ILNews

Judges split on mortgage issue

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Im very happy for you, getting ready to go down that dirt road myself, and im praying for the same outcome, because it IS sometimes in the childs best interest to have visitation with grandparents. Thanks for sharing, needed to hear some positive posts for once.

  2. Been there 4 months with 1 paycheck what can i do

  3. our hoa has not communicated any thing that takes place in their "executive meetings" not executive session. They make decisions in these meetings, do not have an agenda, do not notify association memebers and do not keep general meetings minutes. They do not communicate info of any kind to the member, except annual meeting, nobody attends or votes because they think the board is self serving. They keep a deposit fee from club house rental for inspection after someone uses it, there is no inspection I know becausee I rented it, they did not disclose to members that board memebers would be keeping this money, I know it is only 10 dollars but still it is not their money, they hire from within the board for paid positions, no advertising and no request for bids from anyone else, I atteended last annual meeting, went into executive session to elect officers in that session the president brought up the motion to give the secretary a raise of course they all agreed they hired her in, then the minutes stated that a diffeerent board member motioned to give this raise. This board is very clickish and has done things anyway they pleased for over 5 years, what recourse to members have to make changes in the boards conduct

  4. Where may I find an attorney working Pro Bono? Many issues with divorce, my Disability, distribution of IRA's, property, money's and pressured into agreement by my attorney. Leaving me far less than 5% of all after 15 years of marriage. No money to appeal, disabled living on disability income. Attorney's decision brought forward to judge, no evidence ever to finalize divorce. Just 2 weeks ago. Please help.

  5. For the record no one could answer the equal protection / substantive due process challenge I issued in the first post below. The lawless and accountable only to power bureaucrats never did either. All who interface with the Indiana law examiners or JLAP be warned.

ADVERTISEMENT