U.S. Bank, Nat'l Ass'n v. Miller

• Decision Date: 22 September 2015
• Docket Number: No. 87A01–1409–MF–366.,87A01–1409–MF–366.
• Citation: 44 N.E.3d 730
• Parties: U.S. BANK, NATIONAL ASSOCIATION, as BAFC 2007–1, successor in interest to National City Mortgage Co., Appellant–Plaintiff, v. R. Glenn MILLER, Jr. a/k/a R. Glenn Miller, Melinda F. Miller, German American Bankcorp, Inc., successor in interest to Bank of Evansville, and United States of America, Appellees–Defendants. German American Bankcorp, Inc., successor in interest to Bank of Evansville, Cross–Claimant and Third–Party Plaintiff, v. R. Glenn Miller, Jr., a/k/a R. Glenn Miller, Melinda F. Miller, Tristan C. Briones, II, Chase Home Financing, LLC, successor in interest to Shelter Mortgage Company, LLC, and Republic Bank & Trust Company, Cross–Claimants and Third–Party Defendants.
• Court: Indiana Appellate Court

44 N.E.3d 730

U.S. BANK, NATIONAL ASSOCIATION, as BAFC 2007–1, successor in interest to National City Mortgage Co., Appellant–Plaintiff

v.R. Glenn MILLER, Jr. a/k/a R. Glenn Miller, Melinda F. Miller, German American Bankcorp, Inc., successor in interest to Bank of Evansville, and United States of America¹ Appellees–Defendants.

German American Bankcorp, Inc., successor in interest to Bank of Evansville, Cross–Claimant and Third–Party Plaintiff

v.R. Glenn Miller, Jr., a/k/a R. Glenn Miller, Melinda F. Miller, Tristan C. Briones, II, Chase Home Financing, LLC, successor in interest to Shelter Mortgage Company, LLC, and Republic Bank & Trust Company, Cross–Claimants and Third–Party Defendants.

No. 87A01–1409–MF–366.

Court of Appeals of Indiana.

Sept. 22, 2015.

John S. (Jay) Mercer, Mercer Belanger, P.C., Indianapolis, IN, Aaron J. Stucky, Vorys, Sater, Seymour, and Pease LLP, Cincinnati, OH, Attorneys for Appellant U.S. Bank, National Association, as BAFC 2007–1.

Gregory A. Kahre, Evansville, IN, Attorney for Appellants Tristan C. Briones II and Chase Home Financing LLC.

James D. Johnson, Kyle R. Rudolph, Jackson Kelly PLLC, Evansville, IN, Attorneys for Appellee German American Bancorp, Inc.

Opinion

KIRSCH

, Judge.

[1] In this action to foreclose a first priority mortgage against property previously owned by Melinda F. Miller and R. Glen Miller, Jr. (“the Millers”), U.S. Bank, National Association, as BAFC 2007–1 (“U.S. Bank”) (successor in interest to National City Mortgage Co. (“NCM”)),² Tristan C. Briones II (“Briones”), and Chase Home Financing LLC (“Chase”) (collectively, “Appellants”) appeal the grant of summary judgment in favor of German American Bancorp, Inc. (“German American”) (formerly known as Bank of Evansville),³ granting German American's previously-subordinate lien a first priority on the basis of the merger doctrine.⁴ On appeal, Appellants raise various issues, which we consolidate and restate as:

I. Whether the trial court erred when it set aside the default judgment entered against Bank of Evansville in NCM's mortgage foreclosure, having found that the default judgment was void for lack of notice to Bank of Evansville, which prevented the trial court from obtaining personal jurisdiction; and

II. Whether the trial court erred when it entered summary judgment in favor of German American determining that German American's junior mortgage was entitled to first priority because the common law doctrine of merger extinguished U.S. Bank's priority interest.

[2] We affirm in part, reverse in part, and remand.⁵

Summary

[3] This case began more than seven years ago. What started as a simple foreclosure of NCM's mortgage against the Millers' Newburgh, Indiana property (“the Property”), became complicated when senior lienholder NCM named junior lienholder Bank of Evansville as a defendant in the foreclosure action, but failed to serve notice to the proper address. The trial court entered judgment of foreclosure in favor of NCM and against the Millers, and it entered judgment of default against Bank of Evansville. NCM assigned its foreclosure judgment to U.S. Bank, who purchased the Property at a sheriff's sale and, in turn, resold the Property to Briones.

[4] Thereafter, Bank of Evansville filed a motion both to set aside the judgment of default and to add Briones as a necessary third-party defendant, which the trial court granted. About one month later, and as a separate action, NCM filed a complaint for strict foreclosure, claiming that Bank of Evansville's interest was a cloud on the title and asking that its junior lien on the Property be extinguished. This strict foreclosure action was consolidated into the original foreclosure action by consent of the parties.

