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Judges split on mortgage issue

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In a case of first impression between a lender and the mortgagee on record, the Indiana Court of Appeals was divided as to whether the mortgagee on record had an enforceable right under a mortgage.

Shannon Barabas’ mortgage on her property in Pendleton said that the security instrument “is given to Mortgage Electronic Registration Systems, Inc. (“MERS”), (solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns), as mortgagee.” It also defined the lender in the mortgage as Irwin Mortgage Corporation and gave its address, and said any notice to lender shall be given to lender’s address.

Barabas refinanced the property with ReCasa, defaulted, and ReCasa foreclosed in June 2008. It named Irwin as a defendant, which disclaimed any interest in the real estate. The property was sold back to ReCasa at a sheriff’s sale and then sold to Rick Sanders in March 2009.

In April 2009, MERS assigned the MERS mortgage to Citimortgage and in October, Citi filed a motion to intervene and for relief from the September 2008 amended default judgment in the foreclosure lawsuit. Citi claimed as the assignee of MERS, it could assert any and all rights of MERS and it was the holder of the first mortgage on the property. It sought to foreclose on the MERS mortgage. The trial court declined to set aside ReCasa’s amended default judgment.

Citi argued that because ReCasa didn’t name MERS as a party defendant, it rendered the foreclosure judgment ineffective as to MERS and its assignee, Citi. The trial court held that Citi failed to redeem the property within one year of the judicial sale and as a result, its claim is precluded by Indiana Code Section 32-29-8-3. The majority, citing the June 2008 date in which ReCasa filed its foreclosure complaint, affirmed the lower court in Citimortgage, Inc. v. Shannon S. Barabas, et al., No. 48A04-1004-CC-232.

Judge Elaine Brown dissented on this point, noting that the time period is one year after the sale. The judicial sale happened on Jan. 23, 2009, in this case, not on the date ReCasa first foreclosed on the property or the date the mortgage was assigned to Citi. She wrote that the statute didn’t preclude Citi’s claim because it filed a motion to interview and for relief in October 2009.

The judges also disagreed as to whether MERS is a party possessing rights under the mortgage. Citi also argued that I.C. Section 32-29-8-3 doesn’t apply because MERS – as the mortgagee on record – should have been given notice of ReCasa’s initial foreclosure lawsuit instead of Irwin. An analysis of this relationship between MERS and Irwin is a matter of first impression.

The majority chose to follow the ruling in Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 161 (Kan. 2009), which held that MERS was little more than a “straw man” for a lender.

“Like Landmark, Citi seeks to have the default judgment set aside based on the fact that it received its interest from MERS, which served as the mortgagee ‘solely as nominee’ for Irwin Mortgage,” wrote Judge Patricia Riley. “Thus, when Irwin Mortgage filed a petition and disclaimed its interest in the foreclosure, MERS, as mere nominee and holder of nothing more than bare legal title to the mortgage, did not have an enforceable right under the mortgage separate from the interest held by Irwin Mortgage.”

Judge Brown dissented, noting in the instant case, the mortgage was given to MERS as mortgagee, which was not the case in Landmark. Also, the fact that MERS assigned the mortgage to Citi and Irwin issued a disclaimer of interest indicate that MERS was more than a “straw man” and had a real interest in the property, she wrote.

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  1. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  2. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  3. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  4. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

  5. Seventh Circuit Court Judge Diane Wood has stated in “The Rule of Law in Times of Stress” (2003), “that neither laws nor the procedures used to create or implement them should be secret; and . . . the laws must not be arbitrary.” According to the American Bar Association, Wood’s quote drives home this point: The rule of law also requires that people can expect predictable results from the legal system; this is what Judge Wood implies when she says that “the laws must not be arbitrary.” Predictable results mean that people who act in the same way can expect the law to treat them in the same way. If similar actions do not produce similar legal outcomes, people cannot use the law to guide their actions, and a “rule of law” does not exist.

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