What Is A “Body Attachment” And When Does It Expire?

Lesson. A body attachment is a judicial tool that essentially operates as an arrest warrant for compelling a judgment debtor, who is in contempt, to appear in court. These writs may not issue until a prior “show cause” order to appear has been personally served on the defendant, and ignored by that defendant. If validly issued, a writ of body attachment must sufficiently identify the defendant and state the writ’s expiration date, which is 180 days after its issuance.

Case cite. Murphy v. Cook, 225 N.E.3d 217 (Ind. Ct. App. 2023)

Legal issue. Whether a writ of body attachment was valid.

Vital facts. A small claims court entered a money judgment against Defendant. The court issued an order requiring Defendant to appear in court to answer as to her assets. Having failed to appear, the court next issued a “show cause” order that once again required Defendant to come to court and explain her prior failure to appear. What followed was the court’s issuance of a writ of body attachment. Over a year later, a sheriff’s deputy stopped Defendant because her license plate was not visible. Dispatch advised the deputy that there was an active warrant for a body attachment, so the deputy arrested Defendant, who spent the weekend in jail.

Procedural history. Defendant later moved to set aside the writ of body attachment. The trial court denied Defendant’s motion.

Key rules. In instances of collection proceedings, a writ of body attachment essentially is an arrest warrant for a judgment debtor to be hauled into court. For example, if a judgment debtor failed to be present for post-judgment collection proceedings, the court could issue a body attachment.

Indiana Trial Rule 64(A) controls. Subsections (2) and (4) were at issue in Murphy. Two key components of the rule are (a) the pre-writ “show cause” order must be served upon the defendant personally and (b) the writ automatically expires after 180 days, which expiration must appear on the face of the writ. In addition, the writ must sufficiently identity the defendant.

Holding. The Indiana Court of Appeals reversed the trial court’s order and remanded the case for purposes of setting aside the body attachment.

Policy/rationale. Writs of body attachment are a judgment creditor’s last resort to get a judgment debtor in court to answer as to his or her assets. They usually come into play after the judgment debtor has ignored at least two orders to appear. In Murphy, however, not only were the requirements of Rule 64(A) not satisfied, but the writ, even if valid, had expired at the time of the arrest. The Court’s opinion, prompted by an appeal handled by Indiana Legal Services, a charitable organization, serves as a cautionary tale:

[we] urge [trial] courts to be mindful of the provisions and requirements of Trial Rule 64(A) with respect to issuing a body attachment including the provision that such an attachment for a person expires 180 days after it is issued and the requirement that the expiration date shall appear on the face of the writ.

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Part of my practice involves representing parties in post-judgment collection proceedings. 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.

When Does The Defense Of “Laches” Apply?

Lesson. Laches, based on the maxim that equity does not aid those who slumber on their rights, does not apply to claims for the recovery of money (i.e. promissory note enforcement). The doctrine of laches may come into play in actions for equitable relief (i.e. mortgage foreclosure), however. Among other things, a defendant must show a delay that was unreasonable and that caused prejudice or injury.

Case cites. Forty Acre Coop. v. Delliquadri, 225 N.E.3d 175 (Ind. Ct. App. 2023) and Foster v. First Merchs. Bank N.A., 235 N.E.3d 1251 (Ind. 2024)

Legal issue. Whether the doctrine of laches operated to bar a plaintiff’s claim.

Vital facts. The recent Forty Acre and Foster cases have materially different sets of facts, but both disputes involved the enforcement of promissory notes and how the defense of laches might affect the outcome. Both cases dealt generally with delays by the plaintiffs in asserting their rights.

Procedural history. In Forty Acre, an Indiana Court of Appeals opinion, defendant sought to set aside a default judgment based on laches. Foster, a decision by the Indiana Supreme Court, examined a trial court’s order dismissing an action by junior lienholders against a bank. The junior lienholders claimed the bank failed to conduct a commercially reasonable sale of the underlying loan collateral. The Foster dismissal in favor of the bank was grounded on laches.

Key rules.

The Foster opinion noted that the doctrine of laches “bars a plaintiff from seeking equitable relief.”

The doctrine's "principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation." Because the [junior lienholders] are seeking legal relief in the form of money damages, they argue that laches does not apply. The bank does not squarely address this argument, responding instead that the [junior lienholders] "abandoned" their claim and thus laches applies as an "equitable defense." But "abandonment" is not an explicit element of laches.

The Forty Acre opinion summarized Indiana’s doctrine of laches:

The doctrine of laches may bar a plaintiff's claim if a defendant establishes the following three elements of laches: (1) inexcusable delay in asserting a known right; (2) an implied waiver arising from knowing acquiescence in existing conditions; and (3) a change in circumstances causing prejudice to the adverse party. A mere lapse of time is not sufficient to establish laches; it is also necessary to show an unreasonable delay that causes prejudice or injury. Prejudice may be created if a party, with knowledge of the relevant facts, permits the passing of time to work a change of circumstances by the other party.

Black’s Law Dictionary helps explain the important distinction between an “equitable” claim and a “legal” claim. “Equitable relief” means “that species of relief sought in a court with equity powers as, for example, in the case of one seeking an injunction or specific performance instead of money damages.”

Holding. The Court of Appeals affirmed the trial court’s denial of defendant’s motion to set aside a default judgment in Forty Acre. In Foster, our Supreme Court reversed the trial court’s dismissal of the junior lienholder’s case. Both opinions rejected the application of laches.

Policy/rationale.

The Indiana Supreme Court in Foster articulated its rationale as follows:

The [junior lienholders] seek damages for the bank's alleged failure to conduct a commercially reasonable sale—a claim for legal, not equitable, relief. The bank has not identified a single case from our appellate courts, and we are aware of none, in which laches barred an otherwise timely legal claim for money damages. Though we recognize that other jurisdictions have held that laches can apply to some legal claims ... the U.S. Supreme Court has consistently "cautioned against invoking laches to bar legal relief." The bank has provided no reason either below or on appeal for us to disregard that caution here.

The Court in Forty Acre explained its decision as follows:

There is no indication that [Plaintiff], with knowledge of the relevant facts, permitted the passing of time to work a change of circumstances by the other party…. Moreover, we see nothing in the record that could reasonably be characterized as an implied waiver of a known right by [Plaintiff]…. Punishing [Plaintiff] for granting [Defendants] an additional two months in which to respond to [the] complaint—when they were under no obligation to do so and when there is no evidence that [Defendants] were prejudiced thereby—would be anything but equitable.

Related posts.

• Apparent Windfall Not Enough to Set Aside Federal Foreclosure Sale or Negate Deficiency Judgment
• Are Borrowers Entitled To Jury Trials On Their Counterclaims?

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My practice involves representing parties in disputes arising out of loans that are in default. 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.

Marion County (Indianapolis) Sheriff's Office Updates

Teena Willard, who essentially headed up the Marion County Civil Sheriff's foreclosure division, retired in June.  We wish Teena well.

Lesley Lavender and Funke Idowu have taken over the reins.  All emails must be sent to them at:  [email protected].

The office is at the new Indianapolis Justice Center, 695 Justice Way, Indianapolis, IN 46203.  The phone number is:  317-327-2459.  

The foreclosure division rolled out an updated website in June.  Click here for the link.  The site is very helpful and should be studied by any party or lawyer involved in a sheriff's sale in our county.  The site provides virtually all the forms and information one needs, and my experience has been that the staff is always been helpful in answering questions attorneys and bidders might have. 

As a reminder, not all of Indiana’s 92 counties have a website as extensive as Marion County’s.  But, many of our sheriff’s offices do in fact have a sale web page. Make sure to investigate in advance of your sale. Just as importantly, every county has a sheriff’s sale contact person willing and able to assist in preparing for a foreclosure sale. Finally, don’t forget that local rules, customs and practices control the nitty gritty of the sale process.

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Part of my practice involves representing parties at sheriff’s sales. 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.

Plaintiffs Cannot Lock Down Defendants’ Assets By Simply Filing A Lawsuit

Lesson. As a general rule, a plaintiff cannot inquire about a defendant’s assets or seek a security bond until a judgment has been entered.

Case cite. Busbin v. Excavator's Transp. LLC, 2023 U.S. Dist. LEXIS 202598 (S.D. Ind. 2023)

Legal issue. Whether a plaintiff can attach a defendant’s property to secure a yet-to-be-entered judgment by filing a simple motion.

Vital facts. The underlying case arose out of Plaintiff’s employment-related claims against his employers.

Procedural history. Plaintiff moved to set a security bond and/or attach certain property of Defendants to secure a future judgment. More specifically, Plaintiff asked “the Court to order Defendant … to appear at a hearing and bring information regarding [Defendant’s] bank accounts, real and tangible property, and people or entities that owe Defendants money.”

Key rules. Plaintiff cited to Indiana Trial Rule 64 "Seizure of person or property" in support of the motion.

Defendant pointed to Indiana Code §§ 34-25-2-1 and 4 related to “prejudgment attachment.” Section 4 “requires that a plaintiff seeking remedies such as those sought by Plaintiff make an affidavit showing: (1) the nature of the claim; (2) that the claim is just; (3) the amount to be recovered; and (4) that one of the grounds for an attachment enumerated in Indiana Code § 34-25-2-1 is present.”

I wrote about Section 1 in my 11/20/23 post The Challenges Of Obtaining Prejudgment Attachment.

Holding. The Court denied Plaintiff’s motion.

Policy/rationale. Plaintiff failed to meet the high burden of establishing the right to pre-judgment attachment. The Court reasoned:

[The applicable law]—in addition to common sense—support the conclusion that Plaintiff cannot simply file a motion, cite to Indiana Trial Rule 64, and insist that Defendants be ordered into court with bank and other records, secure a bond, and/or have property attached based solely upon the fact that Plaintiff has filed suit against Defendants. Plaintiff needs to make a more significant showing to justify the relief sought, and Plaintiff has fallen far short of doing so.

Related posts. My blog’s category Attachment/Garnishment has several posts dealing with these issues.
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I represent parties involved in commercial collection actions. 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.

Reminder: As A Defendant Lien Holder, Answer The Complaint To Protect Your Interests

My June 18, 2008 post No Answer To Complaint = No Lien On Property remains true over 15 years later.

Irmscher Suppliers v. Capital Crossing, 887 N.E.2d 97 (Ind. Ct. App. 2008) illustrates how a defendant lien holder’s failure to answer another lien holder’s complaint can result in the termination of the defendant’s lien.

Complaint. Irmscher, a contractor, recorded a mechanic’s lien on the subject property. Capital Crossing, a mortgage lender, recorded a mortgage lien on the subject property a few months earlier. Capital Crossing named Irmscher as a defendant in its foreclosure action to answer as to its interest in the real estate.

Response, or lack thereof. Counsel for Irmscher appeared in Capital Crossing’s foreclosure case, but Irmscher never filed an answer to the complaint. Capital Crossing filed a motion for summary judgment seeking, among other things, a determination that its mortgage lien was a first lien on the subject real estate. Although Irmscher filed a brief in opposition to the motion and a designation of evidence, the Court’s opinion did not mention any evidence tendered by Irmscher. Irmscher’s position was that the case should be decided in a separate foreclosure action filed by Irmscher. Counsel for Irmscher did not appear at the hearing on Capital Crossing’s summary judgment motion. The trial court entered a judgment of foreclosure and decree of sale, finding that Irmscher had no interest in the subject property. Irmscher appealed.

Silence equals admission. On appeal, Irmscher contended that the trial court erred when it found Irmscher had no interest in the real estate. The Court of Appeals disagreed: “Irmscher did not file an answer to Capital Crossing’s amended complaint and therefore admitted, at the very least, to the superiority of Capital Crossing’s mortgage.” The Court cited an Indiana Supreme Court decision from 1886:

As applicable however, to a suit to foreclose a mortgage, and other kindred suits in the nature of a proceeding in rem, where a party is made a defendant to answer as to his supposed or possible, but unknown or undefined, interest in the property, we think that, as against him, a default ought to be construed as an admission that, at the time he failed to appear as required, he had no interest in the property in question, and hence as conclusive of any prior claim of interest or title adverse to the plaintiff.

Lesson. When a plaintiff lien holder files an action and asserts facts placing the validity, priority or amount of a lien in issue, a named defendant must file an answer to assert whatever interest it has in the property. If it fails to do so, the lien of the defendant will be extinguished as a matter of law. In Irmscher, the Court of Appeals held “in this case, although Irmscher’s counsel entered an appearance, Irmscher failed to file an answer asserting whatever interest it had in the property. As such, we conclude that the trial court did not err in finding that Irmscher had no interest in the property.”  Irmscher is still good law in Indiana. Thus, if you have a lien and are named as a defendant in a foreclosure lawsuit, you need to appear in the action if you wish to preserve your interest in the subject real estate. If you ignore the suit, the court can extinguish your lien through a default or summary judgment.

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Part of my practice involves representing parties in lien-related disputes. 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.

IBJ.com: Owner Of 27-story Downtown Indianapolis Apartment Tower Faces $101M Foreclosure Lawsuit

Today's Indianapolis Business Journal is reporting that the relatively new 360 Market Square building on the east side of downtown Indianapolis is the subject of a mortgage foreclosure action.  Click here for a link to the article.

This is the second major downtown Indy foreclosure this year.  Click here for my February post re the other case.    

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I represent parties involved in commercial mortgage foreclosures.  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.

Another Indiana Decision Concerning Attorney’s Fees In A Foreclosure Action

Lesson. A claim for attorney’s fees should not be disproportionate to the amount in controversy.

Case cite. Garber v. Blair, 224 N.E.3d 970 (Ind. Ct. App. 2023)

Legal issue. Whether the trial court’s award of attorney’s fees was erroneous.

Vital facts. The Garber opinion arose out of a loan enforcement action involving a promissory note and mortgage. The essential terms of the loan were that the borrower would pay the lender $180K in monthly installments of $2K with no interest. There were also late fee and attorney’s fees provisions. The borrower defaulted on the loan, and the lender’s counsel sent multiple demand letters that, in part, outlined the amounts owed. Much of the dispute both pre-suit and during the litigation surrounded an interpretation of the loan documents as it related to what the lender could and could not recover from the borrower. After about a year, the lender had incurred approximately $61,000 in attorney’s fees.

Procedural history. The trial court entered judgment against the borrower on the lender’s claim for $105,200, consisting of $97,000 in principal, $3,200 in late charges and $5,000 in attorney’s fees. In its order, the trial court stated, in part, that the heart of the dispute centered only on the late charges claim. The lender appealed the attorney’s fees calculation.

Key rules. Indiana courts have held that "a trial court may consider the amount involved in determining the reasonableness of the requested fees.” Indiana appellate courts review a trial court’s award of attorney’s fees “for an abuse of discretion.”

My 10/5/23 post entitled Lender’s Recovery Of Attorney’s Fees Related To Collateral Actions Denied further outlines Indiana law related to a recovery of fees.

Holding. The Indiana Court of Appeals affirmed the trial court.

Policy/rationale. The lender contended the trial court incorrectly found that the attorney’s fees incurred - $61,000 - were disproportionate to the actual amount in controversy - $105,200. The Court of Appeals disagreed and felt that the fees arose mainly out of the lender’s misinterpretation of his rights under the loan documents. Both the trial court and the Court of Appeals concluded that the true amount in controversy was only $3,200 – the late fee claim. Also, the Court of Appeals concurred with the trial court’s finding that the lender had waived certain claims for damages and/or failed to provide the borrower with notice and an opportunity to cure.

Related posts.

• Indiana Court Discusses Test For Recovery Of Attorney's Fees In Action Against Guarantor
• Attorney Fee Awards in Indiana

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Part of my practice involves representing parties in disputes arising out of loans in default.  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.

Order Granting Receiver’s Motion For Turnover Of Funds Upheld

Lesson. Upon the entry of an order appointing a receiver, all assets of the entity over which the receiver is appointed become assets of the receivership estate.

Case cite. Steingart v. Musgrave, 221 N.E.3d 725 (Ind. Ct. App. 2023)

Legal issue. Whether the trial court’s order for the turnover of funds allegedly owed to the receiver was erroneous.

Vital facts. An Indiana limited liability company executed five promissory notes in favor of a lender totaling about $10.5 million. The lender later filed suit against the LLC and the owner-members due to the notes being in default. In connection with the suit, the court appointed a receiver over the LLC.

The receiver discovered that, eleven days pre-appointment, one of the member-owners opened a bank account in Minnesota and allegedly deposited nearly $400K of the LLC’s assets into the account. The receiver claimed that the funds were then disbursed without notice to or authorization from the receiver, contrary to the court’s order appointing the receiver. The receiver filed a motion for turnover requesting the court to order the member-owner to return certain of the funds to the LLC.

Procedural history. The trial court ordered the member-owner to turn over about $300K to the receiver within seven days. The member-owner appealed the trial court’s turnover order.

Key rules. In Indiana, a receivership “is an equitable remedy, the purpose of which is to secure and preserve property or assets for the benefit of all interested parties, pending litigation.”

Indiana trial courts control and supervise the property in a receivership, as well as direct and advise the receiver. In the trial court’s discretion, the court can grant the receiver the necessary powers to carry out the duties. Indiana Code 32-30-5-7 “provides a nonexclusive list” of those powers.

