Indiana's Mortgage Foreclosure Redemption Laws

I attended the American Legal & Financial Network’s informative and productive “Foreclosure Intersect” Conference in Dallas this week. One of the many issues that struck me was how wide ranging the country’s redemption laws are. This is due, in part, to the fact that, unlike Indiana, twenty-six states have non-judicial foreclosures. Even judicial foreclosure states have different laws regarding when and how to redeem. Anyway, I thought a quick reminder about Indiana’s right of redemption was in order.

Pre-sale. If a borrower defaults, and if a secured lender exercises its rights under a mortgage to foreclose, the borrower still is able to avoid losing the real estate collateral. This is because, in Indiana, borrowers have a right of redemption. “Redeem” means “to buy back. To free property from mortgage . . . by paying the debt for which it stood as security.” Black’s Law Dictionary. Redemption (basically, a payoff) is the way for a borrower to keep the property, end the litigation and free itself of the lender’s mortgage interest.

Indiana Code § 32-29-7-7 “Redemption by owner before sheriff’s sale” outlines this right:

Before the [sheriff’s] sale under this chapter, any owner or part owner of the real estate may redeem the real estate from the judgment by payment to the:

(1) clerk before the issuance to the sheriff of the judgment and decree; or
(2) sheriff after the issuance to the sheriff of the judgment and decree;

of the amount of the judgment, interest, and costs for the payment or satisfaction of which the sale was ordered. If the owner or part owner redeems the real estate under this section, process for the sale of the real estate under judgment may not be issued or executed, and the officer receiving the redemption payment shall satisfy the judgment and vacate order of sale . . ..

Post-sale. There is, however, no post-sale right of redemption for a borrower/owner/mortgagor. I.C. § 32-29-7-13 states: "There may not be a redemption from the foreclosure of a mortgage executed after June 30, 1931, on real estate except as provided in this chapter [Section 7 noted above and 32-9-8 noted below]." Well-settled Indiana case law provides that "a foreclosure sale cuts off a mortgagor's rights of redemption." Patterson v. Grace, 661 N.E.2d 580, 585 (Ind. Ct. App. 1996); Overmyer v. Meeker, 661 N.E.2d 1271, 1275 (Ind. Ct. App. 1996); Vanjani v. Federal Land Bank of Louisville, 451 N.E.2d 667, 672, n.1 (Ind. Ct. App. 1983).

Basically, a borrower must pay the debt amount (pre-judgment) or the judgment amount (post-judgment) before the sheriff’s sale. Otherwise, in Indiana. the right to redeem terminates with the sale. In Re Collins, 2005 Bankr. LEXIS 1800 (S.D. Bankr. 2005). “Once a sheriff’s sale takes place, a mortgage-debtor is no longer the title holder . . ..” Id. 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. Id.  At the sale, when the sheriff's deputy or the auctioneer says "Sold!" the party's over.

Post-sale exception. There is narrow exception to the post-sale rule, but the exception does not apply to borrowers. As explained in detail in my April 12, 2012 post, certain lienholders mistakenly omitted from the foreclosure process have limited remedies under I.C. § 32-9-8

I represent lenders, loan servicers, borrowers, and guarantors in foreclosure and real estate-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Sale Website And Other Tidbits

Shame on me for not more quickly updating the link to the Marion County Civil Sheriff's foreclosure sale website to your left (under the heading "Indiana Courts/Govt.").  We're good now.  Marion County has a slick new website with lots of useful information about the local sheriff's sale process.  The site also has links to many critical form documents.    Any party or lawyer navigating through a sheriff's sale in Indianapolis should study this website.  Click here for the full site.

As a reminder, in Indiana, mortgage foreclosures are judicial or, in other words, through the court system.  As a general proposition, real estate collateral must be sold, pursuant to a judge's decree, by the county civil sheriff's office.  Although the Indiana Code covers the fundamentals of the sheriff's sale process, the specific rules and procedures vary by county.  I once presented at a foreclosure-related seminar, and one of my co-presenters accurately stated, in essence, that there are 92 counties in Indiana and therefore 92 different sets of rules applicable to sheriff's sales. 

My advice is to call or visit the local civil sheriff's office to confirm the hoops through which you must jump, and when, to start and finish a successful sheriff's sale.  Many if not most counties now have websites similar to Marion County's that are very helpful or at a minimum provide contact information.  Despite information that may be available on the internet, I've found it to be invaluable to talk to, and form a working relationship with, the sheriff's staff member who will be handling your sale.

My practice includes the representation of parties involved in, or who wish to bid at, sheriff's sales.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at  You can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on the top left of my home page.

Third In Rem Foreclosure Action Barred Due to Rule 41(E) Dismissal Of First Action

Lesson. Once a lender files an Indiana mortgage foreclosure suit, the lender should move the case along and prosecute it to the end. In the event a post-filing loan modification, workout or intervening bankruptcy occurs, however, the lender should either dismiss the case without prejudice or get an order staying the action. Otherwise, the lender runs the risk of a dismissal for failure to prosecute that could prevent subsequent efforts to foreclose the mortgage, especially in the absence of a new default.

Case cite. Mannion v. Wilmington Savings Fund, Case No. 19A-MF-446.  See, The Indiana Lawyer - "Reversal: Bank loses in lengthy foreclosure battle".

Legal issue. Whether the dismissal of an in rem foreclosure action under Ind. Trial Rule 41(E) bars a subsequent in rem foreclosure on the same note and mortgage.

Vital facts. In this residential case, the borrower filed for bankruptcy in 2007. The borrower received a personal discharge from the mortgage debt in February 2009 and made no further payments on the loan. In April 2009, lender’s predecessor filed an in rem foreclosure action against the borrower, or more specifically the borrower’s property. Due to a failure by the lender to take any action in the case, the trial court dismissed the suit in April 2011 under Rule 41(E). A second action was filed in 2012 and dismissed in 2017 at the plaintiff’s request. Then, in April 2018, the current lender, an assignee of the mortgage loan, filed a third in rem foreclosure action.

Procedural history. The parties filed cross-motions for summary judgment in the third case. The trial court ruled in favor of the lender and entered a decree of foreclosure. The borrower appealed.

Key rules. Under Rule 41(E), a dismissal for a failure to prosecute is “with prejudice.” Unless the order of dismissal states otherwise, the dismissal operates as an adjudication on the merits.

Indiana law is settled that a dismissal with prejudice “is conclusive of the rights of the parties and res judicata as to the questions that might have been litigated.”

Indiana’s doctrine of res judicata “serves to prevent repetitious litigation of disputes that are essentially the same.”

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment for the lender and instructed the trial court to enter judgment for the borrower.

Policy/rationale. Since the order of dismissal in the first foreclosure action was not limited and did not otherwise indicate that it was “without” prejudice, the order was deemed an adjudication on the merits.

The lender in Mannion argued that the first and third foreclosure actions were not the same “because they [were] based on different acts of default and because they [sought] different amounts.” The Court surmised that the lender was trying to argue that a “new and independent default” had arisen since the dismissal of the first case. The Court rejected that contention and reasoned that, because the borrower’s personal liability under the mortgage loan had been discharged in bankruptcy, “both foreclosure actions were based upon the nonpayment of the mortgage due to the [borrower’s] discharge in bankruptcy.” The increase in the amount of the debt through growing interest and attorney fees was immaterial.

The bottom line was that the relief sought in both cases was the same and based on the same default.  So, the borrower got to keep his property free and clear of the mortgage. The Court rationalized the outcome, in part, by saying “the creditor created the situation as a direct result of its failure to prosecute, and … the [dismissal order] should have its full res judicata effect….”

Related posts.

Following Rule 41(E) Dismissal For Failure To Prosecute, Can A Second Suit Be Filed?
Following A Dismissal, Lenders Generally Are Able To Refile Foreclosure Actions Based On New Defaults
An “In Rem” Judgment Limits Collection To The Mortgaged Property

I represent lenders, loan servicers, borrowers, and guarantors in loan and real estate-related disputes.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 reschedules canceled tax sale for early 2020

The Indianapolis Business Journal is reporting that Marion County (Indianapolis) has canceled its fall real estate tax sales (with a combined value of at least $6MM) due to a clerical error.  The 2019 sales will occur 2/14/20.  Here is the story.  Click here for a post of mine from earlier this year talking about Indiana tax sales and notice-related issues.  The "clerical error" leading to the postponement of the sales appears to be related to perfecting the statutory notice required for the sales to be valid.  Better to have a do over now instead of dealing with potentially hundreds of tainted sales later.    

Indiana Court Finds That Ex-Wife Held A Judgment Lien, Not A Security Interest, On Ex-Husband’s Farm

Lesson. Property settlement agreements in divorce cases can create judgment liens on real estate owned by the spouse holding title to the real estate post-dissolution. If an owner intendeds for the ex-spouse only to be a secured creditor, then the divorce court must specifically eliminate the application of Indiana’s judgment lien statute in connection with any approved settlement agreement.

Case cite. Kobold v. Kobold, 121 N.E.3d 564 (Ind. Ct. App. 2019)

Legal issue. Whether, post-divorce, wife held a judgment lien on the marital farm as opposed to a secured interest.

Vital facts. The marital property of the spouses included a farm. The couple got divorced and entered into a property settlement agreement (PSA), which provided that husband would keep the farm while making “equalization payments” to wife for her pro rata share of the farm’s value. Husband signed a promissory note for the full amount of the equalization payments. The note, which did not have an acceleration clause, granted husband the right to sell the marital assets. On the other hand, the PSA stipulated that wife could sell the farm to satisfy the debt if husband defaulted under the note. Husband failed to make any equalization payments, so wife obtained a court order permitting her to sell the farm – which she did over husband’s objection. Husband wanted to go a different direction with the farm’s liquidation. As you might suspect, there is more to the story, so read the opinion for a full report.

Procedural history. The trial court approved the sale of the farm to a third party to satisfy various secured creditors and ordered the net proceeds to be paid to each spouse pursuant to the PSA. The court based its ruling on the premise that wife held a judgment lien on the farm. For a variety of reasons, husband appealed.

Key rules. The outcome in Kobold turned on whether wife held a judgment lien under Ind. Code 34-55-9-2 versus a secured interest under the dissolution security statute at Ind. Code 31-15-7-8.

In divorce cases, when one receives a money judgment against another, the judgment lien statute creates an automatic lien on the indebted party’s real estate. This is so even when one spouse agrees to pay the other in installments, which was the case in Kobold.

A trial court can overcome the presumption of a judgment lien, however, if the trial court “specifically eliminates” application of the judgment lien statute and finds that a settlement agreement creates a security interest under Ind. Code 31-15-7-8.

Holding. The Indiana Court of Appeals affirmed the trial court’s finding that wife held a judgment lien against the farm. This gave wife “the right to attach the judgment to the debtor’s property [the farm].” In turn, that lien “empowered [wife] to sell the farm to procure the full amount of the equalization payments.”

Policy/rationale. Husband contended that the trial court impermissibly modified the PSA by permitting wife to sell the farm. More specifically, husband argued that the trial court erred in concluding “that the dissolution decree gave [wife] a judgment lien … [granting wife] the right to refuse to release the judgment lien unless she was paid in full on the promissory note.” The Court of Appeals concluded that, although the record was not crystal clear, the trial court did not specifically eliminate the application of the judgment lien statute so as to overcome the wife’s presumptive judgment lien arising out of the PSA. As the holder of a judgment lien, wife, not husband, “had the right to negotiate a sale of the real estate.”

While I’m no divorce lawyer, and don’t pretend to understand fully how a settlement agreement with a promissory note constitutes a judgment lien, I see the justice in the Kobold's result. The Court stated that wife’s sale of the farm for $1.63MM, which was more than the appraised value of $1.56MM, “appears to have made the best of a bad situation” by paying off husband’s creditors, including the wife, and paying husband $500,000.

Related posts.

I represent judgment creditors and lenders, as well as their mortgage loan servicers, entangled in lien priority and title claim disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Subsequent Federal And State Income Tax Liens: Priority And Redemption

Do federal or state income tax liens trump your Indiana mortgage lien?  Not if you recorded your mortgage first.  In Indiana, first in time is first in right.

Priority of state income tax liens.  Indiana is a “first to file” state.  Under the Indiana recording statute, a mortgage takes priority according to the date of its filing.  Ind. Code § 32-21-4-1(b)Unlike Indiana’s statutory treatment of delinquent real estate taxes , which are given a super-priority at foreclosure sales, there is no such statutory treatment of state income tax liens.  To my knowledge, Indiana’s tax code is silent with regard to the priority of state income tax liens.  Indeed a state tax lien is akin to a run-of-the-mill judgment lien.  I.C. § 6-8.1-8-2(e)(2) provides that a tax warrant for unpaid income taxes becomes a “judgment” against the person owing the tax and results in the creation of a judgment lien.  In Indiana, judgment liens, which are purely statutory, are subordinate to all prior or equitable liens, including mortgage liens. 

Perfection of state liens.  Logistically, the Department of Revenue will file a “tax warrant” in the county clerk’s office.  The clerk will then automatically enter the tax warrant into the judgment records so as to create the judgment lien on real estate owned by the taxpayer in that particular county.   

Priority of federal income tax lien.  The United States Code contains a provision governing actions affecting real estate on which the IRS has a lien.  28 U.S.C. § 2410(a) states, in pertinent part, that the United States “may be named a party in any civil action . . . (2) to foreclose a mortgage or other lien upon . . . real property on which the [United States] has a . . . lien.”  With regard to the question of priority, § (c) provides:

a judgment or decree in such action or suit shall have the same effect respecting the discharge of the property from the mortgage or other lien held by the United States as may be provided with respect to such matters by the local law of the place where the court is situated.

