Justices uphold St. Joseph County foreclosure

The Indiana Supreme Court has ruled in favor of a mortgage company that foreclosed on a St. Joseph County couple’s home, holding that although the couple’s personal liability was discharged under Chapter 7 liquidation, the lien on the property was still an enforceable action.

In 1994, Lt. Henry McCullough and Princess S. D. Naro-McCullough executed a promissory note and mortgage, using a family property in Granger as security for repayment of the loan. After CitiMortgage Inc. become holder of both the mortgage and the note, it filed a complaint to foreclose the mortgage in May 2014, alleging default on monthly installments on the note beginning in January 2013.

Then in January 2015, CitiMortgage moved for summary judgment, and the husband and wife filed cross-motions to dismiss and for summary judgment. The St. Joseph Circuit Court granted CitiMortgage’s motion, granting an in rem judgment against the property in the principal sum of approximately $100,800 with interest, plus expenses.

On appeal, as in the trial court proceedings, the couple proceeded pro se, filing a “woefully defective brief and appendix,” according to the Supreme Court opinion. After the Clerk of Courts issued a letter of defect to McCullough and Naro-McCullough, the couple asked the Court of Appeals to accept their non-conforming submissions. The Court of Appeals denied the motion and CitiMortgage moved to dismiss the case, which the appellate court granted with prejudice.

Although the Indiana Supreme Court initially denied the couple’s petition for transfer, it later vacated its denial and accepted jurisdiction over the case of Lt. Henry G.L. McCullough and Princess S.D. Naro-McCullough v. CitiMortgage, Inc., 71S03-1605-MF-272. Justice Robert Rucker, writing for the high court, said McCullough and Naro-McCullough make several claims on appeal, but the underlying argument is that they were no longer in debt to CitiMortgage when the foreclosure action was filed in 2014.

The couple based their claims on documents for three prior bankruptcies that showed that they had paid more than $122,000 in principal to CitiMortgage from 2006 to 2013, that CitiMortgage did not apply Chapter 13 payment plans as intended toward principal, and that the mortgage was paid in full when the trustee filed a copy of the final report, which showed that they had been “discharged.” However, Rucker wrote that the homeowners provided no evidence to support the contention their Chapter 13 payments were to be applied toward principal, and further noted Rule 56 material before the court did not support the assertion they paid more than $120,000 in principal.

The couple filed Chapter 13 bankruptcy in two separate cases, and their debts were not discharged in either case, Rucker said. However, in a third bankruptcy filing that was converted from Chapter 13 to Chapter 7, the homeowners were discharged in March 2014.

“Relying on this declaration of ‘discharge,’ Homeowners steadfastly and adamantly maintain that at the time CitiMortgage filed its Complaint on Note and To Foreclose Mortgage, they were no longer indebted to CitiMortgage,” Rucker wrote. “Unfortunately, however, Homeowners misapprehend two different but interrelated concepts, namely: the loan due on the mortgage as evidenced by the Note, and the lien on the property as evidenced by the Mortgage.”

Chapter 7 liquidation “extinguished only ‘the personal liability of the debtor,’” the justice wrote, while a lien is an enforceable right against a property.  Thus, the mortgage lien is still enforceable as an in rem action, the Supreme Court held Tuesday, so the grant of summary judgment to CitiMortgage was proper.


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