Immediately upon appointment and qualification, the entity's assets become receivership assets until final distribution by the court. “To that end, property in receivership remains under the court's control and continuous supervision, and it is the duty of the receivership court to protect the property from interference.” It follows that the receivership court “has the power to control all controversies that affect such property.”

The parties, in turn, “have a duty to deliver to the receiver all property in their possession that is included in the court's order.” Should the parties fail to fulfill such duty, the receiver “has the authority to request the court to act to prevent interference with, or the denial of, his or her possession of the property.”

Holding. The Indiana Court of Appeals affirmed the trial court’s order.

Policy/rationale. The member-owner asserted that the trial court abused its discretion by issuing the turnover order. The member-owner felt the receiver’s concerns of misappropriation were unfounded. The Court of Appeals noted that any money in the Minnesota bank account on the day the receiver was appointed was subject to the receivership order. The LLC was obligated to remit to the receiver all deposit accounts, money and other property listed in the order. The member-owner’s failure to turn over to the receiver the funds in the account as of the day of appointment, or thereafter deposited, was a violation of the receivership order. The Court further found that, as practical matter, the subject turnover order merely was an extension of the original receivership order. Since Indiana gives trial courts “inherent power” to enforce compliance with their receivership orders, the Court of Appeals found no error with the issuance of the turnover order to obtain the assets of the LLC.
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Part of my practice involves representing parties in receivership proceedings. 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.

In A Matter Of First Impression In Indiana, Court Of Appeals Upholds Award Of Punitive Damages In Fraudulent Transfer Action

Lesson. Parties to fraudulent transfer actions could face punitive damages.

Case cite. Clary-Ghosh v. Ghosh, 223 N.E.3d 216 (Ind. Ct. App. 2023)

Legal issue. Whether the trial court abused its discretion when it awarded punitive damages against Defendants in a fraudulent transfer action.

Vital facts. Plaintiff brought an action against Defendants under the Indiana Uniform Fraudulent Transfer Act (UFTA). As is the case with many of these UFTA actions, the facts are very dense.  Here, the dispute primarily surrounded transfers of vehicles to avoid post-judgment collection. For all the details, please review the Court’s opinion. One noteworthy finding of the trial court was:

98. Here, [Defendant 1] provided no documentation which demonstrated that it followed any of the corporate formalities of filing tax returns, conducting meetings, maintaining minutes or notes, etc. In addition, in [Defendant 1’s] response to [Plaintiff's] discovery, it concealed the transfers of the [v]ehicles by stating that they were to [Defendant 2], when in fact they were to a trust established prior to the dissolution of [Defendant 1]. It was only after obtaining discovery from a non-party, the BMV, that the true nature of the transfers was revealed.

Procedural history. Before the appeal, the trial court awarded a judgment against Defendants in a UFTA action. Defendants appealed on several grounds. This post relates only to the punitive damages matter.

Key rules. In Indiana, "[t]he purpose of punitive damages is not to make the plaintiff whole or to attempt to value the injuries of the plaintiff. Rather, punitive damages have historically been viewed as designed to deter and punish wrongful activity. As such, they are quasi-criminal in nature."

Punitive damages in Indiana “are a creature of common law,” and the UFTA at I.C. § 32-18-2-20 states that “unless superseded by this chapter, the principles of law and equity . . . supplement this chapter.”

Further, the remedies provision in the UFTA at I.C. § 32-18-2-17(1)-(3) “provides that a creditor bringing successful claims may obtain a host of types of relief, including avoidance of the fraudulent transfer or obligation, attachment against the transferred asset, an injunction against further disposition of the debtor's assets, and the appointment of a receiver.” I.C. § 32-18-2-17(3)(C) also states that "[s]ubject to applicable principles of equity and in accordance with applicable rules of civil procedure" a creditor may obtain "[a]ny other relief the circumstances require." The court deemed Section 17(3)(C) to be “catch-all” provision, and nowhere in the UFTA is a recovery of punitives prohibited.

Indiana has a punitive damages statute declaring that damages must not be greater than three times the compensatory damages awarded or $50,000. I.C. § 34-51-3-4.

Holding. The Indiana Court of Appeals, in what appears to be a matter of first impression, affirmed the trial court’s award of punitive damages.

Policy/rationale. Defendants argued that the trial court erred in awarding punitive damages because such damages are inconsistent with the UFTA’s limited purpose of removing obstacles to the collection of a judgment. After conceding that no Indiana state or federal court had determined whether punitives are permitted under the UFTA, the Court concluded “that it was our legislature's intent to allow for the imposition of punitive damages upon successful UFTA claims in order to punish those who have violated the statute and to act as a deterrent to future fraudulent conduct.”

Related posts.

• Indiana Court Of Appeals Reverses Fraudulent Transfer Judgment And Remands For Remedy Determination
• Judgment Creditor Entitled To Recover Entire Value Of Real Estate Fraudulently Conveyed

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Part of my practice involves post-judgment collection disputes. 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.

Notices of Sheriff’s Sales: Some Reminders

I received an email last week from the Marion County (Indianapolis) Sheriff’s Office advising that the real estate division “is making advancements in technology” that have led to a new notice of sheriff’s sale. Click here for the form in Word that will be required beginning with the June 21, 2024 sale.

For more background on Indiana law surrounding the sale notice requirement, please review these posts:

• Publishing Notices Of Sheriff's Sales In Indiana
• Indiana Notices Of Sheriff’s Sale Must Identify All Property Being Offered

While I’m at it, remember that the Marion County Sheriff has a great website to help parties navigate through the sale process. The staff provides virtually all the forms and information one needs, and my experience has been that the staff is always been helpful in answering questions attorneys and bidders might have. Click here for that website.

Although not all of Indiana’s 92 counties have a website as extensive as Marion County’s, many of our sheriff’s offices do in fact have a sale web page. Make sure to investigate in advance of your sale. Just as importantly, in my experience every county has a sheriff’s sale contact person willing and able to assist in preparing for a foreclosure sale. Finally, don’t forget that local rules, customs and practices control the nitty gritty of the sale process.
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Part of my practice involves representing parties at sheriff’s sales. 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.

Indiana Claims To Pierce The Corporate Veil Should Be Post-Judgment

Lesson. A veil-piercing claim is a post-judgment collection tool, not a separate cause of action in a lawsuit.

Case cite. Conroad Associates v. Castleton Corner Owners Association et. al. 2023 U.S. Dist. LEXIS 135677 (S.D. Ind. 2023)

Legal issue. Whether a plaintiff in a breach of contract action against a company could simultaneously sue the individual owners of the company for the alleged breach.

Vital facts. This federal court action relates to a state court case about which I wrote in August of 2022. Here is a link to that post, which provides some background about the dispute. In this matter, a plaintiff sued a number of parties for money damages based on several causes of action, one of which was against individuals for their corporate entity’s breach of contract.

Procedural history. The individual defendants filed a motion for judgment on the pleadings seeking dismissal of the case.

Key rules.

To "prevent fraud or unfairness to third parties,” Indiana may allow the corporate veil to be pierced so as to impose liability for a corporation's acts and omissions beyond the corporation itself.

However, "piercing the corporate veil is not a separate cause of action but rather a means of imposing liability for an underlying cause of action, such as breach of contract."

The Piercing Corporate Veil category on this blog has a couple dozen posts identifying the various rules and tests applicable to Indiana’s veil piercing doctrine.

Holding. The Court dismissed the veil piercing count in the complaint.

Policy/rationale. In its complaint, plaintiff argued that it stated "a coherent case for piercing of the corporate veil — including by serious undercapitalization, the failure to keep corporate records and follow other formalities, fraudulent representation by unelected controlling persons, the commingling of assets, and other manipulations of the corporate form to achieve personal ends." While those allegations may have been valid, the Court concluded that the cause of action was premature. If the plaintiff later obtained a judgment, the plaintiff could then seek to pierce the corporate veil, assuming “it has a good faith basis to assert that theory in proceedings supplemental.” In short, the plaintiff in Conroad had the cart before the horse.

Related post. Veil-Piercing Claim Better Left For Proceedings Supplemental

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Part of my practice involves representing parties in post-judgment collection matters. 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.

Forbearance Agreements: The Benefits Of A Timeout

The Indiana Bankers Association publishes the Hoosier Banker magazine, which features my article about forbearance agreements in the current issue.  Click here for the online version of the piece.  The full article follows.  I'd like to thank the folks at the IBA for allowing me to contribute to the March/April publication.  

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When facing a loan default, the fundamental question for lenders is whether to exercise their remedies against the borrower and/or guarantors (collectively, “obligors”) or to pursue a settlement (workout). A forbearance agreement is a workout tool—a temporary settlement agreement.

What is a forbearance? Black’s Law Dictionary defines “forbearance” as the “act of abstaining from proceeding against a delinquent debtor; delay in exacting the enforcement of a right; indulgence granted to a debtor.” The idea is that the foreclosing lender agrees to a timeout.

Why would obligors want time? They:

• face a judgment or a foreclosure (loss of their property) and need to restructure their affairs
• desire to sell the loan collateral (such as commercial real estate) to pay off/pay down the loan
• intend to work with another lender to refinance
• want to settle internal partner disputes affecting the loan’s performance
• need to resolve a temporary hardship (i.e. COVID or other impact on revenue)
• seek to cure covenant defaults such as mechanic’s liens or code enforcement violations

Why would lenders consent to a timeout?

• Foreclosure litigation is a last resort
• The loan’s performance stems from a temporary problem that can be solved with time
• There is a positive relationship with the borrower group (trust)
• The obligors are preserving and protecting the loan collateral (i.e. the assets are not in jeopardy of being lost or impaired)
• The collateral position is weak (i.e. there is relatively little value in the property)
• The collateral is defective (i.e. environmental contamination)
• The guarantors are judgment proof
• The loan documents have defects that can be fixed in the forbearance agreement
• Forbearance saves attorney’s fees and litigation expenses
• Temporary settlements avoid the commitment of bank personnel necessary to litigate

Contract.

Under Indiana law, forbearance agreements are contracts. The agreement reduces the situation into a single document that is relatively easy for judges to understand. (An added bonus is that judges tend to look favorably on lenders who resort to court after first affording obligors the opportunity to avoid suit in the first place.) Make sure to clarify in writing all of the essential terms of the deal.

Signatories.

All obligors to the loan should sign the forbearance agreement, or lenders risk releasing the omitted obligors from liability. This is because a forbearance agreement arguably constitutes a “material alteration” of the original obligation. Under Indiana law, a guarantor can be released from liability if the underlying obligation is “material altered” without the guarantor’s knowledge and consent. The simple solution is to have all the obligors sign the agreement. If a guarantor is unwilling to execute, then the lender should proceed to litigation or explore a different workout approach.

Settlement

As with any compromise, everything is negotiable. Also bear in mind that the parties can enter into forbearance agreements virtually at any point—before or during a lawsuit, even after the entry of judgment.

    Release. All forbearance agreements should require the obligors to waive any and all rights, claims and defenses. This will help lenders and their counsel to streamline any future litigation necessary to enforce the loan if the forbearance agreement is breached. Indiana law is settled that forbearance releases are effective to protect against future lender liability claims. If an obligor is not willing to grant a release, then the lender might as well get on with the fight.

    Deal terms. Here is a list of some key contract terms to be considered:

        • Obligors’ admission of:
            o existing loan documents and the ratification of same
            o lien perfection
            o default(s)
            o debt amounts

        • Payment terms:
            o payment of principal and/or interest during the forbearance period versus deferral
            o rate of interest
            o payment of escrow items versus deferral
            o treatment of any past due interest
            o treatment of any past due principal payments
            o payment of attorney’s fees
            o payment of a forbearance fee
            o payment of other out-of-pocket expenses such as appraisal fees

        • Extension of maturity date
        • Stipulated payoff amount upon maturity (end of the forbearance period)
        • Agreed judgment, either filed or escrowed (aka “pocket” judgment)
        • Addition of collateral
        • Addition of guarantors
        • Cure of prior loan document defects
        • Requirement to resolve other liens or junior lien foreclosure suits
        • Waiver of jury trial and covenant not to sue
        • Consent to jurisdiction and venue
        • Release of claims and defenses (see above)

Depending on your particular situation, the benefits of granting obligors more time through a thoughtful and well-written forbearance agreement can exceed the costs of deferring the enforcement of the loan.

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My practice includes representing parties involved in disputes arising out of loans in default. 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.

Metes And Bounds Legal Descriptions, As Opposed To Street Addresses, Control The Effectiveness Of Mortgages In Indiana

Lesson. So long as the legal description in a mortgage provides notice of the boundaries and location of the subject real estate, discrepancies regarding the street address are of no moment.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether the trial court should have granted Lender’s motion for summary judgment in its mortgage foreclosure action.

Vital facts. Spencer was a residential mortgage foreclosure case involving a few twists and turns. This is my fourth and final post about the opinion. For background, please click on my three prior posts: 1/23/24, 2/2/24 and 2/15/24.

Procedural history. The trial court denied Lender’s motion for summary judgment and later entered judgment for the Borrowers that essentially nullified the mortgage.

Key rules.

The Court in Spencer reminds us of some fundamentals surrounding Indiana mortgage foreclosure claims. First, a “mortgage is an interest in real property that secures a creditor's right to repayment.” This means that “an action to foreclose a mortgage is an in rem (i.e., against the property) proceeding."

Yet, upon a borrower’s default, "in addition to the remedy of an in rem action of foreclosure, a creditor may sue to establish the debtor's in personam (i.e., personal) liability for any deficiency on the debt and may enforce a judgment against the debtor's personal assets."

Among other things, “for a mortgage to be effective, it must contain a description of the land intended to be covered sufficient to identify it.” The test for determining the sufficiency of a legal description “is whether the tract intended to be mortgaged can be located with certainty by referring to the description.”

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment ruling.

Policy/rationale. To prevail on the summary judgment motion, Lender had to show Borrowers were in default under the terms of the promissory note and mortgage. Borrowers did not really contest that they were in default and in violation of the terms of the mortgage. No payments had been made for several years.

Despite Borrowers’ arguments to the contrary, the Court declined to hold that there was a “material” issue of fact (which would have prevented summary judgment) related to some confusion about the correct street address for the subject real estate. This is because the metes and bounds legal description in the relevant deeds and mortgage was consistent and put “potentially interested parties on notice as to the boundaries and location of the property.” In Indiana, legal descriptions, not street addresses (aka common addresses), generally control the enforceability of a mortgage. As such, the Court found that summary judgment as to liability must be entered, although it remanded the case back to the trial court to determine the amount of Lender’s damages, including reasonable attorney’s fees.

Related posts.

• Motion for Summary What?
• Defective Legal Description Will Not Necessarily Invalidate Mortgage
• Reformation: How A Mortgage With An Erroneous Legal Description Can Be Foreclosed
• To Be Enforceable, An Indiana Mortgage Must Adequately Describe The Debt It Purports To Secure

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Part of my practice involves mortgage-related litigation and title disputes. 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.

Lender Permitted To Pursue Third Foreclosure Case Because The Two Prior Actions Were Dismissed “Without Prejudice”

Lesson. A lender’s motion for voluntary dismissal of a foreclosure lawsuit, without prejudice, generally leaves the door open to file a subsequent action.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether Lender’s action – its third - was barred by a voluntary motion for dismissal in a prior foreclosure action.

Vital facts. This is my third post about Spencer. For background on the case, please click on my two prior posts: 1/23/24 and 2/2/24. Again, the Spencer opinion stemmed from Lender’s third foreclosure suit. Lender terminated its first foreclosure case through a T.R. 41(A)(1)(a) voluntary motion to dismiss “without prejudice” that the trial court granted over Borrowers’ objection. Lender had filed the second case about two weeks before the first case was dismissed. Apparently due in part to title issues concerning the mortgaged real estate, Lender filed a motion to dismiss, without prejudice, under T.R. 41(A)(2). The trial court granted the motion over Borrowers’ objection that the dismissal should have been “with prejudice.”

Procedural history. Lender filed a motion for summary judgment that the trial court denied. Lender appealed following an adverse result at trial.

Key rules. Click here for Indiana Trial Rule 41(A) “Voluntary Dismissal: Effect thereof,” upon which the trial court relied in granting judgment for Borrowers at the Spencer trial.

As it relates to this case, Indiana courts have articulated that a purpose of Rule 41(A)(2), which deals with dismissals by court order, is “to eliminate evils resulting from the absolute right of a plaintiff to take a voluntary nonsuit at any stage in the proceedings before the pronouncement of judgment and after the defendant had incurred substantial expense or acquired substantial rights.”

That said, dismissals should be permitted “unless the defendant will suffer some legal prejudice other than the mere prospect of a second lawsuit.”

Holding. The Indiana Court of Appeals reversed the trial court’s decision to deny Lender’s summary judgment motion.

Policy/rationale. Borrowers asserted that the prior Rule 41 dismissal either did or should have operated as a dismissal “with prejudice” that barred the third action. In the end, the Rule 41 argument failed because Section (A)(1), which deals with dismissals entered without the need for a court order, did not apply. Section (A)(2) did, however, apply. Lender, in the second action, asked for leave to dismiss without prejudice, and the trial court granted the request. Despite what may have been compelling arguments to the contrary, the trial court’s order of dismissal without prejudice was “not a judgment on the merits of the dismissed claims … [and did] not bar a future case raising those same claims.” The Court of Appeals concluded that the “parties stand as if the prior suit had never been filed, restored to their original positions, free to file the suit again. [Borrowers] offer no compelling reason to abrogate that long settled principle.”