In other words, state law generally governs, meaning the “first to file” statute, I.C. § 32-21-4-1(b), applies.  See, Religious Order of St. Matthew v. Brennan, 1995 U.S. Dist. LEXIS 8909 (N.D. Ind. 1995) (“in general, the long-established priority rule with respect to federal tax liens is ‘first in time is first in right’”); see also, Citimortgage Inc. v. Sprigler, 209 U.S. Dist. LEXIS 27866 (S.D. Ind. 2009) (summary judgment order identifying second priority federal tax lien vis-à-vis mortgage). 

To perfect its lien, the IRS will record a notice of federal tax lien with the county recorder’s office.

Federal right of redemption.  The unique twist to the federal tax lien is the statutory right of redemption.  Judge Barker identified this in her summary judgment opinion in Citimortgage in which she cited to 28 U.S.C.  § 2410 for the proposition that the United States retains a 120-day right of redemption from the sheriff’s sale.  It’s my understanding that this federal statutory right of redemption trumps Indiana’s redemption statute found at I.C.§ 32-29-7-7, which holds that a right of redemption is terminated immediately upon the foreclosure saleUnlike mortgagors and other parties, therefore, Uncle Sam gets to redeem up to four months after the sale.

Federal redemption amount.  28 U.S.C. § 2410(d) describes how to calculate the redemption amount:

In any case in which the United States redeems real property under this section . . . the amount to be paid for such property shall be the sum of-
(1)  the actual amount paid by the purchaser at such sale . . .
(2)  interest on the amount paid . . . at 6 percent per annum from the date of such sale, and 
(3)  the amount (if any) equal to the excess of
(A)  the expenses necessarily incurred in connection with such property, over
(B)  the income from such property plus (to the extent such property is used by the purchaser) a reasonable rental value of such property.

So, in the event of a redemption, the lender would receive cash for the amount of its bid, and then some.

As an asideCan The SBA's Right Of Redemption Be Purchased After A Sheriff's Sale?

Indiana No-Nos: Confessions Of Judgment And Cognovit Notes

Does Indiana allow “confessions of judgment?”  Some states permit these, but Indiana is not one of them.

Definition.  Black’s Law Dictionary defines a “confession of judgment,” in part, as:

The act of a debtor [borrower] in permitting judgment to be entered against him by his creditor [lender], for a stipulated sum, by a written statement to that effect . . . without the institution of legal proceedings of any kind . . ..

These essentially allow a judgment to be entered without a lawsuit. 

Cognovit note.  A confession of judgment goes hand in hand with a “cognovit note”.  The Indiana Court of Appeals has cited to the following common law definition of such a note:

[a] legal device by which a debtor [borrower] gives advance consent to a holder’s [lender’s] obtaining a judgment against him or her, without notice or hearing.  A cognovit clause is essentially a confession of judgment included in a note whereby the debtor agrees that, upon default, the holder of the note may obtain judgment without notice or a hearing. . .  The purpose of a cognovit note is to permit the noteholder to obtain judgment without the necessity of disproving defenses which the maker of the note might assert . . .  A party executing a cognovit clause contractually waives the right to notice and hearing. . . .

Jaehnen v. Booker, 800 N.E.2d 31 (Ind. Ct. App. 2004).  Indiana has codified the definition of a cognovit note at Ind. Code § 34-6-2-22.  As you can imagine, cognovit notes and confessions of judgment can be powerful loan enforcement tools for lenders. 

Prohibited.  Cognovit notes and confessions of judgment are prohibited in Indiana.  In fact, a person who knowingly procures one commits a Class B misdemeanor pursuant to I.C. § 34-54-4-1.  The Jaehnen Court suggested there is an “evil” associated with of obtaining judgment against a borrower without service of process or the opportunity to be heard. 

An aside.  The Jaehnen case addressed the issue of whether a party is precluded from enforcing a promissory note merely because it contained a cognovit provision.  The Court noted that the plaintiff did not avail himself of the specific cognovit provision in the note.  He sought payment only after filing a complaint, providing for service of process and allowing the defendant the opportunity to hire an attorney and to be heard.  The Court held that the illegal provision did not destroy the overall negotiability of the note.  In other words, cognovit paragraphs may be deleted by the plaintiff/lender/payee without destroying the right to a judgment on the note in a standard lawsuit. 

Don’t be confused.  Indiana has a statute entitled “Confession of judgment authorized” at I.C. § 34-54-2-1.  However, the authorized confession of judgment is a different animal than what I discuss above.  The statute states:

Any person indebted or against whom a cause of action exists may personally appear in a court of competent jurisdiction, and, with the consent of the creditor or person having the cause of action, confess judgment in the action. 

This confession of judgment is not a unilateral filing by a creditor but rather an event arising within a standard lawsuit following notice and an opportunity to be heard.

But compare.  New York Confession Of Judgment From Cognovit Note Enforceable In Indiana.

Properly Filed Lis Pendens Notices Do Not Slander Title

Lesson. The filing of a lis pendens notice to protect one’s unrecorded interest in real estate will not give rise to liability for slander of title provided there was a basis for filing the notice.

Case cite. RCM v. 2007 East Meadows, 118 N.E.3d 756 (Ind. Ct. 2019)

Legal issue. Whether a lis pendens notice, filed by the buyer during litigation about a real estate purchase agreement, constituted slander of title.

Vital facts. The dispute in RCM involved a purchase agreement for a $9MM apartment complex located in Indianapolis. Lawsuits in both Texas and Indiana were filed relating to an alleged breach of the agreement, alleged fraud and an earnest money claim. The buyer filed lis pendens notices in Indiana for the pending Texas and Indiana lawsuits. Following the dismissal of the Texas case, and while the seller was negotiating with a third party for the sale of the property, the seller in the Indiana action asserted a slander of title claim against the buyer for not releasing the lis pendens notice.

Procedural history. After a bench trial, the seller prevailed on the underlying claims associated with the purchase agreement and the earnest money, but the trial court found in favor of the buyer on seller’s slander of title claim. Seller appealed.

Key rules. Ind. Code 32-30-11-3 spells out the requirements for a lis pendens notice in Indiana.

Parties with a claim to title of real estate under a contract for the real estate’s purchase “ha[ve] the kind of interest that requires filing a lis pendens notice under the statute to protect third parties.”

Indiana law is settled that “statements made in a properly-filed lis pendens notice are absolutely privileged … and defendants who file such a notice may not be held liable for slander of title.”

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

Policy/rationale. Seller contended that buyer slandered seller’s title to the real estate by filing a lis pendens notice when buyer knew it would not be able to perform under the purchase agreement. (Seller also claimed that buyer had waived the privilege defense, but the Court rejected the claim on procedural grounds.)

Lis pendens notices “provide machinery whereby a person with an in rem claim to property which is not otherwise recorded [like a purchase agreement] may put his claim upon the public records, so that third persons dealing with the [seller] … will have constructive notice of it.”

The Court reasoned that, since both parties had filed lawsuits regarding their interests in the real estate subject to the purchase agreement, buyer was actually “required” by law to file a lis pendens notice. It follows that the buyer’s notice was proper and therefore absolutely privileged.

Related postsYour Source For Indiana Lis Pendens Law
I represent 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 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 Has Two Statutes Of Limitations For Promissory Notes

This follows-up my last post, Indiana Court of Appeals Adopts Reasonableness Test For Promissory Note Statute of Limitations, where there was cliffhanger about an alternative statute of limitations that may have altered the outcome of the lender's case, which was dismissed based upon the expiration of the six-year statute of limitations.

Statute #1.  The subject of my previous post, the Alialy decision, hinged solely on the Court's application of the statute of limitations located under Title 34, which involves civil procedure.  Specifically, Ind. Code 34-11-2-9 “Promissory notes, bills of exchange, or written contracts for payment of money” simply states:

An action upon promissory notes … must be commenced within six (6) years after the cause of action accrues….

As summarized in my post, the Alialy opinion arguably - depending upon one's interpretation - holds that, even if notes have optional acceleration clauses, under IC 34-11-2-9 the "cause of action accrues" within six years of the last payment or, alternatively, six years after acceleration if the lender accelerated the note within six years of the last payment.  (This is my current read on the outcome, not the expressed conclusion of the Court.)

Statute #2.  On appeal, the lender in Alialy asked the Court to look at the statute of limitations under Indiana's Uniform Commercial Code governing negotiable instruments, which include promissory notes.  Ind. Code 26-1-3.1-118 “Statute of limitations” reads:

… an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.

The Court never entertained the merits of the lender's argument but instead determined that the theory had been waived on procedural grounds.  So, we are left to wonder whether the UCC's statute of limitations may have changed the result in Alialy.  

Wondering. I have not taken a deep dive into the UCC question or researched the case law interpreting Section 118.  I also will not pretend to know what lender's counsel's theory was.  Again, unfortunately the Court did not address the merits.  My best guess is that the lender wanted to seize on the expanded language in the UCC's statute of limitations that provides "if a due date is accelerated, within six (6) years after the accelerated due date."  That terminology, which seems to spell out when the cause of action accrues, does not exist in IC 34-11-2-9.  Under the UCC, therefore, the lender's acceleration date, and not the date of the last payment, may control when the clock on the six years starts ticking.  Because the difference between the two statutes is quite subtle, it's difficult to say whether that reasoning would have carried the day in a scenario like Alialy.  We may need to wait for a future appellate opinion.    

If you have any comments or insights on the issue, please submit a post below or email me.  I would be curious as to others' thoughts.  To confirm, the question is not whether the statute is six years.  The question is - in cases of optional acceleration, when does the cause of action accrue or, in other words, when does the clock starts ticking on the six years.

I represent parties in disputes arising out of loans. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Adopts Reasonableness Test For Promissory Note Statute of Limitations

Lesson. To be absolutely safe, in Indiana a lender’s suit to enforce a promissory note should be filed within six years of the borrower’s last payment. At a minimum, assuming the note has an optional acceleration clause, the debt should be formally accelerated within six years, and it would be advisable to file suit within a period of time thereafter that is reasonable under the circumstances.

Case cite. Collins Asset Group v. Alialy, 115 N.E.3d 1275 (Ind. Ct. App. 2018), rehearing, Collins Asset Group v. Alialy, 121 N.E.3d 579 (Ind. Ct. App. 2019)

Legal issue. Whether the statute of limitations barred a lender’s action to enforce a promissory note.

Vital facts. Borrower signed a 25-year promissory note on June 29, 2007 that was secured by a junior mortgage. After the senior lender filed a mortgage foreclosure action, Borrower stopped paying on the junior note. Borrower’s last payment was July 28, 2008. Plaintiff Lender, an assignee (successor-in-interest) of the junior mortgage loan, accelerated the promissory note (declared the note due and payable in full) on October 24, 2016 and filed suit seeking to collect the accelerated debt on April 26, 2017. It does not appear that the action sought to foreclosure the junior mortgage but simply sought a money judgment under the note. Significantly, the note contained an “optional acceleration clause,” meaning Lender had the right to declare the entire debt due and payable after default.

Procedural history. The trial court granted Borrower’s motion to dismiss based upon the statute of limitations at Indiana Code 34-11-2-9. Lender appealed to the Indiana Court of Appeals.

Key rules. I.C. 34-11-2-9 says that actions under promissory notes for payment of money “must be commenced within six (6) years after the cause of action accrues.” Indiana case law holds that “an action to recover a debt must be commenced within six years of the last payment.”

However, Indiana common law further provides that, if the installment contract contains an optional acceleration clause, then the statute of limitations to collect the debt “does not begin to run immediately upon the debtor’s default.” Rather, the statute begins to run “only when the creditor exercises the optional acceleration clause.”

Here’s the rub: the Court in Alialy cited to a 2010 Indiana Court of Appeals opinion for the proposition that lenders should not be permitted to wait an “unreasonable amount of time to invoke an optional acceleration clause” following a default: “a party is not at liberty to stave off operation of the statute of limitations inordinately by failing to make a demand.”

Holding. The Court affirmed the order dismissing the case.

Policy/rationale. Here is how the Court rationalized its conclusion:

[Lender’s] acceleration option was exercised a full two years after [its] cause of action was barred by the statute of limitation. As [Lender’s] attempt to exercise the acceleration clause did not prevent the six-year statute of limitation from taking effect and expiring, [Lender’s] acceleration clause cannot be given effect and its Complaint is barred.”

Respectfully, I’m not convinced that the Court’s logic was sound, but I can understand the result.

What is the takeaway from Alialy, which seems to establish some kind of potentially-challenging (for creditors) reasonableness standard for certain statute of limitations scenarios? Besides the basic idea that lenders should act sooner, it seems to me that the outcome in Alialy could have been avoided had Lender accelerated the debt within six years of the default (non-payment). Even if Lender did not file suit at that time, Lender would have taken at least some action against Borrower to enforce the note. So, for example, if Lender had accelerated by July 2014, instead of waiting until October 2016, Lender’s April 2017 suit may have survived.

(Lender sought to apply a different statute of limitations under Indiana’s version of the UCC at I.C. 26-1-3.1-118. The Court determined that Lender had waived the argument. I will study that statute further and may post about it later.)

Related posts.

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

No Harm No Foul – 7th Circuit Dismisses RESPA Case

Lesson. A mortgage loan servicer can achieve summary judgment in a RESPA qualified written request case if the borrower fails to establish that the statutory violations caused any actual damage.

