Source: http://commercialforeclosureblog.typepad.com/indiana_commercial_forecl/sheriffs-sales/
Timestamp: 2017-03-28 15:52:55
Document Index: 609430705

Matched Legal Cases: ['§ 32', '§ 32', '§ 26', '§ 26', '§ 32', '§ 548']

Indiana Commercial Foreclosure Law: Sheriff's Sales Indiana Commercial Foreclosure Law
Can The SBA's Right Of Redemption Be Purchased After A Sheriff's Sale? The situation. A client engaged me to bid for a commercial property at a recent sheriff’s sale, but another party outbid us. However, the sale was unusual in that the Small Business Association (SBA), which was a junior mortgagee, retained a post-sale one-year statutory right redemption under 28 U.S.C. 2410(c). (The SBA essentially is the U.S. Government.) The right arose out of the SBA’s loan to the borrower secured by a second mortgage on the subject real estate. The client and I wondered whether we could acquire title to the property through the purchase of the SBA’s right of redemption, which would enable us to redeem the property from the sheriff’s sale (pay off the sheriff’s sale buyer) and slide into ownership. Redemption law. As noted by my prior posts of 2/1/08 and 5/15/08, generally there is no post-sale right of redemption in Indiana. The sheriff’s sale is the end of the line for the borrower and all other lienholders. There are, however, various federal statutes granting the U.S. Government a post-sale right of redemption, and those rights typically will be spelled out in the foreclosure decree (as they were in my recent matter). See, for example, my 7/23/10 post dealing with a federal tax lien. In my case, the SBA’s right stemmed from the junior mortgage and Section 2410.
Transferrable? Candidly, we didn’t know whether we could buy the SBA’s judgment and, most importantly, its right of redemption. Why not? We thoroughly researched the subject but could find no law definitively answering the question one way or the other. In other words, we could find no statute and no case law saying that we couldn’t do this. So, the client decided to move forward, and we were able to connect with the right people at the SBA to initiate negotiations. SBA’s position. We formally offered to buy out the SBA (at a discount). Whether by virtue of the law, policy, or a combination of the two, here is how the SBA’s in-house legal department politely responded to us (paraphrased):
In the end, our client could accomplish its objective – just not how we originally thought. We would never actually buy the redemption right but instead would enter into an agreement with the SBA to essentially purchase the property from the SBA after the SBA exercised its right of redemption. The scenario really was better for us because the SBA, not the client, would take the lead with exercising the right of redemption. Outcome. Unfortunately for the client, our case took an unexpected turn when the successful bidder at the sheriff’s sale got wind of our plan and negotiated with the SBA himself. We understand he offered to pay off the SBA in exchange for its release of the right of redemption – a simpler transaction - at a price our client was unwilling to pay. What we’ll never know is whether the SBA would have negotiated down off of its demand for full payment of its junior debt in order to deal with us. We assume in certain cases that the SBA would do so, but in our unique case apparently the winning bidder was willing to pay full value, or at least far more money than what our client had offered (and what the property was worth). As an aside, by virtue of the sheriff’s sale and the post-sale SBA transaction, the winning bidder made both the plaintiff/senior mortgagee and the SBA/junior mortgagee whole – a rarity in commercial foreclosure cases. What did we learn? In concept, a third party can in fact deal with the SBA with respect to its right of redemption. As such, there is a path to post-sale ownership. Of course any such third party will, at a minimum, be required to pay off in full the winning bidder for the price paid at the sheriff’s sale. The amount required to pay the SBA, however, appears to be negotiable and will vary depending upon the circumstances of the particular case. An investor would only consider this if he or she perceived there to be value in the property over and above the price paid at the sheriff’s sale – which again would be a rare case. __________I frequently represent investors who acquire real estate at sheriff’s sales or who purchase senior commercial mortgage loans that I subsequently foreclose. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@woodenmclaughlin.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page. Posted on September 09, 2016 in Sheriff's Sales | Permalink
Our firm recently re-learned the hard way that Marion County's monthly sheriff’s sales have been bumped up an hour from 3:15pm to 2:15pm, which is when the oral auction starts. Fortunately, no harm, no foul. In the recent past, Marion County mandated that third party (non-plaintiff) bids over and above the plaintiff’s posted bid must be tendered by 2pm instead of 3pm (with cash on deposit by then). As always, the plaintiff’s (the mortgagee's) bid package still must be submitted the day before the sale.
1: Click here for a link to the Marion County Sheriff’s home page dealing with sheriff’s sales. 2: Click here for a link to their forms page, including instructions/rules for plaintiffs and third-party bidders.
