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COA orders bank to release mortgage on Adams County farmland

March 21, 2018

An Adams County couple will be released from the mortgage on their farmland after the Indiana Court of Appeals determined the bank altered the terms of the promissory note secured by the mortgage, entitling the couple to release.

In August 2015, Matthew and Ginger Summersett executed a $398,000 promissory note with the Bank of Geneva, while Ginger’s parents, R. Kinsey and Susan Brooks, executed a mortgage on their farmland to partially secure the Summersetts’ debt. The Summersetts also mortgaged four parcels of their property to secure the debt, and the Brookses’ mortgage specified that they would not be personally liable for the debt.

The bank then issued four additional loans to the Summersetts without the Brookses’ knowledge and modified the terms of the $398,000 note to provide for semiannual, rather than monthly, payments, without their knowledge. The Summersetts eventually sold their mortgaged real estate, but put the proceeds toward their other four loans, not the loan the Brookses were involved with.

Then in May 2016, the bank filed a foreclosure complaint against the Brookses’ mortgage, alleging a balance of more than $407,000 was due on the $398,000 promissory note. However, the bank filed a “Satisfaction of Mortgage” with the Adams County Recorder in June 2016 that showed the Summersetts’ mortgage on the note had been paid in full and was released.

A bank officer later stated that the document filed with the county recorder had “inadvertently” said the loan was paid in full. The Brookses responded with an abuse of process counterclaim, and both parties filed cross-motions for summary judgment. The Adams Circuit Court ultimately ruled in favor of the bank, ordering sale of the Brookses’ property if the $462,772.89 judgment was not paid.  

After reducing the appeal bond from $285,000 to $25,000, the Indiana Court of Appeals reversed the grant of summary judgment to the bank in a Wednesday opinion. Judge Michael Barnes first wrote for the appellate panel that the court reduced the appeal bond — which was based on a $250,000 property valuation — because the trial court issued only an in rem judgment, and because the Brookses’ mortgage explicitly held that they would not be personally liable for the debt.

“Thus, in reducing the appeal bond here to $25,000, we considered that the Bank has incurred approximately $15,000 in appellate attorney fees, and the Brookses’ mortgage contains an attorney fee provision that would allow the Bank to recover those fees from the Brookses if they lost this appeal,” Barnes wrote. “To this we added $10,000 in potential interest at an 8 percent per annum on $250,000, confident in our ability to decide this case in much less time than the trial court or the Bank thought we would.”

Turning then to the merits of the case, the appellate panel determined the bank materially altered the promissory note by changing the payments to a semiannual schedule and by releasing the Summersetts’ mortgage. Thus, the Brookses should have been released, meaning there was nothing for the bank to foreclose on, the court held.

Summary judgment to the bank was reversed, and the case of R. Kinsey Brooks, Susan K. Brooks v. Bank of Geneva, 01A05-1709-MF-2174, was remanded for release of the mortgage on the Brookses’ property and for consideration of the Brookses’ abuse of process claim.

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