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What Is A Replevin Action?

In Indiana, a cause of action for “replevin” will come into play if your lending institution collateralized its loan with tangible personal property and if your borrower defaulted on such loan.  For more on the fundamentals of a claim for replevin in Indiana, keep reading.

Vocabulary.  Black’s Law Dictionary defines replevin as follows:

An action whereby the . . . person entitled to repossession of [personal property] may recover [it] . . . from one who . . . wrongfully detains such [personal property].  Such action is designed to permit one having the right to possession to recover property in specie from one who has either wrongfully taken or detained property.

In this context, a lender is the person entitled to repossession of the property, and a defaulting borrower is the one who has wrongfully detained the property. 

Indiana statute.  Ind. Code § 32-35-2 governs replevin actions.  The detailed statute provides the procedural steps to repossess personal property.  Section 1 states that grounds for an action for replevin exist:

If any personal goods, including tangible personal property constituting or representing choses in action, are: 
(1) wrongfully taken or wrongfully detained from the owner or person claiming possession of the property; or
(2) taken on execution or attachment and claimed by any person other than the defendant;
the owner or claimant may bring an action for the possession of the property.

When lenders seek to enforce a security interest in, for example, a borrower’s equipment, counsel should include a count for replevin, which will result in a court order granting the right to repossess the equipment.  A count for replevin typically will be in addition to a count for damages based upon a promissory note/credit agreement.

Indiana case law.  Indiana judicial opinions provide further insight into replevin actions.  “To succeed on his claim for replevin, [plaintiff] must prove by a preponderance of the evidence that the [defendant] wrongfully held or detained property that belonged to him.”  Whittington v. Indianapolis Motor Speedway Foundation, Inc., 2008 U.S. Dist. LEXIS 62760 (S.D. Ind. 2008) (The Court determined, in a case involving an antique car, that the transaction was a gift, rather than a loan.  Because the plaintiff failed to prove that he had a possessory interest in the car, his claim for replevin failed.)  See also, Schaefer v. Tyson, 2009 U.S. Dist. LEXIS 4536 (S.D. Ind. 2009) (Replevin action dismissed by six-year statute of limitations.)  In McCready v. Harrison, 2009 U.S. Dist. LEXIS 1518 (S.D. Ind. 2009), Judge David Hamilton noted, generally, that:

  • “A replevin action is a speedy statutory remedy designed to allow one to recover possession of property wrongfully held or detained, as well as any damages incidental to the detention.”
  • Reasonable loss of use damages may be recovered in a replevin action; I.C. § 32-35-2-33 provides that judgments for plaintiffs in replevin actions may be for (1) delivery of the property, or the value of the property in case delivery is not possible and (2) damages for the detention of the property. 

To repossess and, ultimately, liquidate most non-real estate loan collateral in Indiana, asset-based lenders and their legal counsel need to be familiar with I.C. § 32-35-2 and the applicable case law.

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I represent parties involved in disputes about loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.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.


Impact of 1099-C Filing On Indiana Deficiency Judgments

Lesson. The filing of a 1099–C form (“1099-C”) does not, in and of itself, operate to extinguish a deficiency judgment under Indiana law. Ultimately, however, lenders should consult with their tax advisors to document, if necessary, that any issuance of a 1099-C following a sheriff’s sale was not the result on an intent to release a borrower (or guarantor) from the deficiency but rather a good faith effort to follow IRS rules and regulations.

Case cite. Leonard v. Old Nat. Bank Corp., 837 N.E.2d 543 (Ind. Ct. App. 2005)

Legal issue. Whether a lender’s issuance of a 1099-C as to its borrower cancelled the underlying debt so as to release the guarantor from liability.

Vital facts. A bank filed a 1099-C following its borrower’s bankruptcy case, which ended in a dismissal but not a discharge. (For more on 1099-C’s, click here.) It appears that the form pertained only to the borrower, not the personal guarantor of the loan, although the 1099-C dealt with the entire loan balance. Please note that Leonard did not involve a mortgage foreclosure. Also, the opinion did not mention whether the bank internally wrote off the debt. The bank in Leonard pursued the guarantor for the loan balance. In response, the guarantor asserted that the 1099-C cancelled the debt.

Procedural history. Following a bench trial that focused primarily on evidence of the bank’s intent, the court entered judgment for the bank and concluded that the bank did not extinguish the debt when it filed the 1099–C. The guarantor appealed.

Key rules. The Indiana Court of Appeals explained that the IRS requires a 1099–C to be filed after an “identifiable event,” which includes “a discharge of debt in bankruptcy, an agreement between the creditor and debtor, and a cancellation or extinguishment of the debt by operation of law that makes the debt unenforceable.”

Holding. The Court affirmed the trial court’s holding that the bank did not cancel the debt by virtue of the 1099–C.

Policy/rationale. The evidence showed that the bank’s filing was the result of the bank’s belief that the IRS required the form to be filed, but it was not an expression of the bank’s intent to discharge the debt.

Leonard appears to be the only Indiana appellate court opinion to address the 1099-C issue, which is to say that there is no Indiana case dealing directly with deficiency judgments following foreclosure sales. The holding is good for Indiana lenders because it definitively concludes that the mere filing of a 1099-C does not cancel a debt. Having said that, Leonard arguably leaves open the door for borrowers or guarantors, with appropriate evidence, to claim that their lender intended to cancel the deficiency by filing the form. In my view, a—or perhaps “the”—compelling factor will be whether the lender filed a satisfaction of judgment, which to my knowledge is the only way to formally terminate a deficiency judgment under Indiana law. Absent a satisfaction of judgment, the deficiency should not be extinguished by the mere issuance of a 1099-C.

Related posts.

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Part of my practice includes representing judgment creditors and lenders, as well as their mortgage loan servicers, in connection with contested mortgage foreclosure actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.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.