Carry on…. Posted on August 17, 2016 in Sheriff's Sales | Permalink
I am sometimes asked by out-of-state lawyers or clients whether Indiana has a separate process for the entry of a deficiency judgment. The answer is no. My definition. The terminology “deficiency judgment” refers to the amount of the money judgment remaining after deducting the price paid at the sheriff’s sale. More generically, the word "deficiency" describes the difference between the debt amount and the value of the collateral securing the debt. Think of it as negative equity. Indiana’s process. It’s my understanding that some states require a post-sale action to obtain a deficiency judgment. Not in Indiana. Here, a judgment entered in a mortgage foreclosure action typically is comprised of two elements. The first is a money judgment on the promissory note and/or guaranty, and the second is a decree of foreclosure based on the mortgage. The deficiency is a product of the sheriff’s sale. In Indiana, a deficiency judgment isn’t a technical or statutory term. The label simply describes the net amount owed by a borrower or guarantor following a sheriff’s sale.
One judgment. So, as to Indiana, unlike some other states, personal liability for a judgment (against a borrower or a guarantor) for any post-sale deficiency effectively occurs immediately upon the entry of the foreclosure judgment itself - before the sheriff’s sale even takes place. There is no second procedural step or subsequent process to establish a deficiency judgment. For more on this topic, see the following posts:
Posted on July 15, 2016 in Procedure/Trial Rules, Sheriff's Sales | Permalink
Indiana Federal Court Denies Request For Injunction To Stop Sheriff’s Sale Lesson. Federal courts generally won’t stay a sheriff’s sale ordered by an Indiana state court.
Legal issue. Whether a federal district court should grant or deny a temporary restraining order (TRO) enjoining a sheriff’s sale decreed by an Indiana state court. Vital facts. Lender/mortgagee sought and obtained, in state court, a judgment and decree of foreclosure in a residential/consumer case. In a subsequent federal court action, the plaintiffs, who lived in the house, sued the servicer of the mortgage upon which the prior foreclosure action was based. The plaintiffs’ complaint asserted a multitude of consumer finance-based claims. The underlying allegations in the plaintiffs’ federal court complaint are not particularly germane here, however. In a nutshell, the plaintiffs felt wronged by the servicer’s alleged unlawful refusal to permit them to assume the subject mortgage. Procedural history. The plaintiffs sought a TRO barring an upcoming sheriff’s sale. The Sims opinion is the United States District Court’s ruling on the TRO request.
Key rules. One seeking a TRO must show that he or she is “reasonably likely to succeed on the merits, is suffering irreparable harm that outweighs any harm the [defendant] will suffer if the injunction is granted, there is no adequate remedy at law, and an injunction would not harm the public interest.” In Indiana, a sheriff’s sale only occurs following the entry of a judgment. Ind. Code 32-30-10-5; 32-30-10-8. The Rooker-Feldman doctrine, discussed on this blog many times, precludes federal courts from exercising jurisdiction over cases brought by “state-court losers complaining of injuries caused by state-court judgments….” Holding. The Court concluded that the plaintiffs in Sims, to the extent they sought to enjoin the sheriff’s sale, were attempting to relitigate the merits of the prior foreclosure action and, as such, the Court lacked jurisdiction to do so. Stated another way, the plaintiffs were unlikely to succeed on the merits of their claim. For this and other reasons, “the standards for issuance of a [TRO were] not met….” The Court denied the TRO. Policy/rationale. A TRO is an extreme remedy granted only under limited circumstances. I’m not saying that a TRO request should be denied in every conceivable circumstance, but it’s hard to imagine a scenario where a federal court would stop a sheriff’s sale ordered by a state court. Attempts to obtain such relief should be focused in the original, state court action through appeal or otherwise. Related posts. Res Judicata, Specifically Claim Preclusion, And How To Dismiss A Borrower’s Post-Foreclosure Case
"Old school" Indiana foreclosure procedure required a plaintiff lender/mortgagee to name the county in cases where there were delinquent real estate taxes. The county would answer the complaint and document its super-priority lien in the amount of the past due taxes. The foreclosure decree, in turn, would order that the county must be paid first out of any sheriff's sale proceeds, which as a practical matter meant that the lender advanced the delinquent taxes to the county at the time of the sheriff's sale. All that changed in 2011. I'm "reprinting" my 1/21/11 post below that explains this. Counties no longer need to be named because, as a matter of law, the sheriff's sale cannot even be scheduled until the plaintiff pays the taxes. Despite this, I still see confusion with judges and counsel regarding the treatment of counties in foreclosure litigation. Again, as explained below, my opinion is that Indiana law is crystal clear that counties, which are owed taxes, no longer need to be parties to foreclosure cases.