Related posts.

• Following A Dismissal, Lenders Generally Are Able To Refile Foreclosure Actions Based On New Defaults
• Third In Rem Foreclosure Action Barred Due to Rule 41(E) Dismissal Of First Action
• Following Rule 41(E) Dismissal For Failure To Prosecute, Can A Second Suit Be Filed?

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Part of my practice involves representing parties in foreclosure-related litigation. 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.

One Indiana Square (aka Regions Tower) Subject Of Foreclosure Action

Various media outlets are reporting that our firm's office building in downtown Indianapolis is being foreclosed upon.  (We're just a tenant and paying our rent, so this isn't our fault!)  The articles, in part, suggest looming problems with the office building sector of commercial real estate.

Here are links to a couple stories:  IBJ.com and Yahoo.com.

To see a copy of the foreclosure complaint, click here  

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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 [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.

 

Lengthy, Multi-Case Foreclosure Conflict Insufficient To Establish Lender Had Unclean Hands

Lesson. In Indiana, the equitable defense of unclean hands requires proof of intentional misconduct.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether Lender had unclean hands that precluded foreclosure.

Vital facts. Spencer was the subject of last week’s post, so click here for background about the case. Beginning in 2013, Lender filed, and then for a variety of reasons, dismissed two prior foreclosures before pursuing this one in 2020. As it relates to this post, the trial court made the following finding:

[Lender] has sought foreclosure of the 12.47 acres in equity, but, it has not done equity at all, nor does [Lender] have clean hands. [Lender] filed multiple lawsuits, voluntarily dismissed the 2014 case because it could not provide an appropriate address for the property secured by the mortgage, secured a judgment in rem against the mobile home, failed and refused to sell the mobile home in 2017, failed to make claims for vandalism of the mobile home, which was or clearly should have been disclosed by the inspections, and in short acted with unclean hands throughout the matter.

Procedural history. The trial court entered judgment for the Borrowers that essentially voided the mortgage. Lender appealed the court’s prior denial of its summary judgment motion.

Key rules.

Indiana common law is well settled that the "unclean-hands doctrine is an equitable tenet that demands one who seeks equitable relief to be free of wrongdoing in the matter before the court." The doctrine’s purpose “is to prevent a party from reaping benefits from his or her misconduct."

To establish the defense, “the alleged wrongdoing must be intentional and must have an immediate and necessary relation to the matter being litigated." Indiana courts apply the doctrine “with reluctance and scrutiny."

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment ruling on the issue of liability.

Policy/rationale.

The Court rejected the finding of unclean hands that “appear[ed] to stray beyond the boundaries of the evidentiary record.” This suggest that at least a portion of the trial court’s decision may not have come from any evidence admitted at the trial. Furthermore, Lender’s procedural posture was, in part, due to “discretionary determinations” made by prior trial courts. Perhaps most importantly, despite Lender’s “conduct in the prior cases [being] no model of efficient litigation practices, we do not find factual support that its actions constitute intentional misconduct.”

Related posts.

• Lender’s Redirection Of Rents Does Not Constitute “Unclean Hands” When Supported By Loan Documents
• Defendants’ “Unclean Hands” Defense Fails In Lender’s Indiana Foreclosure Case

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I represent parties in disputes arising out of secured 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.

Prior Replevin Of Manufactured Home Did Not Render Mortgage Fully Satisfied As To the Underlying Land

Lesson. If a security interest involves both real and personal property, then the secured party may accept certain of the collateral in partial satisfaction of the obligation it secures.

Case cite. United States Bank Nat'l Ass'n v. Spencer, 214 N.E.3d 1017 (Ind. Ct. App. 2023)

Legal issue. Whether, under Indiana Code § 26-1-9.1-620(g), Borrowers’ mortgage obligation was fully satisfied as a result of a prior replevin judgment related to a manufactured home located on the mortgaged real estate.

Vital facts. Spencer was seemingly a straightforward residential mortgage foreclosure case arising out of a payment default. There was no dispute that Borrowers had failed to make payments on their loan for several years. This particular case, however, was Lender’s third stop on a long and winding road in pursuit of relief.

Lender terminated its first foreclosure case through a Trial Rule 41(A)(1)(a) voluntary motion to dismiss “without prejudice.” Lender had filed the second case about two weeks before the first case was dismissed. This second case had counts to foreclose on the mortgaged real estate and for replevin of a manufactured home situated on that real estate. The court denied summary judgment as to the real estate but granted summary judgment as to the manufactured home.

Apparently due in part to some title issues surrounding the mortgaged real estate, Lender filed a motion to dismiss the claim against the real estate in the second case, without prejudice, under T.R. 41(A)(2). The trial court granted the motion over Borrowers’ objection, which asserted that the dismissal should be “with prejudice.”

Lender later filed this third suit, once again seeking to foreclose on the mortgaged real estate.

Procedural history. Lender filed a motion for summary judgment. The trial court denied the motion. Following a bench trial, the court entered judgment for Borrowers that essentially nullified the mortgage and erased the debt.

Key rules.

I.C. § 26-1-9.1-620(g), which is part of the Uniform Commercial Code (UCC), states: "In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures."

However, I.C. § 26-1-9.1-604(a) states:

If a security agreement covers both personal and real property, a secured party may proceed:

(1) under IC 26-1-9.1-601 through IC 26-1-9.1-628 as to the personal property without prejudicing any rights with respect to the real property; or

(2) as to both the personal property and the real property in accordance with the rights with respect to the real property, in which case the other provisions of IC 26-1-9.1-601 through IC 26-1-9.1-628 do not apply.

Indiana courts have decided, based on Section 604(a), that if a security interest involves both real and personal property, Section 620 does not apply. In other words, secured parties may accept collateral in partial satisfaction of the obligation it secures.

Holding. The Indiana Court of Appeals reversed the trial court’s denial of summary judgment on the issue of liability (foreclosure).

Policy/rationale. Borrowers contended, based on I.C. § 26-1-9.1-620(g), that the replevin judgment against the manufactured home operated to fully satisfy Borrowers’ debt. But, the security agreement (mortgage) covered both the manufactured home, which constitutes personal property, and the real estate. The Court therefore rejected Borrowers’ theory based on Section 604(a), stating: “Section 620 does not apply to the instant matter and cannot serve as a sufficient basis for concluding that [Lender] was precluded from foreclosing on the Real Estate.”

Note: This is the first of what I expect to be four posts about Spencer. There were other arguments made by Borrowers and rules to address.
Related posts.

• What Is A Replevin Action?
• Creditor May Repossess Collateral And Sue For Full Debt Simultaneously, And Generally Is Not Compelled To Accept Short Sale

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I represent parties in disputes arising out of secured 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.

Assignee Of Judgment Unable To Pursue Collection Absent Order Substituting Parties

Happy New Year. Forgive me for the extended break in the action here. Year-end projects, holidays, a bout of the flu, etc. prevented me from writing recently.

Lesson. If you’re an assignee of a judgment, file a motion for substitution of party, with supporting evidence, which establishes that you own the judgment that you seek to enforce.

Case cite. H & S Fin. Inc. v. Parnell, 214 N.E.3d 1030 (Ind. Ct. App. 2023)

Legal issue. Whether a purported judgment creditor’s motion for proceedings supplemental was properly denied.

Vital facts. In 2022, the purported assignee of a judgment initiated proceedings supplemental to enforce a 2003 judgment. Importantly, the purported assignee did not first obtain an order establishing that it was the current owner of the judgment.

Procedural history. The trial court interestingly (and erroneously) found that “the statute of limitations to execute on the judgment would have expired” in 2014, ten years post-judgment. The upshot was that the motion for proceedings supplemental was denied. Purported assignee appealed.

Key rules. Indiana Code 34-55-9-2(2) states that money judgments constitute a lien upon the judgment debtor’s real estate until the expiration of ten years after the judgment. Those liens expire after ten years.

However, the judgment itself never truly “expires” under Indiana law. Indeed, judgments survive for ten additional years, and proceedings supplemental are available to enforce the judgment during that period.

It is only after twenty years that Indiana judgments are presumed to be satisfied under I.C. 34-11-2-12. That presumption must be pleaded by the judgment debtor through the assertion of payment. However, the presumption can be rebutted by the judgment creditor with evidence of non-payment.

The more relevant rule to Parnell was Indiana Trial Rule 69(E), which says that proceedings supplemental may be enforced by verified motion alleging that "the plaintiff owns the described judgment against the defendant."

Holding. The Indiana Court of Appeals dismissed the purported judgment assignee’s appeal.

Policy/rationale. The Court concluded that assignee had not been substituted as a party and, as such, had not established that it owned the judgment. Thus, the fatal flaw of assignee’s case was not that the pro supp was late. Rather, it was because the assignee did not first obtain an order for substitution of party. The assignee did not establish by affidavit or verified motion that it owned the judgment (i.e. that it was the actual assignee) as required by Trial Rule 69(E).

Related posts.

• Indiana Judgment Lien (10 Years) and Judgment Enforcement (20 Years) Statutes Of Limitation
• Judgment Lien Principles Courtesy Of The Indiana Supreme Court
• How Long Is Too Long To Wait Before Enforcing A Money Judgment In Indiana?
• Indiana Supreme Court Discusses Proceedings Supplemental

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Part of my practice involves post-judgment enforcement matters. 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.

Indiana’s Post-Judgment Interest Statute Applies to Awards of Attorney’s Fees

Lesson. A money judgment that includes an award of attorney’s fees accrues statutory post-judgment interest.

Case cite. Piccadilly Mgmt. v. Abney, 215 N.E.3d 1078 (Ind. Ct. App. 2023)

Legal issue. Whether an award of attorney’s fees is separate from a judgment and thus excluded from the calculation of post-judgment interest.

Vital facts. This case was an eviction matter in which the Plaintiff landlord received a judgment against the Defendant tenant for unpaid rent plus attorney’s fees. During post-judgment garnishment proceedings, Plaintiff sought recovery of statutory post-judgment interest on both the unpaid rent and the attorney’s fees components of the judgment.

Procedural history. The trial court denied Plaintiff’s request for post-judgment interest on the award of attorney’s fees. Plaintiff appealed.

Key rules. In Indiana, "post-judgment interest is a creature of statute, borne of legislative authority," and is not subject to being denied by the discretion of a judge.

The relevant statute is Indiana Code Section 24-4.6-1-101, which states:

Except as otherwise provided by statute, interest on judgments for money whenever rendered shall be from the date of the return of the verdict or finding of the court until satisfaction at an annual rate of eight percent (8%) if there was no contract by the parties.

The “shall” in the statute means that prevailing plaintiffs are “automatically entitled” to post-judgment interest.

Further, established Indiana precedent provides that “awards of … attorney's fees … accrue post-judgment interest under the statute.”

Holding. The Indiana Court of Appeals reversed the trial court.

Policy/rationale. Piccadilly arose out of a small claims court proceeding, and the court interpreted a specific small claims statute as prohibiting interest from running on an award of fees. The Court of Appeals saw things differently. For purposes of this blog, lenders should be aware that, when obtaining foreclosure-related judgments, counsel’s fees are to be considered an element of the underlying judgment – not unlike unpaid principal or other damages items – that will accrue statutory post-judgment interest.

Related posts.

• What Is Indiana's Post-Judgment Interest Rate?
• Indiana Supreme Court’s COVID Order Interpreted: Post-Judgment Interest

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Part of my practice involves representing parties in loan enforcement actions. 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.

The Challenges Of Obtaining Prejudgment Attachment

Lesson. Indiana recognizes the remedy of prejudgment attachment, but the hoops through which plaintiffs must jump are challenging.

Case cite. Vukadinovich v. Posner, 2023 U.S. Dist. LEXIS 114854 (N.D. Ind. 2023)

Legal issue. Whether a plaintiff’s motion for prejudgment attachment should be granted or denied.

Vital facts. Plaintiff sought damages of $170,000 from Defendant. Plaintiff felt his ability to ultimately recover the money after judgment was at risk due to the passage of time and alleged efforts by Defendant to shield or otherwise insulate his assets from collection.

Procedural history. Plaintiff filed a motion to freeze Defendant’s assets while the underlying lawsuit was pending.

Key rules. “Attachment” is a proceeding, incidental to the underlying action, in which the defendant’s property “is taken [or, frozen] to secure the payment of any judgment that may be rendered in the main action.” In Indiana, prejudgment attachment is authorized by Trial Rule 64 and Indiana Code § 34-25-2-1 (click on the lengthy statute to study its elements).

A plaintiff “must aver the amount of damages that he ought to recover, and the sheriff … seizes only the amount of property, by value, to satisfy the plaintiff’s averred claim, beginning with personal property.” Thus, the remedy is not designed to seize all of a defendant’s assets.

Procedurally, § 34-25-2-1, as well as § 34-25-2-4 and § 34-25-2-5, mandates that plaintiffs file an affidavit showing:

(1) the nature of the plaintiff's claim;
(2) that the plaintiff's claim is just;
(3) the amount that the plaintiff ought to recover; and
(4) that one (1) of the grounds for an attachment enumerated in [§ 34-25-2-1] is present.

Furthermore, I.C. § 34-25-2-5 provides that prejudgment attachment motions must include a bond or written undertaking … payable to the defendant, to the effect that the plaintiff will: (1) duly prosecute the proceeding in attachment and (2) pay all damages that may be sustained by the defendant if the proceedings of the plaintiff are wrongful and oppressive.

Also, the only property that may be attached under subsection (b)(6) is "the defendant's property subject to execution." I.C. § 34-25-2-1(b)(6). Some property may be exempt from execution under the law, and only "the goods and chattels of the person within the jurisdiction of the [executing] officer" may be executed on. I.C. § 34-55-1-12(a).

Holding. The Court denied Plaintiff’s motion. Magistrate Judge Kolar’s opinion is thorough and educational.
Policy/rationale. First, Plaintiff did not post a bond or otherwise stipulate to depositing $170,000 of his own money into court to cover Defendant’s potential damages.

Second, Plaintiff did not establish by a preponderance of the evidence the necessary facts required by subsection (b)(6)(A) of § 34-25-2-1: that Defendant was “about to sell, convey, or otherwise dispose of defendant’s property subject to execution with the fraudulent intent to cheat, hinder, or delay … defendant’s creditors.” Note there are two key hurdles to overcome: (a) whether the Defendant is about to transfer property and (b) whether the Defendant has acted, or is acting, with fraudulent intent. The Court found that Plaintiff’s evidence was speculative on both accounts and thus “insufficient to justify the extraordinary remedy of prejudgment attachment.”

Third, the Plaintiff failed to show a likelihood of success on the merits of the underlying case. A guiding principle for the Court in Posner surrounded constitutional due process, as the Unites States Supreme Court explained in a 1991 case:

Permitting a court to authorize attachment merely because the plaintiff believes the defendant is liable, or because the plaintiff can make out a facially valid complaint, would permit the deprivation of the defendant's property when the claim would fail to convince a jury, when it rested on factual allegations that were sufficient to state a cause of action but which the defendant would dispute, or in the case of a mere good-faith standard, even when the complaint failed to state a claim upon which relief could be granted. The potential for unwarranted attachment in these situations is self-evident and too great to satisfy the requirements of due process absent any countervailing consideration.

Fourth, the Court found that Plaintiff’s request to attach all of Defendant’s property “without a showing that all of Defendant’s property is subject to execution is improper.” Moreover, Plaintiff failed to show that Defendant even owned property in Indiana. The opinion suggested that Defendant owned property in Illinois, but the Court questioned whether it could attach property outside of Indiana even if it wanted to.

Lenders sometimes fear that guarantors may be moving assets during a foreclosure case to avoid collection of a deficiency. Posner reminds us that the procedural requirements to prevent alleged fraudulent transfers are steep. Even if a lender were willing to post a bond, producing admissible evidence of the transfers plus the requisite fraudulent intent can be a challenge.

Related posts.

• In Indiana, Prejudgment Attachment Requires A Bond
• Pre-Judgment Seizure of Property: Attachment Fundamentals
• More On Prejudgment Attachment And Garnishment

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Part of my practice involves representing parties in secured collection proceedings. 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.

Both An Appeal And A Bond Generally Are Required To Stay Proceedings Supplemental

Lesson. In Indiana, a judgment debtor (defendant) generally will be required to post a bond in order to stay (stop) proceedings supplemental (post-judgment collection efforts) during an appeal. Without a bond and a corresponding order of stay, proceedings supplemental can occur.

Case cite. Patterson v. Howe 2023 U.S. Dist. LEXIS 75938 (S.D. Ind. 2023)

Legal issue. Whether the plaintiff/judgment creditor’s motion for proceedings supplemental should be granted or denied.

Vital facts. Plaintiff sued Defendant under the Fair Debt Collection Practices Act and obtained a money judgment in his favor. While Plaintiff sought to force Defendant to testify as to his assets available to satisfy the judgment, Defendant appealed the judgment.

Procedural history. The Patterson case was before the U.S. District Court for the Southern District of Indiana. One of the issues centered on whether Defendant must post a bond in order to stay post-judgment collection proceedings.

Key Rules.

FRCP 62(b) provides that "[a]t any time after judgment is entered, a party may obtain a stay by providing a bond or other security," and the stay "takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security."

“Though a party must post bond if it wants an automatic stay, a court may waive the bond requirement entirely.” “The amount of bond, if any, is left to the discretion of the district court.” A “stay without bond is the exception, not the rule.”