Case cite. Moore v. Wells Fargo, 908 F.3d 1050 (7th Cir. 2018)

Legal issue. Whether a borrower can recover RESPA-based damages “when the only harm alleged is that the response to the borrower’s qualified written request did not contain information … to help him fight a state-court mortgage foreclosure he had already lost.”

Vital facts. The plaintiffs in the Moore case were a borrower/mortgagor (Borrower) and his wife, and the defendant was the mortgage loan servicer (Servicer). The opinion thoroughly details the background of the loan, the default, the state court foreclosure and the plaintiffs’ bankruptcy case. This post focuses on Borrower’s RESPA qualified written request (QWR), which Borrower sent to Servicer about two months before a scheduled sheriff’s sale of the Borrower’s house. Two days before Servicer’s response was due, plaintiffs filed the subject federal court case against Servicer, apparently as part of an effort to delay the sale.

Servicer timely responded to the QWR, which included 22 “wide-ranging” questions, with a three-page letter and 58 pages of enclosures. The response addressed most but not all of Borrower’s questions. About six weeks later, the plaintiffs’ house was sold at a sheriff’s sale. Borrower alleged that he suffered damages, including emotional distress injuries, arising out of the fact that he had to fight the state court foreclosure case without certain information requested from Servicer.

Procedural history. The district court granted Servicer’s summary judgment motion, and plaintiffs appealed to the Seventh Circuit.

Key rules. The Real Estate Settlement Procedures Act (RESPA) at 12 U.S.C. 2601 “is a consumer protection statute that regulates the activities of mortgage lenders, brokers, servicers, and other businesses that provide services for residential real estate transactions.”

Section 2605(e) “imposes duties on a loan servicer that receives a ‘qualified written request’ for information from a borrower.” Among other things, Section 2605(e)(2) requires servicers, upon receipt of a QWR, to do one of three things within 30 days: (1) correct the account and notify the borrower, (2) explain why a correction is not needed, or (3) provide the requested information or explain why it cannot be obtained.

Subsection (f) provides a private right of action for actual damages that result from any violations of Section 2605. However, RESPA does not provide relief for “mere procedural violations … [only] actual injury” caused by the statutory violations.

Holding. The Seventh Circuit affirmed the district court’s summary judgment in favor of Servicer.

Policy/rationale. The Court noted that the policy behind RESPA is “to protect borrowers from the potential abuse of the mortgage servicers’ position of power over borrowers, not to provide borrowers a federal discovery tool to litigate state-court actions.” The Court concluded that, even assuming an incomplete response to the QWR, Borrower did “not present any evidence that there is a material dispute regarding any harm he suffered due to this violation.” The opinion in Moore tackles each item of Borrower’s alleged damages, including out-of-pocket expenses and emotional distress injuries, so please review the decision for additional information.

Related post.

Borrower’s Failure To Prove Actual Damages Leads To Summary Judgment In RESPA Case
Part of my practice involves defending mortgage loan servicers in lawsuits brought by borrowers/consumers. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Prevents Lender From Enforcing Promissory Notes Held By Third Parties

Lesson. Lenders must always prove that they are entitled to enforce their promissory notes under the applicable UCC provisions.  Normally, this is a simple excercise, but creative financing like that in the Tissue v. TAK case can complicate the issue.

Case cite. Tissue v. TAK 907 F.3d 1001 (7th Cir. 2018)

Legal issue. Whether the plaintiff, which was not in possession of the originals, was nevertheless entitled to enforce the subject promissory notes against the defendant.

Vital facts. The Tissue case involved an unconventional and fairly complicated transaction. The Plaintiff entered into an agreement to sell a tissue mill located in Wisconsin to an affiliate of the Defendant. A piece of the financing fell through, rendering Plaintiff unable to pay off certain secured creditors of the mill.  This obstacle prevented Plaintiff from being in a position to deliver clean title to the buyer.

To bridge the gap, the parties entered into a kind of seller financing, whereby the Defendant (as a de facto borrower, as well as the purchaser of the property) issued four promissory notes payable to the Plaintiff (as a de facto lender, as well as the seller of the mill) totaling $16MM over three years.  Plaintiff, in turn, delivered the promissory notes to the secured creditors as substitute security. With the original notes in hand, pledged as security to replace their liens in the mill, the creditors released their security interests, and the transaction closed. My reading of the opinion is that, in a contemporaneous side deal, the Plaintiff itself promised to pay the debts owed to the secured creditors as documented by the notes. The Court summed things up as follows:  “this meant that the [creditors] who released their security in the tissue mill had the credit of both the [Plaintiff] and the [Defendant] behind the notes’ promises.”

Of course, everything fell through, and the Plaintiff sued the Defendant to, among other things, collect on the four promissory notes. As a consequence of the failed transaction between the Plaintiff and the Defendant, the money owed to the prior lienholders had not been paid by either party, and those creditors had not returned the original promissory notes to either the Defendant or the Plaintiff. Therefore, Plaintiff did not possess any of the original notes at the time it filed suit against the Defendant. Please read the opinion for more detail on the facts and background, as well as other legal issues relevant to the outcome.

Procedural history. Tissue is an opinion from the Seventh Circuit Court of Appeals arising out of a judgment entered by the United States District Court for the Eastern District of Wisconsin. Despite the fact that Wisconsin law controlled, the pertinent Uniform Commercial Code sections of Wisconsin and Indiana are similar. Plus, Indiana is in the 7th Circuit, so the decision affects parties doing business in Indiana.

Key rules. The key statute was Wis. Stat. 403.301 dealing with negotiable instruments. Here is Indiana’s version: Ind. Code 26-1-3.1-301:

"Person entitled to enforce" an instrument means:

(1) the holder of the instrument;
(2) a nonholder in possession of the instrument who has the rights of a holder; or
(3) a person not in possession of the instrument who is entitled to enforce the instrument under IC 26-1-3.1-309 or IC 26-1-3.1-418(d).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

Holding. The 7th Circuit affirmed the district court and concluded that, since the Plaintiff was not the holder of the notes, it was not entitled to enforce them against the Defendant.

Policy/rationale. The Plaintiff “was not entitled to enforce the notes because it is not their holder, is not in possession of them, and is not entitled to enforce them [under the statutory exceptions.]"  The notes had not been lost, stolen or destroyed. The notes had not been paid by mistake by anyone. In the end, only the holders, or nonholders in possession, could enforce the notes – which the Plaintiff was neither.

Further, because the notes replaced liens against the tissue mill, the creditors needed the notes as security until the debts were repaid. If the Plaintiff “had paid the notes as promised, and thus retired the loans, then it would recover the notes from the [creditors] and be able to enforce them” under the UCC.

As a side note, the Plaintiff tried to make hay out of the fact that the creditors could not enforce the notes either because the Plaintiff did not endorse the notes before delivering them in pledge as collateral. The Court reasoned that “this may well be true,” but that fact did not get the Plaintiff around its own statutory prohibitions. In the end, the Court simply was not going to “leave the [creditors] in the lurch and [grant the Plaintiff] all of the notes’ benefits.” Interestingly, the courts protected the prior lienholders in the tissue mill, even though it appears that those creditors were not parties to the case.

Related posts.

I represent creditors and debtors entangled in loan-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

County Sale Agent SRI Not Liable To Tax Sale Purchaser In Wake Of Overturned Sale

Lesson. A chagrined tax sale purchaser, whose tax deed is set aside for notice-related deficiencies, cannot sue the county’s sale contractor for alleged lost profits.

Case cite. M Jewell v. Bainbridge 113 N.E.3d 685 (Ind. Ct. App. 2018)

Legal issues. Whether a tax sale purchaser can sue the county’s sale agent for breach of a contract that the agent had with the county; whether the tax sale purchaser was fully compensated for its alleged losses.

Vital facts. Plaintiff tax sale purchaser (Purchaser) bought a property at a county real estate tax sale, which was later overturned by the court based upon notice-related failures in the sale process. Purchaser received a statutory refund of the amount it paid for the property plus some interest and other items totaling about $7,000.

Defendant SRI is a company that contracted with the county to perform certain services related to tax sales. Those services included preparing and mailing notices to owners with delinquent real estate taxes. One of the reasons this particular sale was overturned was that “the [county] auditor and SRI failed to perform the additional research” necessary to substantially comply with the statutory notice requirements under Indiana’s tax sale laws. Purchaser sued SRI claiming that it suffered nearly $800,000 in damages for lost profits from the failed sale.

Procedural history. The trial court granted summary judgment for SRI. Purchaser appealed.

Key rules. Generally, only parties to a contract have rights under the contract. The Jewell opinion outlines many of Indiana’s rules that govern when so-called “third-party beneficiaries” can sue under a contract. Purchaser claimed it was a third-party beneficiary under the SRI/county contract.

Tax sale purchasers in Indiana buy at their own risk. “There is no warranty in tax sales.”

“The remedy for purchasers at invalid tax sales or holders of invalid tax deeds is wholly statutory.” Ind. Code 6-1.1-25-10 and 11 detail the refund procedure.

Holding. The Indiana Court of Appeals affirmed the trial court and held that (a) Purchaser was not a third-party beneficiary of the SRI/county agreement and thus had no standing to sue SRI for breach of contract and (b) regardless, Purchaser had been fully compensated for its losses under the applicable statute.

Policy/rationale. Regarding the third-party beneficiary issue, the Court reasoned that the county and SRI did not intend to protect tax sale purchasers under their agreement. “It is not enough that the performance of the contract would be of an incidental benefit to [Purchaser].” Regardless, Purchaser’s remedy was statutory, and the Court concluded that Purchaser had been made whole. Purchaser identified “no statutory or common law authority that it [was] entitled to lost profits rather than the statutory refund amount.”

Related posts.

I am sometimes engaged to represent parties in connection with contested tax sales. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Mortgage Loan Servicer Sued For Race Discrimination After Denying Loan Assumption

Lesson. Creditors cannot discriminate against an applicant for a credit transaction based on race, but a plaintiff applicant needs to put forth evidence of discrimination in order to survive a creditor’s motion for summary judgment.

Case cite. Sims v. New Penn, 906_F.3d_678 (7th Cir. 2018)

Legal issue. Whether there was sufficient evidence of racial discrimination to avoid the entry of summary judgment against the Plaintiffs.

Vital facts. Plaintiffs, an African-American couple, bought a house that was subject to a mortgage that secured a loan to the seller. The loan later went into default. Upon learning of the mortgage and the default, the Plaintiffs tried to assume the loan in order to avoid a foreclosure sale. This went on for years. The mortgage contained language that purchasers of the mortgaged property could assume the loan if the loan servicer (a) received information to evaluate the purchasers “as if a new loan were being made” and (b) determined that the assumption “would not impair its security.”

At one point in time, the defendant loan servicer advised the Plaintiffs of what was needed in order to apply for a loan assumption, and the servicer postponed a foreclosure sale to give the Plaintiffs an opportunity to submit the required paperwork. The servicer contended that the Plaintiffs did not submit a proper application. In addition, the servicer required that the loan be made current before an assumption could occur but refused to disclose information about the status of the loan without the seller/mortgagor’s written consent, which evidently never occurred. In the end, the servicer did not approve a loan assumption.

The Plaintiffs alleged that the loan servicer denied the loan assumption based upon race. They alleged that they were treated rudely. The Plaintiffs also claimed that an African-American employee of the servicer told them over the phone: “[t]hese people, you know how they treat us.”

Procedural history. The Plaintiffs sued the loan servicer in federal court and alleged race discrimination under the Equal Credit Opportunity Act, 15 USC 1691-1691f (ECOA). The United States District Court for the Northern District of Indiana entered summary judgment for the defendant loan servicer, and the Plaintiffs appealed to the Seventh Circuit.

Key rules. The ECOA makes it “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction, on the basis of race….” Section 1691(a)(1).

Holding. The Seventh Circuit affirmed the district court’s ruling.

Policy/rationale. The Plaintiffs argued that the defendant loan servicer discriminated against them when the servicer prohibited the Plaintiffs from assuming the loan. Specifically, the Plaintiffs claimed that the servicer delayed the application process and required them to first make all of the seller/mortgagor’s overdue payments as a condition of assumption, which condition was not required by the mortgage.

The Court concluded that the Plaintiffs’ “evidence of racial discrimination [was] too speculative to establish a dispute of material fact.” For the Plaintiffs to survive summary judgment, they needed to put forth more evidence than the employee’s alleged statement, which the Court found to be “vague and require[d] too much speculation to conclude that their race motivated [the servicer] to require them to satisfy [the seller’s] outstanding loan payments.” Further, the Plaintiffs did not tender any proof to dispute the servicer’s evidence that the Plaintiffs never produced a complete application.

As an aside, there was a question as to whether the ECOA applied in the first place because the Plaintiffs were trying to assume credit rather than “extend, renew or continue” credit.

Related posts.

I sometimes represent mortgage loan servicers in foreclosure-related litigation. My firm also has employment lawyers who defend race discrimination cases. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Enforcement Of Wisconsin Judgment In Indiana Defeated

Lesson. When enforcing an out-of-state judgment in Indiana, the law presumes that the foreign judgment is valid. That presumption can be overcome with proof that the plaintiff failed to properly serve the defendant with a summons and complaint in the original case.

Case cite. Troxel v. Ward, 111 N.E.3d 1029 (Ind. Ct. App. 2018)

Legal issue. Whether, following the entry of a judgment in Wisconsin, an Indiana order authorizing the sale of the Defendant’s stock was void because the Plaintiff served the Wisconsin summons and complaint at the Defendant’s former dwelling.