[5] Cross-claims and third-party complaints added Chase and Republic Bank & Trust Company (“Republic Bank”) as parties to Bank of Evansville's action to foreclose on its junior mortgage. German American, who was substituted for Bank of Evansville as the real party in interest, filed a motion for summary judgment, and U.S. Bank filed a cross-motion asking that summary judgment be entered in its favor to allow an adjudication of German American's rights and remedies pursuant to Indiana Code section 32–29–8–4

(“I.C. § 32–29–8–4 ”). Following a hearing, the trial court, rejecting U.S. Bank's argument that I.C. § 32–29–8–4 should apply to the facts of the instant action, applied the common law merger doctrine from our Supreme Court's decision in Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., 949 N.E.2d 1195 (Ind.2011). Finding that merger caused U.S. Bank's priority interest to be extinguished, the trial court granted summary judgment and a priority interest to German American's previously subordinate interest.

Facts and Procedural History

[6] The undisputed relevant facts are that, in October 2006, the Millers borrowed approximately $774,500⁶ from NCM⁷ to purchase the Property. To secure the loan, the Millers executed a promissory note and mortgage, pledging the Property as collateral. That same month, NCM's mortgage was recorded as a first priority lien with the Warrick County Recorder.

[7] One month later, the Millers obtained a home equity line of credit (“HELOC”) from Bank of Evansville. To secure the $25,000 line of credit, the Millers executed a second mortgage on the Property, which was recorded with the Warrick County Recorder in November 2006. This HELOC mortgage was second in priority and was recorded prior to a notice of federal tax lien in the amount of $168,382, which the United States of America filed against the Property in October 2007.

[8] After the Millers defaulted on their loan, NCM filed a complaint on the note and to foreclose the mortgage in March 2008, naming as defendants: (1) the Millers; (2) Bank of Evansville; and (3) the United States. The HELOC mortgage reflected that Bank of Evansville's address was 4424 Vogel Road; however, NCM mistakenly served the notice to 8121 Newbury Road. Bank of Evansville did not have an office on Newbury Road; instead, this address was listed with the Secretary of State on a form memorializing Bank of Evansville's corporate name reservation, which had expired in 1998. Bank of Evansville did not file a notice of appearance and later claimed it had not known about the foreclosure.

[9] NCM filed a motion for summary judgment on its foreclosure complaint in May 2008, to which neither the Millers nor Bank of Evansville responded. On July 2, 2008, the trial court, noting that all of the defendants were properly before the court by service of process, granted summary judgment in favor of NCM as to all defendants (“Decree of Foreclosure”). The trial court: (1) entered a default judgment against Bank of Evansville;⁸ (2) awarded NCM a “personal summary judgment”⁹ against the Millers in the amount of $769,425.73;¹⁰ and (3) determined that the United States had a valid judgment lien on the Property with a one-year right of redemption to satisfy its tax lien. Briones's App. at 32. The trial court ordered that the Property be sold at sheriff's sale and foreclosed both NCM's mortgage as a first priority lien and the equity of redemption of all defendants and all persons claiming under and through those defendants.

[10] NCM assigned its foreclosure judgment to U.S. Bank for an unknown value in October 2008, and U.S. Bank, in turn, purchased the Property at sheriff's sale for $528,500, approximately $240,000 less than the amount of NCM's judgment. That same month, U.S. Bank recorded its sheriff's deed with the Warrick County Recorder. In January 2009, U.S. Bank sold the Property to Briones by means of a special warranty deed, which was recorded in April 2009. Briones paid about $450,000 for the Property, $220,000 of which he borrowed from, and was secured by a mortgage to, Chase.¹¹ 2013

Hr'g

Tr. at 27.¹² Chase filed its mortgage lien against the Property, which was superior to a commercial real estate mortgage lien held by Republic Bank.

[11] Although the Millers stopped paying on the NCM mortgage in October 2007, they continued to make payments on the HELOC until September 2009. In October 2009, Bank of Evansville learned that a default judgment had been entered against it in NCM's foreclosure and that the Property securing its mortgage had been sold to Briones. The next month, Bank of Evansville filed two motions. In the first, Bank of Evansville requested that the default judgment be set aside, claiming it was void pursuant to Trial Rule 60(B)(6)

because it had not been properly served, and, therefore, the trial court did not have personal jurisdiction over it. Briones's App. at 37–58. In connection with that motion, Bank of Evansville designated evidence, including an affidavit (“Sutton Affidavit”) of Mike Sutton, President and CEO of Bank of Evansville, in which Sutton stated that the Bank never received a copy of the summons or complaint and was not aware of the litigation or sheriff's sale until October 2009. Id. at 54. In the second motion, Bank of Evansville requested that Briones, be joined as a necessary third-party defendant pursuant to Trial Rule 19(A), to ensure the just adjudication of the controversy. Id. at 59–62. The trial court held a hearing and granted both motions. Briones entered an appearance, as did Chase and Republic Bank, each of whom had liens to protect.

[12] In January 2010, Bank of Evansville filed its answer and affirmative defenses to NCM's original complaint to foreclose on the Property, as well as a cross-claim and third-party complaint against the Millers, Briones, Chase, and Republic Bank, to foreclose on the mortgage securing the HELOC.¹³ Appellee's App. at 40–63. Briones filed an amended answer to German American's third-party complaint in December 2011, as well as a third-party complaint against U.S. Bank. Id. at 127–44. In his amended pleading, Briones alleged that U.S. Bank breached the terms of the special warranty deed because “[a]t the time of the execution...