Holding. The Court ordered Defendant to post an appeal bond in the amount of the judgment and, assuming the posting of that bond, ordered a stay of the proceedings supplement. This prevented Defendant from being required to testify about his assets while his appeal was pending.

Policy/rationale. The Court denied Plaintiff’s motion for proceedings supplemental on the assumption that Defendant would post a bond. “In the event that proceedings supplemental becomes necessary following the outcome of [the appeal], or should [Defendant] fail to post a bond, [Plaintiff] may file a renewed motion.”

Related posts.

• Court of Appeals Reduces Appeal Bond In Indiana Foreclosure Case
• When Can Post-Judgment Collection Efforts Begin In Indiana?
• Post Script: When Can Post-Judgment Collection Efforts Begin In Indiana?
• Indiana Supreme Court Discusses Proceedings Supplemental

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My practice includes representing lenders, borrowers and guarantors in contested commercial collection proceedings. 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.

From Dreams to Deals: Avoiding Pitfalls in Commercial Real Estate Financing

My Indianapolis colleagues in our Firm's commercial real estate transactional group authored a nice article for IBJ.com, the online platform of the Indianapolis Business Journal:  From Dreams to Deals: Avoiding Pitfalls in Commercial Real Estate Financing.  The piece is informative for both lenders and developers, and discusses commercial leases, secondary financing, ground leases and cross-easements/declarations.  

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Dinsmore is a national law firm with over 750+ lawyers in 30 cities across the country. Chambers USA ranks Dinsmore’s Indiana real estate group as one of only two Indiana firms in its prestigious “Band 1” due to its reputation as a premier group known for its handling of sophisticated commercial real estate matters. In 2022, Dinsmore’s Indiana real estate lawyers closed over $5 billion in real estate loan transactions, including FHA, Freddie Mac, Rural Development, balance sheet, mezzanine and syndicated loans for various asset classes, including multifamily and affordable housing, licensed care and mixed-use projects across the country.

 

Lender’s Recovery Of Attorney’s Fees Related To Collateral Actions Denied

Lesson. Depending upon the contractual language, courts may not necessarily award lenders all of their attorney’s fees in loan disputes.

Case cite.  Cent. Mkt. of Ind. v. Hinsdale Bank N.A. 207 N.E.3d 1215 (Ind. Ct. App. 2023)

Legal issue. Whether, in a foreclosure case, a lender can seek attorney’s fees from a borrower based on lender’s involvement in collateral actions with third parties in other jurisdictions.

Vital facts. Please see last week’s post for background on the Hinsdale Bank case. In addition to the underlying action against Borrower, Lender was involved in two related but separate proceedings, one to prosecute fraudulent transfer claims against the loan’s guarantor and another to defend itself in a suit connected to the loan. The promissory note at issue contained an attorney’s fees provision allowing Lender to:

Incur expenses to collect amounts due under [the] Note, enforce the terms of this Note, or other Loan document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance appraisal, environmental remediation costs, and reasonable attorney fees and costs

Procedural history. The trial court granted Lender’s motion for summary judgment and awarded a staggering $447,605.91 in attorney’s fees and costs. The award included Lender’s fees for all three actions. Borrower appealed.

Key rules. A contractual provision agreeing to pay attorney's fees is enforceable “if the contract is not contrary to law or public policy.” The amount recoverable “is left to the sound discretion of the trial court.” The amount of the award of attorney's fees must be reasonable and supported by the evidence.

Indiana courts may consider such factors as hourly rate, the result obtained, and the difficulty of the issues in determining what fees are “reasonable.” As to the “results obtained” factor, courts may consider whether “the plaintiff has made multiple claims but has succeeded on only some of them.”

That said, excessive fee awards can be avoided “when fees are apportioned according to the significance of the issues upon which a party prevails, balanced against those on which the party does not prevail.”

Holding. The Indiana Court of Appeals remanded the attorneys’ fees award to the trial court to quantify the reasonable amount of fees after excluding those incurred in the two out-of-state cases.

Policy/rationale.

Based on the language in the promissory note, the Court found that Lender could not collect all of its claimed fees. The collateral actions involved a guarantor and third parties to which the note did not refer. And, Borrower did not participate in those lawsuits. Lender’s position was that it was entitled to fees for the two out of state cases “on the premise they were integral to the enforcement of the promissory note.” The Court rejected that proposition.

Again, the Hinsdale Bank case was only against Borrower, and apparently the only loan document related to a fee recovery was the promissory note and its quoted section above. Had the two collateral actions been litigated within the same suit as the foreclosure action, the outcome may have been different, particularly with a broader, clearer attorney fee provision.

Related posts.

• Indiana Court Discusses Test For Recovery Of Attorney's Fees In Action Against Guarantor
• Attorney Fee Awards in Indiana
• Unsettled: Recoverability Of Attorney’s Fees For In-House Counsel

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Part of my practice involves representing parties in loan-related disputes. 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.

Lender’s Email Committing To Future Loan Modification Does Not Prevent Foreclosure

Lesson. In Indiana, borrowers generally cannot use oral statements of lenders to contradict or alter the written terms of a promissory note.

Case cite. Cent. Mkt. of Ind. v. Hinsdale Bank N.A., 207 N.E.3d 1215 (Ind. Ct. App. 2023)

Legal issue. Whether Lender’s pre-closing email committing to a post-closing loan modification precluded summary judgment for Lender in loan enforcement action.

Vital facts.

This case arose out of an SBA loan for the purchase of a grocery store. Lender’s loan was secured by a mortgage, personal guaranties, and a security interest on all of Borrower’s assets. Due to financial difficulties with the store, Borrower defaulted on the loan, and Lender filed suit seeking to recover on the approximate $1.8 million debt.

A complicating factor to this otherwise straightforward case surrounded a guaranty executed by a son of one of the owners/members of Borrower (“Son”). Son was reluctant to sign off. The loan officer, after speaking to Lender’s president, sent the following email to the father:

Please tell [Son] there is nothing to worry about. I have spoken to [president] and he assured me that within three months of this closing, the bank will refinance and transfer the loan to [another guarantor]. This refi will get you some working capital and also absolve [Son] of the SBA's guaranty. It's just a matter of three months or at most four months. After the initial closing, the SBA is no [longer]in [the] picture and the bank has more leeway in these matters.

If you want, I can speak to [Son] personally. Also please ask [Son] to sign the [l]ease and reassignment of rents, and some additional documents that were sent to you to forward him for his signatures. Have you forwarded them to [Son] yet[?] Hopefully he will sign off on those once he knows that we will get him off the loan/SBA guaranty within 3-4 months. You also have to finalize some details in [Son's] life insurance. We will need the policy to close.

(the “Email”). These representations were not incorporated into the loan documents, however. The refinance never occurred.

Procedural history. Lender filed a motion for summary judgment that the trial court granted. Borrower appealed.

Key rules. Indiana Code Section 26-2-9-4 bars enforcement of oral "credit agreements" unless they (l) are in writing; (2) set forth all material terms and conditions of the credit agreement; and (3) are signed by the creditor and the debtor.

Holding. The Indiana Court of Appeals affirmed the summary judgment for Lender.

Policy/rationale. In response to the summary judgment motion, Borrower filed an affidavit from Son showing that Lender reneged on its promise to remove Son as guarantor upon refinancing. Borrower’s defense theory was fraudulent inducement. The Court concluded that the Email “fell short” of the requirements of I.C. 26-2-9-4 because it did not mention the promissory note’s terms and was only a discussion about a possible future modification of Son’s guaranty. Thus, neither Son’s affidavit nor the Email created an issue of fact precluding summary judgment. Note: the Hinsdale Bank case dealt only with Lender’s action against Borrower. Lender was not enforcing Son’s guaranty at the time. Had Son been a party, the opinion suggests the outcome would have been the same, which is to say the Email may not have absolved Son from personal liability.

Related posts.

• Is The Label “Indiana Lender Liability Act” A Misnomer?
• Alleged Oral Release Of Mortgage Rejected
• Indiana’s Lender Liability Act Once Again Protects Bank From Borrower’s Claims
• ILLA Saves Bank From Alleged Misrepresentation That Loan Was “A Go”

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Part of my practice involves representing parties in loan-related disputes. 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.

SCOTUS: Innocent Girlfriend’s Debt Stemming From Boyfriend’s Fraud Held Nondischargeable

Lesson. The Bankruptcy Code’s provisions barring the discharge of a debt can extend to an innocent business partner.

Case cite. Bartenwerfer v. Buckley 143 S. Ct. 665 (2023)

Legal issue. Whether the bar to dischargeability in 11 U. S. C. § 523(a)(2)(A) applies to a debtor found liable for fraud that she did not personally commit.

Vital facts. Boyfriend and Girlfriend jointly bought a house and later decided to remodel it for the purpose of flipping it for a profit. Boyfriend was in charge of the project while Girlfriend “was largely uninvolved.” The couple later sold the house to Buyer following the execution of standard paperwork intended to disclose all material facts about the property. Buyer later discovered several defects and sued the couple in state court. The couple was found to be jointly responsible for about $200,000 in damages. The couple later filed a Chapter 7 bankruptcy action seeking to discharge the debt.

Procedural history. Buyer filed an adversary complaint claiming that the money owed for the judgment was nondischargeable. After a trial, the bankruptcy court found that Boyfriend had knowingly concealed the defects. The court also imputed the fraud to Girlfriend based on the premise that the couple had formed a partnership to flip the property. On appeal, the Court affirmed as to Boyfriend but disagreed as to Girlfriend. The Court instructed the lower court to hold a second trial as to whether Girlfriend “knew or had reason to know” of Boyfriend’s fraud. The lower court concluded that Girlfriend lacked the requisite knowledge and discharged her liability to Buyer. On a second appeal, the Court held that Girlfriend’s debt could not be discharged based on precedent that “a debtor who is liable for her partner’s fraud cannot discharge that debt in bankruptcy, regardless of her own culpability.” That decision was appealed to the Supreme Court of the United States.

Key rule. The Supreme Court sliced and diced 11 U. S. C. § 523(a)(2)(A), which applies to a debtor who was the fraudster and bars the discharge of “any debt … for money … to the extent obtained by … false pretenses, a false representation, or actual fraud.”

Holding. The Court found that section 523(a)(2)(A) “turns on how the money was obtained, not who committed fraud to obtain it.”

Policy/rationale. The Court noted that bankruptcy laws balance the interests of insolvent debtors and their creditors. The Bankruptcy Code “generally allows debtors to discharge all prebankruptcy liabilities, but it makes exceptions when, in Congress’s judgment, the creditor’s interest in recovering a particular debt outweighs the debtor’s interest in a fresh start.” The bar on discharging a monetary debt for money obtained by fraud is “one such exception.” The Court, while seemingly sympathetic to Girlfriend’s position, stuck to the text of the code provision:

[I]nnocent people are sometimes held liable for fraud they did not personally commit, and, if they declare bankruptcy, § 523(a)(2)(A) bars discharge of that debt. So it is for [Girlfriend], and we are sensitive to the hardship she faces. But Congress has evidently concluded that the creditors’ interest in recovering full payment of debts obtained by fraud outweigh[s] the debtors’ interest in a complete fresh start … and it is not our role to second-guess that judgment.

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Part of my practice involves representing parties in a variety of debt collection matters.  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.

Twin Decisions By The Northern District Of Indiana Speak To Attorney’s Charging Liens

Lesson. Statutory attorney’s charging liens are not valid unless a judgment has been entered. However, a common law equitable lien for the recovery of fees may attach to settlement proceeds paid into court.

Case cites. Browne v. Waldo, 2023 U.S. Dist. LEXIS 30121 (N.D. Ind. 2023) and Lymon v. UAW Local Union #2209, 2023 U.S. Dist. LEXIS 29128 (N.D. Ind. 2023)

Legal issue. Whether alleged statutory or equitable attorney’s liens were valid.

Vital facts. In Browne, an attorney represented a litigant in a case that resulted in a settlement. The terms of the settlement required the funds to be deposited with the court. After apparently not being paid by his client, the attorney filed notices of attorney’s liens on the settlement funds.

Lymon arose out of an attorney’s withdrawal from a pending case. Shortly after withdrawing, the attorney filed a notice of a statutory charging lien with the court intending to give notice of the unpaid fees against any future settlement or judgment in favor of his client.

Procedural history. The Browne dispute surrounded whether the attorney was entitled to be paid out of the settlement funds by virtue of his lien. On the other hand, Lymon focused on the client’s motion to strike a lien filed before the case had been resolved.

Key rules. There is no federal law providing for an attorney’s lien. Indiana state law controls.

Indiana Code § 33-43-4-1 allows an attorney charging lien only "on a judgment rendered." By statute, there cannot be a valid statutory charging lien before judgment is entered in the case.

Our state also has an equitable attorney's charging lien, which “is the equitable right of an attorney to have fees and costs owed to them for services provided in a lawsuit to be secured out of the funds their client recovers in the lawsuit.” This equitable lien may be enforced in the absence of a judgment.

My 6/30/17 post Indiana Attorney Fee Liens In Commercial Cases discusses these rules in the context of a receivership case, and I comment on how they might factor into a commercial foreclosure matter.

Holding. In Browne, the U.S. District Court for the Northern District of Indiana ruled in favor of the attorney and upheld his equitable lien on the settlement funds. In Lymon, the Court struck the lien.

Policy/rationale. The Browne matter did not involve a judgment, so there was no statutory charging lien. That was the basis of the Lymon decision too. The purported lien was “premature.”

However, the Court in Browne found that a valid equitable lien existed on the settlement proceeds that had been deposited into the Court. The policy behind the decision was “based on natural equity—the client should not be allowed to appropriate the whole of the judgment [or recovery] without paying for the services of the attorney who obtained it.”
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Part of my practice involves representing parties in lien-related disputes. 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.

What Is “Constructive Notice” In The Context Of Indiana Real Estate Law?

I’m sometimes asked by clients and new associates about the idea of “constructive notice” in the context of real estate litigation generally and commercial foreclosures specifically. The concept of constructive notice is a recurring theme on my blog. Indeed the doctrine is important to many things in the real estate world, including:

• The enforceability and priority of mortgages
• Lis pendens law
• The bona fide purchaser doctrine
• The enforceability and priority of judgment liens
• Quiet title and deed-related actions
• Title insurance

A recent opinion by the Indiana Court of Appeals discussed the issue, and I thought it might be worthwhile to quote the Court as a reminder of the rule:

A "purchaser of real estate is presumed to have examined the records of such deeds as constitute the chain of title thereto under which he claims, and is charged with notice, actual or constructive, of all facts recited in such records showing encumbrances, or the non-payment of purchase-money." Crown Coin Meter v. Park P, LLC, 934 N.E.2d 142, 147 (Ind. Ct. App. 2010). The recording of an instrument in its proper book is fundamental to the scheme of providing constructive notice through the records. Id. Constructive notice is provided when a valid instrument is properly acknowledged and placed on the record as required by statute. Id.

Gregory v. Koltz 204 N.E.3d 256 (Ind. Ct. App. 2023)

The mention of the “record” in the above quote refers to the index maintained in each county recorder’s office. (I wrote about “chain of title” here.)  In Gregory, the Court found that the recording of a default judgment to quiet title to the subject property “served as constructive notice to the world” and “bound all successors in interest, regardless of whether the successor was a party to the litigation." The judgment was recorded within the chain of title, which is key.

Constructive notice is tantamount to actual notice in the eyes of the law. Stated differently, even if you didn’t know about the recorded interest, you should have.
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I represent parties involved in real estate and loan-related disputes. 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.

Avoiding Construction Project Challenges

Today's post is a bit off topic but still has relevance to the commercial foreclosure area.  This is because construction problems can lead to mechanic's liens, which can lead to priority disputes between contractors and lenders/mortgagees.

Here is a PDF of Dinsmore's White Paper entitled:  Show Me the Money (Top-10-Considerations-in-Contract-Pre-Planning) 

My partners Rob Schein and Jim Boyers, and our associate David Patton, did great work preparing the article.

Prior posts on this topic:

• Indiana’s “Lender Exception” Applicable To Leasehold Mortgage In Priority Dispute With Mechanic’s Lien
• Indiana’s Remedy For Mechanic’s Lienholder On Property Subject To Mortgage Foreclosure Action
• Commercial Construction Mortgages Stand Tall Over Later-Recorded Mechanic’s Liens In Indiana
• Blog Post On Priority Of Commercial Construction Mortgages “Affirmed On Appeal”

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I represent lenders, as well as their mortgage loan servicers, entangled in lien priority disputes and contested foreclosures. 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.

 

 

     

Orders Enforcing Settlement Agreements Are Not Money Judgments Giving Rise to Interest

Lesson. Foreclosure and commercial collection cases are often resolved through an agreement that includes the payment of money to the lender/creditor. If you, as the plaintiff, want the right to collect interest on the settlement payment(s), then you should articulate that right in the settlement agreement or otherwise file an agreed money judgment as part of the deal.

Case cite. Hair v. Goldsberry, 204 N.E.3d 275 (Ind. Ct. App. 2023)

Legal issue. Whether the payment called for in a settlement included consideration of statutory pre- or post-judgment interest.