Vital facts. Defendant allegedly executed a guaranty of a $653,000 promissory note, which was in default. Troxel was about the Plaintiff’s efforts to collect on the guaranty in both Wisconsin and Indiana, and the related efforts by the Plaintiff to serve the Defendant with a summons and complaint. One of the compelling factors was that the Plaintiff served Defendant at his former residence in Indiana.

Procedural history. The Plaintiff obtained a judgment in Wisconsin and then sought to enforce the judgment in Indiana under I.C. 34-54-1. The Indiana trial court recognized the judgment and then, at the Plaintiff’s request, entered an order for the sale of the Defendant’s stock in a separate company for the purpose of satisfying the judgment. When the Defendant got wind of the judgment and stock sale, he filed a motion to set aside the judgment in the Indiana court.

Key rules.

Troxel set out the following general rule and its fundamental exception:

The United States Constitution requires state courts to give full faith and credit to the judgments of the courts of all states. U.S. Const. art. IV, § 1. However, an out-of-state judgment is always open to collateral attack for lack of personal or subject-matter jurisdiction. Thus, before an Indiana court is bound by a foreign judgment, it may inquire into the jurisdictional basis for that judgment; if the first court did not have jurisdiction over the parties or the subject matter, then full faith and credit need not be given.

A judgment entered without jurisdiction is “void.”

Importantly, the defendant/judgment debtor bears the burden of rebutting the presumption that a foreign judgment, which is regular and complete on its face, is valid.

Troxel spells out various trial rules applicable to service of a summons and complaint, including Trial Rule 4.1(A)(3). The Court noted that, under Indiana law, “service upon a defendant’s former dwelling [aka usual place of abode] is not sufficient to confer personal jurisdiction.” (This Indiana service rule applied to the original action in Wisconsin.)

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

Policy/rationale. The Plaintiff argued that the Wisconsin judgment was presumed to be valid and that the Defendant failed to overcome the presumption. The Court of Appeals disagreed and cited to evidence in the record that, a few weeks before he was served with process, the Defendant had moved from the service address. Because the Wisconsin court did not have personal jurisdiction over the Defendant when it entered judgment, the judgment was void. It followed that all the Indiana orders also were void.

Related posts.

Judgment creditors sometimes engage me here in Indiana to enforce judgments entered in other states. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Residential Borrower Denied Second Settlement Conference

Lesson. If borrowers fail to appear at a court-ordered, pre-judgment settlement conference that they requested, then their post-judgment request for a second conference will be denied. Borrowers – appear at the conference. Lenders – move toward a judgment if borrowers fail to comply with the court’s settlement conference order.

Case cite. El v. Nationstar Mortgage, 108 N.E.3d 919 (Ind. Ct. App. 2018)

Legal issue. Whether the trial court abused its discretion in denying a borrower’s motion for a second, post-judgment settlement conference.

Vital facts. El was a standard residential mortgage foreclosure case. The summons and complaint served upon the borrower contained the appropriate notices to the borrower regarding her rights, including the right to a settlement conference with the mortgage company. The borrower appeared in the action pro se and requested a settlement conference. However, she failed to show up at the court-ordered conference. She also failed to submit certain settlement-related documents required by court's order.

Procedural history. Following the settlement conference, which the lender attended, the lender filed a motion for an in rem summary judgment against the borrower. The trial court granted the motion. The borrower then moved for a second settlement conference. The trial court denied the motion, and the borrower appealed.

Key rules. Ind. Code 32-20-10.5, entitled “Foreclosure Prevention Agreements for Residential Mortgages,” outlines the rules and procedures surrounding the facilitation of settlement conferences and loan modifications. In particular, Section 10 outlines in detail rights and responsibilities of the parties and the courts with regard to settlement conferences.

Although Section 10 “contemplates the possibility of” a second settlement conference, the trial court’s decision on the matter is discretionary:

For cause shown, the court may order the creditor and the debtor to reconvene a settlement conference at any time before judgment is entered. 

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

Policy/rationale. The El opinion indicates that both the lender and the trial court complied with the statutory requirements of I.C. 32-20-10.5. The borrower did not. The Court of Appeals noted that the borrower filed her second motion two months after judgment had been entered. Interestingly, the Court went so far as to say the trial court had no discretion to reconvene the settlement conference because the case had already been resolved. The Court also stated that the borrower did not show any “cause” for a second bite at the apple.

Related posts.


Lenders and mortgage loan servicers sometimes engage me to handle contested foreclosure cases. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 General Assembly Update

This follows up my April 12th post Indiana General Assembly: Nothing Cooking This Year.  The sheriff's sale notice legislation I mentioned last month got new life but ultimately did not pass.  The Indiana Lawyer mentions that development (see, "Newspapers survive scare" section) and others in its article this week entitled What lawmakers did — and didn’t do — in the 2019 session.

Seventh Circuit Reminds Us That Federal Law, And Not Indiana State Law, May Apply To Some Successor/Alter-Ego Claims

Lesson. If you’re trying to collect a judgment in federal court based upon veil-piercing theories, make sure you’re applying the correct legal standard. If the underlying claim arises out of a federal statute, Indiana’s state law tests may not apply. Although similar in nature, the standards are not the same and require a different analysis.

Case cite. McCleskey v. CWG Plastering 897 F.3d 899 (7th Cir. 2018)

Legal issue. Whether Indiana state law versus federal law standards controlled the outcome of plaintiff’s successor and alter ego claims against defendant.

Vital facts. As discussed here before (see below), corporate veil piercing cases tend to be very fact sensitive, and McCleskey is no different. Please review the opinion for a summary of the operative evidence. The Court examined whether a son’s plastering business should be liable for a judgment previously entered against the plastering business of the son’s father. The judgment stemmed from the father’s failure to make certain payments to a union. The Court noted, among other things, the “inconvenient fact” that the son went into business the same day that the $190,940.73 judgment was entered against his father’s company.

Procedural history. The district court (the trial court) granted summary judgment for the defendant (son), and the plaintiff appealed.

Key rules. Generally, cases resting on federal ERISA and NLRA statutes, including 29 U.S.C. § § 1132, 1145 and 29 U.S.C. § 185(a), respectively, “are within the federal court’s subject-matter jurisdiction and typically governed by federal law.”

Under federal law, both alter ego and successor liability “incorporate a scienter [intent or knowledge of wrongdoing] component coupled with an analysis of similarities between the old and new entities.” The “notice of the obligation” by the new entity is key to successor liability. In McCleskey, liability for alter ego required more, however: “a fraudulent intent to avoid collective bargaining obligations.” The McCleskey opinion spells out the other key factors that courts consider.

Holding. First, the Court found that federal post-judgment standards of collection applied. Second, the Court concluded, “the district court was too quick to grant summary judgment” in the defendant’s (the son’s) favor.

Policy/rationale. In fact-sensitive cases like McCleskey, I find it best to defer to the Court’s opinion for any detailed application of the evidence to the law. Every case is different (and blog posts can only be so long….) Importantly, the judgment arose out of the plaintiff’s action under a collective bargaining agreement. For today’s purposes, the significant takeaway is that federal courts have their own body of law in this veil-piercing arena. Admittedly, the federal standards should never apply to a commercial mortgage foreclosure action, which cases are based on state contract and foreclosure law. Nevertheless, if you’re a party chasing money in federal court or defending a non-foreclosure collection claim in an Indiana federal forum, you should be mindful that the Indiana standards, about which I’ve written previously (see below), might not apply.

Related posts.

Indiana Collection Theories Of Piercing The Corporate Veil, Alter Ego, Successor Liability And Mere Continuation: Part I

Indiana Collection Theories Of Piercing The Corporate Veil, Alter Ego, Successor Liability And Mere Continuation: Part II
I have experience representing parties entangled in post-judgment collection actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Who Owes The Taxes After An Indiana Tax Sale, And When?

Lesson. As a tax sale buyer, be prepared to pay the real estate taxes that accrue in the year of the sale.

Case cite. Picket Fence v. Davis, 109 N.E.3d 1021 (Ind. Ct. App. 2018) (pdf)

Legal issue. Whether a tax sale buyer owes real estate taxes that accrue in the year of the sale.

Vital facts. The following chronology is important:

10/26/15: Treasurer’s Tax Sale
(The subject property did not sell because there was no “minimum bid.” Thus, the County acquired a lien on the property.)

4/8/16: County Commissioners’ Certificate Sale
(The property “sold,” meaning that the buyer purchased a “certificate” for the property.)

8/22/16: Petition for Tax Deed
(Following the submission of the required statutory notices, the buyer sought a court order for the issuance of a tax deed.)

9/26/16: Order for Deed
(The trial court directed the County to execute and deliver a tax deed to the buyer.)

Procedural history. Following the order for deed, a dispute arose between the buyer and the County regarding whether the buyer was responsible for real estate taxes accruing on or after January 2015, the year of the Treasurer’s Tax Sale. The trial court ruled in favor of the County. The buyer appealed.

Key rules. Indiana counties assess taxes each year, but those taxes do not become due and payable until May and November of the following year. For example, if in 2019 the Boone County Assessor determines that my wife and I owe $1000 in taxes for our home, the Boone County Treasurer will not collect the $1000 until 2020 (May, $500 and November, $500).

Another Indiana tax sale feature illustrated by Picket Fence is that, if a property does not initially sell for a statutory minimum amount, then the property slides to the county for a second tax sale, which does not require a minimum bid. The Court’s opinion describes this process in detail and includes summaries of the testimony of two experts that testified in the case.

The Indiana Court of Appeals rightly focused on the provisions in the tax sale statute [Indiana Code 6-1.1-25-4(f) and 4(j)] that specifically dealt with the payment of taxes by a sale purchaser. The Court explained why the “sale” referenced in those subsections refers to the Treasurer’s Tax Sale, and not the County Commissioners’ Certificate Sale, as it relates to when taxes should be payable by the new owner.

Holding. The Court of Appeals affirmed the trial court’s decision and concluded that the buyer must pay the real estate taxes that accrued the year of the Treasurer’s Tax Sale, including the taxes that accrued before the date of the County Commissioners’ Certificate Sale.

Policy/rationale. The buyer in Picket Fence argued that he should not be on the hook for the 2015 taxes due in 2016 or the first installment of the 2016 taxes due in 2017. The rationale for the buyer’s argument was that he did not actually become the owner until 2016. The County, on the other hand, asserted that the operative “sale” was the Treasurer’s Tax Sale in October of 2015 and that the buyer was thus obligated to pay the taxes that accrued in 2015. While I’m not entirely sure what’s ultimately fair here, the Court properly zeroed in on the key statutory sections and logically followed the language as written by the legislature. Of perhaps some solace to the buyer was that he did not owe any taxes due and payable in 2015 (the 2014 taxes). He only owed taxes that accrued in 2015, payable in 2016.

Related posts.


Mortgage loan servicers and title insurance companies sometimes engage me to handle tax sale-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 General Assembly: Nothing Cooking This Year

My understanding is that there is no currently-pending legislation that would directly impact Indiana's foreclosure-related laws.  At one point, there was debate about sheriff's sale notices, but a Senate panel voted down the sheriff's sale notification bill.  Whether that bill might come back to life remains to be seen.  If anything develops at the end of this year's session, I'll make a point to post about it.

New post coming next week.  Time has gotten away from me this week....

Perplexing Result In “Bona Fide Mortgagee” Case

Lesson. The bona fide mortgagee defense, where a lender claims priority in title over another lender or an owner, may be a difficult on which to win on summary judgment. These cases can be somewhat fact sensitive. If filing an MSJ, dot i’s and cross t’s for all the necessary undisputed facts.

Case cite. Chmiel v. US Bank, 109 N.E.3d 398 (Ind. Ct. App. 2018)

Legal issue. Whether the assignee of a mortgage was a “bone fide mortgagee,” such that the assignee’s lien was valid and enforceable.

Vital facts. The thirty-page Chmiel opinion arises out of a quiet title dispute and is chock full of facts and legal issues. For purposes of this post, there was a dispute between an individual, who I will call “Son,” and the assignee of a mortgage loan, which I will call “Mortgagee.” Another character in this story is the Son’s mother (“Mom”). Here’s what happened:

1991: Mom deeded her real estate to Son subject to her life estate, meaning that Mom basically owned the property until her death at which point title passed to Son.

2005: Son purportedly deeded his residual interest in the real estate back to Mom, and Mom then got a mortgage loan secured by the property.

2007: Son wrote a letter to Mom’s mortgage lender/servicer at the time and disputed the validity of the 2005 deed. Specifically, Son claimed that his signature on the deed was forged and that, to the extent the mortgage loan was valid, it was only secured by Mom’s life estate interest and not Son’s residual ownership interest. In other words, Son claimed that the mortgage was invalid or, at best, the mortgage was only valid as to Mom during Mom’s lifetime.

2009: Son wrote a second letter to the mortgage lender/servicer at the time.

2010: Son wrote a third letter to the mortgage lender/servicer at the time. (The servicer and holder of the mortgage loan changed over the years). This time, the mortgage servicer simply acknowledged receipt of the letter.

2011: Mom defaulted under the mortgage loan. MERS, as nominee of the mortgage lender, executed an assignment of mortgage to Mortgagee, which initiated foreclosure proceedings. Son intervened in the case and claimed that the 2005 deed was forged. Mom later filed bankruptcy, which stayed the foreclosure, and a Chapter 13 Plan was approved.

2015: Mom died, and the Plan payments stopped.

Procedural history. In 2016, Son filed the instant quiet title action to, among other things, terminate Mortgagee’s lien. Mortgagee counterclaimed to foreclose its mortgage. The trial court granted summary judgment for Mortgagee, and Son appealed.