Distressed loans secured by commercial property often involve delinquent real estate taxes. Workout professionals should remain mindful of this possibility as they analyze their collateral and make decisions concerning the enforcement of the loan. Questions I’m frequently asked are whether the lender should pay the real estate taxes and, if so, when. Prior procedure. Indiana law historically required the plaintiff/lender, assuming it was the winning bidder at the sheriff’s sale, to pay any delinquent real estate taxes immediately after the sale. In the case of a cash bidder (third party), taxes would be paid off the top or, in other words, the county treasurer got the first cut of the sale proceeds. 2011. In recent years, we noticed that some county sheriff’s offices started to require the plaintiff/lender to pay delinquent real estate taxes before the sale. This has now become a formal, statutory requirement by virtue of Ind. Code § 32-29-7-8.5 “Requirements for Payment of Property Taxes and Real Estate Costs Before Sheriff’s Sale.” The statute states, in pertinent part, that “the party that filed the praecipe for the sheriff’s sale shall pay . . . all delinquent property taxes, special assessments, penalties, and interest that are due and owing on the property on the date of the sheriff’s sale.” A failure to pay will result in the cancellation of the sale.
Policing the issue? Beginning in January 2011 in Marion County (Indianapolis), the Treasurer, in conjunction with the Sheriff, requires that a Tax Clearance Form (.pdf) be (a) completed by the party requesting the sale, (b) stamped by the Treasurer’s Office and (c) then submitted to the Sheriff’s Office with the written bid. The form must be stamped regardless of whether delinquent taxes were ever an issue. Lender’s counsel needs to complete the information at the top of the form (the date of the sheriff’s sale, file number, owner, address and parcel number), as well as the contact information at the bottom of the form. The Treasurer’s Office completes everything else. Note that one form needs to be completed for each parcel number (i.e. 4 parcels, 4 forms). As I’ve said on this blog many times, please be sure to confer with the particular county sheriff’s office in advance because rules and procedures may vary by county. Perhaps other counties will follow Marion County’s lead in terms of documenting the status of the real estate taxes. For now, call ahead to see what is needed. Timing. At last week’s Marion County sales, we were able to submit payment for delinquent property taxes and obtain the stamped clearance form on the same day. The better approach would be to allow yourself and your foreclosure counsel a few days before the sale to address the matter in case there are problems or the Treasurer’s Office is congested. Without the stamped form, the Sheriff will not hold the sale. It is my understanding that the Treasurer may set up an e-mail address so these forms can be submitted and completed via e-mail. I will provide more information as it becomes available. Build into judgment. Since I.C. § 32-29-7-8.5 now requires real estate taxes to be satisfied before the sale, the amount of any delinquent real estate taxes that either have been or will be paid by the lender should be an item of damages identified in the judgment. Before the statutory change, borrowers theoretically could attack that damage figure as being speculative. Some borrowers claimed that, because the lender had not actually incurred the loss at the time of the entry of judgment, courts could not award the damages. Hypothetically, the borrower might later pay the taxes or a third-party buyer might pay the taxes. Now, because the foreclosing lender is compelled to advance the taxes, courts in turn should be compelled to include such losses in the calculation of damages.
Plan ahead. In the past, delinquent real estate taxes may have popped onto the lender’s radar in the days leading up to the sheriff’s sale. Now, that issue should be addressed at the time of the filing of a motion for default judgment, motion for summary judgment or trial. Lenders and their foreclosure counsel should make it their routine practice, when calculating the debt, to verify with the county treasurer the status of the real estate taxes generally and the amount of any delinquent real estate taxes specifically. (As an aside, delinquent taxes frequently are identified in a title commitment.) For more on this subject, please see my November 16 and November 24, 2010 posts that deal with tax sales.
Sheriff's Sale Checklist - Marion County (Indianapolis) Illustration
This post should be read with post - New Marion County (Indianapolis) Sheriff's Sale Requirements. The following check list includes many of the key steps but is not an exhaustive list of considerations. So, please make sure you and your counsel independently review the applicable statutes and rules as you prepare for your own sale. Please also glance at my prior post - Indiana Sheriff's Sales: Local Rules, Customs and Practices Control - for further advice/tips.
Upon Entry Of Judgment/Pre-Sale
Praecipe for sale at clerk’s office; submit first page of complaint/two copies of judgment.
Obtain sale date and sale number from sheriff.
Submit notice of sheriff’s sale to sheriff.
Request bidding instructions from client.
Obtain sale data sheet from sheriff.
Prepare bid form.
Obtain check for sheriff’s costs/sale fees.