Vital facts. Plaintiff Hair sued to foreclose on two judgment liens and named a number of defendants, including a mortgagee, which had an interest in the subject real estate. During the course of the litigation, the courts found that the parties had reached a settlement. The resulting court order was that “[defendants] would pay Hair ‘the settlement amount of $18,000’ and that Hair would release the judgment liens.” (The enforceability of the settlement agreement [an exchange of emails, nothing formal] was the subject of a prior appeal, but I’ll spare you those details.)

Procedural history. During subsequent proceedings, Hair sought an order that the settlement included pre- and post-judgment interest over and above the $18K. The trial court denied Hair’s request. The defendants tendered the $18K to Hair, who refused to release the judgment liens and instead filed an appeal seeking interest.

Key rules. "A settlement agreement is a compromise, the purpose of which is to end a claim or dispute and avoid, forestall, or terminate litigation … [and] Indiana law strongly favors settlement agreements, which are governed by general principles of contract law.”

Holding. The Indiana Court of Appeals affirmed the trial court’s ruling that Hair was not entitled to an award of interest.

Policy/rationale. The Court reasoned that an order to comply with a settlement agreement requiring the payment of money is not a money judgment, but rather an order for “specific performance.” As such, the order did not qualify for interest. Had the settlement agreement included a stipulation for the entry of a money judgment or otherwise provided for the payment of interest upon non-compliance, the outcome could have been different. Here, the settlement agreement “did not provide for any payments of interest whatsoever.”

It is not uncommon for parties to enter into a stipulation for the entry of judgment. But, here, the parties did something different. When the parties reached a settlement, they knew — and we presume they took into account — that interest had accrued on the judgment lien of $7,107 entered in 2010 and the judgment lien of $3,225 entered in 2012. The order, which concluded that the parties had settled their dispute and enforced their settlement agreement, merely acknowledged and ratified the agreement and did not alter its terms.

Hair contended that any order requiring the payment of a sum of money is a “money judgment” giving rise to interest on the amount due. The Court disagreed and concluded that the prior order simply was “that an act be done”:

Here, the court did not find and adjudicate that one party owed money to the other party and did not award a money judgment for one party and against the other party. The court ordered that the contract between the parties, the settlement agreement, an accord and satisfaction to resolve disputed claims, be enforced. This was not a money judgment but a decree in equity for specific performance.

Related posts.

• What Is Indiana's Post-Judgment Interest Rate?
• Indiana Supreme Court’s COVID Order Interpreted: Post-Judgment Interest
• Judgment Requiring Payment Of Sum Certain Through Monthly Installments Until Paid Or “Until Death” Does Not Create Judgment Lien

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I represent parties involved in disputes arising out of loans that are in default. 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.

Estate Could Not Recover Alleged Debts Of Decedent’s Son Under “Open Account” Theory

Lesson. To collect a debt that is not otherwise documented in a promissory note or credit agreement, make sure there is evidence of a promise, either express or implied, for the debtor to pay the balance to the creditor.

Case cite. Meyer v. Meyer 205 N.E.3d 215 (Ind. Ct. App. 2023)

Legal issue. Whether a mother’s payment of various bills and debts for her son could later be recovered by her estate.

Vital facts. Estate sued Brian, one of the sons of the decedent (Laverne), to collect a debt. Estate asserted that Brian not only had a promissory note with Laverne but also an “open account” with an amount due of another $22K. Brian did not dispute that he owed about $5K on the promissory note, but he contested the other amounts, which appeared on a list of “bills paid” on behalf of Brian by Laverne.

Procedural history. Following an evidentiary hearing, the trial court entered judgment against Brian for about $27K. Brian appealed the amount of the judgment.

Key rules. Estate bore the burden of proving that Brian promised to repay the money that Laverne provided to him. At issue in Meyer was something called an “open account.” In Indiana:

For a mutual and open account to exist, there must be a mutual relationship, that is, there must be reciprocity of dealing. A mutual open account is an open account where there are items debited and credited on both sides of the account rather than simply a series of transactions always resulting in a debit to one party and a credit to the other party; each party to a mutual account occupies both a debtor and a creditor relation with regard to the other party. Thus, an account is generally not considered mutual if all the items are on one side.

The Court also examined a separate, albeit similar, principle under Indiana law called “account stated”:

An account stated is an agreement between the parties that all items of an account and balance are correct, together with a promise, express or implied, to pay the balance. An agreement that the balance is correct may be inferred from delivery of the statement together with the account debtor's failure to object to the amount of the statement within a reasonable time."

Holding. The Indiana Court of Appeals agreed with Brian and reversed the trial court with instructions to reduce the judgment to $5,292.12 based only on the note.

Policy/rationale. Brian argued that, although Laverne in fact paid certain bills of his, there was no evidence that he promised to repay her. There was also no evidence that the list of bills tendered to the trial court was ever delivered to Brian. With specific regard to Estate’s “open account” theory, the Court concluded that there “was no reciprocity of dealing between Laverne and Brian.” The Court recognized Brian’s assertion that all the subject transactions were “on one side of the ledger.”

Related posts.

• Claim “On An Account” Vs. Enforcement Of A Loan: Comments On Proposed Amendment to Indiana Trial Rule 9.2(A)
• Indiana’s Statute Of Limitations For “Open Account” Claims: Supplier’s Case Too Late

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I represent parties involved in disputes arising out of loans that are in default. 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.

What Is The “Protecting Tenants at Foreclosure Act” And Does It Apply To Foreclosures On Multi-Family Properties?

The Statute. The Protecting Tenants at Foreclosure Act (the "Act"), 12 U.S.C. Section 5220, is a 2018 federal law that offers security for renters living in foreclosed properties. The Act imposes certain obligations on "immediate successors in interest" (presumably including lenders/mortgagees) of foreclosed residential properties. These obligations are as follows:

1. A duty to give bona fide tenants "a notice to vacate [of] at least 90 days before the effective date of such notice."
2. A duty to allow bona fide tenants "to occupy the premises until the end of the remaining term of [their leases]."

The purpose of the Act is to ensure that tenants receive sufficient notice of foreclosure proceedings and are not abruptly displaced. The statute was not intended to create a private right of action for evicted residents, however, but merely to serve as a defense against eviction proceedings.

Applicability to certain foreclosures. The Act's language is not crystal clear. For example, the statute does not use terms like “lender” or “eviction.” However, because both of the Act’s obligations seem to presuppose a scenario in which an immediate successor is attempting to force tenants to vacate a foreclosed property (i.e. to evict residents), immediate successors are not required to take action under the Act unless and until they seek to force tenants to vacate. Thus, our conclusion is that the Act will not apply to mortgage foreclosures unless the action seeks to evict/remove residential tenants from the mortgaged property.

Because the goal of the vast majority of a commercial lender’s foreclosures on multi-family properties is to keep the tenants (and thus the income) intact, as a practical matter the Act rarely will apply to a commercial foreclosure. However, if a foreclosing mortgagee ultimately intends to take title to the real estate and terminate the lease rights of the existing tenants, then the Act will apply.

The Act’s obligations come into play where there is "any foreclosure on a federally-related mortgage loan or on any dwelling or residential property after the date of enactment of this title." Courts are split on whether the Act encompasses only foreclosures on federally-related mortgage loans or on all residential property. Because courts have held that immediate successors carry the burden of proving they are not beholden to the Act's obligations, it is safe to assume that the Act casts a broad net and attaches to foreclosures on "any dwelling or residential property." Stated otherwise, immediate successors of foreclosed real property occupied by residential tenants should abide by the Act. Our conclusion is in line with the Act's purpose of protecting renters who live in foreclosed properties, but we have not comprehensively researched the issue across the country.

Notice requirements.

Duty to give bona fide tenants "a notice to vacate [of] at least 90 days before the effective date of such notice."

    Bona fide tenants of foreclosed properties are entitled to a 90-day notice before they may be forced to vacate the premises by immediate successors. This 90-day notice requirement is not subject to exceptions.

    A tenant is "bona fide" where (1) the tenant and mortgagor are not the same individual, (2) the tenant's lease was the result of an arms-length transaction, and (3) the tenant's lease requires unsubsidized rent that is at least fair market value.

Duty to allow bona fide tenants "to occupy the premises until the end of the remaining term of [their leases.]"

    Immediate successors must permit bona fide tenants to reside at the property until their leases have expired. The duty to honor bona fide leases does not negate the 90-day notice requirement, however. If a tenant's remaining lease term is less than 90 days, that tenant is still entitled to 90 days before he or she must vacate the property with proper notice thereof.

    The duty to honor bona fide leases is subject to three exceptions. Immediate successors are not required to honor bona fide leases where: (1) the lease is invalid, (2) the lease is terminable at will, or (3) the property is sold after foreclosure to a purchaser who will occupy the property as a primary residence.

Note: I’d like to thank our associate Alex Layton for his research and input into today’s post.
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I represent parties involved in disputes arising out of loans that are in default. 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.

Individual’s Credit Card Authorization To Cover Company’s Unpaid Invoices Opened Door To Personal Liability

Lesson. Personal guaranties come in all shapes and sizes. The document need only evidence a conditional promise to answer for the debt of another upon the debtor/borrower’s failure to pay.

Case cite. Innovative Water Consulting LLC v. SA Hosp. Acquisition Grp. LLC, 2023 U.S. Dist. LEXIS 3178 (S.D. Ind. 2023)

Legal issue. Whether an individual’s credit card authorization form signed in conjunction with a company contract constituted a personal guaranty of the company’s debt.

Vital facts. Plaintiff alleged that Defendant company breached a services contract related to COVID test kits. Another of the defendants (Alleged Guarantor) purportedly signed a personal guaranty of the contract by completing a “Credit Card Authorization Form” (Authorization) allowing Plaintiff to charge his credit card for any outstanding invoices. The Authorization, which Alleged Guarantor signed above the line “Customer Signature,” stated:

I, [Alleged Guarantor], authorized representative of [Defendant company] and authorized signer of the credit card reference [sic] above (the "Card") authorize [Plaintiff] to process payment[s] due from [Defendant company] to [Plaintiff] via such Card. Such authorization shall apply to any payments due. I understand that the Card may be saved in [Plaintiff’s] records and periodically charged for any invoice exceeding its due date by 10 (ten) days due [Plaintiff] from [Defendant company], unless/until [Defendant company] provides written notice of de-authorization to [Plaintiff’s] Account Manager, at least three (3) business days before any payment becomes due.

Plaintiff later billed Defendant company for delivered test kits, but the company failed and refused to pay. Alleged Guarantor did not provide Plaintiff with a written notice of de-authorization of the Authorization. Plaintiff’s subsequent efforts to charge Alleged Guarantor’s credit card were declined.

Procedural history. Alleged Guarantor filed a Rule 12(b)(6) motion to dismiss Plaintiff’s claim against him.

Key rules. To prevail, Plaintiffs must show: (1) the existence of a guaranty agreement; (2) a breach of that agreement; and (3) damages.

In Indiana, "[a] guaranty is a conditional promise to answer for the debt or default of another person, such that the guarantor promises to pay only if the debtor/borrower fails to pay." No specific words are required to form a binding guaranty. A guaranty "must consist of three parties: the obligor, the obligee, and the surety or guarantor."

To determine whether a person signs in his personal or official capacity, courts “must interpret the [relevant document] as it would any other contract under Indiana law.”

Holding. The U.S. District Court for the Southern District of Indiana dismissed, without prejudice, Plaintiff’s claim against the Alleged Guarantor. Notably, the Innovative Water Consulting opinion did not arise out of a trial or even a summary judgment motion, but rather a preliminary pretrial motion to dismiss that merely challenged the allegations in the complaint. Although the Court dismissed the complaint, it was seemingly on a technicality related to the damages allegations. The Court permitted the Plaintiff to file an amended complaint to address the deficiency, and the case against the Alleged Guarantor continues today.

Policy/rationale. The takeaway from the Court’s decision is that the Alleged Guarantor may end up being on the hook. Ultimately, any ambiguity regarding the Authorization has to be resolved through summary judgment or trial, however.

The Alleged Guarantor’s first argument was that he signed the Authorization on behalf of Defendant company only. However, “references to the guarantor's official title are not conclusive of the capacity in which he signed.” The Court cited to Indiana precedent and reasoned that, because Defendant company was already obligated under the contract, the Court could “reasonably infer” that Alleged Guarantor signed in his personal capacity.

The Alleged Guarantor’s second contention was that the face of the Authorization itself disproved the notion that he agreed to answer for his company’s debt. Neither the word “guaranty” nor the phrase “personally guaranteed” appeared on the Authorization. The Court was unwilling to accept that position, however, at least at the pleadings stage:

Here, drawing all reasonable inferences in [Plaintiff's] favor, the Authorization appears to contain [Alleged Guarantor's] conditional promise to answer for [Defendant company’s] overdue payments, and it identifies the three necessary parties: [the obligor, the obligee, and the guarantor].

The Alleged Guarantor’s final point was that the parties to the Authorization did not sign the “guaranty” in writing as required by the underlying contract, which provided that “all waivers and amendments to this Agreement must be signed in writing by each party.” The Court rejected this theory on the basis that the Authorization was not a waiver or amendment to the underlying contract but rather a separate agreement.

Related posts.

• Lender Prevails In Interpretation Of Limitation Provision In Guaranty
• Indiana Only Requires The Guarantor To Sign A Guaranty

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I represent parties involved in disputes arising out of loans that are in default. 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.

Indiana’s UCC Financing Statement Termination Obligations

This follows-up my post: Indiana’s Mortgage Release Obligations. Today’s post relates, not to real property mortgage liens, but rather to personal property Uniform Commercial Code liens (security interests).

Duty to terminate.

Unlike mortgages, the applicable Indiana statutes do not automatically compel lenders/creditors to terminate (aka release) their UCC financing statements upon payment in full of the underlying commercial/business debt. Instead, the onus is on the debtor/borrower to ask. Indiana Code § 26-1-9.1-513(c) states:

[W]ithin twenty (20) days after a secured party [creditor] receives an authenticated demand from a debtor, the secured party shall cause the secured party of record for a financing statement to send to the debtor a termination statement for the financing statement or file the termination statement in the filing office if:

    (1) except in the case of a financing statement covering accounts or chattel paper that has been sold or goods that are the subject of a consignment, there is no obligation secured by the collateral covered by the financing statement and no commitment to make an advance, incur an obligation, or otherwise give value….

Thus, if directed to do so by the borrower following the resolution of the underlying debt, the lender must tender a termination statement within twenty days. (Note: Subsections (a) and (b) deal with consumer goods and operate like Indiana’s mortgage release requirement.)

Official Comment 2 to the statute appears to provide a rationale for why the law treats UCC liens differently than mortgages. “Because most financing statements expire in five years … no compulsion is placed on the secured party to file a termination statement unless demanded by the debtor, except in the case of consumer goods.” My 6/6/13 post explains that Indiana mortgages do not expire in a tight, five-year window.

Consequences.

Indiana Code § 26-1-9.1-625 “Remedies for secured party’s failure to comply with chapter” outlines the repercussions associated with a lender’s failure to terminate its UCC financing statement under Section 513.

    First, injunction-like relief under subsection (a) is available:  "If it is established that a secured party is not proceeding in accordance with IC 26-1-9.1, a court may order or restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.”

    Second, damages may be awarded under subsection (b), which states: “[A] person is liable for damages in the amount of any loss caused by a failure to comply with IC 26-1-9.1. Loss caused by a failure to comply may include loss resulting from the debtor’s inability to obtain, or increased costs of, alternative financing.”

    Third, a $500 fine may be imposed under subsection (e), which provides: “In addition to any damages recoverable under subsection (b), the debtor … in a filed record … may recover five hundred dollars ($500) in each case from a person that: … (4) fails to cause the secured party of record to file or send a termination statement as required by … IC 26-1-9.1-513(c)…."

The upshot is that, upon a full payoff, it’s in the lender’s best interests to terminate its financing statement. This is especially true if the borrower demands it.

Settlements/Compromises. As with mortgages, the statutory scheme seems to be limited to situations involving a full and complete payoff – the entire debt including interest. The rules do not apply to settlements, compromises, short pays, etc. Hence the need, in settlement agreements arising out of loan disputes, to compel the lender/creditor to terminate its financing statement at closing.
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I represent parties involved in disputes arising out of loans that are in default. 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.

Indiana's Mortgage Release Obligations

Duty to release.

Indiana’s General Assembly has made it clear that lenders/mortgagees must release their mortgages when the underlying debt has been paid in full, including interest. First, Indiana Code 32-29-1-6 provides:

After a mortgagee [lender] of property whose mortgage has been recorded has received full payment from the mortgagor [borrower] of the sum specified in the mortgage, the mortgagee [lender] shall, at the request of the mortgagor [borrower], enter in the record of the mortgage that the mortgage has been satisfied. An entry in the record showing that a mortgage has been satisfied operates as a complete release and discharge of the mortgage.

A virtually identical statutory requirement exists at Indiana Code 32-29-11-1: “... if the debt … and the interest on the debt … that a mortgage secures has been fully paid … [then] the [lender/mortgagee] … or custodian of the mortgage shall:

(1) release;
(2) discharge; and
(3) satisfy of record;

the mortgage as provided in IC 32-28-1.

Indiana Code 32-28-1-1 (for the third time) redundantly states, in pertinent part:

(b) When the debt … and the interest on the debt … that the mortgage … secures has been fully paid … the [lender/mortgagee] … or custodian shall:

(1) release;
(2) discharge; and
(3) satisfy of record;

the mortgage….

Consequences.