Key rules. To qualify as a bona fide mortgagee, one must purchase in good faith, for valuable consideration, and without notice of outstanding rights of others. Indiana law recognizes both constructive and actual notice. Notice is actual when “it has been directly and personally given to the person to be notified.” Further, in Indiana, actual notice may be implied or inferred from “the fact that the person charged had means of obtaining knowledge that he did not use.”

Holding. The Indiana Court of Appeals reversed the trial court and found there to be genuine issues of material fact regarding whether Mortgagee was a bona fide mortgagee – in other words, whether its mortgage was valid and enforceable. The Court therefore sent the case back for a trial.

Policy/rationale. Son contested the “consideration” and “notice” elements of Mortgagee’s defense. Regarding consideration, the Court found that, although the original lender received money/consideration from Mom for the mortgage, “Mortgagee did not designate any evidence of the consideration it gave for the assignment” of the loan. Mortgagee, or rather its servicer, didn’t help its cause when it answered discovery actually denying, apparently on technical terms, that it gave consideration.

As to notice, Son asserted that Mortgagee received actual notice of his forgery claims before Mortgagee became the assignee of the loan. Specifically, Son pointed out that, in the bankruptcy case, the mortgage servicer (as an agent of the mortgagee/holder of the loan) received his 2010 letter - before MERS assigned the mortgage to Mortgagee. Thus, there was a question of fact as to whether Mortgagee, via its loan servicer, had actual notice of Son’s rights/interests before Mortgagee acquired the loan.

Honestly, I struggle with the Court’s analysis and, frankly, disagree with its conclusion on the bona fide mortgagee issue. The result (denial of summary judgment) may have been correct simply because of the factual density of the case. Nevertheless, to me, the Court’s stated rationale focused on the incorrect time frame. The Court examined the circumstances surrounding the loan assignment transaction, as opposed to the facts associated with the original loan closing. The opinion identified no evidence that, in 2005, the original lender/mortgagee had any reason to believe that the recorded 2005 deed was invalid. In other words, the original lender had to be a bone fide mortgagee. To me, the 2005 closing was the operative moment, not what the assignee paid or knew years later. My view is that the assignee should step into the shoes of the original assignor and possess all its rights and defenses. Case closed. The opinion did not address my theory one way or the other, however, so admittedly I may be missing something. Please email me or post a comment below if you have any insights.

Related posts.


I represent judgment creditors and lenders, as well as their mortgage loan servicers, entangled in lien priority and title claim disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Moves For Default Judgment Only To See Its Foreclosure Case Dismissed

Lesson. Technical inconsistencies between the promissory note and the mortgage may not doom the enforcement of the loan.

Case cite. U.S. Bank Trust v. Spurgeon, 99 N.E.3d 671 (Ind. Ct. App. 2018)

Legal issue. Whether a mortgage still can be valid despite the document’s lack of clarity as to the names of the borrowers and the mortgagors.

Vital facts. Plaintiff Lender filed a mortgage foreclosure action seeking an in rem judgment against a Trust. Mr. Forrest Spurgeon, individually, executed the promissory note. He and Delphine Spurgeon, as trustees of the Trust, executed the mortgage to secure the note. The Trust owned the mortgaged real estate but did not sign the note. Only Forrest executed the note.

Procedural history. The Lender filed a motion for default judgment after the Trust failed to appear in the case. Remarkably, the trial judge not only denied the Lender’s motion but dismissed the Lender’s case altogether. The court had a problem with the fact that the mortgage defined the “borrower” as being the Trust, whereas the note defined the borrower as being Forrest. Since the Lender failed to file a note executed by the trustees on behalf of the Trust, but instead relied only on the note executed by Forrest, the trial court on its own volition found that the Lender failed to state a claim upon which relief could be granted. The Lender appealed to the Indiana Court of Appeals.

Key rules. The Spurgeon opinion has a nice summary of Indiana’s rules of contract construction and interpretation. (Notes and mortgages are both contracts.) The outcome of Spurgeon was driven by the Court of Appeals’ application of those rules, which largely are designed to harmonize the language and ascertain the intention of the parties – even in the face of inconsistencies in the wording.

One other important rule is that “one person may furnish collateral or grant a mortgage on the person’s real property to secure the loan of another.” This person is known as a surety. Thus, the name of the borrower in the note and the name of the mortgagor in the mortgage do not necessarily need to be the same for the mortgage to be valid.

Holding. The Indiana Court of Appeals reversed the trial court’s dismissal of the Lender’s case and instructed the trial court to grant the Lender’s motion for default judgment.

Policy/rationale. The Court concluded that the misuse of the word “borrower” in the mortgage did not render the mortgage invalid or unenforceable. There were a number of factors in the Court’s decision, principal among them being: (1) the dates of the note and mortgage were the same, (2) the mortgage referred to a loan amount that mirrored that in the note, (3) the maturity dates in the contracts were identical, (4) the lender was the same in both documents, and (5) the Trust owned the subject real estate at the time of the loan. The Court said that it “is clear from the language of the Mortgage that the Trust, as mortgagor, has granted a security interest in the property held in its name to secure the payment of the debt owed by Forrest Spurgeon pursuant to the Note.” Also significant was that, despite being served with a summons and complaint, the Trust did not appear in the action to contest the Lender’s claims.

Related posts.

My practice includes representing lenders and their loan servicers in contested mortgage foreclosure actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Court of Appeals Reduces Appeal Bond In Indiana Foreclosure Case

Lesson. In Indiana, a defendant mortgagor generally will be required to post a bond in order to stay a sheriff’s sale during its appeal of an adverse foreclosure decree. Without a bond and a corresponding order of stay, the sheriff’s sale can occur, and the mortgagor (owner) can lose the real estate even if the mortgagor ultimately prevails on appeal. But the amount of the bond will not be the full value of the property, and trial courts have discretion when setting the bond amount.

Case cite. Brooks v. Bank of Geneva, 97 N.E.3d 647 (Ind. Ct. App. 2018); reaffirmed, 103 N.E.3d 197 (Ind. Ct. App. 2018).

Legal issue. Whether the amount of the appeal bond set by the trial court should have been reduced.

Vital facts. The Brooks case was the subject of my 3/6/19 post: Indiana Court Releases Mortgage On Parents' Farmland Based On Material Alteration Of Kids' Loan. Click for a summary of the facts. Importantly, the judgment against the parents/mortgagors was in rem only, meaning that they were not personally liable for the judgment amount. Only their farmland was at risk.

Procedural history. My prior post details the procedural history of the litigation. For today’s purposes, what is important is that the trial court compelled the parents, who lost at the trial court level and appealed, to post a bond of $285,000 in order to stay execution of the judgment during the appeal. The parents immediately requested the Court of Appeals to reduce the amount of the bond.

Key Rules.

Both the Indiana Rules of Trial Procedure and the Indiana Rules of Appellate Procedure speak to appeal bonds. See, Appellate Rule 18 and Trial Rule 62(D)(2). The appellate rule basically is that a bond is not required for an appeal but is required to stay execution during an appeal. Since a sheriff’s sale is a form of “execution,” the defendant/mortgagor generally must post some kind of bond to prevent the sale. The trial rule, on the other hand, provides the guidelines for setting the amount of the bond, and a key consideration in a foreclosure case is that the bond “secure the amount recovered for the use and detention of the property, the costs of the action, costs on appeal, interests and damages for delay.” 

Indiana case law holds that, in a foreclosure case, the bond can include amounts for the “use” of the real estate during the appeal and “damages for delay.” “Use” generally is measured by the fair rental value. “Damages for delay” has included “things such as waste or depreciation.”   

All that being said, trial courts have discretion in determing the amount of the bond and will not be reversed absent abuse of that discretion.   

Holding. The Indiana Court of Appeals reduced the bond amount to $25,000.

Policy/rationale. The trial court set the bond at $285,000 based upon the value of the mortgaged property of $250,000, plus attorney fees and interest. The Court of Appeals concluded that the trial court did not follow the rules and guidelines above. The Court found that the bank offered no evidence of rental value, while the parents asserted that the farmland could not generate any rental income during the winter months when the appeal was pending. Further, apparently there was no information in the record indicating that either depreciation or waste would occur. The Court based its determination of the bond on (1) the bank’s $15,000 estimate of appellate attorney fees and (2) $10,000 in potential interest during the length of the appeal [8% on the $250,000 property value].

My practice includes representing lenders, borrowers and guarantors in contested commercial mortgage foreclosure cases. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Releases Mortgage On Parents' Farmland Based On Material Alteration Of Kids' Loan

Lesson. Sometimes a lender will loan money to a borrower that is secured with collateral, such as a mortgage, pledged by a third party. These third parties are known as sureties. If a lender materially changes the terms of the original loan without the knowledge or consent of the surety, then the surety’s collateral will be released.

Case cite. Brooks v. Bank of Geneva, 97 N.E.3d 647 (Ind. Ct. App. 2018); reaffirmed, 103 N.E.3d 197 (Ind. Ct. App. 2018)

Legal issue. Whether a mortgage pledged by third parties was released when the terms of the borrower’s loan were altered.

Vital facts. A bank granted a loan to a married couple (borrowers) for their dairy farm.  The couple gave the bank a mortgage on real estate they owned.  For the purpose of partially securing the couple’s debt, the wife’s parents also granted a mortgage to the bank on farmland they owned. Importantly, the parents were not personally liable for the underlying debt. 

Over the next year or so, the bank issued four other loans to the borrowers that were secured by their own real estate. The parents were unaware of these additional loans. About a year after that, the bank, again without the parents’ knowledge, agreed to change the terms of the original promissory note to permit semi-annual payments instead of monthly payments. Over the following couple of years, the borrowers began selling off their mortgaged real estate, as well as their farm equipment and cattle, to pay off the four loans that were not secured by the parents’ real estate. The sale proceeds “greatly exceeded” the amount of the original note secured in part by the parents’ farmland. Subsequently, the borrowers defaulted under the original note.

Procedural history. The bank filed a collection lawsuit against both the borrowers and the parents and specifically sought to foreclose on the parents’ farmland. The bank filed a motion for summary judgment, which the trial court granted. The court decreed that the parents’ property should be sold to satisfy the borrowers’ debt. The parents appealed.

Key rules. One who mortgages his land to secure the debt of another is a “surety” to the debtor (the borrower). Indiana law is well settled that a surety’s collateral “is released by any action of the creditor [the lender] which would release a surety, such as the extension of the time of the payment of the debt, the acceptance of a renewal note, or the release of other security.”

A surety is similar to a guarantor. In Indiana, if a borrower and lender “make a material alteration in the underlying obligation without the consent of the guarantor, the guarantor is discharged from further liability.” The test for “material alternation” is “one that changes the legal identity of the debtor’s contract, substantially increases the risk of loss to the guarantor, or places the guarantor in a different position.”

The nature of the “alteration” is irrelevant and can even benefit the surety. If the alteration entails “either a change in the physical document or a change in the terms of the contract between the debtor and creditor that creates a different duty of performance on the part of the debtor,” then such change will be deemed material and will discharge the surety from liability.

Holding. The Indiana Court of Appeals reversed the trial court’s summary judgment for the bank and, in doing so, found that the parents’ mortgage had been released. The Court reaffirmed its opinion on rehearing.

Policy/rationale. The Court reasoned that the bank materially altered the subject promissory note two ways and did so without the parents’ knowledge or consent:

    First, the payment terms went from monthly to semi-annually. Even though the accommodation may have helped the borrowers’ cash flow and did not change the amount of the debt, the parents were entitled to know about it and protect themselves accordingly.

    Second, and perhaps more importantly, the bank had released the borrowers’ mortgage on four other parcels of land. By doing so, the bank placed the parents “in a much more perilous position” as the holders of the only remaining real estate to secure the loan.

Related posts.

My practice includes representing lenders, borrowers and guarantors in contested commercial mortgage foreclosure cases. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Overcomes Borrower’s Allegations Of Misconduct Surrounding Settlement Negotiations

Lesson. In the wake of an undisputed consumer/residential mortgage loan default, lenders and their servicers generally are not compelled to enter into loan modification agreements with their borrowers. Lenders really must only participate in a settlement conference, if requested, or consider whether a borrower qualifies for a loan mod.

Case cite. Feehan v. Citimortgage, 97 N.E.3d 639 (Ind. Ct. App. 2018).

Legal issue. Whether the lender should have been denied the remedy of foreclosure based upon alleged misconduct during and after a court-ordered settlement conference.

Vital facts. Borrower executed a promissory note that was secured by a mortgage on his real property. Borrower later defaulted under the loan, at which point the lender sent him a “notice and cure” letter. Following the borrower’s failure to cure, the lender filed a mortgage foreclosure action. The parties then became involved in lengthy and somewhat complicated workout discussions following the trial court’s order compelling a settlement conference. Distilled to their essence, the borrower’s contentions were (1) the lender did not participate in the settlement conference in good faith, mainly because a lender rep with settlement authority did not appear in person and (2) the lender refused to consider a loan modification. The opinion (link above) outlines the circumstances in greater detail. There was one other significant fact: the subject loan was a conventional non-government-sponsored enterprise with a private investor, which denied all of the borrower’s loan mod requests based in part on the housing expense-to-income ratio. Thus this was not a HUD loan, which may or may not have triggered different loan mod standards.

Procedural history. The trial court granted summary judgment and a decree of foreclosure in favor of the lender. The borrower appealed.

Key rules.

Ind. Code 32-30-10.5-9 states, in part, that “a court may not issue a judgment of foreclosure until a creditor has given notice regarding a settlement conference and, if the debtor requests a conference, upon conclusion of the conference the parties are unable to reach agreement on the terms of a foreclosure prevention agreement.” (This statute does not apply to commercial foreclosures.)