Draft sheriff’s deed and request check for recorder’s fee.
Draft clerk’s return.
Draft sales disclosure and request check for auditor’s fee.
Obtain statement for any delinquent real estate taxes from treasurer’s office.
Request check from client to treasurer for any delinquent taxes.
If applicable, pay any delinquent taxes and secure receipt from treasurer; obtain stamped Tax Clearance Form from treasurer (regardless of whether there were any delinquent taxes).
Submit to sheriff: Bid form with sheriff’s fees/costs check; Deed with recorder’s fee check; Clerk return; Sales disclosure form with auditor’s fee check; and Tax Clearance Form.
Attend auction at City/County Building.
If client purchases, obtain all file-marked conveyance documents and clerk’s return.
If third party purchases, obtain check for sale proceeds from sheriff.
Note: Initiating Marion County (Indianapolis) Sheriff's Sales
Posted on October 11, 2015 in Sheriff's Sales | Permalink
If, as a lender, you tender a full credit bid at your sheriff’s sale, make sure you don’t unwittingly overbid. If you do, you later could be forced to pay cash to cover the difference. This is what happened in Stoffel v. JPMorgan Chase, 2014 Ind. App. LEXIS 34 (Ind. Ct. App. 2014). Setting. Stoffel arose out of a post-sale motion by a borrower/mortgagor to compel the plaintiff lender/mortgagee to pay an alleged surplus. In Indiana, the sheriff must pay any surplus back to the mortgagor. The borrower in Stoffel wanted to recover the alleged “difference between the face amount of the judgment and the amount bid at the sheriff’s sale,” even though the sheriff did not hold any excess sale proceeds. Foreclosure judgment. The lender and the borrower in Stoffel entered into an agreed foreclosure judgment that awarded the amount of the debt, together with “any additional costs of collection, expense, and disbursements incurred from the date of the [lender’s pre-judgment affidavit of debt] to the date of the Sheriff’s Sale, including, but not limited to, Sheriff’s Sale costs, disbursements for real estate taxes, bankruptcy fees and costs, and disbursements for hazard insurance premiums.” These additional items could not be specified until the sale. Credit bid. The lender submitted a winning “credit bid” (a/k/a “judgment bid”) in the amount of $152,121.72. The Court noted that a “credit bid” is made “by the judgment creditor in which no money is exchanged.” The bid is not backed up by cash but rather the amount of the judgment. The lender in Stoffel believed that the judgment amount was enough to cover its bid. Post-sale proceeding. At a hearing on the borrower’s motion, the lender explained how its credit bid had been calculated. The lender offered documents to verify certain post-judgment recoverable costs incurred by the lender. The trial court denied the borrower’s motion, and the borrower appealed. Evidence. The Court of Appeals pointed out what usually happens when amounts need to be added to a judgment after the fact: We acknowledge that judgment creditors routinely include post-judgment costs and expenses in their sheriff’s sale bids and demonstrate those calculations by affidavit. In a typical case, the judgment creditor’s post-judgment costs and expenses are easily determined and the mortgage foreclosure proceeding ends with the issuance of a sheriff’s deed. And where, as here, post-judgment costs and expenses are awarded in the foreclosure judgment, there is no question that the judgment creditor is entitled to recover those costs and expenses, which are usually readily ascertainable and undisputed. The problem in Stoffel was that the judgment included elements that were not really “readily ascertainable and undisputed.” After delving into a technical discussion about the inadmissibility of the lender’s evidence, the Court concluded that much of the evidence was inadmissible. For example, to prove certain facts, the lender simply tendered a letter instead of a sworn affidavit. Shortfall. The lender paid the price, albeit a small price, for its technical error. The Court studied the terms of the judgment and applied the limited amount of admissible evidence to those terms. The Court calculated the amount of the judgment at the time of the sheriff’s sale and held that the lender overbid. Ironically, in a case where the borrower owed the lender $152,121.72, the Court entered a post-sale judgment against the lender in the amount of $374.58. Takeaway. Lenders and their counsel should articulate damages elements within the judgment with as much simplicity and clarity as possible. Any contingent amounts should be written so the sheriff and the trial court can later plug and chug the numbers with ease - eliminating room for interpretation or proof hurdles. For example, lenders must pay any delinquent real estate taxes before the sale. Frequently, the amount of the tax liability is unknown at the time of the judgment and will not be paid until the day before the sale. Judgments can (and should) grant an award for tax advancements, which will be readily ascertainable and undisputed. On the other hand, the less ascertainable and more disputed the post-judgment damages items are, the more lenders set themselves up for scrutiny and proof problems later. Posted on May 02, 2015 in Procedure/Trial Rules, Sheriff's Sales | Permalink
Back in January of 2011, I posted: Sheriff's Sale Checklist - Marion County (Indianapolis) Illustration. Step 1 was to "praecipe" for the sale. (In August of 2010, I answered the question: What's A "Praecipe"?) For years in Marion County, we praeciped for sales by filling out by hand an entry into a formal praecipe book found in the Marion County Clerk's Office on the 1st Floor of the City-County Building. In all other counties, we prepare a written pleading entitled "praecipe" and have it file-stamped by the Clerk for placement into the trial court's record. Recently, we had a case in Marion County in which our praecipe via the book apparently got lost somewhere between the Clerk's Office and the Sheriff's Office. Innocent mistake - it happens - but the client was not happy. So, we inquired into whether we could trigger the sale process without utilizing the book. We can. Here is an information sheet prepared by Marion County that speaks to how to get a sheriff's sale by bypassing the praecipe book process: (.pdf):
Indianapolis, Indiana 46204 Rosalinda made it clear to me that, if you submit a typed praecipe, you do not praecipe with the book. "You choose one or the other," she said.