The General Assembly added teeth to the release obligation by assigning a deadline and financial repercussions in Indiana Code 32-28-1-2.

    15 days:

(a) This section applies if:

(1) the mortgagor [borrower]… makes a written demand, sent by registered or certified mail with return receipt requested, to the [lender/mortgagee] … or custodian to release, discharge, and satisfy of record the mortgage…; and

(2) the [lender/mortgagee] … or custodian fails, neglects, or refuses to release, discharge, and satisfy of record the mortgage … not later than fifteen (15) days after the date [of receipt of] the written demand.

    Fine and fees/costs:

(b) A [lender/mortgagee] or custodian shall forfeit and pay to the mortgagor [borrower] or other person having the right to demand the release of the mortgage or lien:

(1) a sum not to exceed five hundred dollars ($500) for the failure, neglect, or refusal of the [lender/mortgagee] … or custodian to:

(A) release;
(B) discharge; and
(C) satisfy of record the mortgage or lien; and

(2) costs and reasonable attorney’s fees incurred in enforcing the release, discharge, or satisfaction of record of the mortgage….

(c) If the court finds in favor of a plaintiff who files an action to recover damages under subsection (b), the court shall award the plaintiff the costs of the action and reasonable attorney’s fees as a part of the judgment.

(d) The court may appoint a commissioner and direct the commissioner to release and satisfy the mortgage….. The costs incurred in connection with releasing and satisfying the mortgage … shall be taxed as a part of the costs of the action.

Settlements/Compromises. The statutory scheme outlined above appears to be limited to situations involving a full and complete payoff – the entire debt including interest. The provisions do not seem to apply to settlements, compromises, short pays, etc. Hence the need, in settlement agreements arising out of loan disputes (commercial or residential), to compel the lender/mortgagee to release the mortgage and when it must be released.

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I represent parties involved in disputes arising out of loans that are in default. 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.

Replevin Action To Repossess Model Of Picasso Sculpture Succeeds

Lesson. In Indiana auction sales of goods, the auction is final by the fall of the auctioneer’s hammer or other customary manner.

Case cite. Terrault v. Scheere, 200 N.E.3d 490 (Ind. Ct. App. 2022)

Legal issue. Whether a second auction of a good could be negated through a replevin action filed by the winning bidder in the first auction.

Vital facts. Auction Company sold a scaled model of a Picasso sculpture that had been donated to a school. A participant in the auction via telephone was the highest bidder at $20,000, and Auction Company announced the item as sold. The bidder then wired the necessary funds.

About a month later, a dispute arose in which certain city officials claimed there was inadequate or improper notice before the auction. The notice procedure is not pertinent to this post. The point is that the sale process was disputed, and the Auction Company held a second auction. A second individual placed a winning bid of $40,500 that he paid to the school. This second winning bidder then picked up the item.

Procedural history. The original bidder filed suit to obtain possession of the item. One of his claims was for replevin, and he filed a motion for summary judgment. The trial court granted the motion and ordered the subsequent bidder to relinquish possession of the model Picasso to the first bidder.

Key rules. Ind. Code § 26-1-2-328(2) provides in part that "[a] sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner." This statute is a UCC “Sales” (Article 2) provision applicable to the sale of a “good.”

Holding. The Indiana Court of Appeals affirmed the trial court.

Policy/rationale. At the heart of the dispute were statutory notice requirements applicable to a “distressed political subdivision” – an area of law far afield from my practice or this blog. What triggered my interest in Terrault was the replevin claim generally and the finality of the first auction specifically. The Court stated:

while the conditions to which (bidder 1) agreed when registering for the auction provided that the auctioneer may determine the successful bidder, continue bidding, cancel the sale, or reoffer an item, they do not provide that the School and [Auction Company] were able to take such actions after the winning bidder was determined. Indeed the terms provide that the highest bidder acknowledged by the auctioneer will be the purchaser and [Auction Company] acknowledged [bidder 1] as the highest bidder and received payment from him. Based on the designated evidence, the [city] and [Auction Company] had the authority to sell the model on behalf of the School, and the sale of the model on January 19, 2019, to [bidder 1] was valid.

The outcome here is consistent with sheriff’s sale case law in Indiana. As noted in my 11/15/19 post, In Re Collins, 2005 Bankr. LEXIS 1800 (S.D. Bankr. 2005) provided that: “[o]nce a sheriff’s sale takes place, a mortgage-debtor is no longer the title holder....” Judge Coachys concluded, in Collins, that a sheriff’s sale is complete when the hammer falls and that the actual delivery of the sheriff’s deed is purely ministerial.

Related posts.

• What Is A Replevin Action?
• Possessory Interest Key To Indiana Replevin (Repossession) Action

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I represent parties involved in connection with replevin actions and sheriff’s sales. 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.

Apparent Windfall Not Enough to Set Aside Federal Foreclosure Sale or Negate Deficiency Judgment

Lesson. Judgment debtors (defendants) concerned about liability for a post-sheriff’s sale deficiency judgment should closely monitor the sale process and, if possible, take action to maximize the value of the real estate.

Case cite. United States v. Fozzard, 2022 U.S. Dist. LEXIS 226668 (N.D. Ind. Dec. 16 2022)

Legal issue. Whether an inequitable windfall resulted from a foreclosure sale.

Vital facts. This is my second post about Fozzard. To better understand it, please review my 3/9/23 post. The evidence indicated that GPOA, defendant Fozzard’s condo owner's association/junior secured creditor, and GRC, the developer of Fozzard’s condo complex, were related entities. Fozzard owed GPOA, not GRC, a debt. He focused much of his defense on the fact that the VP of the GPOA, who was also a principal of GRC, tendered the winning bid for GRC (not GPOA) at the sale. The Court captured the essence of Fozzard’s theory: “because GRC had won the property at an apparent discount, Fozzard should not have to pay the alleged debt to GPOA, which was supposed to come out of the sale proceeds.”

Procedural history. GPOA moved for an entry of judgment on its damages, and the Court found that Fozzard owed GPOA nearly $78k. Fozzard objected.

Key rules. Fozzard identified a number of defenses to support his theory, but the Court held that none of them applied. Indiana’s doctrine of “unclean hands” is not favored and is applied “with reluctance and scrutiny.” The defense of “equitable estoppel” requires, among other findings, a showing that the defendant relied on the plaintiff’s conduct “to act in a way that changed his position prejudicially.” Finally, “laches” does not focus only on timing - “prejudice or injury is necessary.”

Holding. The United States District Court for the Northern District of Indiana, over Fozzard’s objection, entered judgment in favor of GPOA and against Fozzard for $77,799.13.

Policy/rationale. Fozzard’s arguments centered on the notion that defendant/cross-claim plaintiff GPOA failed to obtain a judgment on its cross-claim before plaintiff SBA’s foreclosure sale. Fozzard’s thinking was (a) GPOA, a junior creditor, was required to proceed on the same track as senior creditor SBA; (b) GPOA then should have tendered a judgment/credit bid at the sale and obtain title to the property; and (c) GPOA ultimately should have sold the property to GRC for the amount GRC offered Fozzard two years earlier ($160k). Instead, according to Fozzard, GPOA received a windfall because GRC purchased the property at a severe discount while GPOA obtained a judgment against Fozzard for the full amount owed. Basically, Fozzard believed that GPOA was set up to receive a double recovery.

The following is a summary of the key points behind the Court’s rejection of Fozzard’s defenses:

    Delay in seeking judgment: “Certainly, GPOA did not move for entry of judgment according to Fozzard’s preferred (when viewed in retrospect) timeline, but the Court sees no misconduct here, much less intentional misconduct, so Fozzard does not prevail.”

    GPOA’s lack of bid: “Perhaps GPOA may have been able to realize a profit if it undertook these actions, but the Court sees no reason to find that GPOA had a duty to act in this manner. By not bidding on the property, GPOA accepted the risk that it may never recoup damages from Fozzard, as not all judgments that are entered are ultimately paid by the debtors. By bidding on the property, GPOA would have accepted the risk that it may not be able to find a buyer for the property or that the property would not yield a sale price sufficient to cover GPOA’s damages. The Court sees no reason to impose on GPOA the duty to accept one of these risks over the other.”

    Windfall to GPOA: “Though the evidence shows that GRC and GPOA have the same directors, the entities are not the same. GRC may be the beneficiary of buying (at a fairly conducted marshal’s sale) a piece of property at a discounted price, but this does not alter the fact that GPOA has incurred damages through Fozzard’s breach of the contract between him and GPOA. A judgment that awards damages to GPOA to make it whole is not a windfall. It is justice.”

Note: The decision has been appealed to the 7th Circuit. If and when an opinion results from the appeal, I will follow up here.

Related posts.

• What Is A Credit Bid?
• An Indiana Deficiency Judgment Arises Out Of The Foreclosure Judgment Itself, Not A Separate Action

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I represent parties involved in foreclosure sales. 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.

Federal Foreclosure Sale Upheld – 15% Of Fair Market Value Did Not “Shock The Conscience”

Lesson. In Indiana, foreclosure sales are not designed, nor required, to net the fair market value of the real estate.

Case cite. United States v. Fozzard 2022 U.S. Dist. LEXIS 226668 (N.D. Ind. Dec. 16 2022)

Legal issue. Whether a foreclosure sale should have been set aside based on an inadequate sale price.

Vital facts. Fozzard purchased a condo to operate a business using a Small Business Administration (SBA) loan. The condo was subject to the regulations of The Galleria Property Owners Association, Inc. (GPOA), which required the property to be kept in a reasonable condition. Fozzard defaulted on his SBA loan and fell behind on the fees he owed to GPOA, which discovered the condo to be empty, leaking and growing mold. This led to GPOA taking possession of the condo and incurring expenses to clean the unit and stabilize the temperature. GPOA placed a lien on the condo for the unpaid expenses.

Meanwhile, the SBA filed suit to foreclose its mortgage. GPOA filed a cross-claim to foreclose its lien. Settlement discussions ensued. The condo had a fair market value between $155k and $170k. Galleria Realty Corporation (GRC), the developer of the condo complex, offered Fozzard $160k for the unit, but Fozzard declined.

The SBA and Fozzard entered into an agreed judgment for $172k that permitted the U.S. Marshals to auction the condo to satisfy the judgment. (In federal court foreclosures, the U.S. Marshals Service handles foreclosure sales – not county sheriffs.) The judgment was silent as to the interests of GPOA, however. By the sale, Fozzard’s debt to the SBA had been paid down to about 19k. At the sale, the VP of GPOA, who was also a principal of GRC, attended the sale for GRC (not GPOA) and tendered the winning bid of $19,697.46. Fozzard did not object to the SBA’s motion to confirm the sale.

Procedural history. After the sale, the Court found that Fozzard owed GPOA nearly $78k. Fozzard objected and requested that the sale be set aside.

Key rules. Under Indiana law, “[w]here it appears that the results of a sale are such that entry of a deficiency judgment is shocking to the court's sense of conscience and justice, the sale may be set aside or the request for a deficiency judgment denied."

The U.S. Supreme Court has held: "market value . . . has no applicability in the forced-sale context; indeed it is the very antithesis of forced-sale value. . . . '[F]air market value' presumes market conditions that, by definition, simply do not obtain in the context of a forced sale."

The Seventh Circuit has stated that “bidders should be able to rely on the results of judicial sales; if the auction is properly noticed and conducted, ‘[t]he sale, for all concerned, should be final.’"

Holding. The United States District Court for the Northern District of Indiana overruled Fozzard’s objection to the sale price of the condo.

Policy/rationale. One of Fozzard’s contentions was that the sale “shock[ed] the conscience” because the price was less than 15% of the appraised value. Indeed, the fair market value of the condo was sufficient to retire Fozzard’s debts to both the SBA and GPOA. Instead, GRC acquired title to a $160k condo for less than $20k, while Fozzard remained on the hook to GPOA for nearly $80,000. A tough pill for Fozzard to swallow, but the Court reasoned that a comparison of the sale price to the market value was “irrelevant” under the law. The Court also pointed to Fozzard’s failure to object to the motion to confirm the sale. Finally, the Court noted there was “no reason to doubt the integrity” of the public auction or the related notices leading up to it.

Fozzard waged a handful of additional attacks on the outcome that I will address in my next post about this case.

Note: The decision has been appealed to the 7th Circuit. If and when an opinion results from the appeal, I will follow up here.

Related post.  How Much Should A Lender/Senior Mortgagee Bid At An Indiana Sheriff’s Sale?

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I represent parties involved in foreclosure sales. 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.

Indiana Court Discusses Test For Recovery Of Attorney's Fees In Action Against Guarantor

Lesson. An arbitrary “partial” award of attorney fees to a lender may be reversible error. Trial courts must assess what is a reasonable amount of attorney’s fees, taking into account all services rendered up to the entry of such an award.

Case cite. Shoaff v. First Merchs. Bank, 2022 Ind. App. LEXIS 395 (Ind. Ct. App. 2022)

Legal issue. Whether a trial court’s award of attorney’s fees was unreasonable (too low).

Vital facts. This is my third post about Shoaff. Please review my first and second posts for more information about the liability and damages issues in Lender’s suit against Guarantor.

Procedural history. The trial court granted summary judgment for Lender, but Lender cross-appealed the court’s award of attorney fees.

Key rules. Last week’s post dealt with non-discretionary contract damages. “Unlike the calculations of interest and late fees, the trial court's discretion with respect to attorney's fees is, generally speaking, unfettered by everything except for reasonableness.”

“The determination of reasonableness of an attorney's fee necessitates consideration of all relevant circumstances.” Indiana courts may, but are not required to, consider things like hourly rate, result achieved, and difficulty of the issues.

Holding. The Indiana Court of Appeals reversed the trial court and remanded the case for an assessment of a reasonable amount of fees for “all services rendered in pursuit of the debt” owed by Guarantor to and through the date of the order granting such fees.

Policy/rationale. Lender asserted that the trial court abused its discretion when it limited its award of attorney’s fees to the date of the initial summary judgment entry. Lender sought fees for the subsequent litigation that included additional motions and a second award of damages. The Court noted that “reasonable attorney's fees are guaranteed by the [guaranty].”

The Shoaff opinion stated that the trial court’s failing was its “unexplained” decision to limit fees up to a certain date. That decision was “arbitrary,” rendering the award of fees unreasonable. The Court threaded the discretionary/reasonableness needle as follows:

The trial court is free to evaluate [Lender’s] submissions for the fee amount and assess whether that amount itself is reasonable, and the trial court may, in its discretion, conclude that the amount either is or is not reasonable. But to award partial fees, reasonable or not, is to ignore the plain meaning of the [guaranty], and therefore constitutes an abuse of discretion.

As stated last week, the rules and outcome in Shoaff should apply to actions to enforce promissory notes as well as guaranties.  

Related posts.

• Attorney Fee Awards in Indiana
• Unsettled: Recoverability Of Attorney’s Fees For In-House Counsel
• Indiana Attorney Fee Liens In Commercial Cases

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I represent parties involved in disputes arising out of loans that are in default. 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.

An Award Of Unpaid Interest And Late Fees Due Under An Absolute Guaranty Is Not Discretionary

Lesson. Contract language is a court’s road map for calculating a lender’s damages, including accrued interest and late fees, which are not discretionary.

Case cite. Shoaff v. First Merchs. Bank, 2022 Ind. App. LEXIS 395 (Ind. Ct. App. 2022)

Legal issue. Whether a trial court has discretion in awarding damages for unpaid interest and late fees due under a guaranty.

Vital facts. This is my second post about Shoaff. Please review last week’s post for background about this lender v. guarantor litigation dealing with an absolute (unconditional) guaranty. The underlying loan documents provided for the recovery of accrued interest and late fees upon default.

Procedural history. The trial court granted summary judgment for Lender, but upon Guarantor’s appeal, Lender cross-appealed the ruling on damages.

Key rules. Indiana recognizes two kinds of guaranties. The first is an absolute or unconditional guaranty:

An absolute guaranty is an unconditional undertaking on the part of the guarantor that the person primarily obligated will make payment or will perform, and such a guarantor is liable immediately upon default of the principal without notice…. An absolute guaranty, unlike a conditional one, casts no duty upon the creditor or holder of the obligation to attempt collection from the principal debtor before looking to the guarantor….

The second type of guaranty is a conditional guaranty, which “is an undertaking to pay or perform if payment of performance cannot be obtained from the principal obligor by reasonable diligence….”

Rules applicable to other contracts govern guaranties. Indiana courts “must give effect to the intentions of the parties, which are to be ascertained from the language of the contract in light of the surrounding circumstances."

Generally, the nature and extent of a guarantor's liability depends upon the terms of the contract, and a guarantor cannot be made liable beyond the terms of the guaranty. Nevertheless, the terms of a guaranty should neither be so narrowly interpreted as to frustrate the obvious intent of the parties, nor so loosely interpreted as to relieve the guarantor of a liability fairly within their terms.

A lender’s damages are contractual in nature, and "[t]he rules governing the interpretation and construction of contracts generally apply to the interpretation and construction of a guaranty contract." Damages must be supported by the evidence.

“Readily ascertainable” damages means that “the trier of fact need not exercise its judgment to assess the amount."

Holding. The Indiana Court of Appeals reversed the trial court’s damages award and remanded the case for a correct calculation of interest and late fees consistent with the Court’s opinion.

