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.

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.

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.

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.

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.

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.

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.  


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.

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

Seventh Circuit Affirms Dismissal Of Borrower’s Post-Foreclosure Federal Claims Based On Rooker-Feldman and Res Judicata

Today’s post follows-up mine from 2/26/17: Borrower’s Claims For Violations of RESPA, TILA, FDCPA, RICO And FPRAM, Together With Claims for Various Torts, Dismissed. For an introduction to the case, Mains v. Citibank, 852 F.3d 669 (7th Cir. 2017), please click on that prior article.

The borrower appealed the District Court’s ruling to the Seventh Circuit Court of Appeals. Click here for the Court's opinion, which thoroughly sets up each of the borrower’s contentions and then knocks them out. Mains provides a road map through Indiana state and federal law under circumstances in which a borrower/mortgagor, in the aftermath of a state court foreclosure, pursues fraud-based remedies in federal court against a lender, a mortgage loan servicer and their law firms.

I’ve written about the Rooker-Feldman and res judicata doctrines many times in the past. In fact, this is the second post about a Seventh Circuit Court of Appeals’ decision on the subject – click here for my first post. As to this recent opinion, here are a couple highlights:

1. Federal claims not raised in state court, or that do not expressly require review of the state court decision, may be subject to dismissal “if those claims are closely enough related to a state court judgment.” Is the federal plaintiff alleging that the state court judgment caused his injury?

2. The Seventh Circuit broadly concluded that “the foundation of the present suit is [the borrower’s] allegation that the [prior foreclosure judgment] was in error because it rested on a fraud perpetrated by the defendants…. [The borrower’s] remedies lie [solely] in the Indiana courts.” The Court reasoned that, to delve into any alleged fraud, “the only relief would be to vacate [the state court] judgment … that would amount to an exercise of de facto appellate jurisdiction, which is not permissible.”

The Court found that “in the final analysis, all of [the borrower’s] claims must be dismissed - most under Rooker-Feldman and a few for issue preclusion [res judicata].” The only thing the Court of Appeals changed was that the dismissal should be without, instead of with, prejudice. (As an aside, the borrower appealed the decision to the United States Supreme Court, which denied his request to hear the case – Mains v. Citibank, 138 S.Ct. 227 (2017)).


I frequently represent creditors and 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.

Absence Of Legal Description Dooms Mortgage In Lien Priority Dispute

Lesson. First, if you are in the business of drafting and recording mortgages, make sure they contain legal descriptions of the subject real estate.  Common (street) addresses technically are inadequate to provide notice of a lien.

Case cite.  U.S. Bank v. Jewell, 69 N.E.3d 524 (Ind. Ct. App. 2017).

Legal issue.  Whether the omission of a legal description of the real estate rendered the mortgage insufficient to charge a competing mortgagee with notice.

Vital facts.  This case involved a mortgage lien priority dispute and dealt with Indiana’s bona fide purchaser (BFP) doctrine.  Jewell held a mortgage that it recorded but that failed to contain a legal description.  The mortgage only identified the common address a/k/a the street address.  When the owner later sold the real estate, the buyer obtained financing from a lender, which conducted a title search before ultimately making the mortgage loan.  The evidence established that the lender’s title search did not disclose Jewell’s mortgage.

Procedural history. Jewell filed suit to foreclose its mortgage and named the lender.  The lender filed a motion for summary judgment claiming that it was a bona fide purchaser and was entitled to senior lien status.  The trial court denied the motion.  The lender appealed.

Key rules.  The Jewell opinion contains an excellent summary of Indiana’s rules, exceptions and tests related to the bona fide purchaser doctrine.  The opinion also provides a really good analysis of Indiana’s summary judgment standard, and related burdens of proof, as applicable to our BFP laws. Without regurgitating all of the law from the opinion (see other posts noted below), here are some of the key rules in play in Jewell:

1. Prospective purchasers of real estate must search the grantor-grantee and the mortgagor-mortgagee indexes for the period that the mortgagor holds title.

2. On the matter of “constructive” notice, “a mortgage must be recorded [in the chain of title] in the proper county and must contain an accurate legal description of the property.”

3. In the absence of contructive notice, there is Indiana law supporting the notion that, in certain circumstances, subsequent purchasers may be charged with “inquiry” notice, sometimes called “implied or inferred” notice:

Notice is actual when notice has been directly and personally given to the person to be notified.  Additionally, actual notice may be implied or inferred from the fact that the person charged had means of obtaining knowledge which he did not use.  Whatever fairly puts a reasonable, prudent person on inquiry is sufficient notice to cause that person to be charged with actual notice, where the means of knowledge are at hand and he omits to make the inquiry from which he would have ascertained the existence of a deed or mortgage.  Thus, the means of knowledge combined with the duty to utilize that means equates with knowledge itself.  Whether knowledge of an adverse interest will be imputed in any given case is a question of fact to be determined objectively from the totality of the circumstances.

Holding. The Indiana Court of Appeals reversed the trial court and granted summary judgment for the lender.

Policy/rationale. Jewell dealt mainly with the inquiry notice matter.  Jewell contended that, had the lender searched the mortgagor-mortgagee index, it would have discovered Jewell’s mortgage.  However, the lender submitted affidavits establishing that it conducted such a search, which did not reveal the Jewell mortgage due to the omission of the legal description.  The problem was that Jewell merely argued that the common address was sufficient to defeat the summary judgment motion.  Jewell’s failure to submit evidence to prove its theory was the deciding factor.

Related posts.

Indiana Court Discusses Whether A Lender Was A “Bona Fide Mortgagee”

BFP Defense Denied, And IRS Lien Prioritized

What Does “Chain Of Title” Mean?
I frequently represent 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.

Indiana Federal Court Concludes That Servicer Is Not A Debt Collector and Did Not Violate The IHLPA

Lesson. Although servicers usually are not the actual owners of residential mortgage loans, they nevertheless may be the proper party to resolve the foreclosure action or to negotiate a settlement. Also, unless the debt was in arrears when the servicer obtained its role, the Fair Debt Collection Practices Act will not apply to communications by the servicer.

Case cite. Turner v. Nationstar, 2017 U.S. Dist. LEXIS (S.D. Ind. 2017) (pdf).

Legal issues. Whether the defendant loan servicer was a “debt collector” subject to the Fair Debt Collection Practices Act (“FDCPA”), specifically 15 U.S.C. 1692e(2)(A). Also, whether the defendant committed a “deceptive act” in violation of the Indiana Home Loan Practices Act (“IHLPA”), Ind. Code 24-9-1 et seq.

Vital facts. For background, click on last week’s post, which also discussed Turner. The borrower claimed that, during a mediation conference, the servicer committed a deceptive act by leading the borrower to falsely think that the servicer owned the loan “such that [borrower] believed he was bargaining with the owner of the loan when he agreed to exchange his counterclaim against [servicer] for a loan modification.” The borrower also alleged that, after the entry of the state court foreclosure judgment, the servicer wrongfully sent the borrower account statements with a debt amount different from the judgment amount.

Procedural history. The defendant servicer filed a motion for summary judgment. Judge Young’s ruling on the motion is the subject of this post.

Key rules.

The IHLPA at I.C. 24-9-2-7(1)(a) defines a deceptive act as:

(1) an act or a practice as part of a mortgage transaction . . . , in which a person at the time of the transaction knowingly or
(A) makes a material misrepresentation; or
(B) conceals material information regarding the terms or conditions of the transaction. . . .

For the FDCPA to apply, “two threshold criteria must be met:” (1) the defendant must be a “debt collector” and (2) the communication by the debt collector forming the basis of the claim “must have been made in connection with the collection of any debt.” 15 U.S.C. 1692a(6), c, e and g.

A “debt collector” is:

any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

Loan servicing agents are not “debt collectors” unless the debt was in arrears at the time the servicer obtained that role.

Holding. The Southern District of Indiana granted summary judgment for the servicer on the IHLPA and FDCPA claims brought by the borrower.


As to the IHLPA action, the Court concluded that the servicer did not conceal “material” information about its role/status because the servicer established that it was the proper party to resolve the foreclosure action. In other words, whether the servicer was or was not the owner of the loan was immaterial in the Court’s view.

Regarding the FDCPA claim, the Court found that the defendant was the agent of the original creditor and acted as the servicer “well before [the loan] was in default.” As such, the servicer did not meet the definition of a “debt collector” under the FDCPA.

Related posts.

Click on the "Fair Debt Collection Practices" category to your right

Loan Servicers As Plaintiffs In Foreclosure Cases (also the Turner dispute)


I frequently represent lenders, as well as their mortgage loan servicers, entangled in consumer finance litigation. 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.

Another Indiana Decision Concerning RESPA: Mixed Result For Servicer

Lesson. In defending RESPA QWR cases, first examine whether the subject letter is in fact a QWR. Next, assess whether the borrower suffered any actual damages arising out of the alleged failure to respond.

Case cite. Turner v. Nationstar, 2017 U.S. Dist. LEXIS (S.D. Ind. 2017) (.pdf).

Legal issue. Whether the lender/servicer was entitled to summary judgment on the borrower’s three theories for RESPA violations.

Vital facts. The procedural history and the underlying facts of Turner are quite involved. For purposes of today’s post, which focuses on the REPSA claims, the borrower sent three letters (alleged “QWRs,” see last week’s post) to the defendant’s lawyer seeking information. Letter 1 asked for the name of the owner of the loan. The defendant (a residential mortgage loan servicer) responded to that letter by identifying both the servicer and the owner of the loan. Later, the borrower, following the entry of a state court foreclosure judgment and a denial of a loan modification request, sent Letter 2 asking for the “amount of the proposed monthly payment” under a requested loan modification that had been denied. That information was never provided. The third alleged QWR, Letter 3, surrounded an inquiry into payments the borrower made that had only been partially refunded, despite a request for a full refund. The servicer did not respond to that letter either.

Procedural history. The parties ultimately entered into a Home Affordable Modification Agreement that vacated the foreclosure judgment. Despite the settlement, the borrower filed suit against the servicer in federal court alleging, among other things, violations of the Real Estate Settlement Procedures Act (“RESPA”). The servicer filed a motion for summary judgment that led to Judge Young’s opinion, which is the subject of today’s post.

Key rules.

  1. Borrowers may recover actual damages, including emotional distress, caused by a failure to comply with a Section 2605(e) qualified written request, per Section 2605(f)(1)(A).
  2. 12 U.S.C. 2605(e)(1)(B) defines a QWR. Case law has interpreted that provision to include “any reasonably stated written request for account information.” However, the duty to respond “does not arise with respect to all inquiries or complaints from borrowers to servicers.” The focus is on the servicing of the loan, not on the origination of the loan or modifications to the loan.
  3. 12 U.S.C. 2605(e)(1) and (2) deal with the timing of certain responses to certain QWRs. For example, Section (e)(2)(C)(i) sets a thirty-day deadline for certain servicing requests related to loan mods. See also 12 C.F.R. 1024.41 regarding timing for loss mitigation requests.
  4. 12 U.S.C. 2605(k)(1)(D) requires a servicer to provide within ten business days “the identity, address, and other relevant contact information about the owner or assignee of the loan” when requested by the borrower.

Holding. The Southern District of Indiana granted in part and denied in part the servicer’s summary judgment motion. The servicer prevailed on the Section 2605(k)(1)(D) and Section 2605(e)(2) claims about Letters 1 and 2. The Court denied summary judgment on the Section 2605(e)(1) claim for Letter 3.

Policy/rationale. As to Letter 1, the Court noted that the faulty timing of the response to the QWR did not cause actual damages. The distress alleged instead arose out of other factors in the borrower’s life. Letter 2 concerning loss mitigation options did not qualify as a QWR in the first place. Information related to a failed loan mod falls outside of RESPA. However, the Court concluded that Letter 3, a letter request seeking information about the servicer’s refund of payments made to stave off foreclosure, was a viable QWR because the letter involved the servicing of the loan. Since the servicer never responded to that letter, the claim regarding Letter 3 passed the summary judgment stage, although the opinion did not address the matter of damages.

Related posts.


I frequently represent lenders, as well as their mortgage loan servicers, entangled in consumer finance litigation. 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 Rejects Alleged RESPA Violations Based Upon Inadequate QWR

Lesson. Careful compliance by mortgage servicers should lead to a favorable summary judgment rulings in RESPA cases brought by borrowers.

Case cite. Perron v. JP Morgan Chase, 845 F.3d 852 (7th Cir. 2017).

Legal issue. Whether the lender violated the Real Estate Settlement Procedures Act (RESPA), specifically the statutory duty to respond to a “qualified written request” from the borrower.

Vital facts. The lender erroneously paid the wrong insurer for homeowner’s coverage using funds from the borrowers’ escrow account. However, the borrowers switched insurers without informing the lender. Upon learning of the error, the lender paid the new insurer and informed the borrowers that the prior insurer would be sending a refund. The lender requested that the borrowers remit the refund to the lender so the depleted escrow account could be replenished, but the borrowers failed to do so. As a result, the lender adjusted the monthly mortgage payment to make up for the shortfall, but the borrowers failed to pay the higher amount and went into default. Instead of curing, the borrowers sent a RESPA “qualified written request” to the lender and demanded reimbursement of their escrow. The lender responded to the requests but still got sued.

