Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 1 of 25

ATTORNEYS FOR APPELLANT

R. Brian Woodward

David E. Woodward

Woodward & Blaskovich, LLP

Merrillville, Indiana 

ATTORNEYS FOR APPELLEE 

Scott B. Cockrum

John R. Terpstra

Schererville, Indiana

I N T H E

COURT OF APPEALS OF INDIANA

Merrillville 2548, Inc. successor 

to Merrillville GC 2548, Inc.,

Appellant/Intervenor/Counterclaim 

Plaintiff,

v.

BMO Harris Bank N.A. f/k/a 

Harris N.A., as the assignee of 

the Federal Deposit Insurance 

Corporation as the receiver for 

Amcore Bank, N.A.,

Appellee/Plaintiff/Counterclaim 

Defendant

June 9, 2015

Court of Appeals Cause No.

45A03-1409-MF-345

Appeal from the Lake Superior Court

The Honorable Calvin D. Hawkins, 

Judge

Cause No. 45D02-1301-MF-26

Bradford, Judge.
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Case Summary

[1] In 2006, MCSS Merrillville, L.L.C. (“Borrower”), executed a promissory note 

(“the Note”) and leasehold mortgage (“the Mortgage”) as security for the note 

in favor of Amcore Bank, N.A.; the debt and mortgage were later assigned to 

Appellant-Plaintiff-Counterclaim Defendant BMO Harris Bank, N.A., (“BMO 

Harris”). Borrower had entered into a lease (“the Lease”) for real property in 

Century Plaza in Merrillville (“the Parcel”), on which it operated a Golden 

Corral restaurant. The Lease required Borrower to refrain from assigning the 

Lease or subletting the Parcel. Since 2007, however, Appellee-Intervenor GC 

2548, Inc. (“GC 2548”), has actually operated the Golden Corral, although it 

has never been made party to the Lease and there was no assignment of rights 

under the Lease from Borrower to GC 2548. 

[2] In 2013, BMO Harris sued Borrower and various guarantors of Borrower’s debt 

for breach of contract, foreclosure, and appointment of a receiver. Eventually, 

BMO Harris moved for default judgment against Borrower and all but one of 

the guarantors and for an order of possession of the leasehold interest. In 

August of 2014, the trial court entered default judgment against Borrower and 

all but one of the guarantors and ruled that any right to possession by those 

parties was barred. At a hearing, GC 2548 argued that Borrower had 

abandoned the Parcel and that GC 2548 was an equitable assignee of the Lease. 

The trial court rejected this argument and ruled that: (1) BMO Harris’s default 

judgment against Borrower entitled it to foreclose on its interest in the Parcel;

(2) Article 9.1 of the Indiana Uniform Commercial Code (“UCC”) dictated the 
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result of this case, rather than Indiana Code provisions governing mortgage 

foreclosure actions; and (3) GC 2548 was bound by the default judgment 

against the defendants and was given thirty days to vacate the Parcel. 

[3] On appeal, GC 2548 contends that (1) the trial court erred in concluding that 

Article 9.1 applied; (2) GC 2548 is an equitable assignee of Borrower’s Lease;

and (3) the equitable assignment of the Lease terminated BMO Harris’s security 

interest; and (4) that, even if BMO Harris is entitled to foreclose the Mortgage, 

it is not entitled to immediate possession of the Parcel. BMO Harris counters 

that (1) GC 2548 waived certain arguments, (2) GC 2548 was bound by the 

default judgment against defendants, (3) Article 9.1 of the UCC applies, (4) GC 

2548 is not entitled to equitable relief, and (5) the trial court correctly entered its 

order of possession in favor of BMO Harris. We conclude that although GC 

2548 preserved its argument that it was equitably assigned the lease, it has failed 

to establish equitable assignment, the provisions of Article 9.1 of the UCC do 

not apply to leasehold mortgages, and BMO Harris is not entitled to an order of 

possession of the Parcel. We therefore affirm in part, reverse in part, and 

remand for further proceedings. 

Facts and Procedural History

[4] At some point in 2005, Borrower entered into the Lease with Century Plaza, 

LLC (“Landlord”), for the Parcel, located in Century Plaza, with a term of 

fifteen years and on which Borrower was operating a Golden Corral restaurant.

Inter alia, the Lease required Borrower to “refrain from assigning, selling, or in 
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any manner transferring this Lease or any interest therein, by operation of law 

or otherwise; to refrain from subletting this Leased Premises or any portion or 

portions thereof; to refrain from permitting the occupancy by anyone with, 

through or under it.” Defendant’s Ex. 2. P. 22. On September 22, 2006, 

Borrower executed the Note in the principal sum of $1,520,000.00, payable to 

Lender.1 The Note required Borrower to make payments on the twentieth of 

each month until maturity on September 22, 2011, at which point Borrower 

was required to make a final principal and interest payment. The Note was 

secured by the Mortgage, originally dated June 2, 2006, and modified on 

September 22, 2006. In the Mortgage, Borrower granted Lender “a security 

interest in and all of [Borrower’s] rights, titles, and interest in the Lease and 

[Borrower’s] leasehold estate ... located in Lake County at 8215 Broadway, 

Merrillville, Indiana, 46410.” Appellant’s App. pp. 129-30. The Mortgage was 

recorded with the Lake County Recorder on or about February 28, 2007. At 

some point, BMO Harris was assigned all of Lender’s rights and obligations 

pursuant to the Note and the Mortgage. 

