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Appellate ruling addresses priority rights

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In reversing summary judgment for a home loan company on its complaint for strict foreclosure, the Indiana Court of Appeals specifically adopted the reasoning set forth in a federal decision involving priority rights on liens.

In Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., et al., No. 76A03-0909-CV-423, Citizens State Bank appealed summary judgment in favor of Countrywide Home Loans on its complaint for strict foreclosure and the denial of the bank's motion for summary judgment on its complaint to foreclose judgment lien against Federal National Mortgage Association.

Countrywide held a mortgage on property in which Citizens obtained a default judgment against the owners, which was properly recorded. Just a few months later, Countrywide filed to foreclose on the property and didn't name the bank as a defendant in its complaint to foreclose. Countrywide then got the title to the property at a sheriff's sale, recorded it, and then transferred it to FNMA. After learning about the bank's judgment lien against the property, Countrywide filed its complaint for strict foreclosure against the bank. Citizens State Bank filed its complaint to foreclose its judgment lien on the property against FNMA.

The issue on appeal is what rights, if any, Countrywide or FNMA has regarding Countrywide's attempt at strict foreclosure. Strict forclosure permits a party who has acquired title through or after a foreclosure sale or gotten the title through a deed in lieu of foreclosure to cut off the interests of any junior lienholders who weren't parties to the foreclosure action.

The appellate court relied on Deutsche Bank National Trust Co. v. Mark Dill Plumbing Co., 903 N.E.2d 116 (Ind. Ct. App. 2009), and Brightwell v. United States, 805 F. Supp. 1464 (S.D. Ind. 1992), to overturn the trial court's ruling. In Deutsche, the appellate court held that a lender could not by strict foreclosure simply remove the liens of junior lienholders from the lender's title to the real estate. Brightwell addressed how to determine priority rights of superior and junior lienholders in cases where the superior lienholder has acquired fee simple title by foreclosure sale and no longer holds a mortgage. It also discussed merging the mortgage with the title.

Although the Court of Appeals hasn't had occasion to do so until now, it specifically adopted the reasoning set forth in Brightwell to determine priority rights.

"In light of the purpose of the anti-merger rule, which is to protect the mortgagee's priority and give the mortgagee 'first crack' at a full recovery, there is no valid reason for that mortgage-assertion right to pass to subsequent purchasers or transferees," wrote Judge Terry Crone. "To hold otherwise would permit for double recovery of the mortgage indebtedness, a result clearly not favored in equity and not intended by the anti-merger rule."

By transferring the property to FNMA, Countrywide had first crack at a full recovery ahead of any junior lienholders and no longer had any interest in the property to protect. As such, there was no basis for its mortgage-assertion right to pass to FNMA, the judge continued.

Brightwell correctly states Indiana law regarding priority rights when a foreclosing mortgagee sells the property to a third party.

"When property is transferred for value or resold to a third party, that party cannot then assert what was formerly a superior mortgage lien position against the judgment lien. Rather, the third party takes the property subject to the valid judgment lien. This is fair and just," the judge wrote.

The appellate court remanded with instructions to enter summary judgment for Citizens on Countrywide's complaint and to enter summary judgment for the bank on its complaint to foreclose judgment lien.

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  1. Hi there I really need help with getting my old divorce case back into court - I am still paying support on a 24 year old who has not been in school since age 16 - now living independent. My visitation with my 14 year old has never been modified; however, when convenient for her I can have him... I am paying past balance from over due support, yet earn several thousand dollars less. I would contact my original attorney but he basically molest me multiple times in Indy when I would visit.. Todd Woodmansee - I had just came out and had know idea what to do... I have heard he no longer practices. Please help1

  2. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  3. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  4. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

  5. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

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