Procedural history. The borrowers filed an action in federal court alleging that the RESPA responses were inadequate and that they had suffered 300k in damages. The district court granted summary judgment to the lender, and the borrowers appealed to the Seventh Circuit.

Key rules. The Perron opinion provides a great summary of the QWR duties in RESPA, 12 U.S.C. 2601-2617. Here are some of the key legal principles outlined by the Court:

  1. Generally, the statute “requires mortgage servicers to correct errors and disclose account information when a borrower sends a written request for information” known as a “qualified written request” or QWR.
  2. RESPA gives borrowers a cause of action for actual damages incurred “as a result of” a failure to comply with the duties imposed on servicers of mortgage loans.
  3. If borrowers prove the servicer engaged in a “pattern or practice of noncompliance,” then statutory damages of up to 2k are available. Also, successful plaintiffs may recover attorney fees.
  4. RESPA does not impose a duty to respond to all borrower inquiries or complaints. The statute “covers only written requests alleging an account error or seeking information relating to loan servicing.”
  5. “Servicing” means “receiving … payments from a borrower pursuant to the terms of the loan … and making the payments … with respect to the amounts received from the borrower as may be required by the terms of the loan.” 12 U.S.C. 2605(i)(3). A QWR “can’t be used to collect information about, or allege an error in, the underlying mortgage loan.”
  6. Upon receipt of a valid QWR, RESPA requires the servicer to take the following action “if applicable”: (A) make appropriate corrections in the account, (B) after investigation, provide a written explanation or clarification explaining why the account is correct, (C) provide the information requested by the borrower or explain why it is unavailable and (D) provide the contact information of a servicer employee who can provide further assistance. 12 U.S.C. Sec 2605(e)(2).

Holding. The Seventh Circuit affirmed the district court’s summary judgment for the lender.

Policy/rationale. In Perron, the lender “almost perfectly” complied with its RESPA duties by providing a complete account and payment history, as well as a complete accounting of the escrow payments. The only area where the lender fell short was its failure to identify one of the insurers at issue, but the Court noted that the borrowers already had that information. The Court concluded that the borrowers were not harmed by an uncorrected account error or lack of information. “Simply put, [the borrowers] weren’t harmed by being in the dark because the lights were on the whole time.”

Related posts.

Borrower’s Claims For Violations of RESPA, TILA, FDCPA, RICO And FPRAM, Together With Claims for Various Torts, Dismissed
I frequently represent lenders, as well as their mortgage loan servicers, entangled in consumer finance litigation. 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 Trial Rule 9.2(A) Officially Amended But Uncertainty Remains

Back in May, I submitted this post: Claim “On An Account” Vs. Enforcement Of A Loan: Comments On Proposed Amendment to Indiana Trial Rule 9.2(A). One of my points was that the proposal left open the question of whether the rule applied solely to accounts, or to both loans and accounts. Indeed my post doubled as a submission to the Rules Committee recommending, among other things, language clarifying that the new rule does not (and should not) apply to loans, other than perhaps credit card debt.

New rule. On October 31st, the Indiana Supreme Court entered its official Order Amending Indiana Rules of Trial Procedure that included amendments to Rule 9.2. Here is the order signed by Chief Justice Rush. Regrettably, the amendment did not incorporate our proposed limiting language or otherwise resolve the matter of whether a plaintiff must file the new affidavit of debt in mortgage foreclosure cases. For reasons spelled out in my May 11th post, a strong argument still can be made that the affidavits only need to be filed with complaints articulating an action “on account” and that a mortgage foreclosure, or any other action to enforce a promissory note, is no such action. Admittedly, however, the situation remains clouded.

Consumer debts only. One critical change the Supreme Court made from the proposed rule was to limit the pleading requirement in Section (A)(2) to consumer debts. The rule’s requirement for the new affidavit applies only “if … the claim arises from a debt that is primarily for personal, family, or household purposes…” This is a common phrase in the law that identifies consumer claims and that excludes commercial/business debts. See my 12/18/09 and 11/16/06 posts. Thus the Supreme Court’s insertion of that language definitively means that Rule 9.2(A)(2) does not apply to commercial foreclosures or to the collection of business debts.

Effective date. It will be interesting to see how lawyers and judges interpret and apply Rule 9.2(A)(2), which is brand new. Again, and meaning no disrespect whatsoever, I think the Supreme Court left the scope of that subsection open for debate. We have time to digest this further as the amendment does not take effect for over two years - until January 1, 2020.

Indiana Code 32-30-10.5-8.6: Can Foreclosing Lenders Obtain Provisional Court Orders Requiring Borrowers To Make Monthly Payments?

Lesson. In Indiana residential mortgage foreclosure cases, under certain circumstances a court can require a borrower to make monthly payments during the pendency of the foreclosure action. Typically, this happens when the parties are discussing a loan modification or similar workout. Before entering such an order, however, the court must first determine the borrower’s ability to pay.

Case cite. Yeager v. Deutsche Bank, 64 N.E.3d 908 (Ind. Ct. App. 2016).

Legal issue. Whether the trial court abused its discretion by failing to hold a hearing or otherwise obtain data to determine the borrowers’ ability to make monthly payments before it issued its provisional order.

Vital facts. Yeager was a residential mortgage foreclosure case. Borrowers defaulted under a promissory note and mortgage, and lender filed suit to foreclose. During the suit, lender filed a “motion for payment of mortgage, taxes and insurance premiums” in which lender sought a “provisional order,” essentially requiring the borrowers to make their monthly mortgage payment.

Procedural history. The trial court granted lender’s motion without a hearing and before the borrowers even filed a response. The borrowers appealed.

Key rules.

Yeager involved Ind. Code § 32-30-10.5 entitled “Foreclosure Prevention Agreements for Residential Mortgages.” This statute was born in 2009 during the Great Recession and has many provisions regulating the residential foreclosure process, including loss mitigation.

The specific section at issue in Yeager was 8.6(b):

(b) During the pendency of an action to which this section applies, regardless of any stay that is issued by the court under section 8.5 of this chapter, if the debtor continues to occupy the dwelling that is the subject of the mortgage upon which the action is based, the court may issue a provisional order that requires the debtor to continue to make monthly payments with respect to the mortgage on which the action is based. The amount of the monthly payment:

    (1) shall be determined by the court, which may base its determination on the debtor's ability to pay; and
    (2) may not exceed the debtor's monthly obligation under the mortgage at the time the action is filed.

Holding. The Indiana Court of Appeals, with one Judge dissenting, reversed the trial court’s ruling and remanded the case back to the trial court for a factual determination of the borrowers’ ability to pay.


The lender contended that a hearing was not required because the provisional order “did nothing more than direct such matters as permitted by statute.” Further, neither the statute nor any procedural rules required a hearing. Finally, the lender asserted that the order did not harm the borrowers. (Subsection [c] of the statute calls for any payments to be held in trust pending a future court order for disbursement.)

The borrowers countered that the trial court entered the order “ex parte” (without the borrowers being present or heard) in violation of due process. The Court’s opinion suggested that the lack of a hearing may not have been the compelling factor. Rather, the error stemmed from the trial court’s failure to conduct, in some fashion, “any inquiry on which to base its determination of the monthly payment prior to issuing the Provisional Order” in violation of 8.6(b)(1) set out above. The record contained no evidence of the borrowers’ current financial situation.

Related posts.

Certain Summonses In Indiana Residential Mortgage Foreclosure Cases Deemed Confidential

Indiana State Courts Cannot Modify (Cram Down) A Mortgage


I have represented lenders, as well as their mortgage loan servicers, in connection with consumer finance litigation. 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.

8 of 9 Consumer Finance Race-Based Claims Against Servicer Dismissed In Recent Indiana Federal Court Case

Lesson. In Indiana, it is difficult to defend mortgage foreclosure actions based upon the mere assertion of consumer finance statutory violations. To avoid dismissal of the claims, courts commonly require plaintiffs to articulate specific facts.

Case cite. Sims v. New Penn Financial, 2016 U.S. Dist. LEXIS 155241 (N.D. Ind. 2016) (.pdf).

Legal issue. There were several in Sims. This case was more about procedural (pleading) requirements than anything.

Vital facts. Plaintiffs bought a home on a land contract. Plaintiffs later discovered that the land contract seller had stopped paying the mortgage loan on the home. The seller’s lender filed to foreclose. To avoid a sheriff’s sale, Plaintiffs sought to assume the seller’s loan, but the servicer of the loan refused to do so until Plaintiffs brought the loan current. In response, Plaintiffs filed suit in federal court against the loan servicer. The essential premise upon which Plaintiffs based their claim was that the servicer declined the loan assumption because Plaintiffs were African-American.

Procedural history. The defendant mortgage loan servicer filed a Rule 12(b)(6) motion to dismiss Plaintiffs’ complaint. The Sims opinion outlines Chief Judge Philip Simon’s ruling on the motion.

Key rules. Plaintiffs asserted nine consumer finance-related causes of action. I’ll address five of them here.

  1. Fair Housing Act: A claim under the FHA requires an allegation that the servicer “acted with the intent to discriminate or that its actions had a disparate impact on African Americans.” See generally, 42 U.S.C. 3604.
  2. Indiana Deceptive Consumer Sales Act: The IDCSA, Ind. Code 24-4-0.5, has the purpose of encouraging “the development of fair consumer sales practices … and provides that a “supplier may not commit an unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction.”
  3. Fair Debt Collection Practices Act: The FDCPA generally “prohibits a debt collector from using certain enumerated collection methods in its effort to collect a ‘debt’ from a consumer.”
  4. Dodd-Frank Wall Street Reform & Consumer Protection Act: The Court noted that although “there is no doubt that Dodd-Frank creates a private cause of action for whistleblowers, courts have been reluctant to find that Dodd-Frank created any other private cause of action.”
  5. Equal Credit Opportunity Act: The ECOA generally prohibits creditors “from discriminating against ‘applicants’ on the basis of race.” 15 U.S.C. 1691(a). And, “if credit is denied or another ‘adverse action’ is taken,” the ECOA “requires creditors to set out its reasons for the action.” An “applicant” is “any person who requests … an extension of credit … including any person who is or may become contractually liable.” 12 C.F.R. 202.2(e).

Holding. The Court granted the servicer’s motion to dismiss on eight of the nine counts asserted by Plaintiffs. The sole count that survived was the ECOA claim. This did not mean that the servicer was liable under that claim – only that Plaintiffs sufficiently pleaded the action so as to notify the servicer of the allegations “and to make the right to relief under the ECOA more than speculative.”


  1. As to the FHA claim, the Court concluded that Plaintiffs alleged no “facts” to support the “vague” allegation that the servicer hindered Plaintiffs’ “efforts to assume the mortgage, because of their race and color.”
  2. Plaintiffs complained that a letter the servicer sent to Plaintiffs omitted language spelling out that the assumption approval was contingent upon Plaintiffs’ ability to reinstate the loan. The Court reasoned that “there is no plausible IDCSA claim here because the complaint pleads no facts to support the notion that [the servicer’s] omission was ‘unfair, abusive, or deceptive’ in any way.” The servicer’s failure to mention one of many requirements for approval could not “reasonably be viewed as unfair, abusive, or deceptive.”
  3. Regarding the FDCPA count, the Court’s rationale was that Plaintiffs’ complaint did not allege a false or misleading representation prohibited under the Act. Further, Plaintiffs were not “consumers” for purposes of the Act because they were never obligated to pay the contract seller’s debt but instead “could walk away from [his] debt at any point.”
  4. The Court dismissed the Dodd-Frank claim for the simple reason that a so-called “private right of action” [see post below] did not exist in this context.
  5. The ECOA cause of action passed the initial test because Plaintiffs fell under the broad definition of “applicants” requesting an extension of credit. Further, the servicer’s rejection of Plaintiffs’ assumption application theoretically “could constitute an adverse action under the ECOA.” The Court cautioned, however, that “it remains to be seen whether [Plaintiffs] can prove an ECOA violation.” 

Related posts.

I have represented lenders, as well as their mortgage loan servicers, in connection with consumer finance litigation.  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 Supreme Court Order Amending Rules Regarding Service Of Process And Execution Sales

On July 31st, the Indiana Supreme Court entered this Order Amending Rules of Trial Procedure.  The changes become effective 1/1/18.  

The order makes a slight amendment to Rule 4.1(B) dealing with "copy service" and now requires a follow-up mailing of both the summons and the complaint.  For more on service of process matters, including copy service, read my post “Service Of Process” Fundamentals For The Plaintiff Lender.

The order also modifies Rule 69(A) dealing with execution sales and does away with the requirement that the subject real estate must first be appraised and then sell for at least two-thirds of the appraised value.  For a little more information on execution sales, check out my post The Difference Between An Execution Sale And A Foreclosure Sale In Indiana.