[5] Since August of 2007, William Niemet has operated the Golden Corral 

Restaurant at 8215 Broadway on behalf of GC 2548. Borrower transferred the 

franchise agreement for the Golden Corral to GC 2548, and ever since, GC 

2548 has operated pursuant to the terms of the Lease, making payments directly 

 

1

 The Note was amended on September 21, 2007, in the amended amount of $1,501,918.50. 

(Appellant’s App. 85). 
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to Landlord while also paying property taxes and improving the real estate. GC 

2548, however, is not associated with Borrower, has never been made a party to 

the Lease, and has not been assigned any of Borrower’s rights pursuant to the 

Lease. Moreover, GC 2548 has made no payments to BMO Harris on the 

Note. 

[6] On January 23, 2013, BMO Harris filed a complaint for breach of contract, 

foreclosure of the Mortgage, and appointment of a receiver. BMO Harris 

named Borrower as principal defendant and also named, as guarantors of 

Borrower’s debt, MCSS Illinois, L.L.C.; Kipling Homes, L.L.C.; Kipling 

Development Corporation; Edward Mattox; and Peter Cinquegrani. BMO 

Harris alleged that Borrower breached the terms of the Note by, inter alia, 

failing to repay the indebtedness and all other sums due on the maturity date of 

September 22, 2011. The complaint also sought to foreclose BMO Harris’s 

interest in the Parcel. Of the defendants, only Cinquegrani appeared and 

answered the complaint. 

[7] On April 18, 2013, the trial court granted BMO Harris’s request for the 

appointment of a receiver. On May 29, 2013, GC 2548 moved to intervene, 

which motion the trial court granted on June 18, 2013. On June 20 and 

October 29, 2013, the receiver filed reports, neither of which was objected to by 

GC 2548. On December 20, 2013, the receiver filed a third report, to which 

GC 2548 objected on unspecified grounds. 
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[8] On June 24, 2014, BMO Harris moved for entry of default, judgment, and order 

of possession of the Parcel. On July 11, 2014, GC 2548 filed a counter/thirdparty claim. On July 14, 2014, the trial court held a hearing on BMO Harris’s 

motion for entry of default, judgment, and order of possession. On August 5, 

2014, the trial court entered default judgment against all defendants except 

Cinquegrani and ruled that none of the defendants had any right of possession 

of the Parcel. 

[9] On August 20, 2014, the trial court held a contested hearing on the issue of 

possession of the Parcel, at which GC 2548 presented evidence concerning its 

claim that Borrower had abandoned the Parcel and that GC 2548 was an 

equitable assignee of the Lease. On September 19, 2014, the trial court issued 

its order on BMO Harris’s motion for possession. The trial court’s order 

provides as follows:

ORDER

This matter came before the Court on Plaintiff’s Motion 

for Possession of Real Estate and heard on August 20, 2014. The 

Plaintiff, BMO HARRIS, N.A. f/k/a HARRIS N.A., as the 

Assignee of the Federal Deposit Insurance Corporation as the 

receiver for Amcore Bank, N.A. (hereinafter, “BMO HARRIS”) 

appeared by counsel, JOHN R. TERPSTRA and SCOTT B. 

COCKRUM. The Intervening Defendant, [GC 2548], appeared 

in person by its corporate representative and by counsel, DAVID 

E. WOODWARD and R. BRIAN WOODWARD.

Cause submitted. Evidence heard.

The Court, after considering the evidence, hearing 

arguments of counsel, having taken this matter under advisement 

and being duly advised in the premises now submits its findings 
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of fact and conclusions of law pursuant to Trial Rule 52 A of the 

Indiana Rules of Civil Procedure.

ISSUES

The Plaintiff contends that Promissory Notes dated 

September 22, 2006 and September 21, 2007 were entered into 

between AMCORE BANK, N.A. to which BMO HARRIS is an 

assignee, as Lender and MCSS MERRILLVILLE, LLC 

(hereinafter “MCSS”) as Borrower. The Plaintiff contends that 

the subsequent note amended the original. Moreover, the note 

was secured by a Leasehold Mortgage dated June 2, 2006 with a 

Modification of Leasehold Mortgage dated September 22, 2006. 

The Plaintiff further contends that the Leasehold Mortgage 

claimed a right to a leasehold interest held by, MCSS under 

Lease for Century Plaza Merrillville (hereinafter, the “LEASE”) 

as described under a Memorandum of Lease dated June 15, 2006 

and recorded with the Recorder of Lake County, Indiana. The 

Plaintiff further contends that the Leasehold Mortgage and 

Memorandum of Lease encompass a leasehold located at 8215 

Broadway, Merrillville, Indiana, at which address is operated a 

Golden Corral restaurant. Before August, 2007, MCSS operated 

the Golden Corral restaurant; since August 2007, [GC 2548] has 

operated the Golden Corral restaurant.