Policy/rationale. Lender argued that the trial court did not compute its damages correctly. At issue were accrued interest and late fees that, according to the Court, were “calculable and readily ascertainable.” This means that the trial court's discretion (such as a reasonableness standard) should not have been implicated.

In Shoaff, the trial court did not take into account all of the variables needed to accurately calculate Lender’s losses. First, the trial court's computation of interest employed a flat 5% rate instead of the fluctuating interest rate called for in the loan documents. Second, the trial court assessed only one late fee, but the loan documents required a fee for each of the several late payments in question. The Court of Appeals reasoned that the trial court improperly exercised “some discretion” regarding the “methodology for calculating interest and late fees,” and thus “abused that discretion by adopting an approach that did not comply with the unambiguous terms of the [loan documents].” The Court’s reasoning should apply with equal vigor to any loan documents, not just guaranties.

Related posts.

• “Collection” Vs. “Payment” Guaranties: Dearth Of Indiana Law
• Lender Prevails In Interpretation Of Limitation Provision In Guaranty

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I represent parties involved in disputes arising out of loans that are in default. 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.

Indiana Court of Appeals Denies Guarantor’s “Material Alteration” Defense

Lesson. While it still is advisable for lenders to have guarantors sign off on any loan modifications, such paperwork may not always be required. Indiana courts will look closely at both the nature of the alterations and any waiver/consent language in the guaranty when deciding whether to absolve guarantors of liability.

Case cite. Shoaff v. First Merchs. Bank, 2022 Ind. App. LEXIS 395 (Ind. Ct. App. 2022)

Legal issue. Whether a guarantor was released from liability based on alleged “material alterations” of the original obligation.

Vital facts. Borrower defaulted on a $600k loan, and Lender sued Guarantor for the debt. The Shoaff opinion quotes verbatim important provisions of the guaranty upon which the Court relied, so please review for more facts. Over a five-year period, Borrower’s underlying obligation was modified “multiple times,” which included:

(1) a series of new notes being issued for the debt; (2) a new loan number being provided; (3) [a co-guarantor] signing a new guaranty; (4) the alteration of the payment of the debt from a revolving line of credit to a term note; (5) a change in the manner in which the debt was to be repaid (altered to required monthly payments); and (6) multiple changes in the form and amount of the interest rate.

Lender notified Guarantor “as a courtesy” about many, but not all, of these modifications.

Procedural history. The trial court granted summary judgment in favor of Lender. Borrower appealed.

Key rules. Shoaff provides an impressive summary of Indiana guaranty law, including how the rules operate within the summary judgment context. As it relates to Guarantor’s key defense, Indiana common law provides that “when parties cause a material alteration of an underlying obligation without the consent of the guarantor, the guarantor is discharged from further liability whether the change is to [the guarantor’s] injury or benefit.” A “material alteration” is:

a change which [1] alters the legal identity of the principal's contract, [2] substantially increases the risk of loss to the guarantor, or [3] places the guarantor in a different position. The change must be binding.

“[T]he legal identity of the principal's contract … is best understood to mean whether the obligation itself—rather than the instrument which records it—has meaningfully changed.” On this point, the Court cited to a legal encyclopedia, American Jurisprudence 2d, for authority:

even without an express term in a guaranty allowing it, a modification of the underlying obligation generally does not revoke a continuing guaranty; the guarantor is only discharged if the modification, other than an extension of time, creates a substituted contract or imposes risks on the secondary obligor fundamentally different from those imposed pursuant to the original one.

Holding. The Indiana Court of Appeals affirmed the summary judgment for Lender.

Policy/rationale. Guarantor contended that Borrower’s underlying obligation had been “materially altered” such that Guarantor was released from the debt. The Court disagreed. A distinctive aspect of Shoaff is the Court's reliance on language in the guaranty that Guarantor “prospectively consented” to the alterations and waived notice of them:

The only changes were to the structure of the loan, the dates associated with its repayment, and the manner in which it was to be repaid. Those changes do not fit any of the three categories of materiality, and clearly fall within the language of the [guaranty], demonstrating that [Guarantor] contemplated their possibility and prospectively consented to them.

Moreover, the Court did not view the loan modifications as imposing “fundamentally different risks” on Guarantor, even though Guarantor may end up paying more than he expected to pay when he signed the guaranty. Such changes, the Court reasoned, were “in degree, not in kind.” Guarantor “assumed” such risks of paying interest, late fees and future debts by virtue of the language in the guaranty. In a nod to a strict reading of the operative contract language, the Court concluded:

the underlying obligation—guaranteed by [Guarantor]—was not materially altered. Regardless, any alterations were contemplated by the parties to the Agreement, and prospectively consented to by [Guarantor].

Related posts.

• Indiana Court Releases Mortgage On Parents' Farmland Based On Material Alteration Of Kids' Loan
• “Material Alteration” Defense Rejected In Indiana Guaranty Enforcement Action
• Liability Of Guarantors Or Accommodation Parties When The Original Obligation Is Materially Altered

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I represent parties involved in disputes arising out of loans that are in default. 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.

Indiana Court Holds That Contract For Purchase Of Loan Was Not Breached

Lesson. When dealing with the purchase or sale of a loan, be mindful that the borrower could pay off the loan before closing, so consider including language in the agreement to account for that contingency.

Case cite. Singleton St. Pierre Realty Invs. LLC v. Estate of Singleton 2022 Ind. App. Unpub. LEXIS 1390 (Ind. Ct. App. Dec. 6 2022)

Legal issue. Whether a seller breached a loan sale agreement.

Vital facts. Buyer and Seller (and estate) entered into an agreement for the purchase and sale of a $1MM loan that was in default. The parties contemporaneously contracted for the purchase of a funeral home, which the underlying borrower operated. The borrower (as tenant) was $366k behind in its lease payments. If the deals closed, Buyer would become both a lender and a landlord with rights to recover the $1.0MM loan and the $366k lease arrearage. The probate court approved the agreements. About a week before closing, the borrower paid off the loan, so the closing on that agreement never occurred. The closing on the purchase of the property did occur, however. Buyer later collected the $366k.

Procedural history. Seller claimed Buyer was obligated to remit the lease arrearage to Seller. The trial court agreed and granted a summary judgment awarding damages to Seller for the arrearage. Buyer appealed.

Key rules. The Singleton opinion, which turned on the Court’s reading of the two agreements, spelled out Indiana’s general rules of contract interpretation (citations omitted):

The unambiguous language of a contract is conclusive upon the parties to the contract and upon the courts. Courts may not construe clear and unambiguous provisions, nor may courts add provisions not agreed upon by the parties. Unambiguous contracts must be specifically enforced as written without any additions or deletions by the court. In interpreting a written contract, the court should attempt to determine the intent of the parties at the time the contract was made as discovered by the language used to express their rights and duties. If the language of the instrument is unambiguous, the intent of the parties is determined from the four corners of that instrument. If, however, a contract is ambiguous or uncertain, its meaning is to be determined by extrinsic evidence and its construction is a matter for the fact finder. The contract is to be read as a whole when trying to ascertain the intent of the parties. The court will make all attempts to construe the language in a contract so as not to render any words, phrases, or terms ineffective or meaningless.

Holding. The Indiana Court of Appeals affirmed the trial court.

Policy/rationale. One of Buyer’s theories to retain the $366k was based on its interpretation of the loan purchase agreement. Buyer contended that Seller breached the contract despite the fact that “no amounts were owed” under the loan at the time of the scheduled closing. Nonetheless, Buyer claimed that, because the loan had a balance of over $1,000,000 when the related (but separate) property sale agreement was executed, "[$1MM was] the amount … that the parties understood and intended that [Buyer] had to recover before it would be obligated to remit the Arrearage to the [Seller]."

Seller countered that Buyer did not identify which contract term in the loan purchase agreement was allegedly breached. No language in the agreement “prevented [Seller] from accepting the amount due under the [loan] before the closing date and [nothing gave Buyer] any right to the [loan] proceeds before the closing date.” Had Buyer "wanted to prevent an early payoff … or require [the loan have] some minimum balance at the time of closing, [Buyer] could have demanded that the [agreement] include language to that effect." Or, the agreement "could have included language reducing the purchase price … to account for any payments made … prior to the closing date[,] but it did not.” Moreover, Buyer did not tender the purchase price to Seller and did not proceed with the closing as the agreement stipulated, “thus relieving [Seller] of performing its obligations under the [loan purchase] agreement.”
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Part of my practice includes the purchase and sale of secured 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.

Criminal Fraud Arising Out of Civil Title/Foreclosure Disputes

Quick post today to start the New Year. My routine case law search uncovered a criminal case related to some procedural technicalities that admittedly have no relevance to my blog:    United States v. Yoder, No. 3:17-CR-30 JD, 2022 U.S. Dist. LEXIS 204060 (N.D. Ind. Nov. 9, 2022).

What I found interesting was that the two characters implicated in the criminal matters were involved in a pair of residential title/foreclosure disputes we handled back in 2016. The factual background in Yoder essentially mirrors what we thought occurred in our cases:

As set out in the presentence report, in 2014 and 2015, Mr. Yoder and his codefendant Kyle Holt, were engaged in a scheme to defraud homeowners who were facing foreclosures on their homes. They would approach such distressed homeowners and convince them to transfer title of the property in exchange for false promises of being able to avoid further foreclosure obligations. In particular, they falsely represented to the homeowners that they would handle their mortgage arrearages and the foreclosure process. Some believed these lies and transferred their interest in the property through quit claim deeds to entities controlled by the defendants. Mr. Yoder and Mr. Holt would then record the quit claims deeds at the local recorder's office. In reality, though, the quit claim deeds did not extinguish the outstanding mortgage debts. Regardless, Mr. Yoder would use the fraudulent interest in the property to secure to himself or others ownership of the property.

In some instances, to further the fraud, Mr. Yoder would cause to be mailed a bogus document entitled "International Promissory Note" to the financial institution holding the outstanding mortgage debt, purporting to extinguish the debt. Mr. Yoder knew this was fiction and did this to cloud the title of the property. Simultaneously, Mr. Yoder would cause to be filed a fraudulent “Satisfaction of Mortgage” with the county recorder's office in an attempt to discharge the mortgage.

We were engaged by a residential mortgage loan servicer to protect the interests of the senior lender/mortgagee in the prior matters. We were able to convince the court that the paperwork purportedly affecting title and our client’s mortgage was bogus, and the court granted summary judgment in our client’s favor.

Apparently our cases were not isolated events, and someone must have reported Yoder and Holt to the authorities. The criminal actions appear to be ongoing, and you can search Pacer under the case number above to learn more.

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I represent lenders, as well as their mortgage loan servicers, entangled in loan-related disputes. 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.

Debtors Who Fail To Disclose A Potential Claim During The Bankruptcy Process Are Precluded From Pursuing Such Claims Later

Lesson. A BK debtor’s civil claims for damages remain exclusively with the BK trustee.

Case cite. Capalla v. Best, 198 N.E.3d 26 (Ind. Ct. App. 2022).

Legal issue. Whether a state court lawsuit for damages should be dismissed because the underlying claims were not disclosed by the plaintiffs in prior bankruptcy action.

Vital facts. Best Vineyards filed a lawsuit against the Capallas in an Indiana state court in July 2019. That action alleged breach of contract, theft, and deception. The Capallas filed for bankruptcy in October 2019, and the trial court stayed Best Vineyards' case. In 2021, following months of bankruptcy-related proceedings, the Capallas initiated their own Indiana state court lawsuit against Best Vineyards for abuse of process, malicious prosecution, defamation per se, fraud, deception, and intentional infliction of emotional distress. Notably, “the Capallas failed to timely disclose their interest in [these] civil claims in their bankruptcy proceedings.”

Procedural history. Best Vineyards filed a Trial Rule 12(C) motion for judgment on the pleadings that the trial court granted. The Capallas appealed to the Indiana Court of Appeals.

Key rules. Indiana law is settled that “a debtor who fails to disclose a potential cause of action in a bankruptcy proceeding is precluded from pursuing such undisclosed claims in subsequent litigation.”

The Court noted that when a debtor files bankruptcy, unliquidated lawsuits become part of the bankruptcy estate:

When a debtor files a petition in bankruptcy, the debtor is divested of all of his or her assets, including any potential causes of action, and the assets are transferred to the bankruptcy estate. As stated in 11 U.S.C. § 541(a), the bankruptcy estate consists of "all legal or equitable interests of the debtor in property as of the commencement of the case." Once a cause of action becomes property of the bankruptcy estate, the debtor may not pursue the claim until it is abandoned from the estate. A property interest can be abandoned from the bankruptcy estate only if it has been listed in the debtor's schedule, has been disclosed to all the creditors, and is ordered abandoned by the bankruptcy court.

Further, the absence of standing “effectively prevents a plaintiff from pursuing an action and restrains the court from exercising its general jurisdiction over any issue in the case.”

Holding. The Court of Appeals affirmed the trial court's dismissal and concluded that the Capallas' claims were barred because the Capallas lacked standing to bring them.

Policy/rationale. Since the Capallas failed to list in their bankruptcy schedule their causes of action against Best Vineyards, they lacked standing to pursue the claims later in state court. This is because the suit must be brought by the bankruptcy trustee. In other words, the Capallas’ claims belonged to their bankruptcy estate and could only be brought by the trustee in that case. The Capallas also failed to disclose their interests in the civil suit, so the trustee “cannot be said to have abandoned them.”

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Part of my practice involves the collection of commercial debts. 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.

Collecting From Related Companies - The Two Prongs Of Indiana’s Alter Ego Doctrine

Lesson. The alter ego doctrine requires a causal connection between the misuse of the corporate form and an injustice.

Case cite. Perez v. Reitz, 2022 U.S. Dist. LEXIS 177250 (N.D. Ind. 2022)

Legal issue. Whether two companies acted as alter egos such that the corporate veil could be pierced to hold both liable for damages.

Vital facts. Perez stems from a wrongful death action following a fatal truck accident. “Driver” of a tractor-trailer struck the decedent’s vehicle. Defendant “Transfer Co” owned the tractor-trailer and employed Driver. Two brothers started the company in 2010 to haul certain construction materials. Transfer Co owned trucks/trailers and employed 12 drivers. “Farm Co,” also named as a defendant, was created in 1991 and specialized in the transportation of certain farm products. Farm Co had about 47 trucks and 62 employees. The two brothers that owned Transfer Co also owned Farm Co.

Procedural history. The Plaintiff estate, after settling with Transfer Co, sought to hold Farm Co liable for the accident. Farm Co filed a motion for summary judgment.

Key rules. Generally, in Indiana, the “alter ego doctrine” provides that one corporation can be liable for another corporation’s actions “when the one so organizes or controls the other's affairs as to use it as a mere instrumentality or adjunct, often with the goal of shielding itself from liability.” The fact-intensive, two-pronged analysis must establish that the two corporations “are acting as the same entity” and that the “misuse of the corporate form would constitute a fraud or promote injustice.” However, Indiana is “reluctant to disregard the corporate form.”

Prong one looks to many factors, including the “intermingling of business transactions, functions, property, employees, funds, records, and corporate names in dealing with the public.” Further, courts look to whether “(1) similar corporate names were used; (2) the corporations shared common principal corporate officers, directors, and employees; (3) the business purposes of the corporations were similar; and (4) the corporations were located in the same offices and used the same telephone numbers and business cards.”

Prong two (fraud/injustice) must result from the misuse of the corporate form. “Only when the corporations ‘disregard the separateness of [their] corporate identity and when that act of disregard causes the injustice or inequity or constitutes the fraud that the corporate veil may be pierced.’”

Holding. The U.S. District Court for the Northern District of Indiana granted the motion for summary judgment and dismissed Farm Co from the case.

Policy/rationale. The Court reasoned that, while there was evidence Transfer Co and Farm Co may have acted as alter egos (prong one), the misuse of the corporate form did not cause an inequity or injustice (prong two). There was no nexus between acts of the alter egos and the alleged injustice, which was that Plaintiff could not fully collect on the judgment. In fact, the Plaintiff offered no evidence of inequity or injustice at all, “much less a causative link back to the alleged acts of a merged identity.” The Court reasoned:

Nothing on this record indicates that [Transfer Co] has proven defunct, insolvent, or incapable of financing a settlement or judgment to make the estate whole. Nothing on this record indicates that [Farms Co] erected or used [Transfer Co] as a shield (or vice versa) to evade liability or that the estate would be inequitably foreclosed from recovery.

Please review the opinion for more details applicable to the fact-sensitive analysis of the Court. Perez is an example of the challenges facing litigants who are trying to pierce the corporate veil, particularly where, as here, the alter ego nature of the business relationship may not have been designed to harm, or otherwise avoid liability to, the Plaintiff.

Related posts.

• Indiana Federal Court Dismisses Alter Ego Claim Against Affiliated Company
• Indiana Collection Theories Of Piercing The Corporate Veil, Alter Ego, Successor Liability And Mere Continuation: Part I

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Part of my practice involves the representation of parties in post-judgment collection actions. 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.

Lender Permitted To Praecipe For Sheriff’s Sale 12 Years Post-Judgment

Lesson. Sheriff’s sales can occur even after an Indiana judgment lien expires.

Case cite. U.S. Bank Tr. Bank Tr. Nat'l Ass'n v. Dugger, 193 N.E.3d 1015 (Ind. Ct. App. 2022).

Legal issue. Whether a mortgage lender’s right to a sheriff’s sale ceased to exist ten years after the entry of judgment.