Incidentally, I have not yet seen a determination by the Indiana Supreme Court on the proposed changes to Rule 9.2(A) that I discussed in my 5/11/17 post.  

Indiana’s Statute Of Limitations For “Open Account” Claims: Supplier’s Case Too Late

Lesson. The deadline for creditors to file suit on an “open account,” including a guaranty of an “open account,” is six years.

Case cite. Ganz Builders v. Pioneer Lumber, 59 N.E.3d 1025 (Ind. Ct. App. 2016)

Legal issue. Whether a creditor’s claims against a debtor and a guarantor were barred by the statute of limitations.

Vital facts. In 1996, the defendant debtor, a builder, signed an application for a line of credit with the plaintiff creditor, a supplier. The debtor also signed a credit account agreement. The debtor’s president signed a personal guaranty agreement in connection with the arrangement. The last charge against the account was February 21, 2006. In November of 2012, the creditor filed its complaint against the debtor and the guarantor for a failure to make payments under the terms of the agreements.

Procedural history. The parties filed cross-motions for summary judgment against one another related to liability under the agreements and defendants’ statute of limitations defense. The trial court granted summary judgment for the creditor.

Key rules.

  • Indiana’s statute of limitations for actions on accounts and contracts not in writing is six years pursuant to Ind. Code 34-11-2-7. I.C. 34-11-3-1 governs the accrual date: “an action brought to recover a balance due upon a mutual, open, and current account … is considered to have accrued from the date of the last item proved in the account on either side.”
  • I.C. 34-11-2-9 controls actions based upon promissory notes and other written contracts for the payment of money. Although this statute also has a six-year limitation period, the accrual date is different. See my 3/9/09 post.
  • An action upon a contract in writing, other than for the payment of money, must be commenced within ten years. I.C. 34-11-2-11.
  • Indiana case law is settled that a written credit card application and/or agreement does not constitute a written contract or a promissory note. Rather, “the contract creating the indebtedness is formed only when the customer accepts the bank’s offer of credit by using the card.” This type of arrangement is materially different than a promissory note or installment loan. As such, Indiana treats a credit card relationship as an “open account” as opposed to being governed by a written contract per se. For more, see my 9/27/10 post.
  • The Court in Ganz cited to Black’s Law Dictionary to define an open account as: “an account that is left open for ongoing debit and credit entries by two parties and that has a fluctuating balance until either party finds it convenient to settle and close, at which time there is a single liability.”

Holding. The Indiana Court of Appeals reversed the trial court’s decision and held that the creditor untimely filed its claims against both the debtor and the guarantor.

Policy/rationale. In Ganz, there were fluctuating balances resulting from a series of transactions, and the creditor kept the account open in anticipation of future purchases. The Court thus concluded that the credit arrangement was in the nature of an open account, like a credit card, as opposed to one based upon a written contract or a promissory note – both of which have different statutes of limitations and accrual triggers.

The accrual date under I.C. 34-11-3-1 – “date of the last item proved in the account on either side” – meant the last charge to, or the last payment made on, the account. In Ganz, the last activity at issue was February 21, 2006, meaning that the latest the creditor could file a claim was February 21, 2012. November of 2012 was too late.

Regarding the guarantor, the Court basically approached the two defendants the same. The separate written guaranty still fell under the open account analysis, according to the Court. Although the accrual date arguably may have been slightly different, the same six years applied, so the guarantor, too, prevailed on the defense.

Related posts.


I frequently represent creditors and debtors in business-related 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.

Claim “On An Account” Vs. Enforcement Of A Loan: Comments On Proposed Amendment to Indiana Trial Rule 9.2(A)

Proposed rule change.  Indiana’s Committee on Rules of Practice and Procedure has before it a proposal to amend Trial Rule 9.2(A). To see the proposed change, click here.  The amendment also has changes to the form affidavit of debt found in Appendix A-2 of the rules.  Application of the added language appears to be limited to actions “on an account” and does not seem to relate to actions involving loans, such as breaches of promissory notes or security agreements like mortgages. Although the amendment does not expressly target mortgage foreclosure cases or the enforcement of UCC security interests, the proposed language arguably leaves the rule open to interpretation as to its scope.  As such, we are respectfully recommending that the Committee clarify the proposed amendment to confirm that the new subsections (A)(1) and (2) are limited to claims “on an account” and do not apply to loans.

What is an action “on an account?”  To my knowledge, and based on some very limited legal research, there is no specific Indiana statutory definition of, or statutory cause of action for, an action on an account.  Black’s Law Dictionary defines “on account,” in part, as “a sale on credit.”  Indiana Practice, Procedural Forms with Practice Commentary (Arthur), Chapter 9, discusses “Complaints-On An Account” and says: “an action on account is one upon which billings have been sent to the other party specifying the goods or services delivered and the amount due….” Section 9.1 identifies the following elements of such an action:

1. A description of the account and the nature of the dealings between the parties;
2. The goods and services were provided to defendant at his request;
3. Defendant is indebted to plaintiff for a specified sum; and
4. The account is due and unpaid.

Not a loan.  An account and a loan are two different animals. Black’s Law Dictionary defines a loan, in part, as “delivery by one party to and receipt by another party of a sum of money upon agreement, express or implied, to repay it with or without interest.” Although an account and a loan both might be considered “debts,” they arise out of dissimilar transactions.  With a loan, one party (a lender or a creditor) gives money to another party (a borrower or a debtor).  Obvious examples of this are banks funding the purchase of a car or a house.  On the other hand, an account is born out of one party (seller/vendor) giving, not money, but rather goods and/or services to the other party (buyer/vendee).  A classic example of an account is a hospital bill.

Written contracts.  Certainly a written contract could exist for an account, and the contract conceivably may result in some kind of lien, but ultimately the nature of an account does not involve the transfer of money but rather the provision of goods or services.  But frequently there is not a written agreement - only an invoice or purchase order.  In fact, there may not be any written document at all, like when I mowed lawns in high school.  As such, unlike with promissory notes or mortgages, when a debt arising out of an account is sold or assigned from the original account holder to a third party, proof of the account creditor may be unclear or perhaps non-existent.  This absence of documentation makes the collection of such debts susceptible to fraud, or at least to questions about who is owed the money.

The target.  In our view, the new Rule 9.2(A) seems to focus on a plaintiff’s obligation to establish that it has the right to enforce the debt.  We understand the amendments proposed to Rule 9.2(A) may arise, in part, out of bad actors attempting to collect debts based on an account.  These debt collectors often purchase debt at a discount and specialize in trying to collect it. We further understand that some of these debt collectors may be fraudsters that either don’t actually own the debt or try to collect the debt long after the statute of limitations has run.

Protections unnecessary.  While claims “on an account” arguably need the protections afforded by the new subsection to the rule, claims for breaches of loan documents do not.  Indeed, protections already are in place. Article 3.1 of Indiana’s UCC dealing with Negotiable Instruments (promissory notes), Article 9.1 involving secured transactions, Ind. Code 32-29 (Mortgages), Ind. Code 32-30-10 (Foreclosure Actions), well-settled case law, and a plethora of other rules, laws, and regulations, both state and federal, at present cover questions surrounding proof of standing and the right to enforce.  See, for example, my post Proving You’re The Holder Of The Note. This makes the proposed amendment unnecessary for loans and, even more, contradictory to existing law and procedure, not to mention onerous.  Indeed some of the proposed requirements may not even be possible for certain assignees to meet, such as a listing of all prior owners of the loan.  (The Indiana Supreme Court's opinion in the Barabas case from 2012 that surrounds MERS is instructive here.)       

Solution.  Without clarification that the new rule is limited to claims on an account and thus does not apply to loans, courts will be confused as to how to handle such cases, which could create more problems than the rule seeks to solve. We’ve seen one very simple yet meaningful change that could be made to the proposed amendment.  The mere insertion in Subsection (2) of “and the claim is on account” after the word “if” and before the words “the plaintiff” should be sufficient to clarify that the new rule does not apply to loans.  Even better, if at the end of the proposed amendment, the rule said something like “Subsection (2) does not apply to actions to enforce loans, including but not limited to promissory notes or credit agreements,” then the lending and finance communities should have no issue whatsoever with the amendment.

Call to action.   The Committee invites public comment on the proposed rule amendments.  Those wishing to comment should do so, in writing, not later than May 15, 2017.  That's Monday. Comments may be sent by email to or addressed to:

ATTN: Rules Committee
Hon. Mary Willis
Indiana Office of Judicial Administration
30 South Meridian Street, Suite 500
Indianapolis, IN 46204

If you work for a lender or are an Indiana lawyer who represents creditors in commercial or consumer finance, and if you agree with our position, then we invite you to submit a comment by next Monday – even if it’s just to state briefly that you generally agree with the points outlined here.  I’m planning on emailing a link to today’s post directly to the committee’s staff. If you have any questions or comments, please call me at 317-860-5375 or email me at  Thanks.  


Success Following Trial And Appeal Of Contested Foreclosure, Including Defense Of Constructive Fraud and Bad Faith Claims

In February 2016, my partner Matt Millis and I tried a contested commercial foreclosure case.  Following the four-day trial, the court entered judgment in our clients’ favor.  Click here to see the judgment.  The trial mainly was about the borrower’s counterclaims against our clients, an originator of hard-money commercial mortgage loans and the company that funds the loans, as well as the borrower’s defenses to the foreclosure.

The borrower appealed.  Yesterday, the Indiana Court of Appeals affirmed the trial court’s judgment.  Here is the opinion.  The Court’s opinion summarizes some of the key facts and, of note, addresses two of the borrower’s defenses: (1) that our clients breached a “duty to speak,” which arose out of the borrower’s allegations of constructive fraud, and (2) that our clients violated the “Hamlin Doctrine,” which dealt with the borrower’s assertion that our clients breached a duty to act in good faith.

The Court of Appeals decided that our clients did not breach any alleged duty to speak about certain loan-to-value requirements for the deal.  In other words, the Court found that the judgment was supported by the findings of fact (the evidence at trial) and was not clearly erroneous.  In addition, the Court held that the trial court’s findings of fact supported the conclusion that our clients did not act in bad faith with respect to the fulfillment of a broker’s price opinion contingency.  For more about the case, please read the trial court’s judgment and the appellate court's memorandum decision – links above.


I frequently represent lenders, as well as their mortgage loan servicers, in connection with contested mortgage foreclosure actions.  If you need assistance with a similar matter, please call me at 317-639-6151 or email me at  You may also follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to my blog posts via RSS or email as noted on my home page.

Computing Time Deadlines In Indiana: Tax Sale Notice Not 1 Day Late

Lesson. For tax sale notice deadlines, count backwards from the date of the sale to determine when the notice mailing is due.

Case cite. Schafer v. Borchert, 55 N.E.3d 914 (Ind. Ct. App. 2016).

Legal issue. Whether the county timely mailed its notice of tax sale to the owner.

Vital facts. The date of the tax sale was October 3rd. The county mailed the notice of tax sale on September 12th.

Procedural history. Buyer purchased the subject property at the tax sale and filed an action to quiet title following the receipt of the tax deed from the county. The former owner contested the action and sought to set aside the tax deed. The owner’s theory was that the county mailed the notice one day late – twenty days before the sale instead of twenty-one. After a bench trial, the court entered judgment for the buyer and found that, although the notice was one day late, it “substantially complied” with the statutory requirements.

Key rules.

Ind. Code 6-1.1-24-4(a) controlled the notice issue. At the time, the statute provided that the county auditor “shall send a notice of the sale by certified mail to the owner or owners of the real property … at least twenty-one (21) days before the day of the sale….” The current statute – link here – basically says the same thing.

Indiana Trial Rule 6(A) generally controls, in part, how parties determine deadlines in connection with litigation. In Schafer, the Indiana Court of Appeals applied the rule in the context of a tax sale. Rule 6(A) says:

In computing any period of time prescribed or allowed by these rules, by order of the court, or by any applicable statute, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed is to be included unless it is:
(1) a Saturday,
(2) a Sunday,
(3) a legal holiday as defined by state statute, or
(4) a day the office in which the act is to be done is closed during regular business hours.
In any event, the period runs until the end of the next day that is not a Saturday, a Sunday, a legal holiday, or a day on which the office is closed….

Holding. The Court of Appeals affirmed the trial court but on different grounds. “It was not necessary for the trial court to reach the issue of substantial compliance….” The notice was in fact timely.

Policy/rationale. Schafer is a counting lesson. The trial court (and the former owner) mistakenly concluded that the clock began to run when the county mailed the notice. However, the statute “places a requirement on the auditor concerning the timing of notice, not the timing of when the tax sale must be held after notice is provided.” In other words, as explained by the Court, the statute does not mandate the sale to be held no fewer than twenty-one days after notice is mailed. Instead, the “act or event” for Rule 6(A) is the date of the sale. As such, “the days should be counted backwards to the date notice is mailed.” Since the sale date was October 3rd, the first day to be counted for the deadline was October 2nd. (See the italics section in the rule above.) Counting backwards from the sale, instead of forwards from the mailing, twenty-one days was September 12th, which is when the county mailed the subject notice.