The Intervening Defendant contends that [GC 2548] is not 

affiliated with MCSS. Furthermore, the Intervening Defendant 

contends that [GC 2548] executed no documents evidencing 

assignment of any rights or obligations under the Lease by MCSS 

or BMO HARRIS. The Intervening Defendant contends that it 

was not, and never has been, a named tenant or other party 

under the terms of the Lease. And the Intervening Defendant 

contends that it took on obligations under the Lease in payment 

of rents and maintained its Golden Corral restaurant through 

capital and repair expenditures. The issues are:

1. Does the Order of Hearing of July 14, 2014, as 

amended foreclose BMO HARRIS’ security interest with finality 

against the interest of [GC 2548]?

2. Notwithstanding the fact that [GC 2548] took on 

the obligations of the Lease without having actually signed same 
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is said Intervening Defendant subject to the provisions related to 

its predecessor, MCSS?

FINDINGS OF FACTS

A preponderance of the evidence established the following 

facts:

1. The Lease, a real estate interest, is owned by the 

landlord, IP-TL Century Plaza, LLC.

2. BMO HARRIS is foreclosing upon a leasehold 

interest.

3. With the exception of the Intervening Defendant all 

other Defendants have been defaulted and that those Defendants 

have no existing right to possession or claim to the property at 

issue.

4. The Court appointed a Receiver on April 18, 2013; 

moreover, the Receiver demanded no rents nor initiated no 

lawsuits against the Intervening Defendant.

5. Since August, 2007 the Intervening Defendant has 

operated the Golden Coral restaurant in Merrillville, Indiana in 

accordance with and consistent with the Lease.

6. The Intervening Defendant is not affiliated with any 

of the defaulted Defendants.

7. The Intervening Defendant has not paid any 

payments to BMO Harris or its assignor at any time pursuant to 

the Leasehold Mortgage or note.

8. The Intervening Defendant is the sole entity which can 

currently operate a Golden Corral restaurant as a franchisee at the 

Merrillville location which is the subject of this lawsuit.

9. Since taking possession of the premises in August, 

2007, the Intervening Defendant has made improvements on the 

property.

PRINCIPLES OF LAW

1. The Court shall further determine whether or not 

the default judgment of July 14, 2014 as amended binds the 

Intervening Defendant.

2. In determining whether a security holder of a 

leasehold has a possessory interest of real estate, courts examine 

whether a lessor is privy to said security agreement.
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3. The Court shall determine BMO HARRIS’ ability 

to remove the Intervening Defendant from real estate located at 

8215 Broadway, Merrillville, Indiana pursuant to IC 34-30-10-4 

et seq.[]

ANALYSIS

In the matter before the Court a default judgment of 

foreclosure on the Note and Leasehold Mortgage between BMO 

HARRIS, MCSS and other defendants except for Peter 

[Ci]nquegrani who agreed to a judgment of foreclosure being 

entered against him to the Order of Hearing of July 14, 2014, as 

amended. The aforesaid order forecloses BMO HARRIS’

security with finality and entitles BMOHARRIS [sic] to 

immediately execute said foreclosure.

The real estate owner, IP-TL Century Plaza, LLC is not a 

party in the herein cause of action. The Leasehold Mortgage, 

however, spells out the relationship between IP-TL Century 

Plaza, LLC and BMO HARRIS. Consequently, IP-TL Century 

Plaza, LLC has protection of its rights regardless of whom the 

lessee might be given the Leasehold Mortgage.

The intervening Defendant argues that BMO HARRIS 

failed to set forth evidence of assignment of the Leasehold 

Mortgage and, thus, cannot sustain[] its judgment of foreclosure. 

Indiana Courts have held “the assignment is not the foundation 

of the action in (foreclosure cases), and that it is not necessary to 

set out a copy of such assignment”. Stanford v. Broadway 

Savings & Loan Company, 24 N.E. 154, 155 (Ind. 1890). Since 

the Intervening Defendant was not a party to the contract 

between BMO HARRIS and MCSS, not in privity with BMO 

HARRIS or MCSS, and not an intended third party beneficiary 

of the Leasehold Mortgage it lacks standing to assert contract 

defen[ses]. Harold McComb & Son, Inc. v. JP Morgan Chase 

Bank, NA, 892 N.E. 2d 1255 (Ind. Ct. App. 2008). Williams v. 

Eggleston, 170 US 304 (1898).

The statutory argument that the Intervening Defendant 

postulate[s] has no basis herein due to the fact that BMO 

HARRIS is probably seeking its remedy under IC 32-30-10, et 

seq.[] Moreover, the Leasehold Mortgage is a security interest 
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flowing with the negotiable instrument and attaching to the 

collateral under I.C. 26-1-9.1-203 the transaction is govern by 

Article 3 and enforceable under Article 9[.1] of the Uniform 

Commercial Code. BMO HARRIS is entitled to take possession 

of the collateral given the fact that the Intervening Defendant has 

not made a requisite payment to the Receiver notwithstanding 

that said Receiver has not made any demands of same on said 

Intervening Defendant. The Leasehold Mortgage in essence 

binds the Intervening Defendant given the fact that there was a 

default judgment on the critical parties in the herein proceedings.

