ILNews

Mortgage company didn't act in good faith

Back to TopCommentsE-mailPrintBookmark and Share

The Indiana Court of Appeals affirmed that a mortgage company shouldn't have been treated as a bona fide purchaser because it didn't act in good faith in providing a mortgage that was obtained by fraud.

In Richard Thomas, et al. v. Benjamin H. Thomas, No. 45A05-0906-CV-357, Trustcorp Mortgage Co. challenged the trial court's ruling that the mortgage it holds on Benjamin Thomas' home is invalid.

Benjamin remained in possession of his home that he owned since 1965, but his home was conveyed to his son Richard by a quit claim deed. After a family dispute, Benjamin asked Richard to convey the title back to him as agreed, but he refused. Benjamin filed notice of intention to hold a mechanic's lien for $200,000 on the home and filed a quiet title suit against his son. He didn't file a lis pendens notice at any point.

Richard then got an $118,000 mortgage on the home from Trustcorp by submitting a fraudulent loan application that included a purported release of the mechanic's lien. Richard never made any payments and filed for bankruptcy.

Benjamin received the title back via a mediated settlement and executed a release of the mechanic's lien to Trustcorp after the trial court issued partial summary judgment to the mortgage company on the lien's validity. Trustcorp conveyed the right to collect the mortgage loan to Fannie Mae and the servicing rights to EverBank.

The trial court then entered summary judgment for Benjamin in his suit, ruling the mortgage was invalid because it was a product of fraud. It also concluded despite Benjamin's failure to file a lis pendens, Trustcorp had constructive notice of his claims due to his pending litigation with Richard and the irregularities in the mechanic's lien release submitted with the loan application.

The trial court didn't err in finding Trustcorp's mortgage was invalid on the basis that the company wasn't a bona fide mortgagee. The record supports Trustcorp didn't act in good faith and can be imputed with notice of Richard's fraud and Benjamin's lawsuit, wrote Judge Cale Bradford.

"Quite simply, it is undisputed that Benjamin was in possession of the property in question and that Trustcorp nonetheless did nothing to ascertain his rights to it," he wrote. "It is apparent that even a cursory investigation would have quickly uncovered both Richard's fraud and Benjamin's claims on the home."

In addition, the irregularities in the forged mechanic's lien release should have put a reasonably prudent person on notice that something was amiss, the judge continued.

Although Trustcorp couldn't have had constructive notice because Benjamin failed to file the lis pendens, the record contains sufficient evidence to support a finding of inquiry notice. Richard was the only person present when the lien was notarized, even though Benjamin supposedly signed it. Second, the lien had an incorrect number and Trustcorp had the means to verify it.

The same evidence supports the finding the mortgage was obtained by fraud, rendering it invalid, the appellate court concluded.

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

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  2. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

  3. This outbreak illustrates the absurdity of the extreme positions taken by today's liberalism, specifically individualism and the modern cult of endless personal "freedom." Ebola reminds us that at some point the person's own "freedom" to do this and that comes into contact with the needs of the common good and "freedom" must be curtailed. This is not rocket science, except, today there is nonstop propaganda elevating individual preferences over the common good, so some pundits have a hard time fathoming the obvious necessity of quarantine in some situations....or even NATIONAL BORDERS...propagandists have also amazingly used this as another chance to accuse Western nations of "racism" which is preposterous and offensive. So one the one hand the idolatry of individualism has to stop and on the other hand facts people don't like that intersect with race-- remain facts nonetheless. People who respond to facts over propaganda do better in the long run. We call it Truth. Sometimes it seems hard to find.

  4. It would be hard not to feel the Kramers' anguish. But Catholic Charities, by definition, performed due diligence and held to the statutory standard of care. No good can come from punishing them for doing their duty. Should Indiana wish to change its laws regarding adoption agreements and or putative fathers, the place for that is the legislature and can only apply to future cases. We do not apply new laws to past actions, as the Kramers seem intent on doing, to no helpful end.

  5. I am saddened to hear about the loss of Zeff Weiss. He was an outstanding member of the Indianapolis legal community. My thoughts are with his family.

ADVERTISEMENT