Except with respect to a vacant or abandoned property, a servicer of a Federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.

Limited Applicability:

Neither the forbearance mandate nor the foreclosure moratorium of Section 4022 apply to commercial mortgage loans, nor do they apply to residential/consumer mortgage loans that are not "federally backed" per Section (a)(2).  See also the moratorium exception at Section (c)(2) for vacant or abandoned property.