In Buchanan v. HSBC Mortg. Servs., 993 N.E.2d 275, 2013 Ind. App. LEXIS 404, 2013 WL 4507932 (Ind. Ct. App. 2013), the Indiana Court of Appeals held that HSBC had the right to foreclose on the homeowners’ mortgage, dismissing homeowners’ allegations that the HSBC assignment was unauthorized. The Buchanans procured a loan from Accredited Mortgage Lenders in 2006, which named MERS as mortgagee and nominee. Later that year, MERS sold the loan to HSBC, who began foreclosure proceedings in 2008 after the homeowners defaulted. HSBC’s motion for summary judgment was granted in 2012, which homeowners appeal from here. The Indiana Court of Appeals upheld the decision of the trial court, finding that the homeowners presented no evidence that MERS lacked authority to assign the note and mortgage. The Buchanans alleged that the assignment was rendered invalid because an endorsement was not attached to the note in the complaint, and because the allonge was blank and not dated. However, the court held the assignment was valid and endorsed to HSBC in blank under Indiana Code Section 26-1-3.1-109(a)(2) which states “A promise or order is payable to bearer if it: . . . (2) does not state a payee,” showing that HSBC was the holder of the “bearer instrument” pursuant to Indiana Code Section 26-1-3.1-301(1). The court further found no evidence that the allonge was not affixed to the note, and states that HSBC is permitted to amend its complaint to attach the allonge to the note. Homeowners also failed to produce evidence that the signatory of the HSBC assignment lacked authority to sign on behalf of Accredited. Ultimately the court found that no issue of genuine or material fact existed.
Tag Archives: Indiana foreclosure
Bates Fails to Shake MERS’ Standing in Indiana Superior Court
In Bates v. MERS, et al., 49D12-0911-CT-051734 (June 22, 2012) Bates filed suit against MERS and several lenders in the mortgage industry on behalf of all counties in Indiana, alleging that the MERS system is an attempt to falsify records to avoid paying recording fees. The Marion Superior Court dismissed Bates’s complaint for lack of subject matter jurisdiction under the Indiana Whistleblower and False Claims Act, as Bates was not an original source to the information as required by the Act. The court notes that the MERS system has been discussed at length publicly, in prior cases, by media outlets, and by MERS itself; Bates’s allegations against MERS merely reiterate these points, and therefore cannot qualify for whistleblower status under the Act. Furthermore, Bates claimed he obtained this information in June 2009, when the information was already public, so “his knowledge cannot be direct and independent”.
This is Bates’s sixth failed attempt against MERS, as he filed similar actions in California, Hawaii, Nevada, Tennessee, and Washington, D.C. MERS comments on the case here.
Indiana Supreme Court Allows Citimortgage to Intervene in ReCasa’s Foreclosure Proceeding
In Citi v. Barnabas, 975 N.E.2d 805 (Ind. 2012), the Indiana Supreme Court held that Citimortgage had a right to intervene in ReCasa’s foreclosure proceeding and sale since Citi held a first mortgage on the property, reversing the decision of the Court of Appeals and trial court.
The homeowner, Barnabas, granted a first mortgage on the property in 2005 to Irwin Mortgage Corp. (Irwin) with MERS designated as nominee and mortgagee, which later assigned the mortgage to Citimortgage (Citi). In 2007, Barnabas granted a second mortgage to ReCasa. Barnabas defaulted on the second mortgage and ReCasa commenced foreclosure proceedings in 2009. In response to the foreclosure proceedings, Irwin filed a disclaimer of interest in the property. When Citi learned the property was already sold through ReCasa’s foreclosure sale, Citi filed a motion to intervene, which was denied by the trial court. The Court of Appeals upheld the trial court’s decision.
The Supreme Court found the trial court erred in denying Citi’s motion, as ReCasa didn’t dispute the validity of the assignment from MERS to Citi, but rather argued that MERS lacked a property interest, and therefore so did Citi. However, the court stated that “the assignee of rights under a contract stands in the shoes of the assignor and can assert any rights that the assignor could have asserted,” citing Lake Cnty. Trust Co. v. Household Merch., Inc., 511 N.E.2d 512, 514 (Ind. Ct. App. 1987) giving MERS the same property interest as the original lender.
When examining the mortgage language, the court found MERS’s designation as both “nominee” and “mortgagee” to be conflicting based on standard definitions for both terms, rendering the mortgage ambiguous. To determine MERS’s interest, the court looked to the parties’ intent and found that the legal title held by MERS was sufficient to give MERS foreclosure rights, acting as agent for the lender, Irwin.
ReCasa further argued that Irwin’s disclaimer of interest extinguished MERS’s property rights. The court notes that MERS has an agency relationship not only to Irwin, but also to all its member banks, and therefore does not disclaim the interests of another member bank in the property, such as Citi.
Although Citi’s motion to intervene was untimely, the court held that if Citi were not permitted to intervene, its interest would be destroyed in its entirety, prejudicing Citi. The court further noted that although intervention is typically “disfavored,” it is appropriate in certain “extraordinary and unusual circumstances,” particularly when “the petitioner’s rights cannot otherwise be protected.” Bd. of Comm’rs of Benton Cnty. v. Whistler, 455 N.E.2d 1149, 1153–54 (Ind. Ct. App. 1983). Furthermore, Citi’s delay in filing was a direct result of ReCasa’s failure to notice either Citi or MERS of the foreclosure proceedings. ReCasa argued that notice to an attorney representing Citi in the Barnabas bankruptcy proceeding provided Citi with actual knowledge of the foreclosure. But the court held that “actual knowledge of the suit does not satisfy due process or give the court in personam jurisdiction.” Overhouser v. Fowler, 549 N.E.2d 71, 73 (Ind. Ct. App. 1990) (quoting Glennar Mercury Lincoln, Inc. v. Riley, 167 Ind. App. 144, 152, 338 N.E.2d 670, 675 (1975)).
The court was hesitant to outline MERS’s rights as a mortgagee under Indiana statute, though it noted the original statute might soon require modernization to account for changes in the mortgage industry.