As with some Indiana counties, St. Joseph County has a local rule that also provides for the scheduling of a settlement conference upon a demand by the borrower.

Feehan cited to a number of cases from Indiana and elsewhere holding that alleged violations of the Home Affordable Modification Program (HAMP) do not give rise to a private right of action by a borrower against a lender or its servicer.

Holding. The Indiana Court of Appeals affirmed the summary judgment in favor of the lender:

[The lender] has satisfied its burden of establishing that, even if another foreclosure-prevention settlement conference was scheduled and a personal representative of [the lender] with the authority to enter a loan modification or make a loan modification offer was present at the conference, [the borrower] is not eligible for or entitled to a loan modification, a loan modification offer, or further consideration of the possible loan modification options.

Policy/rationale. The defendant borrower in Feehan claimed that the Court should have denied the lender the equitable remedy of foreclosure given the lender’s alleged misconduct surrounding the settlement conference and its failure to appropriately process the borrower’s loan mod applications. In response, the Court reasoned that, among other things, the borrower was unable to point to any terms in the loan documents requiring the lender or its servicer to consider, upon a default for non-payment, a loan modification on any certain terms. Indeed the borrower never went so far as to assert that the lender was required to agree to a particular loan modification. In the end, the lender was able to designate evidence establishing that it did consider loss mitigation and loan mod options but determined that the borrower was not eligible.

Related posts.

Part of my practice is to represent lenders, as well as their mortgage loan servicers, entangled in contested foreclosures. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Your Source For Indiana Lis Pendens Law

I've been tied up with my day job of late but wanted to post some material this weekend.  The links below should answer most basic questions about Indiana's lis pendens rules:

  1. For Indiana's lis pendens statute, Indiana Code 32-30-11, click here.
  2. Lis Pendens Lessons is a post from 2007.
  3. In 2015, I wrote Indiana Lis Pendens Notices:  What and When.
  4. Indiana Supreme Court Tackles Lis Pendens Law is from 2016.   
  5. My most recent article on this subject was last year, Indiana Lis Pendens Notice Deemed Discharged Despite Pending Appeal Of The Discharge Order

I have represented judgment creditors and lenders, as well as their mortgage loan servicers, entangled in lien priority and title claim disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

New York Confession Of Judgment From Cognovit Note Enforceable In Indiana

Lesson. Although Indiana does not permit cognovit notes (confessions of judgment), our state will enforce properly-entered foreign judgments based upon the otherwise prohibited language. The key is to determine whether cognovit notes are legal in the state that entered underlying the judgment.

Case cite. EBF v. Novebella, 96 N.E.3d 87 (Ind. Ct. App. 2018)

Legal issue. Whether Indiana courts must give “full faith and credit” to a “confessed judgment” entered in New York pursuant to a cognovit note.

Vital facts. Plaintiff obtained a judgment in a New York state court based upon the Defendant’s alleged breach of a contract. The contract, a purchase agreement, contained a clause with the following language: upon a default “… [Defendant] hereby authorizes [Plaintiff] to execute in the name of the [Defendant] a Confession of Judgment in favor of [Plaintiff] in the full uncollected Purchase Amount and enter that Confession of Judgment with the Clerk of any Court and execute thereon.” (This type of clause transforms the agreement into something called a “cognovit note.”) The contract in EBF expressed that it was to be governed by and construed under New York law.

Procedural history. The New York court entered a judgment pursuant to the confession of judgment clause. Because Defendant was an Indiana company, Plaintiff came to Indiana and filed a Petition to Domesticate Foreign Judgment that asked the Indiana trial court to recognize and enforce the New York judgment. (Plaintiff did not proceed under the statutory method to enforce the foreign judgment.) Defendant contested the Indiana action on the basis that the judgment was void under Indiana law. The trial court granted Defendant’s motion to dismiss, and the Plaintiff appealed.

Key rules. Generally, a cognovit note is a legal device whereby the debtor consents in advance to the creditor’s judgment without notice or hearing. Evidently, such confessions of judgment are allowed in the State of New York.

Indiana Code 34-54-3-1 essentially is Indiana’s definition of a cognovit note.

Importantly, cognovit notes are prohibited in Indiana. See, I.C. 34-54-3-2. In fact, Indiana makes it a crime to procure such a note or enforce it. I.C. 34-54-4-1. A key concept here is that the promise to pay cannot be entered into before a cause of action on the underlying agreement has accrued. I.C. 34-54-3-3.

Nevertheless, the Court in EBF noted that, under Indiana common law, “a valid foreign judgment based on a cognovit note will be given full faith and credit in Indiana … based upon the Federal Constitution’s ‘full faith and credit’ clause.” Article IV, Section 1. Indiana cases articulate “full faith and credit” as meaning: “the judgment of a state court should have the same credit, validity, and effect, in every other court of the United States, which it had in the state where it was pronounced.” The Indiana Code adopts full faith and credit at I.C. 34-39-4-3.

The full faith and credit rule has two exceptions/limitations: if, in the foreign court, there was an absence of (1) subject matter jurisdiction and/or (2) personal jurisdiction. The debtor/defendant has the burden of proof on these jurisdictional matters, meaning that it must rebut the presumption of the judgment’s validity.

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

Policy/rationale. The Court concluded that constitutional federal full faith and credit rules and policies trumped Indiana’s statutory prohibition on cognovit notes/confessions of judgment. The underlying judgment appeared “on its face to be rendered by a court of competent jurisdiction and [Defendant] did not challenge the jurisdiction of the New York court to enter the judgment.” For more on the policies behind full faith and credit, read the EBF opinion, which impressively lays out all the applicable and competing ideas.

Related posts.

My practice includes representing parties to judgment enforcement actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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 Summary Judgment Affidavit Flawed - Business Records Inadmissible

Lesson.  For lenders and servicers filing motions for summary judgment, always remain mindful of the elements of the Evidence Rule 803(6) business records exception to the hearsay rule.  An insufficient supporting affidavit could doom the motion.     

Case citeHolmes v. National Collegiate Student Loan Trust, 94 N.E.3d 722 (Ind. Ct. App. 2018)

Legal issue.  Whether, on a motion for summary judgment, the lender proved it owned the subject loan and thus had standing to bring the claim. 

Vital facts.  This case involved what appeared to be a straightforward default under a school loan.  The original lender sold a pool of loans to National Collegiate Funding LLC, which then sold the pool to the plaintiff lender.  The defendant in the case was the student’s father, who co-signed the loan.  There seemed to be no question that the loan was in default.      

Procedural history.  Lender filed a motion for summary judgment.  The trial court granted the motion and ordered the father to pay the debt, plus interest and costs.  The father appealed.

Key rules

To make a prima facia case  for summary judgment, the plaintiff lender in Holmes was required to show that the defendant father executed a contract for a loan and that the lender was the assignee of the loan - and thus the owner of the debt.  Indiana law also required the lender to establish that the defendant owed the original lender the amount alleged.

Indiana Trial Rule 56(E) states that affidavits on summary judgment “… shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify as to the matters stated….”

Inadmissible hearsay contained in an affidavit may not be considered in ruling on a summary judgment motion.

Indiana Evidence Rule 803(6) discusses the “business records” exception to the general hearsay rule and outlines the elements of admissibility.

Holding.  The Indiana Court of Appeals reversed the summary judgment for the lender and concluded that it failed to make a prima facia case.   


The defendant in Holmes contended that the lender’s designated evidence (documents) constituted inadmissible hearsay and, as a result, the lender failed to show that it was entitled to summary judgment.  The Court’s opinion is a technical lesson in evidence and provides an example of how an assignee (a successor-in-interest) can get tripped up in a simple loan enforcement claim.

When Holmes first came down last year, some thought the ruling may have created a real problem for servicers to obtain summary judgment in cases involving loan assignments.  In reality, the plaintiff in the case simply failed to dot the I’s and cross the T’s.  There is favorable case law in Indiana, and across the country, concerning how assignees and successors-in-interest can establish a prima facia case pursuant to the Rule 803(6) business records exception.  But the affidavit in Holmes was deficient as to several key elements, according to the Court: 

Here, the [affidavit] provided no testimony to support the admission of the contract between [defendant] and [original lender] or the schedule of pooled loans sold and assigned to National Collegiate Funding, LLC, and then to [plaintiff], as business records pursuant to Evidence Rule 803(6). There was no testimony to indicate that [the witness] was familiar with or had personal knowledge of the regular business practices or record keeping of [the loan originator or that of plaintiff] regarding the transfer of pooled loans, such that she could testify as to the reliability and authenticity of those documents. Indeed, [the witness] offered no evidence to indicate that those records were made at or near the time of the business activities in question by someone with knowledge, that the records were kept in the course of the regularly conducted activities of either [original lender or plaintiff], and that making the records was part of the regularly conducted business activities of those third-party businesses.

Also noteworthy is that Holmes was not a mortgage foreclosure case.  The school loan in Holmes was not secured, and the opinion does not address one way or another whether there was a UCC negotiable instrument at issue.  Thus the Court did not analyze some of the more conventional ways of proving standing, such as the possession of an original promissory note and/or the recording of an assignment of mortgage.     

Related posts.


My practice includes representing lenders, as well as their mortgage loan servicers, in contested mortgage foreclosure cases.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Tune Up To Indiana Commercial Foreclosure Law

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

Related posts.


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

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

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

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

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

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

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

Key rules.

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

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

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

Related posts.

I represent judgment creditors and lenders in commercial collection actions. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Post Script: When Can Post-Judgment Collection Efforts Begin In Indiana?

This follows-up last week's post.  Yesterday, I bumped into a lawyer who reads my blog and reminded me that we always must check the local rules of a particular county, including the local smalls claims court rules, for their potential application to a particular situation.  Local rules often supplement, or even trump, the state rules of procedure or case law.  As an example, the Marion County (Indianapolis) Small Claims Court Rules, specifically Rule LR49-SC00-602 provides:

B.  Thirty-Day Rule.  A Motion for Proceedings Supplemental shall not be set until thirty (30) calendar days after the date of judgment, except by order of the Court for good cause shown.

The point is that, in certain Indiana venues, post-collection efforts may not begin immediately.  Thanks to attorney Robert Burt for the feedback on last week's post.  


When Can Post-Judgment Collection Efforts Begin In Indiana?

How long must the holder of an Indiana judgment wait before executing on the judgment?  The answer depends on whether the case is in state or federal court.  Two opinions by Magistrate Judge Cherry address that issue and other proceedings supplemental basics Artmann v. Center Garage, 2012 U.S. Dist. LEXIS 153966 (N.D. Ind. 2012) (“Artmann I” - .pdf) and 2012 U.S. Dist. LEXIS 160908 (N.D. Ind. 2012) (“Artmann II” - .pdf). 

Procedural posture.  In Artmann I, the U. S. District Court for the Northern District of Indiana entered judgment in plaintiff’s favor, and one day later plaintiff filed its motion seeking to freeze, and collect upon, defendant’s bank accounts pursuant to Ind. Code §§ 28-9-3-4 and 28-9-4-2.  The opinion dealt with plaintiff’s motion and defendant’s corresponding motion to quash plaintiff’s motion. 

14 days.  The defendant contended that plaintiff’s efforts were premature.  Specifically, Federal Rule 62(a) provides for a 14-day stay of execution on a judgment.  The purpose of the rule is to “afford litigants an ample period of time to consider whether to appeal, to file a motion for new trial and/or to seek a stay of execution of judgment.”  Plaintiff argued that the rule did not bar its request for interrogatories and a hold because plaintiff sought only to “preserve” defendant’s property for eventual satisfaction.  Plaintiff stipulated that it would not actually collect any money until after the 14-day stay had expired. 

Yes and no.  The Court concluded that it could not permit garnishment proceedings before the expiration of the 14-day stay.  As such, plaintiff filed its motion too early.  Clearly the Court could not issue any order granting the motion until the stay ended.  Having said that, the ultimate result in Artmann I was a practical one in that the Court allowed plaintiff’s motion to remain pending until the expiration of the stay period.  (I learned that the Court granted plaintiff’s motion on day 15.) 

State law.  Indiana state court Rule 62(A) does not articulate a 14-day automatic stay of execution, or any stay whatsoever.  Historically, the Indiana state rule provided for a 60-day automatic stay, which later evolved into a 30-day stay and ultimately to no stay at all.  As such, the Artmann I holding only applies in federal court proceedings.  Plaintiffs in Indiana state courts may undertake post-judgment collection efforts immediately.  (Note:  In instances of enforcing a foreign judgment in Indiana, the domestication process cannot commence until 21 days after the entry of the judgment in the original [non-Indiana] court.)      

Pro supp basics.  Artmann II dealt with defendant’s contention that plaintiff’s Artmann I motions did not follow certain technical requirements for proceedings supplemental.  The Artmann II opinion provides a nice summary for judgment creditors and their counsel struggling with the nuts and bolts of proceedings supplemental in federal court.  Specifically, judgment creditors need to remain mindful that, under Indiana law, before courts can entertain a garnishment motion under I.C. §§ 28-9-3-4 and 28-9-4-2, creditors must first (or simultaneously) file a separate motion for proceedings supplemental.

Pro supp relief.  Finally, for those wondering what “proceedings supplemental” can accomplish, the Artmann II opinion noted the three fundamental types of relief available:  (1) requiring a judgment debtor (a defendant) to appear in court for an examination as to available property, (2) requiring a judgment debtor to apply particular property to satisfy the judgment and (3) joining a third-party (a garnishee) to the action and requiring that party to answer as to property held by that party for the judgment debtor.   For more posts on garnishment and proceedings supplemental, including freezing bank accounts, please click on the those Categories to your right.