Related posts.

Court Rejects Property Owner’s Plea To Set Aside Tax Sale

Tax Sale Set Aside: Inadequate Notices To Property Owner

Tax Sale Bullet Strikes Property Owner

Indiana Tax Sale Notices To Mortgagees

Mortgagees Beware: Only Owners Receive Notices Of Indiana Tax Sales
I sometimes represent lenders, as well as their mortgage loan servicers, entangled in disputes arising out of 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.

Must Indiana Affidavits Be Signed Under The Penalties Of Perjury?

A client recently asked me whether its summary judgment affidavit needed to be signed under the penalties of perjury. Given the business records nature of the affidavit (under Evidence Rule 803(6)), the affiant had some heartburn about the nature of his execution.

Trial rule.  The affidavit was for an Indiana state court case, so Indiana state law applied.  The applicable Trial Rule is 11(B). The rule doesn’t directly answer the question, however. Here is the entire section of the rule:

Verified pleadings, motions, and affidavits as evidence. Pleadings, motions and affidavits accompanying or in support of such pleadings or motions when required to be verified or under oath shall be accepted as a representation that the signer had personal knowledge thereof or reasonable cause to believe the existence of the facts or matters stated or alleged therein; and, if otherwise competent or acceptable as evidence, may be admitted as evidence of the facts or matters stated or alleged therein when it is so provided in these rules, by statute or other law, or to the extent the writing or signature expressly purports to be made upon the signer’s personal knowledge. When such pleadings, motions and affidavits are verified or under oath they shall not require other or greater proof on the part of the adverse party than if not verified or not under oath unless expressly provided otherwise by these rules, statute or other law. Affidavits upon motions for summary judgment under Rule 56 and in denial of execution under Rule 9.2 shall be made upon personal knowledge.

The rule begs the question of what “verified or under oath” means.

Case law.  Indiana case law appears to have the answer. Although using the exact language of TR 11(B) is not required, the “chief test of the sufficiency of an affidavit is its ability to serve as a predicate for a perjury prosecution.” Jordan v. Deery, 609 N.E.2d 1104, 1110 (Ind. 1993). In Gaddie v. Manlief (In re H.R.M.), 864 N.E.2d 442 (Ind. Ct. App. 2007), the Indiana Court of Appeals provides a thorough discussion of what is required for a business records affidavit and affidavits generally. The Court determined that a business records affidavit whose affiant stated, “I, Anita Martin, being duly sworn, state as follows” was insufficient to constitute a valid verification as it was inadequate to subject Martin to prosecution for making a false affidavit, and therefore, insufficient to support the accompanying business records. A statement such as “duly sworn upon his oath, alleges and says” with a notarized signature provides a stronger intention to be bound by the penalty for perjury than “being duly sworn,” Id. (citing State ex rel. Ind. State Bd. Of Dental Examiners v. Judd, 554 N.E.2d 829 (Ind. Ct. App. 1990)). The Court did note, however, that Bentz v. Judd, 714 N.E.2d 203 (Ind. Ct. App. 1999), and an older Indiana Supreme Court case, Gossard v. Vawter, 21 N.E.2d 416 (Ind. 1939), found such a verification to still be insufficient. On the other hand, the statement “I affirm the truth of the above statements” met the requirements for verification in a summary judgment affidavit in Hoskins v. Sharp, 629 N.E.2d 1271 (Ind. Ct. App. 1994).

The answer is yes.  Although the rule and the case law may not crystal clear on the exact verbiage needed, the bottom line is that, to ensure affidavits will stand up in court, it is prudent to state, either at the beginning or immediately before the signature, that the affidavit is being given under oath and subject to the penalties of perjury. For what it’s worth, I usually start my affidavits with “Affiant, _____, having first been duly sworn upon his oath, hereby affirms as follows", and I end my affidavits with “I affirm under the penalties of perjury that the foregoing is true and correct to the best of my knowledge, information and belief.”

Here are a couple prior posts related to affidavits:

I’d like to thank our associate Erica Drew for researching this issue. Her work helped me to get this post up before being out on spring break next week.     

Borrower’s “Mutual Mistake” Defense Fails Under Indiana Law

Lesson. To set aside a loan document based upon the defense of mutual mistake, there first must be a mistake concerning a vital fact upon which the parties based the loan. Second, the mistake must be on the part of both parties.

Case cite. Williamson v. U.S. Bank, 55 N.E.3d 906 (Ind. Ct. App. 2016).

Legal issue. Whether a loan modification agreement should have been reformed or rescinded based upon an alleged mistake of fact.

Vital facts. In 2008, borrower defaulted under a promissory note and mortgage, and in 2009 lender obtained a default judgment against him. The day before the scheduled sheriff’s sale, lender notified the sheriff that the sale should be cancelled due to ongoing settlement negotiations. Nevertheless, the sheriff inadvertently held the sale, and the lender’s pre-sale written bid prevailed. The sheriff’s processed and recorded the sheriff’s deed. About three months later, lender discovered the mistake and ultimately got a court order vacating the deed. In 2010, borrower and lender executed a loan modification agreement that amended the note and mortgage, and set up a new payment plan. For three years, borrower made the payments under the loan mod. At some point, borrower discovered information leading him to believe that he was not on the deed to the property. He also had been denied his homestead exemption multiple times. About the same time, lender notified borrower that he needed to make an additional payment into escrow to cover real estate taxes. In response, borrower told lender he would not pay anything further until lender assured borrower “his name was back on the deed….” Lender then filed an affidavit with the county assessor reaffirming that the court had vacated lender’s title to the property and that the assessor’s records should reflect that title was with borrower. Despite lender’s action, borrower made no further mortgage payments.

Procedural history. Lender initiated a foreclosure lawsuit and filed a motion for summary judgment. In response, borrower filed an affidavit stating that he did not know that his name had been taken off the deed to the property when he signed the loan mod. Borrower argued that he would not have entered into the loan mod knowing his name had been taken off the deed. He essentially asserted that the loan mod was not enforceable against him. The trial court rejected borrower’s position and granted lender summary judgment.

Key rules. A contract may be reformed on grounds of mistake upon clear and convincing evidence of both the mistake and the original intent of the parties. Stated differently, “where both parties to a contract share a common assumption about a vital fact upon which they based their bargain, and that assumption is false, the transaction may be avoided if, because of the mistake, a quite different exchange of value occurs from the exchange of values contemplated by the parties.”

Ind. Code 32-30-10-3 provides that “if a mortgagor defaults in the performance of any condition contained in a mortgage, the mortgagee … may proceed in the circuit court of the county where the real estate is located to foreclose the equity of redemption….” If a lender produces evidence of a demand note and mortgage, it establishes the prima facie evidence supporting foreclosure. That shifts the burden to the borrower to prove payment of the note or any affirmative defense to foreclosure.

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

Policy/rationale. Borrower contended that he should not have been held to the terms of the loan mod, and thus his mortgage should not have been foreclosed, because the parties mistakenly believed his name was on the deed when they executed the loan mod. But the alleged mistake of fact did not exist upon execution of the loan mod. Borrower did in fact have a valid deed at the time. Although borrower was temporarily divested of ownership through the sheriff’s sale, the trial court later set the sale aside and vacated the deed. That happened in December of 2009. The loan mod didn’t occur until December of 2010. Since borrower’s name was on the deed upon execution of the loan mod, “there was no basis to reform or rescind the agreement.”

This seemed to be a fairly straightforward decision, but I suspect there may have been more to the story. (It’s common for appellate court opinions to distill the facts to their essence.) In any event, despite borrower’s obvious frustrations arising out of the 2009 sheriff’s sale and the resulting confusion with the county’s records, the loan mod had to be enforced.

Related posts.

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

Borrower’s Claims For Violations of RESPA, TILA, FDCPA, RICO And FPRAM, Together With Claims for Various Torts, Dismissed

Following his unsuccessful defense of a state court foreclosure action, a borrower filed a multi-count complaint in federal court against six defendants. Mains v. Citibank, et. al., 2016 U.S. Dist. LEXIS 43874 (S.D. Ind. 2016) (.pdf) is a 34-page opinion by Judge Barker in which she methodically explains why all the counts against all the defendants must be dismissed with prejudice based upon the Rooker-Feldman doctrine.

“At the core” of the borrower’s case, he alleged that the defendants, which included lenders and law firms, (1) wrongfully assigned the subject promissory note, (2) lacked standing to foreclose the subject mortgage and (3) committed fraud against him and the state court. The borrower asserted the following legal claims: (a) Real Estate Settlement Procedures Act [RESPA] violations, (b) Truth In Lending Act [TILA] violations, (c) Ind. Code 32-30-10.5 Indiana Foreclosure Prevention Agreements for Residential Mortgages violations, (d) negligent and intentional infliction of emotional distress, (e) fraud, (f) negligence, (g) Fair Debt Collection Practices Act [FDCPA] violations and (h) violations of the Racketeer Influenced and Corrupt Organizations Act [RICO].  In other words, the borrower threw in everything but the kitchen sink....

Even though the case ultimately was dismissed on jurisdictional grounds, Judge Barker’s court took the time and effort to analyze the substantive legal claims involving RESPA, TILA, I.C. 32-30-10.5, torts, fraud, FDCPA and RICO. If lenders or their counsel face these claims in a similar context (following a state court foreclosure case), the Mains opinion would be a good place to start one’s research.

In the end, this case is another in line of recent federal court cases I’ve discussed that dismisses a borrower’s post-foreclosure claims and defenses. For more on the Rooker-Feldman doctrine, click here for my 8/24/16 post.

UPDATE:  Seventh Circuit Affirms Dismissal Of Borrower’s Post-Foreclosure Federal Claims Based On Rooker-Feldman and Res Judicata

Foreclosing Party, As Owner, May Evict Tenants In Breach

Secured lenders repossessing real estate collateral at a sheriff’s sale normally keep tenants in place to maintain income.  There are instances, however, when a plaintiff lender, or a third-party sheriff’s sale purchaser, may desire to evict a tenant.  Ellis v. M&I Bank, 960 N.E.2d 187 (Ind. Ct. App. 2011) sheds light on a new owner’s rights, following a sheriff’s sale, vis-à-vis tenants. 

Unusual circumstance.  In Ellis, a developer leased the subject real estate to tenants (husband and wife), but then defaulted on its line of credit.  As a result, the developer’s lender foreclosed and ultimately acquired the real estate at a sheriff’s sale.  The court’s decree of foreclosure was against the developer and the husband only, not the wife/co-tenant.  When the lender pursued a writ of assistance to evict the tenants, the wife asserted that her interest in the real estate had not been extinguished in the mortgage foreclosure case.  She was right.   

To terminate, name tenants.  The Court in Ellis noted that, in Indiana, the purchaser at a sheriff’s sale “steps into the shoes of the original holder of the real estate and takes such owner’s interest subject to all existing liens and claims against it.”  Because the lender did not make the wife a party to the foreclosure case, the sheriff’s sale could not be enforced against her.  This is because, in Indiana, “where a mortgagee knows or should know that a person has an interest in property upon which the mortgagee seeks to foreclose, but does not join that person as a party to the foreclosure action, and the interested person is unaware of the foreclosure action, the foreclosure does not abolish the person’s interest.”  See my 10/07/11 and 07/09/10 posts for more on this area of the law.  Because the wife was not named or served in the foreclosure action, the trial court found that her interest was not extinguished by the foreclosure judgment and that the lender’s interest in the real estate remained subject to her leasehold interest. 

How did the lender obtain possession of the real estate from the wife?

Option 1 – strict foreclosure.  One option available to the lender was to terminate the interest of the wife through a strict foreclosure action.  I have written about this remedy, including Indiana’s 2012 legislation, extensively.  Please click on the category Strict Foreclosure to your right for more.  The lender in Ellis did not pursue this option. 

Option 2 - eviction.  The lender elected, as the then-owner of the real estate, to pursue eviction based upon the subject lease agreement.  The eviction action was separate and distinct from the foreclosure action.  The evidence in Ellis was clear that the tenants had breached the lease and that the lender had the corresponding right to terminate.  The trial court entered an order of possession for the lender based on the lease, and the Court of Appeals affirmed. 

Plaintiff lenders, after the entry of the foreclosure decree and sheriff’s sale, usually can evict parties in possession of the subject real estate through the mechanism of a writ of assistance, about which I have written in the past, assuming the mortgage lien is senior to the possessory interest.  That remedy generally is effective only when the targets of the writ of assistance were made parties to the underlying action.  The rub in Ellis was that one of the parties in possession of the real estate (the wife) was not named in the case.  Rather than embarking on what may have been a relatively costly, complicated and lengthy strict foreclosure action, the lender in Ellis chose a simpler approach by filing a straightforward landlord/tenant eviction action based upon the terms of the subject lease.  This turned out to be a good solution to the problem caused by failing to name the wife.