CONCLUSIONS OF LAW

1. The default judgment of July 14, 2014, as amended 

binds the Intervening Defendant.

2. The lessor, IP-TL Century Plaza, LLC, is privy to 

the herein Leasehold Mortgage.

3. BMO HARRIS has standing to remove the 

Intervening Defendant from the real estate located at 8215 

Broadway, Merrillville, Indiana pursuant to IC 34-30-10-4.

ORDER

The Court orders as follows:

(a.) The Motion for Possession of BMO HARRIS is 

granted.

(b.) The Intervening Defendant is ordered to vacate any 

right or obligation it holds to the leasehold at 8215 Broadway, 

Merrillville, Indiana within (30) thirty days from the date of the 

herein order.

(c.) In the event the Intervening Defendant fails to 

vacate the leasehold, the Sheriff of Lake County shall enter upon 

said interest and eject the Intervening Defendant or any other 

person or party, who, since the commencement of this action, 

may have come into possession of the herein leasehold interest 

and put BMO HARRIS in full, peaceful and quiet possession of 

the leasehold interest without delay.

(d.) This matter is hereby certified for interlocutory 

appeal.

ALL OF WHICH IS ORDERED this 19th day of 

September, 2014.
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Appellant’s App. pp. 26-30. 

[10] GC 2548 contends that (1) the trial court erred in concluding that Article 9.1

applied; (2) GC 2548 is an equitable assignee of Borrower’s Lease; (3) the 

equitable assignment of the Lease terminated BMO Harris’s security interest; 

and (4) that even if BMO Harris’s security interest is still valid, BMO Harris is 

not entitled to immediate possession of the Parcel. BMO Harris counters that 

(1) GC 2548 waived certain arguments, (2) GC 2548 was bound by the default 

judgment against defendants, (3) Article 9.1 of the UCC applies, (4) GC 2548 is 

not entitled to equitable relief, and (5) the trial court correctly entered its order 

of possession in favor of BMO Harris. 

Discussion and Decision

[11] Where, as here, the trial court has issued written findings and conclusions, our 

standard of review is well-settled: 

First, we determine whether the evidence supports the findings 

and second, whether the findings support the judgment. In 

deference to the trial court’s proximity to the issues, we disturb 

the judgment only where there is no evidence supporting the 

findings or the findings fail to support the judgment. We do not 

reweigh the evidence, but consider only the evidence favorable to 

the trial court’s judgment. Challengers must establish that the 

trial court’s findings are clearly erroneous. Findings are clearly 

erroneous when a review of the record leaves us firmly convinced 

a mistake has been made. However, while we defer substantially 

to findings of fact, we do not do so to conclusions of law. 

Additionally, a judgment is clearly erroneous under Indiana Trial 
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Rule 52 if it relies on an incorrect legal standard. We evaluate 

questions of law de novo and owe no deference to a trial court’s 

determination of such questions.

Balicki v. Balicki, 837 N.E.2d 532, 535-36 (Ind. Ct. App. 2005) (citing Carmichael 

v. Siegel, 754 N.E.2d 619, 625 (Ind. Ct. App. 2001)), trans. denied. 

I. Whether GC 2548 has Waived Certain Arguments

[12] BMO Harris argues that GC 2548 has waived certain arguments for appellate 

review. Specifically, BMO Harris contends that GC 2548 failed to make any 

argument in the trial court regarding the equitable assignment of Borrower’s 

Lease and may not now raise it for the first time on appeal. 

As a general rule, a party may not present an argument or issue 

to an appellate court unless the party raised that argument or 

issue to the trial court. Pitman v. Pitman, 717 N.E.2d 627, 633 

(Ind. Ct. App. 1999). This rule exists because trial courts have 

the authority to hear and weigh the evidence, to judge the 

credibility of witnesses, to apply the law to the facts found, and to 

decide questions raised by the parties. See Whiteco Indus., Inc. v. 

Nickolick, 549 N.E.2d 396, 398 (Ind. Ct. App. 1990). Appellate 

courts, on the other hand, have the authority to review questions 

of law and to judge the sufficiency of the evidence supporting a 

decision. Id. The rule of waiver in part protects the integrity of 

the trial court; it cannot be found to have erred as to an issue or 

argument that it never had an opportunity to consider. 

Conversely, an intermediate court of appeals, for the most part, is 

not the forum for the initial decisions in a case. Consequently, 

an argument or issue not presented to the trial court is generally 

waived for appellate review. Id. 
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GKC Indiana Theatres, Inc. v. Elk Retail Investors, LLC., 764 N.E.2d 647, 651 (Ind. 

Ct. App. 2002). 

[13] BMO Harris points to the fact that GC 2548 did not specifically argue equitable 

assignment at the default judgment or possession hearings on July 14 and 

August 20, 2014, respectively. While essentially conceding that this is true, GC 

2548 contends that the equitable assignment issue was adequately before the 

trial court because it was raised in its counter/third-party claim, filed on July 

11, 2014. In support of its position, GC 2548 includes passages from the 

counter/third-party claim in its reply brief. This, along with the fact that GC 

2548 presented evidence at the August 20, 2014, hearing relating to the issue, is

adequate to preserve the issue for appellate review. 