Data Suggests Housing Recovery Complete

Click on the following link for an article from the Jacksonville Daily Record about the status of the recovery from the housing market collapse:  Black Knight data shows the housing recovery finally is complete

The conclusions in the story are consistent with recent comments from one of our mortgage servicer clients.  He told me that virtually all of the foreclosures from the early 2010's have been processed and that the market is back to more normal default levels.

(For a little different spin on the story, here is a link to my 9/6/18 post:  Housing Crisis Revisited In Long-Form Article, With Video)

Mortgage Lien Second In Line, Because Small Claims Court Judgment Never Fully Satisfied

Lesson. Look for a filed satisfaction of judgment to conclusively determine whether a judgment lien has been extinguished. A small claims court judgment, properly indexed and unreleased, will have senior priority over a subsequently-recorded mortgage.

Case cite. Herron v. First Financial Bank, 91 N.E.3d 994 (Ind. Ct. App. 2017)

Legal issue. The issue in Herron was whether a judgment lien was effective as of May 14, 2013, when a small claims court entered its judgment, or as of November 17, 2015, following an appeal of the small claims court’s ruling during proceedings supplemental. If the judgment lien was effective as of the earlier date, then it would have senior priority over the competing mortgage lien. If the judgment lien was not effective until the later date, then the mortgage lien would have first priority.

Vital facts. Herron, a contractor, repaired a church’s roof in March 2011. In 2013, the Lawrence Township small claims court (Marion County) entered judgment for Herron against the church. The Township recorded the judgment in its Judgment Book on May 14, 2013. There was no appeal. Proceedings supplemental ensued and resulted in payments that satisfied the principal amount of the judgment and filing fees. However, on November 14, 2014, the court awarded additional damages to Herron for attorney’s fees and collection costs. Several months later, the small claims court, apparently sua sponte (on its own), rescinded the November 2014 order. Herron appealed that ruling to the Marion Superior Court, and on November 17, 2015, the superior court (a) reversed the small claims court’s rescission of its 2014 damages ruling and (b) entered a $10,000 award for Herron. Meanwhile, in November 2014, First Financial Bank (FFB) entered into a mortgage loan with the church and recorded its mortgage on February 23, 2015 – after the May 2013 Herron small claims judgment but before the November 2015 superior court judgment.

Procedural history. Herron filed an action to foreclose his judgment lien and named FFB as a defendant. FFB contended that its mortgage was senior to Herron’s lien. Both FFB and Herron filed summary judgment motions claiming that their respective liens had senior priority. The trial court determined that FFB’s mortgage had priority and granted FFB’s motion for summary judgment. Herron appealed.

Key rules. Indiana Code 34-55-9-2 provides that a money judgment becomes a lien on the defendant’s real property when the judgment is entered and indexed in the judgment docket in the county where the property is located. Indiana Code 32-21-4-1 states that a mortgage takes priority according to the time that it was filed in the recorder’s office of the county where the property is located. Generally, in Indiana, “priority in time gives a lien priority in right.” 

Holding. The Indiana Court of Appeals reversed the trial court and held that Herron’s judgment lien was first in time and thus senior to FFB’s mortgage.

Policy/rationale. FFB based its argument on the fact that the file of the small claims court contained a November 7, 2014 receipt that showed the 2013 judgment balance to be zero, which suggested that there was no judgment lien as of that date. FFB further asserted that the November 14, 2014 award for fees during proceedings supplemental constituted a new judgment that was later rescinded. According to FFB, therefore, on November 17, 2015, when the superior court overturned the rescission and awarded damages, a second judgment lien was created, nine months after FFB perfected its mortgage lien.

The Indiana Court Appeals rejected each of FFB’s points. Although the record from the small claims court proceedings was not crystal clear, there was nothing “determinative” showing that the original judgment for Herron had been paid in full or was otherwise satisfied or released. Also, through proceedings supplemental, Herron had an ongoing claim for attorney fees and interest that related back to the original judgment. The Court also found that the small claims court’s rescission of its prior fee award did not go into effect because the superior court ultimately overturned the rescission on appeal. In the end, the Court concluded that Herron had a single judgment lien, created May 14, 2013, which had not been satisfied. As such, Herron’s judgment lien preceded FFB’s February 23, 2015 mortgage lien and had first priority.

Related posts.


I represent judgment creditors and lenders, as well as their mortgage loan servicers, entangled in lien priority and title claim disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

12 Years And Counting

On November 1, 2006, at age 38, I placed my first four posts on this blog.  (I was on fire that month, with 12 posts.)  Although my production varies from month to month, on Monday, at age 50, I'll submit my 553rd post.  And I have no plans to stop.  Thanks for reading, for the feedback and for the referrals. 


From Marion County Sheriff's Sale Team - Recording of Plaintiff's Deeds

I received the attached email blast from the MCSO Sheriff’s Sale Real Estate Team today:

The Marion County Sheriff’s Office (“MCSO”) requires that the successful bidder notify the MCSO Sheriff’s Sale Real Estate team within one week of the recording date once each deed has been recorded by the Marion County Recorder’s Office.

Effective 10.18.2018 Sheriff sale, please email MCSO-SheriffSaleRealEstate@Indy.Gov within one week of the deed’s recording date with the:

1. Sheriff’s File #
2. Date the deed was recorded

If you have multiple deeds being recorded, we would ask that you still report each deed within the requested timeframe.

Please submit all questions and/or comments to this email address MCSO-SheriffSaleRealEstate@Indy.Gov 

Commercial Foreclosure Refresher: Some Basics

A prospective client, who holds a promissory note, which requires an upcoming balloon payment, and a mortgage on commercial real estate securing the note, had these questions for us:

1.    Could the client (effectively, a lender) pursue a default the day after the balloon payment was due?

2.    What did #1 require?

3.    How long would the loan collateral be tied up?

Since I've written about each of these topics in the past, I thought the prospective client's questions made for a nice, short blog post.  Here are the quick answers (as I prepare to head on a fall break vacation with the family):

1.    Depending upon the language in the note, usually yes.  The default and enforcement provisions in the note control.  But, some lenders provide a notice and cure letter as a courtesy, or to initiate settlement discussions.  For more, see Notices of Default, Who Should Send the Letter.   Moreover, while residential/consumer foreclosures require pre-suit notice in Indiana, commercial cases do not:  Indiana's Pre-Suit Notice And Settlement Conference Statute Not Intended For Commercial Foreclosures.  

2.    The Commercial Lender's 8-Item Care Package For Its Foreclosure Attorney

3.    Indiana Foreclosure Process And Timing - The Basics


As A Matter Of First Impression, Indiana Adopts Rule That A Debtor Lacks Standing To Challenge An Assignment

Lesson. Generally, defendants in foreclosure actions - such as borrowers, guarantors or mortgagors - cannot contest the validity of a loan assignment.

Case cite. Duty v. CIT, 86 N.E.3d 214 (Ind. Ct. App. 2017)

Legal issue. Whether a borrower had standing to challenge the assignment of the loan documents from his original lender to the assignee of the loan.

Vital facts. The borrower executed a promissory note and mortgage in favor of lender Wilmington Finance in connection with the purchase of his home. Later, lender CIT Group filed a foreclosure action against him. Shortly thereafter, the loan was assigned to a Trust. A few months later, the trial court entered a judgment against the borrower, who then filed for bankruptcy. Years later, the bankruptcy stay was lifted, and the borrower sought relief from the judgment. By then the loan was held by yet another Trust (another mortgagee). The borrower essentially claimed that one or more of the assignments of the loan documents were faulty.

Procedural history. Following the entry of the foreclosure judgment against the borrower, the borrower moved the trial court to set aside the judgment on the basis that the entity that filed suit against him had no legal right to enforce the loan documents at the time. The trial court denied the motion, and the borrower appealed.

Key rules. As a fundamental matter, a party to an underlying contract lacks standing to attack problems with the reassignment of that contract. Therefore, the general rule across the country is that a debtor may not challenge an assignment between an assignor and assignee. Before Duty, however, that rule had not been adopted in Indiana. The only recognized exception to this rule is if the subject assignment is “void” (such as being made under duress), as opposed to being “voidable,” but the Court in Duty did not address this distinction, which I’ll defer to another day.

Holding. The Indiana Court of Appeals affirmed the trial court and held that the borrower had no standing to challenge the loan assignment.

Policy/rationale. The Duty opinion cited to a bankruptcy opinion from Pennsylvania for the rationale behind the prevailing rule:

[The underlying contract] is between [Debtor] and [Assignor].  [Assignor’s] assignment contract is between [Assignor] and [Assignee]. The two contracts are completely separate from one another.  As a result of the assignment of the contract, [Debtor’s] rights and duties under the [underlying] contract remain the same: The only change is to whom those duties are owed….  [Debtor] was not a party to [the assignment], nor has a cognizable interest in it. Therefore, [Debtor] has no right to step into [Assignor’s] shoes to raise [its] contract rights against [Assignee].  [Debtor] has no more right than a complete stranger to raise [Assignor’s] rights under the assignment contract.

Related posts.

I represent judgment creditors and lenders, as well as their mortgage loan servicers, entangled in contested foreclosure cases. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Unusual Deed In Lieu Of Foreclosure Agreement Failed To Guarantee Sale Proceeds to Borrower/Mortgagor

Lesson. Creativity with settlement agreements is fine so long as the language clearly and unambiguously articulates the terms of the intended deal.

Case cite. Bobick’s Pro Shop v. 1st Source Bank, 84 N.E.3d 1238 (Ind. Ct. App. 2017)

Legal issue. Whether a deed in lieu of foreclosure agreement compelled a lender/mortgagee to dispose of the mortgaged property in a fashion that paid money back to the borrower/mortgagor.

Vital facts. Borrower and Bank entered into an Agreement for Deed In Lieu of Foreclosure (Agreement). The Bobick’s opinion sets out verbatim the pertinent portions of the Agreement, which by its nature was a settlement arrangement between the parties related to a $2.5MM debt. A unique element of the Agreement surrounded how the proceeds from the Bank’s sale of the mortgaged property would be applied, including a scenario whereby the Borrower itself could recover a portion of the proceeds. After a lengthy time on the market, the Bank ultimately sold the property back to itself at a price that did not net any money to the Borrower.

Procedural history. The Borrower filed a lawsuit against the Bank claiming that the Bank’s sale of the property to itself was a breach of the Agreement. The parties filed cross-motions for summary judgment, and the trial court ruled in favor of the Bank. The Borrower appealed.

Key rules. A contract may be construed on summary judgment if it is not ambiguous or uncertain.

Holding. The Indiana Court of Appeals affirmed the trial court’s summary judgment in favor of the Bank.

Policy/rationale. The Borrower asserted that the language in the Agreement gave the Bank limited discretion to sell the property and that the “fundamental purpose of the Agreement … was to provide a mechanism for the parties to share excess value…” in the property. The problem was that the Agreement’s wording did not support the Borrower’s theory. The Court rejected the Borrower’s position as being “wholly without merit” and pointed to a clause in the Agreement that authorized the Bank to “dispose of the property in such manner … and at such time as [Bank] determines in its sole and absolute discretion.” The Court also noted that, as is the case with any standard deed in lieu agreement, the Agreement resulted in the Bank acquiring unrestricted title to (ownership of) the property. “The plain language of the Agreement demonstrates that the parties contemplated that [the Bank] might dispose of the property in such a manner and time that there would be no funds to distribute to [Borrower).”

Related posts.

I represent lenders, as well as their mortgage loan servicers, entangled in contested foreclosures. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Mortgagor/Owner Compelled To Turnover Tax Sale Surplus Funds To Mortgagee/Judgment Creditor

Lesson. Indiana law may obligate an owner/mortgagor to turnover real estate tax sale surplus funds to his judgment lien creditor or mortgagee.

Case cite. 2444 Acquisitions v. Fish, 84 N.E.3d 1211 (Ind. Ct. App. 2017).

Legal issue. Whether a lender/mortgagee could compel his borrower/mortgagor to turnover previously-refunded surplus funds arising out of a county’s tax sale of the mortgaged real estate.

Vital facts. This case involved a private loan from Plaintiff to Defendant that was secured by a mortgage on Defendant’s real estate. Following a loan default, Plaintiff obtained a judgment and foreclosure decree against Defendant in state court. Before the sheriff’s sale, Defendant filed a Chapter 11 bankruptcy case. In connection with that proceeding, the bankruptcy court ordered the County to turnover surplus funds, from a prior real estate tax sale, to counsel for Defendant to be held in trust. The bankruptcy case later was dismissed, and Defendant’s counsel transferred the tax sale surplus to his client.

Procedural history. Plaintiff filed a motion in the state court case for the Defendant to turnover the tax sale surplus funds. The trial court granted Plaintiff’s motion, and Defendant appealed.

Key rules. Ind. Code 6-1.1-24-7(c) authorizes who can make a claim for a refund in the event of a tax sale surplus. Although that statute does not expressly authorize a mortgagee or judgment creditor to obtain a surplus, Indiana courts have held that persons “with an interest in the real estate, including those who did not own the real estate at the time of the tax sale or who did not purchase the real estate at the tax sale, may assert a claim for a tax sale surplus directly with the trial court.” Indiana case law provides that a mortgagee qualifies as a person with a substantial property interest of public record.

Holding. The Indiana Court of Appeals affirmed the trial court’s order granting Plaintiff’s motion for turnover.

