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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. Bob Leonard killed two people named Jennifer and Dion Longworth. There were no Smiths involved.

  2. Being on this journey from the beginning has convinced me the justice system really doesn't care about the welfare of the child. The trial court judge knew the child belonged with the mother. The father having total disregard for the rules of the court. Not only did this cost the mother and child valuable time together but thousands in legal fees. When the child was with the father the mother paid her child support. When the child was finally with the right parent somehow the father got away without having to pay one penny of child support. He had to be in control. Since he withheld all information regarding the child's welfare he put her in harms way. Mother took the child to the doctor when she got sick and was totally embarrassed she knew nothing regarding the medical information especially the allergies, The mother texted the father (from the doctors office) and he replied call his attorney. To me this doesn't seem like a concerned father. Seeing the child upset when she had to go back to the father. What upset me the most was finding out the child sleeps with him. Sometimes in the nude. Maybe I don't understand all the rules of the law but I thought this was also morally wrong. A concerned parent would allow the child to finish the school year. Say goodbye to her friends. It saddens me to know the child will not have contact with the sisters, aunts, uncles and the 87 year old grandfather. He didn't allow it before. Only the mother is allowed to talk to the child. I don't think now will be any different. I hope the decision the courts made would've been the same one if this was a member of their family. Someday this child will end up in therapy if allowed to remain with the father.

  3. Ok attorney Straw ... if that be a good idea ... And I am not saying it is ... but if it were ... would that be ripe prior to her suffering an embarrassing remand from the Seventh? Seems more than a tad premature here soldier. One putting on the armor should not boast liked one taking it off.

  4. The judge thinks that she is so cute to deny jurisdiction, but without jurisdiction, she loses her immunity. She did not give me any due process hearing or any discovery, like the Middlesex case provided for that lawyer. Because she has refused to protect me and she has no immunity because she rejected jurisdiction, I am now suing her in her district.

  5. Sam Bradbury was never a resident of Lafayette he lived in rural Tippecanoe County, Thats an error.

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