Part of my practice is to protect the interests of lenders in contested foreclosures.  If you need assistance with such matters in Indiana, please call me at 317-639-6151 or email me at  Also, you can receive my blog posts on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Bankruptcy Proofs Of Claim Following A State Court Judgment: Debt Locked In

Lesson.  If a lender obtains a judgment in a foreclosure case, the borrower generally cannot re-litigate the amount of the debt in a subsequent bankruptcy action.  

Case cite.  Harris v. Deutsche Bank, 2016 U.S. Dist. LEXIS 14838 (S.D. Ind. 2016) (.pdf).  Our law firm successfully handled this appeal for one of my servicer clients.  My partner Matt Millis took the lead with the briefing.   

Legal issue.  Whether a bankruptcy court is barred from recalculating a debt amount previously determined by a state court. 

Vital facts.  Lender held a senior mortgage on real estate owned by Debtor, who defaulted on the subject promissory note and mortgage.  Lender, in state court, filed a foreclosure action and obtained a summary judgment after Debtor unsuccessfully argued that Lender improperly calculated the amount due.  One of Debtor’s points was that Lender failed to account for payments the Chapter 13 Trustee made in Debtor’s prior bankruptcy.  Debtor did not appeal the state court’s summary judgment.  Debtor later filed the instant Chapter 13 case, and Lender filed a Proof of Claim based upon debt figures in the state court’s summary judgment order.  Debtor objected to the Proof of Claim and once again argued, among other things, that Lender failed to credit payments made during the prior Chapter 13 action. 

Procedural history.  Debtor appealed the bankruptcy court’s denial of her objection to Lender’s Proof of Claim.   

Key rules. 

The federal Full Faith and Credit Act at 28 U.S.C. 1738 “requires federal courts to give the same preclusive effect to state court judgments that those judgments would be given in the courts of the State….”  In Harris, the doctrine of collateral estoppel (aka issue preclusion) applied. 

In Indiana, when used as a defense, the doctrine has five elements:  (1) a final judgment on the merits, (2) identity of the issues, (3) the party to be estopped was a party or in privity of a party in the prior case, (4) the party to be estopped had a full and fair opportunity to litigate the issue and (5) whether it would be otherwise unfair under the circumstances to permit the use of collateral estoppel. 

Holding.  The district court affirmed the bankruptcy court’s decision.  All of the elements of collateral estoppel had been met.

Policy/rationale.  The state court conclusively decided the amount owed by Debtor to Lender in the prior foreclosure action – after the parties litigated the matter.  There was an identity of the issues between the two cases.  Debtor had a full and fair opportunity to litigate the debt amount in state court.  Permitting the use of collateral estoppel was not unfair under these circumstances.  “If [Debtor] felt that the [state court] erred by disregarding her arguments or miscalculating an amount, she could have sought review by the Indiana Court of Appeals.  For whatever reason, she chose not to do that.”  As such, the law precluded Debtor from re-litigating that issue in the subsequent federal bankruptcy proceedings.   

Related posts. 

I represent judgment creditors and lenders, as well as mortgage loan servicers, in bankruptcy-related litigation.  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.

"Wet Signature" Defense To Indiana Promissory Note Enforcement Action

A pro se (unrepresented) borrower, in a recent contested mortgage foreclosure case our firm is handling, claimed that the action should be dismissed because the lender failed to file or otherwise produce the promissory note with a "wet signature" with the complaint.  We're fairly certain the borrower pulled her filing, or at least the argument, off the internet.  

The only legitimate argument coming even close to a "wet signature" defense is outlined in my 10/14/14 post:   Promissory Notes “Endorsed In Blank” Are Perfectly Fine.  Essentially, if an assignee of a note (not the original lender) holds a note that has been endorsed in blank, then the assignee needs to establish that it possesses the original note.  Even then, filing the original note with the complaint, or even with a motion for summary judgment, is not strictly required.  

To expand on why there is no "wet signature" defense in Indiana, I'm reposting below my 3/26/10 article Judgment Granted To Lender Despite Absence Of Signature On Promissory Note.


Has your lending institution failed to maintain an original or copy of an executed promissory note?  Similar to the case discussed in my February 7, 2009 post No Signatures, No Promissory Notes, No Problem, the Indiana Court of Appeals in Baldwin v. Tippecanoe Land & Cattle, 2009 Ind. App. LEXIS 1491 (Ind. Ct. App. 2009) upheld a summary judgment for the plaintiff lender even though the lender could not produce the signed promissory note. 

Procedural history.  Lender filed a claim to foreclose its second mortgage and attached to the complaint a promissory note that was not signed.  (The mortgage did, however, appear to contain the borrower’s signature, and the unsigned note referred specifically to the accompanying mortgage.)  In his response to the lender’s claim, the borrower entered a “general denial” pursuant to Indiana Trial Rule 8(B).  The lender later filed a motion for summary judgment that the trial court granted.

The borrower’s contentions.  The borrower argued that the mortgage was unenforceable because the note was not signed by him. 

The lender’s contentions.  The lender’s theory to get around the absence of the signature rested upon Ind. T. R. 9.2(B), which states:

When a pleading is founded on a written instrument and the instrument or a copy thereof is included in or filed with the pleading, execution of such instrument . . . shall be deemed to be established . .  . unless execution be denied under oath in the responsive pleading or by an affidavit filed therewith.

The lender’s point was that the execution of the note was deemed to be established pursuant to this trial rule. 

Rule 8(B) versus 9.2(B).  The Court of Appeals analyzed the technical requirements of Trial Rules 8(B) and 9.2(B), as well as Rule 11(A) dealing with signatures on court filings.  Those rules, collectively, “mean that the attorney’s signature on a general denial [per Rule 8(B)] rejects the assertions in the claim, but does not constitute an oath by which the pleader denies the execution of an instrument attached to a claim [per 9.2(B)].” 

Must deny under oath.  Because the borrower failed to deny, under oath, the execution of the subject note, the Court affirmed the summary judgment granted in favor of the lender:

As [lender] attached the Note and Second Mortgage to its cross-claim, execution of both would be deemed to be established, by operation of Trial Rule 9.2(B), unless [borrower] denied under oath that they were executed.  [Borrower], himself an attorney, filed a general denial.  He signed it as “respectfully submitted.”  He omitted to include a statement that his general denial was truthful and made under penalty for perjury.  Thus, [borrower] failed to deny under oath the execution of the Note.  We therefore conclude that execution of the Note was deemed to be established . . ..

As was the case with the Bonilla opinion, which was the subject of my February 7, 2009 post, Indiana law seemingly allowed the lender in Baldwin to dodge a bullet in order to obtain a pre-trial judgment in its favor.

Loan Servicers As Plaintiffs In Foreclosure Cases

Lesson.  Mortgage loan servicers can, in certain circumstances, prosecute foreclosure actions on behalf of lenders/mortgagees. 

Case cite.  Turner v. Nationstar, 45 N.E.3d 1257 (Ind. Ct. App. 2015).

Legal issue.  How can a servicer of a mortgage loan, instead of the lender itself, be the plaintiff in a foreclosure case?

Vital facts.  Nationstar sued Borrowers to foreclose a mortgage.  The parties entered into a settlement agreement that the Borrowers later breached.  Nationstar filed a motion to enforce the settlement agreement and sought to proceed with the foreclosure.  During the proceedings, facts surfaced that JPMorgan Chase Bank as Trustee for CHEC 2004-C (Chase) was the actual owner of the loan and that Chase had hired Nationstar to service the loan.  The Turner opinion is not altogether clear as to whether Nationstar or Chase actually possessed the original promissory note (endorsed in blank), other than to make an inference that, for purposes of its servicing, Nationstar probably held it.  There was proof that Nationstar’s servicing obligations obligated it to, among other things, handle foreclosure proceedings. 

Procedural history.  Borrowers filed a motion to dismiss Nationstar’s complaint because it was not prosecuted in the name of the owner of the loan (Chase).  In other words, Borrowers contended that Chase should have been the plaintiff.  The trial court denied the motion and granted foreclosure.  Borrowers appealed.

Key rules.  Indiana Trial Rule 17(A) deals with who is the “real party in interest,” and every action must be prosecuted by such party.  T.R.17(A)(1) suggests that in certain instances a party can sue for the benefit of another after “stating his relationship and the capacity in which he sues.”   

Indiana’s UCC at Ind. Code 26-1-3.1-301 outlines persons “entitled to enforce” a promissory note that include the “holder” of the note.  I.C. 26-1-1-201(2)(a) defines “holder” of a note, which can be a person in possession of the note if the note is endorsed in blank. 

Holding.  The Indiana Court of Appeals affirmed the trial court’s denial of Borrowers’ motion to dismiss and affirmed the decision to foreclose. 

Policy/rationale.  Borrowers argued that, under Rule 17(A)(1), Nationstar was required to disclose (plead) its relationship to Chase and the capacity in which it was suing.  The Court disagreed.  Although Chase owned the note, Nationstar was its holder and, by statute, had the right to enforce it.  It followed that Nationstar was a real party in interest.  Furthermore, as to the settlement agreement, the Court pointed out that, as servicer, Nationstar’s role was to negotiate such agreements and that Chase was not a necessary party to any such negotiations.  In the end, although the evidence seemed shaky as to whether Nationstar actually possessed the original promissory note, as a practical matter the Court had enough facts upon which to base its decision that Nationstar was a proper party to enforce the settlement agreement and take the matter through foreclosure. 

(The opinion did not address in any way whether Nationstar or Chase held the underlying mortgage.  In other words, Turner was silent on what assignment(s) of mortgage had been recorded.  As such, I think this case may be unique with regard to traditional standing issues given that the context was the enforcement of a settlement agreement as opposed to a straight foreclosure action.)      

Related posts. 


Part of my practice is to defend lenders and their servicers in contested foreclosures and consumer finance litigation.  If you need assistance with such matters in Indiana, please call me at 317-639-6151 or email me at  Also, you can receive my blog posts on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.

Dismissing A Borrower’s Post-Foreclosure Federal Court Action For Fraud And Deception: Rooker-Feldman Strikes Again

Lesson.  A defendant in state court foreclosure action doesn’t get another bite at the apple in federal court.

Case cite.  Shaffer v. PNC, 2015 U.S. Dist. LEXIS 116831 (S.D. Ind. 2015) (.pdf).

Legal issue.  Whether federal court had jurisdiction over the plaintiff borrower’s post-foreclosure case against the defendant lender and its law firm.

Vital facts.  This federal court case followed a judgment rendered in a residential foreclosure suit in state court.  In state court, the lender/mortgagee sued its borrower/mortgagor for a default under the subject promissory note and to foreclose the subject mortgage.  The state court granted summary judgment for the lender, and the mortgaged property was sold at a sheriff’s sale.  Efforts by the borrower to appeal failed.  Subsequently, the borrower filed a complaint in federal court asserting claims for:  “demand for chain of title; statutory violations; a Fourteenth Amendment violation; and a clarification as to the individual status of each party under the Fair Debt Collection Practices Act.”  At its core, the borrower alleged fraud and deception on the part of the lender and its law firm.   

Procedural history.  The Shaffer opinion arose out of the defendants’ motion to dismiss for lack of subject matter jurisdiction.  Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana issued the ruling that dismissed the plaintiff borrower’s complaint. 

Key rules. 

  • The outcome hinged on the Rooker-Feldman doctrine, which bars two categories of federal claims:  (1) where a plaintiff requests a federal court to overturn an adverse state court judgment or (2) where federal claims were not raised in state court but yet are “inextricably intertwined” with a state court judgment. 
  • In addition, “fraud (no matter how described) does not permit a federal district court to set aside a state court’s judgment in a civil suit.” 
  • Subject matter jurisdiction motions to dismiss are based upon Rule 12(b)(1).  

Holding.  The Court dismissed the case, stating “[borrower’s] claims are precisely the type of claims the Rooker-Feldman doctrine was designed to prevent the Court from reviewing.”

Policy/rationale.  The purpose of the Rooker-Feldman doctrine is to preclude lower federal court jurisdiction over claims seeking review of state court judgments because “no matter how erroneous or unconstitutional the state court judgment may be, the Supreme Court of the United States is the only federal court that could have jurisdiction to review a state court judgment.”  In Shaffer, the borrower sought review and reversal of the state court judgment.  “The thrust of her complaint is that [the lender] cannot enforce its note and mortgage.”  Moreover, while federal courts have jurisdiction to award damages “for fraud that imposes extrajudicial injury,” the borrower’s complaint in Shaffer made no such allegation.  As such, no exception to the Rooker-Feldman doctrine applied. 

Related posts. 

An Indiana Deficiency Judgment Arises Out Of The Foreclosure Judgment Itself, Not A Separate Action

I am sometimes asked by out-of-state lawyers or clients whether Indiana has a separate process for the entry of a deficiency judgment.  The answer is no. 

