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
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

ADVERTISEMENT