Policy/rationale. One of Defendant’s challenges was that Plaintiff could not file a motion against Defendant to recover the surplus but that Plaintiff instead was limited to proceedings supplemental for any relief. The nuance here is that prior Indiana case law (see post below) dealt with a mortgagee’s pursuit of funds still held by the County, not funds already refunded to the owner. The Court rejected the Defendant’s contention because the statute does not specify the procedural conduit to file the claim, which essentially is one for an equitable declaratory judgment. The Court reasoned that, because Plaintiff held a lien against the real estate subject to the tax sale, Plaintiff’s interest in the real estate had priority over the interest of the property’s owner, Defendant. The Court concluded that, since Plaintiff “has a more substantial interest in the tax sale surplus funds than [Defendant], we find that equity requires the disbursement of the funds to [Plaintiff].” The Defendant asserted other technical bases for a reversal, all of which the Court rejected.

Related post. Mortgagee Prevails In Claim For Indiana Tax Sale Surplus 

I represent lenders, as well as their mortgage loan servicers, entangled in tax sale disputes and contested foreclosures. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.

Housing Crisis Revisited In Long-Form Article, With Video

First, credit goes to the Indianapolis Business Journal's "Eight @8" daily eNewletter for alerting me to this content.  The eight stories from yesterday, compiled by Mason King, included this in-depth piece from The Penny Hoarder:  "The Amercian Nightmare," which "examines the [foreclosure crisis] impact" a decade later, by Desiree Stennett and Lisa Rowan.  There are lots of interesting perspectives in the story.  Hard to believe it's been ten years since the crash....       

Reminder Of Indiana's View Of MERS

I've been pressed for time of late but wanted to post some material today.  The article that follows is from my October, 2012 post prepared in the wake of the Indiana Supreme Court's landmark decision involving Mortgage Electronic Registration Systems, Inc. (aka MERS).  


What is Mortgage Electronic Registration Systems, Inc. (“MERS”)?  More specifically, what does mortgage language identifying MERS “as nominee” mean?  The Indiana Supreme Court in Citimortgage v. Barabas, 2012 Ind. LEXIS 802 (Ind. 2012) dealt with those and other questions surrounding the role of MERS in the foreclosure world about which I wrote following the Indiana Court of Appeals' opinion, which the Supreme Court ultimately reversed. 

Setting the table.  In Citimortgage, junior mortgagee ReCasa initiated a foreclosure action and named only Irwin, the purported senior mortgagee, as a defendant.  The language in the subject mortgage stated that Barabas, the mortgagor, granted the mortgage to MERS “as nominee” of Irwin, identified as the lender.  Upon being sued to answer as to its interests in the subject real estate, Irwin quickly filed a disclaimer of interest, and the court dismissed Irwin from the case.  The trial court later entered judgment for ReCasa, which acquired the real estate at the sheriff’s sale.  ReCasa then sold the real estate to a third party, Sanders.  A month later, Citimortgage filed a motion to intervene in the action and asked the trial court to set aside the judgment and sheriff’s sale. 

Defining MERS.  In its rationale, the Court came to terms with the reality that “about 60% of the country’s residential mortgages are recorded in the name of MERS rather than in the name of the bank, trust, or company that actually has a meaningful economic interest in the repayment of the debt.”  The Court pronounced that “a MERS member bank appoints MERS as its agent for service of process in any foreclosure proceeding on a property for which MERS holds the mortgage.”  The Court found that:

the relationship between Citimortgage and MERS was one of principal and agent.  Clearly, one of the primary purposes of that agency relationship was to facilitate efficient service of process.  . . .  By designating MERS as an agent for service of process, as Irwin did in the Barabas mortgage, lenders can have their cake and eat it too; they free themselves from burdensome, expensive recording requirements but still receive notice when another lienholder seeks to foreclose on a property in which they have a security interest.

Senior mortgage survives.  The core question in Citimortgage was whether ReCasa’s failure to name MERS as a defendant impacted the rights, if any, of Citimortgage, which at some point appears to have acquired the senior mortgage.  Although the Court of Appeals affirmed the trial court’s decision in favor of ReCasa, the Supreme Court ruled for Citimortgage.  ReCasa’s failure to name MERS as a defendant or, more specifically, failure to serve MERS with a summons and complaint, prevented ReCasa from terminating the senior mortgage and leapfrogging into the first lien position.  In short, the judgment was void as to Citimortgage. 


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 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 “Lender Exception” Applicable To Leasehold Mortgage In Priority Dispute With Mechanic’s Lien

Lesson. A leasehold mortgage constitutes a valid mortgage lien and can be senior to a mechanic’s lien, if the facts otherwise meet the so-called “Lender Exception.”

Case cite. Kellam Excavating v. Community State Bank, 82 N.E.3d 928 (Ind. Ct. App. 2017)

Legal issue. Whether a leasehold mortgage or mechanic’s lien had priority in title.

Vital facts. A lessee of real estate and a contractor entered into a construction contract on 7/30/13 to build a fertilizer plant. Construction began on 10/25/13. Lessee later needed additional financing for the construction. On 5/16/14, the lessee granted a bank a leasehold mortgage as collateral for some financing the bank offered through a series of master leases between the bank and the lessee. The bank recorded its mortgage on 6/24/14. Following the lessee’s failure to pay the contractor in full, the contractor recorded a mechanic’s lien on 3/6/15. Collection and foreclosure litigation subsequently commenced against the lessee that included a lien priority dispute between the bank and the contractor.

Procedural history. The bank filed a motion for summary judgment claiming that its mortgage should receive priority over the contractor’s mechanic’s lien. The trial court granted the motion, and the contractor appealed.

Key rules.

    Three statutes: There are three Indiana statutes that govern priority between a mortgage and a mechanic’s lien: Indiana Code Sections 32-21-4-1(b), 32-28-3-2 and 32-28-3-5(d).

    Lender Exception: The Court in Kellam incorporated its prior decision in Harold McComb v. JP Morgan Chase that “discussed the interplay between the three relevant statutes and the question of mortgage lien priority versus a later-recorded mechanic’s lien as to improvements provided on commercial property.” That holding “is commonly referred to as the Lender Exception,” and I wrote about the McComb opinion on 9/6/08. In short, the Lender Exception provides:

With regard to commercial property, where the funds from the loan secured by the mortgage are for the specific project that gave rise to the mechanic’s lien, the mortgage lien has priority over the mechanic’s lien recorded after the mortgage.

    Mortgage defined: The definition of a mortgage is a “conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms” and as a “lien against property that is granted to secure an obligation (such as a debt) and that is extinguished upon payment or performance according to stipulated terms.”

Holding. The Indiana Court of Appeals affirmed the trial court’s summary judgment in favor of the bank/mortgagee. The Indiana Supreme Court denied transfer.

Policy/rationale. The heart of the Kellam dispute surrounded the nature of the financing. The contractor argued, among other things, that the lessee did not execute a promissory note and that the security agreement was not a qualifying mortgage because the document’s title was a “leasehold” mortgage. The Court, however, found that the agreement operated like a typical mortgage by granting a lien on the lessee’s property rights and by obligating the lessee to repay the bank for funds the bank expended. Moreover, there was no authority for the proposition that a promissory note is required for a valid mortgage.

In the final analysis, despite the unconventional (my term) nature of the financing arrangement, the Court in Kellam was convinced that the lessee sought a loan from the bank for construction of the facility and that the bank’s funds were used for that purpose. Since the Lender Exception applied, the bank’s mortgage was superior to the contractor’s mechanic’s lien.

Related posts. The Mechanic's Liens category to your right contains all of my posts about these kinds of priority disputes.
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 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 Sheriff's Sale Buyers Beware: Meth Labs

Yikes.  Did you know that Indiana has a set of regulations that deal with the cleanup of properties contaminated by the manufacture of illegal drugs?  Did you know that, for instance, an innocent buyer at a sheriff's sale arguably could be compelled by the State of Indiana to cleanup a house previously utilized as a meth lab?  

The Law.  Title 410 of the Indiana Administrative Code, Article 38, entitled Inspection and Cleanup of Property Contaminated with Chemicals Used in the Illegal Manufacture of Controlled Substance, governs this matter.  Even though the regulation never mentions mortgage foreclosures or sheriff's sales, a handful of key provisions point to the idea that even a totally innocent buyer at a sale, with no prior knowledge of any contamination, could be required to pay for a cleanup before either living in the house or, perhaps more on point here, liquidating the post-foreclosure.  410 IAC 39-2-18-1 defines "owner" as "a person having an ownership interest in the contaminated property."  410 IAC 38-3-2 goes on to require the owner to cleanup the property before occupying it or "transferring any interest in the property to another person." 

The Impact.  Other than a client once asking me to interpret the law, admittedly I've never had to litigate this issue, nor have I been involved in a dispute with the State surrounding the law's applicability.  Nevertheless, it seems to me that residential mortgage loan servicers should be aware of these rules in the event they learn, either pre or post-sheriff's sale, that they service a mortgage on a house contaminated by the manufacture of illegal drugs (i.e. a meth lab).  By foreclosing on a meth lab, the lender/mortgagee could end up with an expensive mess on its hands.     

The Rub.  The potential exposure to cleanup liability is similar to the environmental exposure discussed in my 9/24/09 post Always Consider An Environmental Liability Analysis, geared more toward commercial foreclosures.  (See also, Real Estate Appraisals Are Important, But Not Required, In Indiana Foreclosures.)  One difference between the environmental topic I previously discussed and today's subject is that it may be difficult if not impossible for a foreclosing lender or a sheriff's sale buyer to know about a meth lab before the sheriff's sale.  Ideally, a foreclosing mortgagee or potential buyer would inspect the interior of the house before any sale, but that's not always possible absent consent by the owner/mortgagor or perhaps a clear abandonment by the occupant. 

More Info.  I understand that the State agency that oversees these matters is the Indiana State Department of Health, Environmental Public Health Division.  For details about the State's program, the Division's website has a plethora of information.  Start by clicking here, but note the "Cleanup and Inspection of Illegal Drug Labs" button on the left side of the home page. 

Post-Foreclosure Attack On Writ Of Assistance (Eviction) Dismissed

Lesson. A borrower-mortgagor’s challenge to a lender-mortgagee’s execution of a writ of assistance needs to occur in the state court foreclosure action, not in a subsequent federal court case. Even then, there’s not much the borrower can do about the writ, which essentially is the process to evict the former owner following a sheriff’s sale.

Case cite. Holt v. BSI, 2017 WL 3438192 (N.D. Ind. 2017) (pdf)

Legal issue. Whether a borrower/mortgagor had a viable federal court claim against his lender (the mortgagee) for damages arising out of the manner in which a state court writ of assistance was executed.

Vital facts. A borrower lost a state court mortgage foreclosure action, and his property was sold at a sheriff’s sale. The lender then obtained a writ of assistance in order to take possession of the property. Movers later loaded the borrower’s belongings onto a truck and locked him out of the house. Among other things, the borrower, in this subsequent federal case, claimed that the lender should not have taken possession of his property and that some of his belongings were damaged after they were removed.

Procedural history. The defendants, including the lender/mortgagee, filed a Rule 12(b)(6) motion to dismiss the borrower’s claims.

Key rules. For the rules related to Trial Rule 70(A) writs of assistance, please click on the related blog posts below. One guideline of particular importance here is the Seventh Circuit precedent establishing that “the sheriff has the ‘right and duty’ to execute the writ of assistance immediately upon receiving it,” so the borrower (former owner) cannot claim that the writ was executed without delay.

Holding. In Holt, the U.S. District Court for the Northern District of Indiana granted the defendants’ motions and dismissed the borrower’s case.

Policy/rationale. The borrower alleged that the lender wrongfully seized his property because it executed the writ of assistance while the borrower was contesting the foreclosure. However, the state court had already entered the foreclosure judgment, and the sheriff had already sold the mortgaged property. As such, the borrower “had already lost that dispute.” The foreclosure order entitled the lender to immediate possession of the real estate and directed the sheriff to enter the property and remove the borrower from it.

As to the borrower’s personal property, his complaint did not allege that the lender actually performed the lockout or took the belongings. Rather, an independent contractor performed those acts. Also the Court noted the principle that the borrower “could have avoided his trouble by moving out voluntarily and promptly when [the lender] obtained title to the property as opposed to forcing [the lender] to utilize the sheriff’s department to enforce the court’s decision.” In the end, the Court in Holt concluded that the borrower did not identify a basis upon which the lender could be liable for negligence.

Related posts.

I represent lenders, as well as their mortgage loan servicers, in connection with contested mortgage foreclosure cases and related claims. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at 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.


Restraining Order To Enjoin Sheriff's Sale Denied

Hollowell v. Bornkempt, 2017 WL 3446676 (N.D. Ind. 2017) (pdf) is an Indiana federal court opinion following an Indiana state court foreclosure case wherein the borrower's property was slated for a sheriff's sale.  The pro se borrower filed the federal court action seeking a temporary restraining order (TRO) to prevent the sale.  For the following reasons, the Court denied the borrower relief:

1.    The borrower did not convince the Court that the standard for an injunction was met.  Primarily, the Court found the borrower was not reasonably likely to succeed on the merits of his claims (for FDCPA and TILA) violations.  

2.    The TRO was barred by the Rooker-Feldman doctrine.  

3.    There was no evidence that the borrower gave prior notice to the defendants of the TRO as the law required him to do.

Here are links to two other posts dealing with similar issues:

*    Indiana Federal Court Denies Request For Injunction To Stop Sheriff’s Sale

*    Assets Cannot Be Frozen By An Injunction