My definition.  The terminology “deficiency judgment” refers to the amount of the money judgment remaining after deducting the price paid at the sheriff’s sale.  More generically, the word "deficiency" describes the difference between the debt amount and the value of the collateral securing the debt.  Think of it as negative equity.   

Indiana’s process.  It’s my understanding that some states require a post-sale action to obtain a deficiency judgment.  Not in Indiana.  Here, a judgment entered in a mortgage foreclosure action typically is comprised of two elements.  The first is a money judgment on the promissory note and/or guaranty, and the second is a decree of foreclosure based on the mortgage.  The deficiency is a product of the sheriff’s sale.  In Indiana, a deficiency judgment isn’t a technical or statutory term.  The label simply describes the net amount owed by a borrower or guarantor following a sheriff’s sale.

One judgment.  So, as to Indiana, unlike some other states, personal liability for a judgment (against a borrower or a guarantor) for any post-sale deficiency effectively occurs immediately upon the entry of the foreclosure judgment itself - before the sheriff’s sale even takes place.  There is no second procedural step or subsequent process to establish a deficiency judgment. 

For more on this topic, see the following posts:

Full Judgment Bid = Zero Deficiency

How Much Should A Lender/Senior Mortgagee Bid At An Indiana Sherriff’s Sale?

Full Credit (Judgment) Bid in Michigan Extinguishes Debt and Mortgage in Indiana

Guarantor Wins Res Judicata Battle, Loses Deficiency War

Indiana Commercial Court Pilot Project And Interim Rules

Yesterday, the Indiana Supreme Court issued interim rules related to Indiana's effort to form specialty commercial courts, about which I mentioned here in June and August of last year.  This program and these rules would apply to commercial foreclosures.   Click here for the rules.

One of our Firm's summer associates, Jedidiah Bressman, prepared a summary of the rules.  Thanks to Jedidiah for his contribution to my blog.

General Notes

There are six commercial courts handling specialized dockets of business cases.  The pilot project establishes these courts for business disputes in which parties agree to have their cases resolved:

• Allen Superior Civil Division Judge Craig Bobay;
• Elkhart Superior 2 Judge Stephen Bowers;
• Vanderburgh Superior Judge Richard D’Amour;
• Floyd Superior 3 Judge Maria Granger;
• Lake Superior Judge John Sedia; and
• Marion Superior Civil Division 1 Judge Heather Welch.

Commercial Courts employ and encourage electronic information technologies, such as e-filing, e-discovery, telephone/video conferencing, and employ early alternative dispute resolution interventions, as consistent with Indiana law.

Cases Eligible For Commercial Court Docket (CCD)

Any civil case, including any jury, non-jury case, TRO, injunction, restraining order, class action, declaratory judgment, or derivative action, shall be eligible for assignment into the CCD if the case relates to:

1. The formation, governance, dissolution, or liquidation of a business entity
2. Rights, obligations, liabilities, or indemnities of owners, shareholders, etc.
3. Agreements involving a business entity and an employee, member of the business entity, etc.
4.  Disputes between or among two or more business entities or individuals as to their business activities relating to contracts, transactions, or relationships between or among them, including without limited to:

a. Any transactions governed by the UCC, except for Consumer claims against business entities or insurers of business entities and Consumer Debts.
b. Cases relating or arising under antitrust laws.
c. Cases relating to securities or relating to or arising under securities laws.
d. Commercial insurance contracts, including coverage disputes.
e. Environmental claims arising from breach of contract or legal obligations or indemnities between business entities.
f. Cases with a gravamen substantially similar to the previous and not otherwise disallowed by Commercial Court Rule 3.
g. Subject to the acceptance of jurisdiction over the matter by the Commercial Court Judge, cases otherwise falling within the general intended purpose of the Commercial Court Docket wherein the parties agree to submit to the Commercial Court Docket.

Cases Not Eligible For CCD

1. Personal Injury;
2. Consumer Claims;
3. Matters involving only wages or hours, occupational health or safety, workers’ comp, or unemployment;
4. Any environmental claims not already established;
5. Eminent domain;
6. Any employment law cases not already established;
7. Discrimination cases based on federal or state constitutions;
8. Administrative agency, tax, zoning, and other appeals;
9. Petition Actions; strategizing;
10. Individual residential real estate disputes;
11. Any matter subject to the domestic relations, juvenile, or probate division of a court;
12. Any matter subject to the exclusive jurisdiction of a city court, a town court, or the small claims division of a court;
13. Any matter required by law to be heard in some other court or division of a court;
14. Any criminal matter, other than criminal contempt in connection with a matter pending on the Commercial Court Docket;
15. Consumer debts.

Steps To Get Into The CCD

1. If case is eligible and a party seeks to have the case assigned to the CCD, the attorney representing that party shall identify the case as a “CCD case” by filing with the clerk of the court a “Notice Identifying CCD Case” (“Identifying Notice”).
2. If a party does not consent a “Notice of Refusal to Consent to Commercial Court Docket: (“Refusal Notice”) must be filed within 30 days after service of the Identifying Notice; or 30 days after the date the non-consenting party first appears in the case.
3. If Identifying Notice is filed: (a) the clerk of court shall assign the case to the CCD, which assignment is deemed a provisional assignment; (b) if no Refusal Notice is timely filed by any party that has appeared in the case, the assignment of the case is deemed permanent; and (c) if a Refusal Notice is timely filed, the clerk shall transfer and assign the case to a non-CCD in accordance with applicable Rule.
4. If new trial is granted; or after remand is granted, the steps of getting into the CCD start over again.
5. The CCD judge has final say over whether a case is deemed appropriate for the CCD and can send a case back to a non-CCD in accordance with applicable rule. The judge’s determination shall not be subject to appeal.

General Notes About Getting Into CCD

1. This can be done at any time. (Of course, all parties must agree.)
2. This includes if a case becomes eligible for the CCD after a cross-claim, etc.
3. The Commercial Court Rules are limited to cases filed after June 1, 2016.  Cases already pending cannot be transferred.
4. Rule 4(C)(2) is the same as used in Trial Rule 3.1(B).

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

Lesson.  Federal courts generally won’t stay a sheriff’s sale ordered by an Indiana state court.

Case cite.  Sims v. New Penn, 2015 U.S. Dist. LEXIS 85498 (N.D. Ind. 2015) (.pdf) .

Legal issue.  Whether a federal district court should grant or deny a temporary restraining order (TRO) enjoining a sheriff’s sale decreed by an Indiana state court.

Vital facts.  Lender/mortgagee sought and obtained, in state court, a judgment and decree of foreclosure in a residential/consumer case.  In a subsequent federal court action, the plaintiffs, who lived in the house, sued the servicer of the mortgage upon which the prior foreclosure action was based.  The plaintiffs’ complaint asserted a multitude of consumer finance-based claims.  The underlying allegations in the plaintiffs’ federal court complaint are not particularly germane here, however.  In a nutshell, the plaintiffs felt wronged by the servicer’s alleged unlawful refusal to permit them to assume the subject mortgage. 

Procedural history.  The plaintiffs sought a TRO barring an upcoming sheriff’s sale.  The Sims opinion is the United States District Court’s ruling on the TRO request.

Key rules. 

  • One seeking a TRO must show that he or she is “reasonably likely to succeed on the merits, is suffering irreparable harm that outweighs any harm the [defendant] will suffer if the injunction is granted, there is no adequate remedy at law, and an injunction would not harm the public interest.” 
  • In Indiana, a sheriff’s sale only occurs following the entry of a judgment.  Ind. Code 32-30-10-5; 32-30-10-8
  • The Rooker-Feldman doctrine, discussed on this blog many times, precludes federal courts from exercising jurisdiction over cases brought by “state-court losers complaining of injuries caused by state-court judgments….”

Holding.  The Court concluded that the plaintiffs in Sims, to the extent they sought to enjoin the sheriff’s sale, were attempting to relitigate the merits of the prior foreclosure action and, as such, the Court lacked jurisdiction to do so.  Stated another way, the plaintiffs were unlikely to succeed on the merits of their claim.  For this and other reasons, “the standards for issuance of a [TRO were] not met….”  The Court denied the TRO.

Policy/rationale.  A TRO is an extreme remedy granted only under limited circumstances.  I’m not saying that a TRO request should be denied in every conceivable circumstance, but it’s hard to imagine a scenario where a federal court would stop a sheriff’s sale ordered by a state court.  Attempts to obtain such relief should be focused in the original, state court action through appeal or otherwise. 

Related posts. 

Breaches Of Pooling And Servicing Agreements Are Not A Defense To Foreclosures

Lesson.  If you are a borrower or a guarantor in Indiana, or are defending such parties in a contested mortgage foreclosure, defeating a motion for summary judgment on the basis of an alleged breach of a pooling and servicing agreement isn’t going to happen. 

Case cite.  Wilmington v. Bowling, 39 N.E.3d 395 (Ind. Ct. App. 2015).

Legal issue.  Whether the plaintiff/lender was the holder of the promissory note and entitled to enforce it.  In other words, did the lender have standing to sue the borrower?

Vital facts.  The lender, an assignee of a securitized mortgage loan, possessed the original note, which had been endorsed in blank.  The lender also had a complete chain of recorded assignments establishing who held the note at various times.  Nevertheless, the borrower found on the internet what he believed to be the applicable pooling and servicing agreement (PSA), which “reflects that the assignees of the mortgage and note were required to transfer possession by a special endorsement that must be reflected on an allonge.”  There was an absence of evidence of such an allonge and, as such, arguably there had been a breach of the PSA.   

Procedural history.  The trial court granted summary judgment for the lender on the standing issue, and the borrower appealed.

Key rules.  Generally, “only the parties to a contract … have rights under the contract.”  The exception is “where it can be demonstrated that the parties clearly intended to protect a third party by imposing an obligation on one of the contracting parties….”  The law has developed in the country, which law the Indiana Court of Appeals adopted in Wilmington, is that borrowers lack standing to (a) challenge the validity of mortgage securitization or (b) request a judicial determination that a loan assignment is invalid due to noncompliance with a PSA.     

Holding.  The evidence did not establish that the borrower was a party to the PSA.  The evidence also failed to show that there was an intent to protect the borrower as a third party such that he could enforce any obligation under the PSA.  The trial court properly found that the lender was entitled to enforce the note under Ind. Code 26-1-3.1-301.

Policy/rationale.  Parties to PSA’s typically are the certificate holders, a trustee, and a servicer.  Borrowers have no contractual privity with these parties.  Any breach of a PSA, and any damages arising out of such breach, are relevant only as between the parties that signed the PSA.  Alleged breaches do not inure to the benefit of borrowers (or guarantors), who only are in privity of contract with the lenders/mortgagees under the notes and mortgages (or guaranties) – not the securitization documents. 

Related posts. 

Following Rule 41(E) Dismissal For Failure To Prosecute, Can A Second Suit Be Filed?

Lesson.  Once a lender files an Indiana foreclosure suit, that lender should either prosecute it or dismiss it without prejudice.  Sometimes, particularly in high-volume residential/consumer foreclosure servicing, a file can be ignored to the point that it is automatically dismissed, which could prove problematic or even disastrous.  If a post-dismissal second suit is filed, the second complaint must articulate separate and distinct defaults.   

Case cite.  Grant v. The Bank of New York, 20 N.E.3d 733 (Ind. Ct. App. 2015). 

Legal issue.  Whether the lender’s second mortgage foreclosure action against the borrowers should have been dismissed where the first case was dismissed with prejudice under Ind. Trial Rule 41(E)

Vital facts.  In this residential case, the lender filed an in rem (against the property only, not the individuals) complaint to foreclose its mortgage.  The borrowers previously had been discharged in bankruptcy, so the lender’s recovery was limited to the mortgaged property.  The lender took no action for a year and a half, so the trial court set a Rule 41(E) “call of the docket,” and the lender failed to appear.  The trial court dismissed the action for cause for failure to prosecute.  Later, the lender filed a new suit asserting the same allegations and seeking the same relief.  

Procedural history.  The trial court denied the borrowers’ motion to dismiss the second suit and granted the lender’s summary judgment motion.  The borrowers appealed. 

Key rules.  The borrowers’ position hinged on principles of res judicata, a topic I have discussed (see below).  Also in play were Rules 41(E) [failure to prosecute] and 41(F) [reinstatement following dismissal].  Further, under Rule 41(B), a dismissal automatically is with prejudice (on the merits) unless the order specifies otherwise.  This is a lot of technical lawyer stuff, but generally speaking, though not in all instances, a dismissal “with prejudice” is “conclusive of the rights of the parties and is res judicata as to any questions that might have been litigated.” 

Holding.  The fundamental question in Grant was whether the first and second actions were the same.  The lender argued that the borrowers’ obligations under the loan were ongoing such that any subsequent default (post-dismissal nonpayments) created “a new and independent right to initiate foreclosure.”  The Court of Appeals rejected the lender’s contentions, reversed the trial court and ordered the trial court to dismiss the lender’s case. 

