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Court orders more proceedings in foreclosure action

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An Elkhart County man successfully convinced the Indiana Court of Appeals to reverse the denial of his motion to set aside default judgment in a foreclosure action. The man argued he relied on information from the bank that he could proceed with a short sale and the foreclosure proceeding would be put on hold.

Bank of America N.A. attempted to foreclose on Michael H. Kretschmer’s property in Elkhart County in 2012. When Kretschmer didn’t reply to the complaint, the trial court awarded default judgment to the bank. When Kretschmer learned of the judgment, he filed a motion to set it aside, alleging that Bank of America had agreed to a short sale of the real estate. He said he spoke with someone in the bank’s counsel’s office who told him, “not to worry about anything and to continue with the short sale.” Based on that conversation, Kretschmer did not hire an attorney or appear in court.

The matter went to a settlement conference, in which the parties agreed to stay the foreclosure pending Kretschmer’s submission of a possible short sale offer and the bank’s review of the offer. But the bank claimed it never received any offers and the trial court later ruled in favor of the bank on Kretschmer’s motion to set aside the default judgment.

But the trial court erred by denying his motion, the Court of Appeals ruled Thursday in Michael H. Kretschmer v. Bank of America, N.A., 20A05-1312-MF-600. The judges found that his failure to timely answer BANA’s complaint was the result of excusable neglect under Trial Rule 60(B)(1) and (3) due to the information provided by the bank’s counsel’s office.

Kretschmer claimed that he presented two short sale offers to the bank, but the bank failed to consider the offers. If true, these allegations could show that the bank engaged in contractual sabotage or other acts of bad faith, the appeals court held.

“If Kretschmer’s assertions that BANA promised to allow him more time to attempt to obtain an acceptable short sale offer are credited, then it was incumbent upon BANA to give due consideration to any short sale offers Kretschmer submitted for approval. Finally, we observe that Ind. Code § 24-4.4-2-201 provides in part that a creditor who fails to respond to a short sale offer may be liable in an action under 12 U.S.C. 2605(f), and the fact that Kretschmer may be entitled to damages under certain circumstances supports the conclusion that, if the case were tried on the merits, a different result may be reached,” Judge Elaine Brown wrote.

The case is remanded for further proceedings.
 

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