[14] While there does not seem to be any reason to doubt the accuracy of the quoted 

passages from the counter/third-party claim, and BMO Harris does not contest 

their authenticity or accuracy, the fact is that GC 2548’s counter/third-party 

claim does not appear in the record on appeal: it was not included in BMO 

Harris’s Appellant’s Appendix and GC 2548 did not file an appendix. As a 

general rule, this court may not consider material that is not properly part of the 

record on appeal. See King v. State, 877 N.E.2d 518, 522 n.2 (Ind. Ct. App. 

2007) (“[W]e may not and should not consider material that is not part of the 

record.”). 

[15] Under the circumstances of this case, however, we conclude that application of 

waiver would be inappropriate. First, in our view it was BMO Harris’s 
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responsibility to point out that GC 2548’s counter/third-party claim was not 

part of the record on appeal, and it did not. BMO Harris could have filed a 

motion to strike that portion of GC 2548’s reply brief but did not. Second, it 

seems a near certainty that the result of a motion to strike portions of GC 2548’s 

reply brief would have been a request to file a belated appendix, a request that 

likely would have been granted in the interest of deciding issues on the merits. 

Third, GC 2548 did, in fact, present evidence related to the equitable 

assignment issue at the hearing on August 20, 2014. We conclude that 

application of the waiver rule would be inappropriate in this case, allowing this 

court to reach the merits of all of GC 2548’s arguments. 

II. Whether the Trial Court Erred in Concluding that 

GC 2548 was not Equitably Assigned the Lease

[16] GC 2548 argues that despite never having been made a party to the Lease, it 

was nonetheless equitably assigned the Lease by Borrower and that the trial 

court erroneously failed to so conclude. GC 2548 follows this argument by 

claiming that the alleged equitable assignment of the Lease extinguished BMO 

Harris’s security interest. It is worth noting that GC 2548 is appealing from a 

negative judgment on this claim, making its task difficult on appeal: 

A judgment entered against a party who bore the burden of proof 

at trial is a negative judgment. Garling v. Ind. Dep’t of Natural Res., 

766 N.E.2d 409, 411 (Ind. Ct. App. 2002). On appeal, we will 

not reverse a negative judgment unless it is contrary to law. 

Mominee v. King, 629 N.E.2d 1280, 1282 (Ind. Ct. App. 1994). 

To determine whether a judgment is contrary to law, we consider 

the evidence in the light most favorable to the appellee, together 
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with all the reasonable inferences to be drawn therefrom. J.W. v. 

Hendricks Cnty. Office of Family & Children, 697 N.E.2d 480, 482 

(Ind. Ct. App. 1998). A party appealing from a negative 

judgment must show that the evidence points unerringly to a 

conclusion different than that reached by the trial court. 

Mominee, 629 N.E.2d at 1282.

Smith v. Dermatology Associates of Fort Wayne, P.C., 977 N.E.2d 1, 4 (Ind. Ct. 

App. 2012). 

[17] Although the trial court did not issue any conclusions of law regarding GC 

2548’s equitable assignment claim, GC 2548 contends that certain uncontested 

findings of fact necessarily support such a conclusion. BMO Harris argues that 

the cases regarding the equitable assignment of leases relied upon by GC 2548 

are distinguishable and that the facts and evidence do not otherwise support an 

equitable assignment. We agree with BMO Harris that the trial court’s 

conclusion on this point is not contrary to law. 

[18] GC 2548 relies on the Indiana Supreme Court’s decision in Indianapolis 

Manufacturing and Carpenters Union v. Cleveland, C., C., and I. Railway Company, 

45 Ind. 281 (1873), and our decision in Collins v. McKinney, 871 N.E.2d 363 

(Ind. Ct. App. 2007). In Indianapolis Manufacturing and Carpenters Union, the 

Cleveland, C., C., and I. (“Lessor”) leased a parcel to a man named Tate 

(“Lessee”), who operated a lumber yard thereon, with the proviso that he could 

not assign or sublet any portion of the premises without Lessor’s written 

consent. Indpls. Mfg. and Carpenters Union, 45 Ind. at 285. Lessee occupied the 

parcel until he sold his business to the Indianapolis Manufacturing and 
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Carpenters Union (“the Union”), at which point Lessee notified Lessor’s agent 

of the sale, continued to pay his rent to Lessor pursuant to the lease, and 

received an equal amount from the Union each month. Id. at 285-86. As it 

happens, Lessor objected to the Union’s occupation of the parcel and sued to 

recover possession soon after learning of it. Id. at 290. The Indiana Supreme 

Court ruled that even in the absence of a written assignment, the arrangement 

between Lessee and the Union amounted to an equitable assignment, 

something the lease did not allow. Id. Consequently, the Indiana Supreme 

Court affirmed the trial court’s ruling that Lessor was entitled to recover 

possession of the property in question. Id. 