Vital facts. Original lender obtained a foreclosure decree against Joshua Dugger (“Joshua”) in 2009. Three subsequent sheriff’s sales were cancelled. In 2010, Joshua filed a Chapter 7 bankruptcy and received a discharge in January 2011. Joshua transferred the mortgaged property to Steven Dugger (“Steven”) in 2016. Later, the Baldridges (“Owners”) purchased the real estate from Steven. Apparently nothing of any significance occurred in the foreclosure case until 2021, at which point the current lender (“Lender”) acquired the original lender’s interest in the mortgage, appeared in the action, and asked the court for permission to praecipe for a sheriff’s sale. Notably, Lender’s initiative in 2021 occurred over ten years after the entry of judgment in 2009.

Procedural history. The trial court denied Lender’s motion for leave to file a praecipe for a sheriff’s sale.

Key rules.

Indiana Code 34-55-9-2 states that final judgments for money create a lien that exists for ten years. Importantly, however, “although the judgment lien expires after ten years, [the] judgment still exists for at least another ten years.”

I.C. 34-55-1-2(a) essentially provides that execution on a judgment over ten years old can occur but only “on leave of court” (i.e., a judge’s permission). The court’s ruling on such a motion is discretionary. The Court in Dugger explained:

[A] creditor holding a judgment that is more than ten years old may, only with leave of court, execute the judgment against the debtor's real estate during the remainder of the life of the judgment. See, e.g., Ind. Code § 34-55-1-3(1) (1998) (one of three kinds of execution of judgments is execution against property of judgment debtor).

Here is a reminder of the dual nature of most mortgage foreclosure judgments:

    “A mortgage is an interest in real property that secures a creditor’s right to repayment.” As such, a party’s action to foreclose a mortgage is, by definition, an in rem (i.e. against the property) proceeding.

    Creditors also may pursue a debtor’s in personam (i.e. personal) liability for under a promissory note or credit agreement. This includes the enforcement of a judgment against the debtor’s personal property assets.

    A debtor may protect herself from this personal liability only by obtaining a Chapter 7 bankruptcy discharge. A mortgage lien, which is a right against real estate, survives and remains enforceable, however.

Holding. The Indiana Court of Appeals reversed the trial court, paving the way for a sheriff’s sale.

Policy/rationale. Owners first contended that Lender’s judgment ceased to exist because Lender did not “renew” the lien before the ten-year deadline. The Court reasoned that, while a judgment may be renewed, there is no legal requirement to do so. Lender’s course of action in Dugger was thus appropriate.

Owners’ second allegation was deception on the part of Lender when it requested the court to convert the 2009 judgment into an in rem judgment. However, the judgment had both in personam and in rem elements. When Joshua received his Ch. 7 BK discharge, the law eliminated only his personal liability under the loan. Lender’s right to collect against the mortgaged real estate still was enforceable. As such, Lender’s request to amend the judgment - which in my opinion probably was unnecessary - nevertheless did not constitute deception.

Related posts.

• An “In Rem” Judgment Limits Collection To The Mortgaged Property
• Contents of Indiana Foreclosure Judgment/Decree
• Mortgage Liens Survive Chapter 7 Bankruptcy Discharge, Allowing In Rem Foreclosures
• Indiana Judgment Lien (10 Years) and Judgment Enforcement (20 Years) Statutes Of Limitation

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I represent parties involved in disputes arising out of loans that are in default. 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.

In Indiana, Prejudgment Attachment Requires A Bond

Lesson. When considering the remedy of prejudgment attachment – i.e. freezing a defendant’s assets during the pendency of a lawsuit - make sure you evaluate the statutory bond requirement.

Case cite. Wayne Mfg. LLC v. Cold Headed Fasteners & Assemblies Inc., 2022 U.S. Dist. LEXIS 122685 (N.D. Ind. July 12 2022)

Legal issue. Whether Plaintiff was entitled to prejudgment attachment.

Vital facts. Plaintiff sued Defendant for breach of contract associated with the supply of auto parts, including custom bolts and fasteners. Defendant countersued for Plaintiff’s failure to pay for the allegedly non-confirming products.

Procedural history. The Wayne Mfg. opinion arises out of Plaintiff’s motion for writ of prejudgment attachment of Defendant’s assets.

Key rules. Federal Rule 64(a) states: “at the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located [here, Indiana law], provides for seizing a person or property to secure satisfaction of the potential judgment." Rule 64(b) provides that the remedies available under section (a) include, among others, attachment.

Indiana authorizes prejudgment attachment under Indiana Code 34-25-2-1 and Trial Rule 64. Please click on the links to review in full.

I.C. 34-25-2-4 also is relevant as it outlines the affidavit required to be filed by the Plaintiff seeking prejudgment attachment.

Moreover, I.C. 34-25-2-5 states that a bond must be posted in order to obtain the relief. Plaintiff shall:

[E]xecute a written undertaking, with sufficient surety, to be approved by the clerk, payable to the defendant, to the effect that the plaintiff will: (1) duly prosecute the proceeding in attachment; and (2) pay all damages that may be sustained by the defendant if the proceedings of the plaintiff are wrongful and oppressive.

Holding. United States Magistrate Judge Collins denied Plaintiff’s motion based on the failure to meet the surety requirements in I.C. 34-25-2-5(2).

Policy/rationale. Plaintiff pursued prejudgment attachment because it sought a sizable judgment in Indiana against an Ohio corporation. Plaintiff filed the statutory affidavit in support, but the Court’s opinion did not focus on the factual bases for the requested relief. Instead, the Court concentrated on the bond requirement. Plaintiff stipulated it was prepared to post a cash bond of 300k. The Court found that amount to be “woefully inadequate.” Defendant argued that attachment “would drastically impact its business and ability to continue operations.” Defendant’s affidavit detailed that the bond offered by Plaintiff would not cover Defendant’s projected damages of over $2 million. Further, Defendant’s affidavit specified that that attachment would cause its business to fail altogether. The fact that Defendant had a pending counterclaim for damages bolstered its position.

Related posts.

• Pre-Judgment Seizure of Property: Attachment Fundamentals
• Assets Cannot Be Frozen By An Injunction

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Part of my practice involves the collection of business debts. 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.

Memo To Mortgage Lenders/Servicers/Counsel: Stop Naming County Treasurers In Indiana Mortgage Foreclosure Cases

In connection with my consumer finance/contested foreclosure practice, I continue to see mortgage foreclosure complaints that name the county or the county treasurer when there are delinquent real estate taxes on the mortgaged property. This is a waste of time and money.

Pre-2011. Before 2011, the practice of naming the county was common, if not required. In the event a pre-foreclosure title search disclosed delinquent taxes, which in Indiana are a super-priority lien on the owner’s real estate, the foreclosing plaintiff would name the county as a defendant so the treasurer could formally assert the county’s lien. The foreclosure decree, in turn, would order that the county must be paid first out of any proceeds from the sheriff's sale. As a practical matter, this meant that the lender advanced the delinquent taxes to the county at the time of the sheriff's sale or immediately after. Or, in the case of a cash bidder (third party purchaser), the county treasurer would get the first cut of the sale proceeds.

Post-2011. Even before 2011, we started to see some county sheriffs' offices requiring the plaintiff/lender to pay delinquent real estate taxes before the sale. That became a formal, statutory requirement by virtue of Ind. Code § 32-29-7-8.5, which states, in pertinent part:

(a) Before the date of a sheriff's sale of property under section 3(c) of this chapter, the party that filed the praecipe for the sheriff's sale shall pay the following:

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    (2) … all delinquent property taxes, sewer liens described in IC 36-9-23-32, special assessments, penalties, and interest that are due and owing on the property on the date of the sheriff's sale.

(b) If the payments required under subsection (a) are not made in full by the date of the sale, the sheriff:

    (1) shall cancel the sheriff's sale; and
    (2) may conduct the sheriff's sale only:

        (A) upon evidence that the payments required under subsection (a) have been made in full; and
        (B) after a subsequent praecipe is filed, costs are paid, and the sheriff's sale is advertised under this chapter.

In short, if a foreclosing lender does not pre-pay all delinquent real estate taxes, then there will be no sale.

Proof. Depending on the county, the sheriff’s office will require some sort of proof in advance of the sale that there are no delinquent real estate taxes associated with the mortgaged property. Marion County (Indianapolis), for example, mandates that a so-called Tax Clearance Form be (a) completed by the party requesting the sale, (b) stamped by the treasurer’s office and (c) submitted to the sheriff’s office with the pre-sale bid package. The form must be stamped regardless of whether delinquent taxes were ever an issue.

No more. Since the Indiana General Assembly mandates that county treasurers automatically collect delinquent real estate taxes whenever there is a foreclosure sale, the time and expense of naming counties is neither required nor, frankly, advisable. This is true with both commercial and residential foreclosures.
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Part of my practice includes representing parties in connection with sheriff’s sales. 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.

Before You File, Review For “Personally Identifiable Information” and Redact: Indiana Overview

Most if not all states, including Indiana, have rules requiring the redaction of so-called “personally identifiable information” (PII) before documents may be filed with a court. (Don’t know what “redaction” means? This article helps explain.) Generally speaking, each document should be prepared according to the court’s respective guidelines and jurisdictional/county rules. Examples of these documents include, but are not limited to, complaints for foreclosure, affidavits, judgments, and bankruptcy filings.

Federal rules. For federal court actions, see Federal Rule of Civil Procedure Rule 5.2 and Federal Rule of Bankruptcy Procedure 9037.

Indiana rules. Indiana’s Rules on Access to Court Records (the “Rules”) govern our state court matters. There are only 12 rules, and Indiana practitioners and their staffs should take a minute to review (or re-review) them. For purposes of today’s post, Rule 5(C)(1) is key:

        (C) Personal Information of Litigants, Witnesses, and Children:

            (1) Unless necessary to the disposition of the case, the following information shall be redacted, and no notice of exclusion from Public Access is required:

                (a) Complete Social Security Numbers of living persons;
                (b) Complete account numbers, personal identification numbers, and passwords.

If the information is necessary to the disposition of the case, the document containing the confidential information shall be filed on green paper (if paper filing) or filed as a confidential document (if e-filed). A separate document with the confidential information redacted shall be filed on white paper (if paper filing) or filed as a public document (if e-filing). A separate ACR Form identifying the information excluded from public access and the Rule 5 grounds for exclusion shall also be filed.

Note that Rule 11 provides that lawyers and/or their clients can be subject to sanctions for failing to comply with the Rules. Again, any PII not required in the filing should be redacted.

Examples of PII. The following is a list of the type of information that should be redacted, but the list is not all inclusive:

• Social Security Number(s)

• Taxpayer Identification Number ("TIN")

• Driver’s License Number(s) or other Government identification number

• Loan Originator/ Loan Application Number(s)

• Servicer Loan Number(s)

• Third Party Loan/File Number(s)

• Bank Account Number (may include copy of imaged check)

• Any Financial Account, credit card numbers, Escrow Account Number(s)

• Customer Reference Number(s)

• Mortgage Identification Number ("MIN")

• Mortgage Electronic Registration Systems Number (“MERS”)

• Birthdates

• Insurance Policy Number(s)

• Any Minor Child Information

• Any Images that may include NPPI

• Telephone Numbers

• Bar Codes on Collateral Documents for any of the above numbers, except as may otherwise be required in documents that are filed as part of the public record.

Other tips.

• All information, including attachments and exhibits, should be reviewed for PII (including handwritten information).

• Even if a previously-recorded document, such as a mortgage, contains PII, redaction still should occur.

• With today’s computer software, redactions can (and should) be accomplished electronically.

• We advise redacting with a clearly visible black box to reflect where PII has been removed. The black box should completely cover the PII.

• Be careful not to redact any original loan documents such as an original promissory note.

Credit. I would like to thank my colleague Edward Boll, who helps lead Dinsmore’s default servicing and consumer bankruptcy practice group in Cincinnati. Ed and his team prepared the majority of today’s content.  Thanks for sharing your presentation, Ed.
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I represent parties involved in disputes arising out of loans that are in default. 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.

7th Circuit Opinion Captures The Essence Of An Indiana Lis Pendens Notice

The recent Seventh Circuit Court of Appeals case in Nat'l Asset Consultants LLC v. Midwest Holdings-Indianapolis LLC 2022 U.S. App. LEXIS 16689 (7th Cir. June 16 2022) did not litigate a lis pendens issue per se. The opinion did, however, comment on the practical impact of an Indiana lis pendens filing.

The dispute began with the filing of a state court case in which the plaintiffs [Sellers] sought to require the defendant [Purchaser] “to perform what [Sellers] described as a contract for the sale of a parcel of land.” Sellers filed a lis pendens notice in connection with the suit. Purchaser later alleged that Sellers attached an altered exhibit to their state court complaint. In an effort to combat that wrong, Purchaser filed a federal court action against the Sellers for fraud and counterfeiting.

In the federal court case, the district judge granted summary judgment for Sellers on the basis that the alleged fraud/counterfeiting had not caused any damage. Sellers thus convinced the district court that there was an absence of injury arising out of the bogus exhibit. Purchaser appealed.

At the 7th Circuit, Purchaser asserted that it had been injured by the very existence of the state court litigation, which made the subject real estate unmarketable by greatly diminishing the potential selling price. The Court rejected the theory, noting that “one page of one exhibit to a complaint” did not affect the value or marketability of the real estate. Rather:

it is the complaint itself, accompanied—as Indiana law requires—by a lis pendens in the real-estate property records. The lis pendens notifies potential buyers that the interests a seller can convey may be subject to the suit's outcome…. [A] lis pendens would have been filed whether or not the page had been altered, so any injury would have been the same.

The Court stated that Purchaser could have asked the state court judge to withdraw the lis pendens notice, but Purchaser apparently had not done so. Thus, the “altered page did not injure anyone, which knocks out any claim for damages” under the statute at issue.

A couple takeaways: (1) an Indiana lis pendens notice is a powerful tool that effectively renders the subject real estate unmarketable during the pendency of the underlying lawsuit and (2) if an owner has an objection to a lis pendens notice, the owner should seek an order lifting the notice.

For more on lis pendens, I have a separate category devoted to the subject.
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Part of my practice involves representing parties in real estate-related disputes. 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.

Indiana Receiver Sales: Why ... Why Not?

I wanted to post some content before leaving on a vacation to celebrate my 25th wedding anniversary. Today’s article incorporates material first published back in 2015 and relates to my prior post - Receiver Not Authorized To Sell Property Without Mortgagor’s Consent - which followed another post - Can Indiana receivers sell the subject real estate?  Those pieces begged the question: When would a lender/mortgagee in a commercial foreclosure case want to pursue a receiver’s sale in the first place?

Why? There are a multitude of factors involved in a lender’s decision to pursue a receiver’s sale of the mortgaged real estate. The pros and cons are almost endless and vary depending upon the lender, the borrower, the extent of any competing liens, the nature of the real estate, the purpose of the borrower’s business, if any, that operates on the property and the costs of the auctioneer. With those factors in mind, based upon my experience the following is a list of considerations in favor of seeking a receiver’s sale:

• The plaintiff lender has no interest in taking title to the real estate.
• The plaintiff lender desires to quickly cut off its interest in, and thus the attendant expenses associated with ownership of, the real estate. Costs may include real estate taxes, hazard insurance premiums and receivership expenses (for the maintenance/management of the property).
• The plaintiff lender has reason to believe that there are interested buyers.
• A defendant junior lien holder may be particularly interested since it should have a greater chance of being paid. A receiver’s sale, due to enhanced and targeted marketing, coupled with a more organized transaction, should net more proceeds than a standard sheriff’s sale.
• Similarly, a defendant guarantor of the debt may be especially attracted to this option. Since a receiver’s sale theoretically will result in a higher price, the deficiency judgment (if any) should be lower. In other words, a guarantor’s personal liability could be reduced or even eliminated.
• In complex cases involving multiple competing liens, the replacement of the real estate with a cash fund often triggers, simplifies and expedites a global settlement of the litigation. (Remember that a foreclosure case could last many months, meaning that a sheriff’s sale may be delayed indefinitely.)

Why not? Factors weighing against a receiver’s sale include, but are not limited to:

• The lender (or current owner of the loan) desires to take ownership of the property.
• The real estate taxes, hazard insurance and receivership/management costs are tolerable.
• There is no known, immediate market for the property.
• Attorney’s fees to obtain court authority for the receiver’s sale, coupled with the fees associated with closing the sale, are higher and otherwise unnecessary in a standard foreclosure case. Also, sheriff’s sales are cheap – a few hundred dollars.
• The foreclosure case is either uncontested, or there is a realistic possibility for some kind of settlement.
• Perhaps most importantly, one or more parties, particularly the owner/mortgagor, objects to the receiver’s sale. (Objections to the sale, especially from the mortgagor/owner, create an insurmountable obstacle to obtaining court authority for the sale.)

Hybrid? My old post In Indiana Sheriff’s Sale, Consider The Option Of Using A Private Auctioneer addressed a kind of hybrid between a receiver’s sale and a sheriff’s sale. And, unlike receiver’s sales, there is no question as to the statutory authority for this relief, and mortgagor/owner consent generally isn’t needed. We have not seen many of these types of sheriff’s sales in recent years – (or many commercial foreclosures period due to the healthy economy) – but this statutory alternative should not be forgotten.
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Part of my practice includes representing parties in connection with sheriff’s sales. 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.