Policy/rationale.  The Court found compelling the fact that the borrowers’ personal liability under the note had been discharged.  This meant that the second action had to be the same as the prior action, “which fully contemplated nonpayment due to the bankruptcy.”  Indeed the two complaints articulated the same defaults.  The Court distinguished Grant from other Indiana case law holding that second suits can be pursued if the facts necessary to establish a default in the first case are different from those necessary to establish a default in the second one.   

Related posts. 

Single Note/Multiple Mortgages In Different States: Can The Indiana Mortgage Be Foreclosed And, If So, When?

Facts:  A prospective lender client was considering a high-dollar commercial loan to be documented by a single promissory note secured by several mortgages in several states, including Indiana.  In the event of a default under the note, the lawsuit to enforce the note – the action to obtain the judgment under the note – would not be in Indiana. 

Issues:  The lender generally wanted to know whether the Indiana mortgage would be enforceable.  Since Indiana law requires mortgages to be foreclosed in the county where the mortgaged real estate is located (Ind. Code 32-30-10-3), one of my first questions was how, if at all, could the Indiana mortgage be foreclosed, given that the action on the note would be pursued in a different state?  My next thought concerned how any Indiana foreclosure action would be impacted by the promissory note case in the other state? 

Statutes: I reviewed several Indiana statutes for answers, including I.C. 32-30-10 (Mortgage Foreclosure Actions) and I.C. 32-29 (Mortgages).  According to my research, there are no statutes directly on point.  None of the statutes contemplate what to do when there are multiple mortgages in different states securing a single note, although from experience I understand that a debt can be secured by multiple mortgages.  Generally, the structure appeared to be sound.  The enforcement of a default was the trickier matter.  Other than I.C. 32-30-10-3 mentioned above, the only other instructive Indiana statute was I.C. 32-30-10-10, which says in pertinent part:

A plaintiff may not:
(1) proceed to foreclose the mortgagee’s mortgage:
    (A) While the plaintiff is prosecuting any other action for the same debt or matter that is secured by the mortgage; [or]
    (B) While the plaintiff is seeking to obtain execution of any judgment in any other action
(2) Prosecute any other action for the same matter while the plaintiff is foreclosing the mortgagee’s mortgage or prosecuting a judgment of foreclosure.

What I think this statute says is that a lender cannot, in one suit, pursue a judgment under the promissory note while at the same time, in a separate suit, foreclose the mortgage securing the note.  The two actions must occur simultaneously within the same case, or they must be done sequentially – with the note action first to establish the debt to be foreclosed.  Having said this, as noted below, Indiana case law either interpreting or applying Section 10 is extremely limited.  Further, it’s frankly unclear to me what the words “matter” or “same matter” mean in Section 10. 

Case law:  The good news is that there are five Indiana Supreme Court cases that deal with the concepts in Section 10, and one of those cases actually cites to an older version of the statute.  The bad news is that all of the five cases are from the 1800’s.  Assuming the 21st Century courts follow the 19th Century decisions, a lender should be able to obtain a judgment on a note without abandoning its mortgage lien on the mortgaged premises.  In other words, recovery of a judgment on a debt is not a bar to a subsequent action to foreclose the mortgage.  Moreover, a lender, holding a judgment on a debt, may proceed to foreclose the mortgage without going through the judgment execution process. 

Conclusions:  Indiana law appears to be settled that there can be two suits – one on the note and one on the mortgage – as long as the two suits are not pending at the same time.  This principle seems to be supported by the Setree opinion, which I discussed last year - Full Faith And Credit: Indiana Foreclosure’s Die Was Cast By Kentucky Judgment.  Referring back to the original issues above, my opinion is that the Indiana mortgage generally should be enforceable but that the Indiana foreclosure action cannot be commenced until after the entry of the out-of-state judgment on the promissory note.  The unresolved question in my mind is whether the post-judgment Indiana foreclosure action could be prosecuted simultaneously with foreclosure actions in other states. 

If you are aware of any case law to the contrary or have litigated these matters previously, please post a comment or email me at  I’d be curious as to any thoughts or input. 

Now, back to March Madness….

Senior Mortgagee Loses Priority Claim In Bankruptcy Court After Being Defaulted In State Court

Lesson.  The Rooker-Feldman doctrine can operate to defeat a lender’s post-foreclosure federal court claims, not just a borrower’s.  Don’t ignore state court actions.  Respond to complaints.  A junior mortgagee’s foreclosure action, which named the senior mortgagee as a defendant, resulted in the junior mortgagee leapfrogging into senior position due to the failure of the senior mortgagee to participate in the foreclosure. 

Case cite.  Chamberlin v. 1st Source Bank, 2015 Bankr. LEXIS 15393 (N.D. Ind. 2015) (.pdf).

Legal issue.  Whether the senior mortgagee held its senior priority secured claim even though an Indiana state court previously defaulted the senior mortgagee in a foreclosure proceeding that occurred before the bankruptcy case.  Does the Rooker-Feldman doctrine apply to lenders too?    

Vital facts.  Chase held a mortgage on the subject real estate that Chase recorded in 1999.  1st Source held a mortgage recorded in 2002.  Chase was senior in time.  In 2011, 1st Source filed a state court mortgage foreclosure action and named Chase as one of the defendants.  The state court defaulted Chase in the action and granted summary judgment to 1st Source declaring that 1st Source was the “first and prior” lien holder on the subject real estate.  Subsequently, Chase moved to set aside the trial court’s judgment but was unable to convince the state court to do so.  In 2014, the mortgagors filed a Chapter 13 bankruptcy case, and both 1st Source and Chase filed proofs of claim asserting senior priority.  The instant adversary proceeding followed. 

Procedural history.   Chamberlin was the bankruptcy court’s opinion arising out of the motion for summary judgment to determine lien priority matters between Chase and 1st Source.        

Key rules.  The Court discussed at length the Rooker-Feldman doctrine and its applicability here.  For more on these rules, click here, as I’ve discussed that doctrine many times.  In a nutshell, “state-court losers” cannot commence proceedings in federal court to review and reject state court judgments.  Under Indiana law, Chase’s failure to answer the state court complaint resulted in its lien being extinguished.      

Holding.  The Rooker-Feldman doctrine prevented relitigation of the 1st Source foreclosure action.  The bankruptcy court did not disturb the state court’s decision defaulting Chase and rendering the lien of 1st Source first and senior.  

Policy/rationale.  The Court reasoned:  “Chase had a full and fair opportunity to participate in the 1st Source state court foreclosure action.  Any adverse outcome from that litigation is of Chase’s own making.  [The bankruptcy court] is not the proper forum to review the determination of the state court.”

Related posts.     

Indiana Upholds Dismissal Of Residential Borrower’s Tort Claims Arising Out Of Alleged HAMP Violations

Lesson.  Assorted counterclaims filed by borrowers arising out of alleged failings by lenders to modify mortgages following defaults generally will be dismissed.

Case cite.  Jaffri v. JPMorgan Chase, 26 N.E.3d 635 (Ind. Ct. App. 2015)

Legal issue.  Whether the borrower’s counterclaims for negligence, constructive fraud and intentional infliction of emotional distress should have been dismissed for a failure to state a claim.

Vital facts.  Borrower defaulted on her residential mortgage loan.  Borrower and lender entered into discussions about the possibility of modifying the mortgage based upon the federal government’s Home Affordable Modification Program (“HAMP”).  The loan mod never occurred, and borrower contended that lender “intentionally did not dedicate the resources to HAMP modifications that were necessary to properly comply with the federal program.” 

Procedural history.  Lender filed a Trial Rule 12(B)(6) motion to dismiss borrower’s counterclaims, which motion the trial court granted.  Borrower appealed.

Key rules. 

  • When parties have, by contract, arranged their respective risks of loss, tort law should not interfere.  One cannot negligently breach a contract. 
  • Contractual relationships do not give rise to a fiduciary relationship creating a duty.  Generally, the relationship between a bank and a customer is insufficient to establish a constructive fraud claim. 
  • Intention of infliction of emotional distress claims require proof that the defendant:  (1) engaged in extreme and outrageous conduct, (2) which intentionally or recklessly, (3) caused, (4) severe emotional distress to another. 

Holding.  The Indiana Court of Appeals affirmed the trial court’s dismissal of borrower’s tort claims against lender. 

Policy/rationale.  The Court in Jaffri referred to the widely-recognized rule that alleged violations of HAMP do not give rise to a private right of action.  In other words, HAMP does not establish a duty of care owed by a lender to a mortgagee seeking a modification.  The Court said:  “We cannot perceive that by enacting HAMP, the federal government intended for persons rejected for HAMP assistance to have a private cause of action against the mortgage lender or servicer, unless a contract actually was entered into under HAMP.” 

Related posts. 

No Service On Calvin Hair = Void Judgment Against Hair Calvin

Lesson.  Before obtaining a foreclosure judgment, make sure you perfect service of process against all defendants. 

Case cite.  Hair v. Deutsche Bank, 18 N.E.3d 1019 (Ind. Ct. App. 2014).

Legal issue.  Whether a foreclosure judgment in favor of the lender/mortgagee was void as to a junior lien holder due to ineffectual service of process.   

Vital facts.  Hair obtained a judgment against Adejare in 2006 that resulted in judgment lien on Adejare’s real estate.  In 2002, Adejare granted to Deutsche a mortgage on the same property.  Deutsche filed a foreclosure action in 2011 and served Hair via publication.  Deutsche’s lawyers had tried to serve Hair by using the name “Hair Calvin,” which was consistent with how his judgment had been docketed by the county clerk.  His actual name was “Calvin Hair”, however, and his address was readily ascertainable through internet searches using that name.  Hair did not respond to Deutsche’s suit, and the trial court issued judgment, which included a decree terminating Hair’s judgment lien.  Deutsche bought the property at a sheriff’s sale in 2012 and quickly sold it to a third party. 

Procedural history.  In 2013, Hair filed a motion to set aside the foreclosure judgment.  He claimed that service of process by publication was not warranted and that the court entered judgment against him without first having personal jurisdiction.  The trial court denied the motion, and Hair appealed.

Key rules. 

  • Upon obtaining a judgment by an Indiana county court, a plaintiff automatically obtains a judgment lien against any real estate the defendant owns in that county.  Ind. Code 34-55-9-2
  • Junior lien holders in mortgaged property must be named in a foreclosure action before the judgment will be binding on them. 
  • Trial Rule 4.13(A) deals with service by publication, and the law generally requires “due diligence in attempting to locate a [junior lien holder] before proceeding with a foreclosure by publication only.”
  • A “void” judgment may be attacked through Trial Rule 60(B)(6).  If a judgment is void, the party seeking to set it aside is not required to demonstrate the so-called “meritorious defense” to such judgment. 

Holding.  The Indiana Court of Appeals in Hair reversed the trial court’s denial of Hair’s motion to set aside judgment.  “Hair’s judgment lien … still exists….”

Policy/rationale.  The opinion in Hair goes into great detail about how and why Deutsche should have figured out that it was suing Calvin Hair instead of Hair Calvin and that Deutsche should have served Hair personally instead of by publication.  In the final analysis, the Court concluded that Deutsche failed to give Hair proper notice of the foreclosure proceedings.    

Related posts. 

Res Judicata, Specifically Claim Preclusion, And How To Dismiss A Borrower’s Post-Foreclosure Case

Lesson.  Absent an appeal, borrowers generally cannot obtain relief following an unsuccessful defense to a state court foreclosure action.  If a borrower files a subsequent case that is, essentially, an attempt at a do-over, Indiana courts very likely will dismiss it.  

Case cite.  Thomas v. Deutsche Bank, 2014 U.S. Dist. LEXIS 131081 (N.D. Ind. 2014) (.pdf).

Legal issue.  Whether the borrower’s federal court complaint was barred by res judicata (claim preclusion).   

Vital facts.  The defendants were a lender/mortgagee and its loan servicer.  The lender filed an action in state court against the borrower seeking to foreclose on the mortgaged property.  The borrower appeared in the action and filed a counterclaim.  The state court entered judgment, which the borrower sought to set aside to no avail.  She even filed a post-judgment complaint, which the state court struck.  Next, the borrower filed a new action in state court with a pleading identical to the complaint struck by the prior court.  The new action then was removed to federal court. 

Procedural history.  The Thomas opinion arose out of the lender’s Rule 12(b)(6) motion to dismiss for failure to state a claim.   

Key rules.  Thomas dealt with the claim preclusion component of res judicata in which four factors must be present:  (1) the former judgment was entered by a court of competent jurisdiction, (2) the former judgment was rendered on the merits, (3) the current matter in question was, or could have been, determined in the prior case and (4) the controversy adjudicated in the prior action was between the parties to the present suit or their privies.  A “privy” includes one that controls an action, although not a party to it, and one whose interests are represented by a party to the action. 

