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Court affirms in part lien priority ruling

January 19, 2016

A trial court correctly concluded that a living trust, which held a purchase-money mortgage over a property in question, had first priority in enforcing a lien against the property, the Court of Appeals ruled Tuesday.

Sabine Matthies obtained a nearly $40,000 judgment against Solid Foundations Investment Properties Inc. in December 2012. Gary Hippensteel, director and president of SFIP, subsequently purchased an Indianapolis property after borrowing money from the Alan D. Nelson Living Trust. SFIP executed a mortgage granting the trust a security interest in the property; SFIP also signed a promissory note. The organization also entered into a partnership and borrowed money from Amici Resources to cover renovations to the property. SFIP executed a second mortgage granting Amici a security interest in the Indianapolis property.

Matthies sought to enforce her judgment lien against SFIP, but the trust argued that it held a purchase-money mortgage and therefore had first priority against the Indianapolis property. After it was sold, proceeds were held in an escrow account by the Marion County Clerk’s Office.

A trial court ruled that the trust’s lien had first priority and Amici’s lien had second priority. The court ordered the $40,000 held in escrow be paid to the trust. The court also entered a $39,000 judgment against Hippensteel and SFIP, jointly and severally, in favor of Amici.

In Amici Resources, LLC and Solid Foundation Investment Properties, Inc. Partnership; Solid Foundation Investment Properties, Inc.; Gary Hippensteel; et al. v. The Alan D. Nelson Living Trust, et al., 49A02-1506-PL-560, the Court of Appeals affirmed that the trust had priority over Matthies’ lien. The mortgage qualified as a purchase-money mortgage, which, according to I.C. 32-29-1-4, “has priority over any mortgage, lien, or other claim that attaches to the real estate but is created by or arises against the purchaser-mortgagor prior to the purchaser-mortgagor’s acquisition of title to the real estate.”

But the trial court erred in concluding that Amici’s mortgage lien has second priority, the judges held, citing Michaels v. Boyd, 1 Ind. 259, 260 (1848) and Yarlott v. Brown, 86 Ind. App. 479, 149 N.E. 921 (1925). Therefore, Matthies’ lien should be granted second priority behind the trust’s lien. The case is remanded to amend the order to reflect as much. Judge Cale Bradford noted that the COA’s review of the issue was made more difficult by Amici’s failure to file an appellee’s brief.

The judges also denied the trust’s counter-claim for appellate attorney fees.

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