Nationstar Mortg., LLC v. Curatolo

Decision Date18 June 2013
Docket NumberNo. 45A03–1211–MF–469.,45A03–1211–MF–469.
Citation990 N.E.2d 491
PartiesNATIONSTAR MORTGAGE, LLC, Appellant–Plaintiff, v. Jeffrey A. CURATOLO, et al., Appellee–Defendant.
CourtIndiana Appellate Court


Joel F. Bornkamp, Reisenfeld & Associates, Cincinnati, OH, Attorney for Appellant.

Shaun T. Olsen, Law Office of Weiss & Schmidgall, P.C., Merrillville, IN, Attorney for Appellee.


ROBB, Chief Judge.

Case Summary and Issue

Nationstar Mortgage, LLC (Nationstar), appeals the trial court's order modifying its mortgage agreement with Jeffery A. Curatolo. We find the following restated issue dispositive: whether the trial court had the authority to modify the mortgage agreement without consent of both parties. Concluding the trial court lacked the authority to do so, we reverse and remand.

Facts and Procedural History

In August 2006, Curatolo executed and delivered a promissory note and mortgage, promising to pay $245,000.00 plus interest and granting a security interest in the mortgage property, to Bancgroup Mortgage Corporation. Paying interest at the rate of 6.5% and over the term of thirty years, the monthly payment was $1,548.57. The mortgage was eventually assigned to Nationstar in 2010. Nationstar filed its complaint on note and to foreclose mortgage on September 19, 2011, alleging that Curatolo was in default pursuant to the terms of the note and mortgage after March 1, 2010.

Curatolo did not answer the complaint, but, rather, requested a mortgage foreclosure settlement conference. A series of settlement conferences and status hearings took place.1 An order following a settlement conference that took place on January 12, 2012, indicated that Nationstar presented Curatolo with a three-month forbearance plan. The court ordered Nationstar to prepare a permanent modification plan after receipt of the third payment and the court set the matter for an additional status hearing on April 12, 2012. An order following the April 12th settlement conference indicated that Curatolo had successfully completed the three-month plan but that Nationstar “now request[s] that [Curatolo] submit fresh financial documents ... because of a discrepancy in [Curatolo]'s stated income. [Nationstar] has demonstrated consistent absence of good faith in their negotiations....” Appellant's Appendix at 14. A hearing was held on June 14, 2012, on “Mortgage Foreclosure Facilitator's Petition for Sanctions,” 2 and the trial court issued an order the next day, finding the following:

(a) That [Curatolo] has substantially complied with all requisites relating to making payments to [Nationstar] over a three month trial period.

(b) That [Nationstar] consistently raises additional issues in the negotiation process notwithstanding the fact that [Curatolo] timely makes his mortgage payments.

(c) That [Nationstar]'s conduct in the negotiation process borders on bad faith and should be sanctioned.

(d) That the herein Court shall withhold sanctions and allow the parties an opportunity to effectuate a fair and equitable modification.

(e) That [Curatolo] shall commence making monthly mortgage payments to [Nationstar] in the sum of $1,632.83, the first payment due on or before July 1, 2012 and each month thereafter for a five month period.

(f) That if, during the hereinbefore mentioned five month period, [Curatolo] makes timely payments and [Nationstar] fails to act in good faith, the Court will establish a modification program for the parties.

(g) That the Court sets this matter for a status hearing on the 2nd day of August, 2012, at 1:30 p.m.

Id. at 11–12. After the August 2nd settlement conference and status hearing, Nationstar requested an additional thirty days to review the documents submitted by Curatolo.

A final “status conference” took place on October 11, 2012, and the court issued an order, finding the following:

a. That the parties have undergone a series of loan modifications during the pendency of this action.

b. That [Curatolo] has consistently made timely payments and kept himself current pursuant to the terms of said loan modifications.

c. That [Nationstar] has consistently imposed additional requisites on [Curatolo] and the Court deems same as bad faith maneuvers designed to thwart [Curatolo] from maintaining his residence and making payments on same.

d. That in the herein hearing [Nationstar] proposed another trial period in which [Curatolo] was to pay an additional Three Hundred ($300.00) Dollars for a three month period, said proposal the Court deems as another bad faith maneuver.

e. That as a result of [Nationstar]'s bad faith [Nationstar] is denied attorney fees and penalty fees.

f. That the Court finds that there is an unpaid balance on the mortgage note of Two Hundred Thirty Four Thousand Twenty Eight ($234,028.59) Dollars and Fifty Nine Cents.

g. That the Court hereby modifies the mortgage agreement between the parties by ordering [Curatolo] to pay principle and interest to [Nationstar] in the sum of One Thousand Six Hundred Thirty Two ($1,632.83) Dollars and Eighty Three Cents per month commencing November 1, 2012 and for a like period thereafter for fifteen years.

h. That the interest rate on said mortgage shall be at the rate of three (3%) percent.

i. That either party or the mortgage facilitator may petition the Court for a hearing if either party fails to abide by the terms of the herein order.

Id. at 7–8. Nationstar now appeals. Additional facts will be provided as necessary.

Discussion and Decision

In response to the mortgage foreclosure crisis, the Indiana legislature passed Indiana Code chapter 32–30–10.5 to “avoid unnecessary foreclosures” and facilitate “the modification of residential mortgages in appropriate circumstances.” SeeInd.Code § 32–30–10.5–1(b). Under this chapter, upon filing a foreclosure action, a creditor must generally give a debtor notice of his or her right to participate in a settlement conference, and the debtor has thirty days to notify the court if he or she intends to partake in such a conference. Ind.Code § 32–30–10.5–8(c). “If, as a result of a settlement conference held under this chapter, the debtor and creditor agree to enter into a foreclosure prevention agreement,” the foreclosure may be dismissed or stayed as long as the debtor complies with the terms of the agreement. Ind.Code § 32–30–10.5–10(e). This case raises the question of whether a trial court has the authority to modify a mortgage agreement without the consent of both parties if they fail to agree to the terms of a foreclosure prevention agreement. We hold that it does not.

Here, Curatolo requested and the court scheduled a settlement foreclosure conference. Several settlement conferences were ultimately conducted and while the parties initially agreed to a three-month forbearance plan, which Curatolo successfully completed, they were unable to reach a final agreement. The statute is clear that its aim was to “modify the foreclosure process to encourage mortgage modification alternatives.” Ind.Code § 32–30–10.5–1(a)(3) (emphasis added). The statute does not make it mandatory on creditors and debtors to enter into foreclosure prevention agreements. In fact, if the statute had purported to do so, it would likely run afoul of the constitutional prohibition on the impairment of contractual obligations. SeeInd. Const. art. 1, § 24 (“No ex post facto law, or law impairing the obligation of contracts, shall ever be passed.”); see also Wencke v. City of Indianapolis, 429 N.E.2d 295, 298 (Ind.Ct.App.1981) (“A retrospective application of a statute to a contract entered into before the effective date of that statute can impair contractual obligations contrary to both the United States and Indiana Constitutions.”).

And while the statute gives the trial court the right to stay the foreclosure action pending the negotiation process, Ind.Code § 32–30–10.5–8.5(b), and the right to issue a provisional order requiring the debtor to continue to make monthly payments if he or she continues to occupy the dwelling while the foreclosure action is pending, Ind.Code § 32–30–10.5–8.6(b),3 nowhere does the statute give a trial court the authority to enter a final order modifying the mortgage agreement. The fact that the legislature itself could not have impaired the contractual obligations of the parties lends further support to our conclusion it did not intend to give the courts that authority. Because the mortgage agreement was based upon ...

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