Although Marion County's book system would seem to have a 99% success rate, my sense is that the submission of a typed praecipe, which looks and feels more like a formal pleading, could close that 1% gap. For what it's worth, from now on we're going to follow the steps in Rosalinda's handout. As a reminder, a word to the wise: Indiana Sheriff's Sales: Local Rules, Customs and Practices Control. Find the Rosalinda in each county with which you're unfamiliar, and make her your friend....
Last week, an out-of-state lawyer and reader of my blog asked a question I’ve received several times previously – whether Indiana has a separate process for post-sheriff’s sale deficiency suits. In this instance, he was reading my 4/22/08 post, How Much Should A Lender/Senior Mortgagee Bid At An Indiana Sherriff’s Sale?, and had some follow-up questions. My definition. The terminology “deficiency judgment” refers to the amount of the judgment remaining after deducting the price paid at the sheriff’s sale or, more generally, the difference between the debt amount and the value of the collateral securing the debt.
One judgment. So, as to Indiana, unlike some other states, a personal judgment (against a borrower or a guarantor) for any post-sale deficiency actually occurs before the sheriff’s sale takes place. There is no second procedural step or subsequent process to establish a deficiency judgment. In fact, as noted in my 8/1/08 post Full Judgment Bid = Zero Deficiency, ultimately there may be no deficiency (residual money judgment) if the sheriff’s sale price meets or exceeds the amount of the judgment. Posted on July 13, 2014 in Judgment Enforcement, Procedure/Trial Rules, Sheriff's Sales | Permalink
The Indianapolis Star and the Indianapolis Business Journal recently reported on the March 6th sheriff's sale of Tim Durham's $5.5MM, 10,700 sq. ft. mansion in Hamilton County. The mortgaged debt appears to be about $4.5MM. Mr. Durham is serving a 50-year prison sentence for a $200MM Ponzi scheme. Here is a link to the Star's article: Durham. The IBJ article is premium content, so if you're a subscriber go to IBJ.com for the February 15th piece written by Greg Andrews. If you're interested in bidding at the sale, here is a link to the relevant Hamilton County Sheriff's website, and here is a link to the listing, which is on page 86 of 111. Posted on February 21, 2014 in News, Sheriff's Sales | Permalink
Full Credit (Judgment) Bid in Michigan Extinguishes Debt and Mortgage in Indiana Sometimes multiple mortgages on multiple properties secure a single promissory note. Lenders/mortgagees may pursue separate foreclosure actions against separate properties, but there cannot be a double recovery. Neu v. Gibson, 968 N.E.2d 262 (Ind. Ct. App. 2012) illustrates this and applies the so-called “full credit bid rule” that was the subject of my post Full Judgment Bid = Zero Deficiency. The transaction. In exchange for the sale of stock, Nowak gave Gibson a promissory note and granted Gibson a mortgage against real estate in both Indiana and Michigan. Nowak sold the Indiana real estate to Neu but did not inform Gibson of the sale. Nowak ultimately defaulted on the promissory note to Gibson. Suits. Legal proceedings ensued in Indiana between Gibson and Neu that led to an Indiana Supreme Court decision concerning the doctrine of equitable subrogation, which was the subject of my March 1, 2011 post. Unbeknownst to Neu, Gibson also pursued a legal proceeding in Michigan with respect to the Michigan real estate. Gibson obtained a foreclosure judgment in Michigan and made a credit bid at the sale for the full amount of the judgment. Gibson ultimately acquired title to the Michigan real estate. The collection proceedings then turned back to Indiana where the issue was whether the Indiana judgment had been satisfied by virtue of the Michigan sale. Full credit bid rule. Neu’s primary argument in the Indiana case focused on Gibson’s entry of a full credit bid in the foreclosure sale of the Michigan real estate. The question was whether Gibson’s claim against the Indiana real estate, which claim rested on the same debt secured by the Michigan real estate, was barred by the “full credit bid rule.” (Michigan also recognizes and applies this rule.) Essentially, the rule provides that the payment of a bid at a sheriff’s sale