[19] In Collins, McKinney leased two parcels of land from Collins, which it promptly 

assigned (with Collins’s consent) to Tomkinson Chrysler Jeep, Inc. Collins, 871 

N.E.2d at 367. As in Indianapolis Manufacturing and Carpenters Union, the lease 

contained a no-assignment/sublet-without-consent provision. Id. at 366. 

Tompkinson subsequently sold its Chrysler Jeep dealership to Glenbrook 

Dodge, Inc., without Collins’s consent. Id. at 367. The trial court granted 

McKinney’s motion for directed verdict, concluding that Collins had produced 

insufficient evidence of a breach of contract. Id. at 369. We reversed on this 

point, reasoning as follows:

Here, Collins presented sufficient evidence to support a jury 

finding that the arrangement between Tomkinson and Glenbrook 

constituted an equitable assignment as discussed in Indianapolis 

Manufacturing. First, the evidence as to whether there was ever 

actually a management agreement between Tomkinson and 
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Glenbrook is in conflict. At one point, Doug McKibben, the 

owner of Glenbrook, testified, “We had a Management 

Agreement.” Tr. p. 123. However, he then testified that the 

“only” agreement between Tomkinson and Glenbrook was the 

Asset Purchase Agreement. Id. at 123-24. Furthermore, there is 

evidence that Glenbrook assumed Tomkinson’s lease obligations 

for Parcel 1 in August 2004, took possession of Parcel 1, and 

began paying rent directly to McKinney for the parcel. Finally, 

there is evidence that Glenbrook began selling a different brand 

of cars than McKinney after taking possession of Parcel 1, 

suggesting that Glenbrook was in primary control. The jury 

could have reasonably found that the arrangement between 

Tomkinson and Glenbrook constituted an assignment of the 

Sublease.

Id. at 373. 

[20] Keeping in mind that we are evaluating a claim rooted in equity, we conclude 

that the authority relied upon by GC 2548 does not help its cause. “[T]he very 

first maxim with which we meet in equity is that it will regard that as done 

which in good conscience ought to be done.”2 Sourwine v. Supreme Lodge Knights 

of Pythias of the World, 12 Ind. App. 447, 452, 40 N.E. 646, 647 (1895) (citation 

omitted). In both Indianapolis Manufacturing and Carpenters Union and Collins, 

the doctrine of equitable assignment was enlisted to aid landlords whose tenants 

had effectively–and impermissibly–assigned their leases while hoping to avoid 

the consequences because the assignment was not “official.” The facts of this 

case are quite different. Essentially, GC 2548 is seeking to employ the doctrine 

 

2 The version of this passage found in the www.westlaw.com database differs from the version found in 

the Indiana Appellate Court Reports by adding commas after “which” and “conscience.”
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of equitable assignment so that it may assume Borrower’s beneficial rights 

without being burdened by Borrower’s most onerous obligation, i.e., the Note 

with its associated security interest. Put simply, the equities of this case do not 

favor GC 2548. 

[21] Even beyond the purely equitable concerns, this case is also distinguishable 

from Indianapolis Manufacturers and Carpenters Union and Collins on the facts 

more specifically relating to the alleged assignment. GC 2548 points to some of 

the trial court’s findings to support its argument that the trial court was 

essentially compelled to conclude that an equitable assignment of the Lease 

occurred, namely, findings that GC 2548 had operated the Golden Corral since 

2007 and that it made improvements to the Parcel. These findings do not 

necessarily support a conclusion that CG 2548 had completely taken over the 

Parcel, especially when one considers that there is no evidence that GC 2548 

ever made a single payment on the Note. GC 2548 also points to evidence in 

the record that it purchased the franchise rights for the restaurant from 

Borrower, that it dealt directly with Landlord, that BMO Harris was aware as 

far back as 2007 that it was in possession of the Parcel, and that all concerned 

were aware that it GC 2548 was not affiliated with Borrower. The trial court, 

however, made no findings regarding this evidence and was not required to 

credit it. Finally, there does not seem to be any evidence that Landlord had any 

issue with GC 2548’s occupancy of the Parcel, despite the fact that the Lease 

included the standard non-assignment/sublet language. In other words, it may 

be inferred that the Landlord seems to have viewed GC 2548’s occupancy of the 
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 19 of 25

Parcel as something like a management agreement. When viewed in light of 

the stringent standard of review employed when a party appeals from a negative 

judgment, the findings and other evidence in the record do not point unerringly 

to a conclusion different from the trial court’s. The trial court’s conclusion in 

this regard is not clearly erroneous.3 

III. Whether The Trial Court Erred in Concluding that 

Article 9.1 of the Indiana UCC Applies to Leasehold 

Mortgages

[22] GC 2548 argues that the trial court erred in applying Article 9.1 of the Indiana 

UCC, which governs secured transactions, because the interest at issue in this 

case is a leasehold, allegedly an interest in real property. BMO Harris argues 

that the trial court properly ruled that Article 9.1 (codified at Indiana Code 

chapter 26-1-9.1) applies in this case, arguing that GC 2548 has failed to 

establish that a leasehold mortgage is an interest in or lien against real property. 