Holding.  The federal district court in Thomas granted the motion to dismiss and concluded that the four prongs of claim preclusion were satisfied.  “[Lender] obtained a final, favorable judgment by a court of competent jurisdiction, and [borrower] missed her opportunity to raise her allegation at that time.”  The servicer, although not a party to the former action, also was dismissed because it was in privy with the lender.

Policy/rationale.  The borrower sought to raise issues that were or could have been adjudicated in the foreclosure proceeding.  She challenged the lender’s interest in the property and its status as the holder of the loan.  Yet, the foreclosure action determined ownership and interest.  “[Borrower] had an opportunity to dispute the ownership in the prior proceeding before the [state court].”  Her contentions were, or should have been, resolved in the former case.

Related posts. 

Full Faith And Credit: Indiana Foreclosure’s Die Was Cast By Kentucky Judgment

Lesson.  If, as a lender, you have a promissory note (or notes) secured by mortgages in two (or more) states, you should only be required to litigate the note default and damages claims in one state.  Although you still must open a subsequent case in Indiana to obtain a decree of foreclosure, you should not have to incur the time and expense of a “do-over” to adjudicate the merits of the underlying promissory note (or guaranty) issues. 

Case Cite.  Setree vs. River City Bank, 10 N.E.3d 30 (Ind. Ct. App. 2014).

Legal Issue.  Whether principles of full faith and credit required the Indiana trial court to consider a Kentucky judgment res judicata.  A sub-issue was whether the Kentucky judgment had any influence in the Indiana foreclosure action, which involved a property separate from that which was the subject of the Kentucky action. 

Vital Facts.  In Setree, the borrowers executed promissory notes in favor of the lender, which notes were secured by mortgages on real estate in both Indiana and Kentucky.  The lenders claimed the borrowers defaulted under the notes.  In a foreclosure proceeding in the state of Kentucky, the judge found the borrowers to be in default under a note that was secured by the Indiana mortgage.  Following the Kentucky ruling, the lender, in the Indiana action, sought to foreclose on the Indiana property.  The Indiana trial court granted the lender’s summary judgment motion and concluded, in part, that, based upon full faith and credit principles, res judicata prevented the relitigation of the borrowers’ defaults, which the Kentucky court previously decided. 

Procedural History.  Setree arose out of the borrowers’ appeal of the trial court’s summary judgment in favor of the lender.

Key Rules.  The United States Constitute requires “full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state.”  Indiana codified this principle at Ind. Code § 34-39-4-3, which provides that records and judicial proceedings from courts in other states “shall have full faith and credit given to them in any court in Indiana as by law or usage they have in the courts in which they originated.” 

The one exception to this rule, is that a foreign judgment may be open to collateral attack “for want of jurisdiction.”  Before Indiana is bound by a foreign judgment, it may inquire as to the jurisdictional basis for the original judgment because, if the original court did not have jurisdiction over the subject matter or the parties, “full faith and credit need not be given.”  (Jurisdiction was a non-issue in Setree.)

The doctrine of res judicata is designed to prevent relitigation of the same issues in a subsequent case.  To apply, there must be (1) an identity of the parties between the two actions, (2) an identity of the two causes of action, and (3) the prior action must have been decided on the merits.

Holding.  The Indiana Court of Appeals resolved that it must grant full faith and credit to the Kentucky order.  The Court held that, although the Kentucky case concerned different mortgages and different property, the trial courts in both states litigated the same issues between the same parties, including specifically whether the borrowers were in default.  Therefore, “granting the Kentucky judgments full faith and credit, we are precluded from addressing the [borrowers’] claim [that there was no default].” 

Policy/Rationale.  The Setree opinion did not delve into policy.  My understanding has always been that these rules are rooted in principles of judicial economy or, in other words, are to save the court system and the parties time and money. 

Related Posts. 


Employees Of Mortgage Loan Servicers Are Competent To Testify About Default And Damages In Foreclosure Cases

This is a spin on my 09/10/13 post discussing how to prove a default.  Many mortgage loans, both residential and commercial, are “serviced” by companies separate and distinct from the lender itself.  In a nutshell, servicers are the liaison between the lender and the borrower (my definition).  Servicers are therefore agents of the lenders.  Whether and to what extent employees of servicers can testify at a trial on behalf of the lender was at issue in Riviera Plaza v. Wells Fargo, 2014 Ind. App. LEXIS 208 (Ind. Ct. App. 2014)

Objection.  In Riviera, a case I discussed last week, the defendants in the commercial mortgage foreclosure objected to the testimony of witnesses who serviced the loan on behalf of the plaintiff, Wells Fargo, as well as predecessors in interest to Wells Fargo.  All of the witnesses testified about the borrower’s default on the promissory note, including that the borrower failed to make scheduled loan payments during the time each specific witness serviced the loan.  The borrower challenged whether the witnesses were competent to testify and specifically claimed that the witnesses lacked the requisite personal knowledge. 

Competent.  Indiana Rule of Evidence 602 “Lack of Personal Knowledge” provides that a “witness may testify to a matter only if evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter.”  So, a lack of personal knowledge renders the witness incompetent.  A determination of competency is a determination of whether, and to what extent, a witness may testify at all.  Indiana case law provides that “a witness’ personal knowledge of a situation can be inferred from his or her position or relationship to the facts set forth in his or her testimony or affidavit.”  Moreover, Indiana cases hold specifically that personal knowledge can be inferred from a witness’ position as a recovery specialist for a loan servicer.  Further, an asset manager “and his possession of files relating to the debt” justifies admission of the testimony concerning a borrower’s default and the amounts owed on the debt. 

Admissible.  The upshot is that employees of mortgage loan servicers are indeed the proper witnesses to prove a lender’s case to enforce its loan, assuming a proper foundation is laid for that particular witness to testify.  The Court expanded on this idea:

Here, each of the challenged witnesses testified that [the borrower] failed to make scheduled loan payments during the time in which each serviced the loan pursuant to their positions in loan recovery for the appropriate loan services.  Each of the challenged witnesses further testified to the amount owed and indicated that they had personal knowledge of the loan and serviced the loan in a manner consistent with the policies employed in the loan servicers’ normal courses of business.  As such, we conclude that the trial court did not err in determining that each of the challenged witnesses held the requisite personal knowledge to testify about [the borrower’s] default of the loan.

Normally the basis of this kind of testimony will be on the witness’ review and analysis of the records maintained by the servicer.  Although the Court in Riviera did not dwell on the records review concept, experience tells me that the review of loan records is the primary way to form a basis for the requisite personal knowledge of servicer witnesses.  Riviera supports this proposition. 

Indiana Foreclosures: How Long Do They Take?

One question I often get is:  how long does the foreclosure process take in Indiana?  I posted about this back in November, 2006.  With the benefit of seven more years of experience and dozens of more cases, I’ve refined my answer.  As outlined below, commercial foreclosures can take anywhere from five months at the absolute earliest to several years. 

Judicial state.  The first thing to understand is that Indiana is a judicial foreclosure state.  A foreclosure requires a lawsuit, a judgment and a sheriff’s sale.  The process officially starts with the filing of a complaint.  (In residential cases only, Indiana law has pre-suit notice and settlement conference mandates.)

Timing.  Predicting the timing largely depends upon whether and to what extent the borrower contests (defends) the proceeding. 

Uncontested:  5 months minimum.  If a business borrower does not contest a foreclosure, the process can move relatively quickly.  Below are the major steps and an estimated timeline.  Five months is about as fast as things will go.  Realistically, the process will take longer.

Day 1:  Filing of the Complaint.

Day 7+:  Service of process on defendant - can occur in 7 to 10 days, but difficulties perfecting service are not uncommon.  This simple step can take several weeks

Day 28/31:  Motion for default judgment - can be sought 21 to 24 days after service of process.  A summary judgment may be preferable to a default judgment, but that should not alter the timing in an uncontested case.

Day 60:  Entry of judgment and decree of foreclosure - should occur in under 30 days.

Day 90:  Praecipe for sheriff’s sale, including notice of same - by statute, cannot be filed until three months after the Complaint.

Day 150:  Sheriff’s sale - happens about 60 days from Praecipe, depending on the county.

Contested:  8+ months minimum.  The steps in a contested case essentially will be the same as those above, except that the court will hold a hearing on the summary judgment motion that will necessarily delay a ruling.  Having said that, with the vagaries of litigation, it’s virtually impossible to conclusively estimate how long a case may last.  Each one is different and driven by a wide variety of factors.  Much depends upon how clear the default and the damages are, and how aggressively each party pushes its position.  An eight-month contested foreclosure is optimistic.  A year is not unusual.

Be prepared for delays.  The timing will be impacted by the docket of a particular court and/or the schedule of an individual civil sheriffs’ office.  Moreover, defense attorneys can prolong the matter by seeking (and obtaining) multiple extensions of time, serving requests for discovery and vigorously challenging a motion for summary judgment.  In the event of a trial, meaning that the court denied summary judgment, a resolution of the case will be deferred many months if not years.  Also remember that defendants can appeal an unfavorable ruling.  Finally, a borrower/mortgagor can stop a sheriff’s sale by filing for bankruptcy protection at any time before the sale begins. 

Even with the best loan documents and great facts, the Indiana foreclosure process, perhaps to the delight of borrowers and certainly the chagrin of lenders, has the potential to be a lengthy and expensive undertaking. 

Pro Hac Vice Admission In Indiana And The Role Of Local Counsel

You’re an out-of-state lawyer with a client who needs to enforce a loan in Indiana.  You’re not licensed to practice in the state, and no one in your firm is admitted in Indiana.  You don’t want to relinquish control over the case, but instead wish to be in charge of representing your long-standing client in its important matter.  What you need is to be admitted pro hac vice in the Indiana court.  

More Latin.  “Pro hac vice” in English means “for this turn; for this one temporary occasion.”  Black’s Law Dictionary.  In the legal context, the phrase refers to the limited admission to practice in a court.  Admission pro hac vice is governed by the Indiana Rules for Admission to the Bar and the Discipline of Attorneys, including specifically Rule 3, which was substantially amended in 2007. 

The 7 hoops.  Indiana’s rules require prospective pro hac vice admitees to jump through a number of hoops.  The rules mandate filings with both the Clerk of the Indiana Supreme Court ("Clerk") and with the particular trial court.  According to Rule 3(2)(a), here’s what needs to be done:

  1. Hire a member of the bar of the State of Indiana to act as co-counsel and ensure he or she has an appearance on file.
  2. Pay the Clerk a registration fee of $180.  See, Rule 2(b).  The registration fee must be paid annually until the proceeding has concluded.  See, Rule 3(2)(c). 
  3. Provide the Clerk with a copy of the Rule 3(2)(a)(4) Verified Petition for Temporary Admission ("VPTA") that will be filed with the trial court. 
  4. Procure from the Clerk a temporary admission attorney number and payment receipt. 
  5. File the VPTA with the trial court, co-signed by Indiana co-counsel, setting forth the nine specific disclosures articulated in Rule 3(2)(a)(4). 
  6. Obtain from the trial court an order granting the VPTA.
  7. File with the Clerk a Notice of Temporary Admission that includes a statement of good standing issued by the highest court in each jurisdiction in which the attorney is admitted to practice law, a copy of the VPTA and a copy of the order granting the VPTA.   

After successfully jumping through these hoops, counsel may file an appearance in the trial court.

Further handling of the case.  Beware of Rule 3(2)(d), which mandates that all papers filed in the cause of action be co-signed by the Indiana co-counsel.  On the other hand, unless ordered by the trial court, local counsel need not be personally present for court appearances. 

Indiana's philosophy.  Here is an excellent article entitled Taking the vice out of pro hac vice:  temporary admission and local counsel from the October, 2006 issue of Res Gestae, the official publication of the Indiana State Bar Association.  Donald R. Lundberg, the Executive Secretary of the Indiana Supreme Court Disciplinary Commission at the time, is the author.  The article describes the January 1, 2007 changes to the rules.  It also explains why Indiana co-counsel cannot be a “potted plant,” but instead must play a meaningful role in the case, particularly with written submissions.  In response to those who feel that Indiana’s procedural requirements for admission pro hac vice may be burdensome, Mr. Lundberg makes a great point:  “would you rather take the bar exam?”

The General and the Lieutenant.  My standard approach to serving as local counsel is based on the notion that, as with most cases, there needs to be a General and a Lieutenant.  Someone - one person – should be in charge, and others should follow that person’s orders.  Otherwise, the “too many cooks in the kitchen” syndrome develops, followed by reduced efficiency and increased costs to the client.  Usually, but not always, my primary purpose as local counsel is to support the out-of-state lawyer – to be a Lieutenant – regardless of the age or experience of the non-Indiana attorney.  Most good local counsel set their egos aside and do as little (or as much) as the lead counsel wants.  To me, the main objective of any out-of-state, lead attorney should be to hire a responsive, cost-effective role player with local knowledge of the law and procedures.  Certainly I’m always ready, willing and able to be lead counsel, and there are times when the referring attorney hires me to serve in that capacity.  But most of the time, out-of-state Generals simply want a local Lieutenant, which is fine with me.