sufficient to satisfy the judgment extinguishes that judgment. It follows that, where a judgment creditor has been paid the full amount of the judgment, there is a complete satisfaction of that judgment. Rule applied. In Neu, Gibson obtained a foreclosure judgment on Nowak’s promissory note with regard to the Michigan real estate in the amount of $305,722.48. A few months later, the Michigan real estate was the subject of a foreclosure sale where Gibson submitted the highest bid of $305,722.48. The Court said: “as Gibson purchased the Michigan Real Estate for a price equal to the amount of the foreclosure judgment, the debt became satisfied and the underlying promissory note was extinguished.” Consequently, the mortgage on the Indiana real estate was terminated. Fair market value immaterial. In an effort to avoid the consequences of the Michigan proceedings, Gibson contended that the Court should use the fair market value of the Michigan real estate – not the full credit bid – in determining the amount still owed in the Indiana action. Gibson submitted an appraisal of the Michigan real estate stating the property was only worth $72,000. As discussed in the Titan opinion and my 8/1/08 post, however, the full credit bid rule “precludes a lender for purposes of collecting its debt from making a full credit bid and subsequently claiming that the property was actually worth less than the bid.” The Court summed up its opinion as follows:
Posted on August 08, 2013 in Judgment Enforcement, Sheriff's Sales | Permalink
Posted on February 25, 2013 in Procedure/Trial Rules, Redemption, Sheriff's Sales | Permalink
Posted on February 15, 2013 in Procedure/Trial Rules, Sheriff's Sales, Strict Foreclosure | Permalink
Posted on April 12, 2012 in News, Redemption, Sheriff's Sales, Strict Foreclosure | Permalink
Posted on December 02, 2011 in Sheriff's Sales | Permalink
Posted on January 21, 2011 in Sheriff's Sales | Permalink
Today, in the wake of new statutory language for 2011 -- Ind. Code 32-29-7-8.5 -- I revised and re-posted three prior articles related to Indiana sheriff's sales and the role of delinquent real estate taxes in such sales. I'll try to bring things together in a separate post next week and comment upon this week's experience with Marion County's brand-spanking-new Tax Clearance Form. More to come.... Posted on January 13, 2011 in Sheriff's Sales | Permalink
Sheriff's Sale Checklist - Marion County (Indianapolis) Illustration - Revised
This follows-up my August 14, 2009 post - New Marion County (Indianapolis) Sheriff's Sale Requirements- and fulfills my promise, while presenting at last last year's foreclosure CLE/seminar, to provide a sale checklist. The following list includes many of the key steps but is not an exhaustive list of considerations. So, please make sure you and your counsel independently review the applicable statutes and rules as you prepare for your own sale. Please also glance at last week's post - Indiana Sheriff's Sales: Local Rules, Customs and Practices Control - for further advice/tips. Upon Entry Of Judgment/Pre-Sale
1. Praecipe for sale at clerk’s office; submit first page of complaint/two copies of judgment. 2. Obtain sale date and sale number from sheriff.3. Submit notice of sheriff’s sale to sheriff.4. Request bidding instructions from client.5. Obtain sale data sheet from sheriff.6. Prepare bid form.7. Obtain check for sheriff’s costs/sale fees.8. Draft sheriff’s deed and request check for recorder’s fee.9. Draft clerk’s return.10. Draft sales disclosure and request check for auditor’s fee.11. Obtain statement for any delinquent real estate taxes from treasurer’s office.12. Request check from client to treasurer for any delinquent taxes. Day Before Sale
13. If applicable, pay any delinquent taxes and secure receipt from treasurer; obtain stamped Tax Clearance Form from treasurer (regardless of whether there were any delinquent taxes).14. Submit to sheriff: (a) Bid form with sheriff’s fees/costs check; (b) Deed with recorder’s fee check; (c) Clerk return; (d) Sales disclosure form with auditor’s fee check; and (e) Tax Clearance Form.
15. Attend auction at City/County Building. After Sale
16. If client purchases, obtain all file-marked conveyance documents and clerk’s return.17. If third party purchases, obtain check for sale proceeds from sheriff.