This question is key because if the provisions of the Indiana Code governing 

“normal” real estate mortgage foreclosures apply, BMO Harris’s remedy in the 

event of foreclosure would be a sheriff’s sale of Borrower’s interest in the 

Parcel. On the other hand, if the provisions of the UCC apply, BMO Harris 

would have the ability to immediately take possession of the Parcel. 

 

3

 Because we affirm the trial court’s conclusion that there was no equitable assignment of the Lease, we 

need not address GC 2548’s argument that the equitable assignment extinguished BMO Harris’s 

security interest. 
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 20 of 25

[23] We agree with GC 2548. Broadly, under the provisions of the UCC dealing 

with security interests in personal property, “[e]xcept as otherwise provided in 

subsections (c) and (d), IC 26-1-9.1 applies to ... a transaction, regardless of its 

form, that creates a security interest in personal property or fixtures by 

contract[.]” Ind. Code § 26-1-9.1-109(a). This provision does not include 

leaseholds on real property, and we have little hesitation in concluding that 

leaseholds on real property are neither personal property nor fixtures. 

Additionally, subsection (d) of the same statute specifically provides that, inter 

alia, “IC 26-1-9.1 does not apply to ... the creation or transfer of an interest in 

or lien on real property, including a lease or rents thereunder[.]” Ind. Code § 26-1-

9.1-109(d) (emphasis added). The plain language of the Indiana UCC indicates 

that its provisions do not apply to leasehold mortgages. 

[24] Our resolution of this issue is consistent with the weight of authority 

nationwide, which holds that a leasehold mortgage is a security interest in real 

estate and that law pertaining to security interests in personal property does not 

apply to them. See, e.g., In re Bristol Associates, Inc., 505 F.2d 1056, 1061 (3d Cir. 

1974) (“Our conclusion, that lenders need not conform to the requirements of 

Article 9 in order to retain their security interest in a real estate lease assigned to 

them as collateral, is supported, apparently unanimously, by authorities who 

have considered this problem.”).; In re Le Sueur’s Fiesta Store, Inc., 40 B.R. 160, 

162 (Bankr. D. Ariz. 1984) (“Accordingly, as an ‘instrument affecting real 

property’ a security interest in an Arizona lease is valid against the Trustee or 
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 21 of 25

subsequent purchasers or creditors without notice only if recorded in the 

County Recorder’s office rather than with the Secretary of State.’”).

[25] In summary, GC 2548 is correct that a leasehold mortgage foreclosure is 

governed by Indiana statutory law regarding real estate mortgages, and that the 

same foreclosure procedures need to be used. Therefore, Indiana Code chapter 

32-30-10, which details the process of mortgage foreclosure, applies. 

IV. Whether the Trial Court Erred in Concluding that 

BMO Harris is Entitled to Immediate Possession of the 

Parcel 

[26] Finally, GC 2548 argues that nothing in either Indiana Code chapter 32-30-10 

or the Mortgage allows BMO Harris to take immediate possession of the Parcel. 

BMO Harris responds to this contention by arguing that GC 2548 must present 

a defense in order to defeat BMO Harris’s claim of immediate possession, a 

defense that GC 2548 lacks the standing to assert. We agree with GC 2548 that 

BMO Harris has no right to immediate possession of the Parcel. GC 2548 is 

correct that Indiana Code chapter 32-30-10 contains no provisions for 

repossession by a mortgagee prior to a sheriff’s sale. The Mortgage is likewise 

silent on the topic. As this court has explained,

In most of our states, however, the lien theory of a mortgage 

prevails and a mortgagee acquires nothing more than a lien upon 

the property mortgaged. The mortgagor retains legal title and 

foreclosure is necessary to transfer the same to the mortgagee, 

who must purchase the property at decretal sale if he wishes to 

acquire such title. See Wiltsie on Mortgage Foreclosures, Fifth 
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 22 of 25

Edition, Vol. 1, p. 10. Indiana is unequivocally committed to the 

lien theory and the mortgagee has no title to the land mortgaged. 

The right to possession, use and enjoyment of the mortgaged 

property, as well as title, remains in the mortgagor, unless 

otherwise specifically provided, and the mortgage is a mere 

security for the debt. Baldwin v. Moroney (1910), 173 Ind. 574, 91 

N.E. 3; Aetna Life Ins. Co. v. Broeker (1906), 166 Ind. 576, 77 N.E. 

1092; State ex rel. v. Smith (1902), 158 Ind. 543, 63 N.E. 25, 214, 

64 N.E. 18, 63 L.R.A. 116; Lowe v. Turpie (1897), 147 Ind. 652, 

44 N.E. 25, 47 N.E. 150, 37 L.R.A. 233; United States Saving Fund 

and Investment Co. v. Harris (1895), 142 Ind. 226, 40 N.E. 1072, 41 

N.E. 451; Morton v. Noble (1864), 22 Ind. 160; Fletcher v. Holmes

(1870), 32 Ind. 497; Grable v. McCulloh (1867), 27 Ind. 472.[

4

]

Oldham v. Noble, 117 Ind. App. 68, 75-76, 66 N.E.2d 614, 617 (1946).