(This revises/updates my 3-7-10 post.)
2. Senior mortgage debt. The payment of the outstanding principal, interest and costs to the senior lien holder comes second. This almost always will be the full, accelerated debt as articulated in the judgment. (2010 statutory revisions did away with post-sale payment of taxes. If the senior mortgagee prepaid any delinquent real estate taxes, its counsel should attempt to build those losses into the judgment.) 3. Junior liens. Any payments of amounts owed to any junior lien holders are next, in accordance with their legal priority and as articulated in the court's decree.
4. Surplus to mortgagor. Lastly, if any sale proceeds remain, that "surplus must be paid to the clerk of the court to be transferred, as the court directs, to the mortgage debtor, mortgage debtor's heirs, or other persons assigned by the mortgage debtor." Security Interests. The disposition of collateral under Indiana’s UCC, Article 9.1 (Secured Transactions), is slightly different and will depend upon the nature of the collateral. Article 9.1 should be reviewed in detail for each specific case and the particular collateral in question, because there are many different rules that could apply. With certain collateral (accounts receivable, for instance), disposition by sale normally will not occur. On the other hand, sales of tangible personal property collateral, like inventory or equipment, are common. I.C. § 26-1-9.1-610 speaks to disposing of collateral after default. Unlike with mortgages, in Indiana a judicial sale of personal property collateral is not required. Lenders may choose to conduct the sale privately, although it may make sense to group the personal property with any real estate that is being sold at a sheriff’s sale. I.C. § 26-1-9.1-615 governs how to apply the proceeds: 1. Sale Expenses. First, proceeds are applied to the reasonable expenses of retaking, holding, preparing for disposition and reasonable attorney’s fees and expenses incurred by the secured party. This would include payment of the sheriff’s fees if the civil sheriff is conducting the sale, or to private auctioneers upon a private sale.
So, if and to the extent there are cash proceeds from an Indiana foreclosure sale of loan collateral, the debt of the plaintiff lender will not be satisfied until after the sale-related expenses are reimbursed. Also, lenders should not receive a windfall from a sale because the borrower generally receives any surplus, but that normally is a very remote possibility. (This revises/updates my 1-9-07 post.)
In February of 2010, I wrote about Indiana Sheriff's Sales - Local Rules, Customs and Practices Control. For secured lenders and their counsel preparing for a mortgage foreclosure sale in Marion County (Indianapolis), Indiana, I thought I'd expand upon that post and convey a handful of things about which I was reminded during recent experiences. I'm directing this post mainly to plaintiffs/first mortgagees, who hold a judgment/foreclosure decree and who are "first in line" to make a judgment bid (credit bid) at the sale. Because this post discusses cash that bidders must bring to the sale, however, the information will also be relevant to junior lien holders seeking to bid. Pre-sale sheriff's notice. About fifteen days before a sheriff's sale, the Civil Sheriff's Office will send to the lawyer for the plaintiff/first mortgagee a sheet outlining certain information about the sale. Click here for an example notice. The notice includes such data as the sale number, the court cause number, the names of the plaintiff and the plaintiff's attorney, the parcel number and, perhaps most importantly, the current judgment amount, including interest, upon which the plaintiff is entitled to make a credit bid. Finally, the notice lists the sale fees/costs and, as in my case, any delinquent property taxes.
Deposit. Pursuant to Marion County's custom and practice, in order to perfect a bid, the plaintiff/bidder must deposit with the sheriff a check for the user fee, sheriff fee and advertising cost, which in my client's case was $608.40. The sale fees/costs must be paid to the "Marion County Sheriff." (Remember that junior lien holders or third parties also must have on deposit with the sheriff’s personnel a certified check or cashiers check equal to or in excess of the amount of any bid submitted.) Taxes. Beginning in 2011, Ind. Code 32-29-7-8.5 mandates that any delinquent real estate taxes, which by the way include delinquent sewer lien fees, be paid by the plaintiff/senior mortgagee before the sale. In the past, checks for taxes were tendered with the sale bid, or in some counties taxes could be paid by the successful bidder after the sale. Now (2011), Indiana statute requires the taxes to be current by the date of the sale, or the sale will be cancelled. Proof of payment can come from a receipt from the County Treasurer's office. However, in Marion County (Indianapolis), local procedure dictates that a Tax Clearance Form, stamped by the Treasurer's office, be provided to the sheriff with the presale bid package. Source of delinquent tax figure. Without boring you with the details, I've learned the hard way that delinquent tax figures provided by the sheriff's office on its presale notice often are slightly inaccurate. I would recommend that lenders or their lawyers go directly to the county treasurer's office in order to confirm (in writing, if possible) the amount of any delinquent taxes or fees. (This updates/revises my 12-15-08 post.)