[27] To summarize, the default situation in Indiana is that a mortgagee has a lien 

on, but no right to possession of, the mortgaged premises, and the facts of this 

case fit the default pattern. Because BMO Harris has no right to immediate 

possession of the Parcel, GC 2548 need not present a defense. Whatever rights 

BMO Harris may have to possess the Parcel will have to be purchased at the 

sheriff’s sale conducted pursuant to Indiana Code sections 32-30-10-5, -8, and -

 

4

 This string citation, as it appears in the Indiana Appellate Reports, differs in several respects from the 

citation found on the www.westlaw.com database and the printed Northeast Reporter volume. Rather 

than list the differences, the most obvious of which is the lack of italics, here is the West version for 

comparison: 

Baldwin v. Moroney, 1910, 173 Ind. 574, 91 N.E. 3, 30 L.R.A., N.S., 761; Aetna 

Life Ins. Co. v. Broeker, 1906, 166 Ind. 576, 77 N.E. 1092; State ex rel. Lewis v. 

Smith, 1902, 158 Ind. 543, 63 N.E. 25, 214, 64 N.E. 18, 63 L.R.A. 116; Lowe v. 

Turpie, 1897, 147 Ind. 652, 44 N.E. 25, 47 N.E. 150, 37 L.R.A. 233; United States 

Saving Fund & Investment Co. v. Harris, 1895, 142 Ind. 226, 40 N.E. 1072, 41 N.E. 

451; Morton v. Noble, 1864, 22 Ind. 160; Fletcher v. Holmes, 1870, 32 Ind. 497; 

Grable and Others v. McCulloh, 1867, 27 Ind. 472.
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 23 of 25

9. We reverse the trial court’s order giving immediate possession to BMO 

Harris. 

Conclusion

[28] We conclude that GC 2548 preserved its equitable assignment claim for 

appellate review, although it has failed to establish that the trial court erred in 

finding that equitable assignment of the Lease did not occur. We further 

conclude that the trial court erred in concluding that the provisions of Article 

9.1 of the UCC applied to the leasehold mortgage in this case. Finally, because 

we have concluded that real estate mortgage procedures must be used, we 

further conclude that BMO Harris has no right to immediate possession of the 

Parcel. Consequently, we remand for a sheriff’s sale pursuant to the Indiana 

Code chapter 32-30-10. 

[29] The judgment of the trial court is affirmed in part and reversed in part, and we 

remand with instructions. 

Kirsch, J., concurs.

Vaidik, C.J., concurs in part and dissents in part with opinion.
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 24 of 25

I N T H E

COURT OF APPEALS OF INDIANA

Merrillville 2548, Inc. successor to 

Merrillville GC 2548, Inc.,

Appellant/Intervenor/Counterclaim 

Plaintiff,

v.

BMO Harris Bank N.A. f/k/a 

Harris N.A., as the assignee of the 

Federal Deposit Insurance 

Corporation as the receiver for 

Amcore Bank, N.A.,

Appellee/Plaintiff/Counterclaim 

Defendant,

Court of Appeals Case No.

45A03-1409-MF-345

VAIDIK, Chief Judge, concurring in part, dissenting in part.

[30] I concur in full with the majority’s treatment of the waiver, equitable 

assignment, and UCC issues in this case. I respectfully dissent with respect to 

the final issue—whether BMO Harris is entitled to possession of the Parcel. 

[31] The majority concludes that BMO Harris must purchase its right of possession 

at a sheriff’s sale because “the default situation in Indiana is that a mortgagee 
Court of Appeals of Indiana | Opinion 45A03-1409-MF-345 | June 9, 2015 Page 25 of 25

has a lien on, but no right to possession of, the mortgaged premises, and the 

facts of this case fit the default pattern.” Slip op. at 22. I agree with this 

statement of the law. But here, GC 2548 is, at best, a month-to-month tenant, 

not a lessee or mortgagor. See Ind. Code § 32-31-1-2. As such, GC 2548 lacks 

any interest in the Parcel that certain mortgage-foreclosure procedures—

particularly sheriff sales—are designed to protect.5 See Ind. Code § 32-30-10-14 

(“In all cases in which the proceeds of sale exceed the amounts described . . . 

the surplus must be paid to . . . the mortgage debtor, mortgage debtor’s heirs, or 

other persons assigned by the mortgage debtor.”). As a month-to-month 

tenant, GC 2548’s interest in the property was thirty days’ possession, and had 

there been no mortgage-foreclosure action, GC 2548 would have been entitled 

to thirty days’ notice before eviction, nothing more. See Ind. Code § 32-31-1-1.

[32] By ordering a sheriff’s sale, I believe the majority confers greater protection 

upon GC 2548 than it deserves, given that it is merely a month-to-month tenant 

with no interest in the Parcel. I would affirm the trial court’s order giving BMO 

Harris the right to take possession of the Parcel in thirty days’ time. 

 

5 The only party with interest in the Parcel was Borrower, but Borrower abandoned that interest when it 

agreed to foreclosure by default.