Thanks to Cindy Edmiston of SRI, Incorporated for circulating the attached list of Indiana sheriffs for 2011. Sheriff's sale documents, such as the notice, clerk return and deed, should identify the county sheriff. Evidently, there will be forty-six new sheriffs in 2011. Mortgagees and their foreclosure counsel should update certain forms accordingly. Posted on December 03, 2010 in Sheriff's Sales | Permalink
On March 7, 2010, I provided a Sheriff's Sale Checklist - Marion County Illustration. As noted, one of a foreclosing lender's tasks is to tender a sheriff's deed (click for local form) to the sheriff's office to perfect the sale bid. Last August, the Marion County Sheriff's Office revised some of its sale rules and requirements. Here is a link to the office's site on that issue: Real Estate Rules for Attorneys. Rules. With respect to the sheriff's deed form, the Marion County Sheriff's website says: Notices, deeds clerk returns and bid forms must be on 8 ½” by 11” paper. All forms must have the Sheriff’s file number in the upper right corner. Documents without the file number in the upper right corner will NOT be processed. All forms MUST be completely filled out with accurate information. Deeds must be one (1) page. If second page is needed, the legal description may be an attachment, BUT the street address and parcel number must be spelled out in the area where deed indicates legal description is attached. Deeds without the signature/notary page on front will NOT BE SIGNED! As noted, deeds should be one page.
Rejection. In the past, absent a very short legal description of the property, our firm routinely tendered sheriff's deeds with the legal description attached as an exhibit. At a sale last month, for the first time the sheriff's office rejected our deed and required us to provide another deed with the legal description contained on its face. The one-page rule was enforced. (Lesson learned.) Rationale. In speaking with the sheriff's office, I was told that the primary reason for the one-page requirement is to ensure that legal descriptions don't get misplaced or lost. The goal is to protect the integrity of the deed. Since Marion County processes 400-600 deeds for each month's sale, the one-page guideline is understandable.
Exception? In order to squeeze our legal on last month's deed, my secretary had to work some magic with fonts, margins, etc. She got it done, and the sheriff evidently has accepted our revised deed. But what if the legal simply is too long to insert into a one-page deed? I'm informed by the sheriff's office that the incorporation of an exhibit will be acceptable in those instances. The rules above support this, but note that the street address and parcel number must still be typed on the face of the deed. Plan and discuss. In the end, common sense should and likely will prevail, but clearly the "default" (preferred) approach by the Marion County Sheriff is to limit the deed to one page, without any attached exhibits. Because local rules, customs and practices prevail in each county, I recommend that you or your lawyer contact the county sheriff's offices in advance of your sales to ensure you are complying with sale details, such as the form of deed. In the meantime, please email me or post a comment with regard to your experiences with attaching legal descriptions to sheriff's deeds in counties other than Marion, thanks.	Posted on June 18, 2010 in Sheriff's Sales | Permalink
I posted a sheriff's sale checklist on March 7, 2010, and I've written about the sales disclosure form (SDF) component to the sheriff's sale process previously. The involvement and handling of SDF's in connection with the sheriff's sale of your real estate loan collateral continues to evolve. Please remain mindful that local rules, customs and practices control. To fully prepare for the sale, contact your county civil sheriff's office in advance. The Marion County Civil Sheriff's Office now requires that, before they will accept the SDF, it must first be submitted and completed on line. Here is a link to the site for submission: SDF Link. I'm also providing a .pdf of a cheat sheet, with contact information, regarding this process: SDF .pdf. The plaintiff/mortgagee/bidder at the sheriff's sale must complete the SDF on line and then submit the printed form (with the auditor's fee check) to the sheriff's office at the time one submits the sale bid. (This has something to do with the fact that the on line form, once printed, contains data in the upper right corner that shows the appropriate on line submission.) Please note that the form itself will not be fully completed since the sheriff will need to execute it post-sale. Please email or post a comment if you or your foreclosure counsel have had a different experience. I have not yet seen this on line requirement in other counties, but perhaps this is changing across the state. As I've posted before, in other counties, including Marion County, a hard copy of the blank form could be completed and submitted to the sheriff.	Enough about SDF's -- I'm now going on a family vacation and will post something again during the week of June 14th, if not before....	Posted on June 02, 2010 in Sheriff's Sales | Permalink
This post will supplement the following, prior posts related to Indiana sheriff's sales, including specifically sales in Indianapolis, Marion County: "(Tax) Lessons Learned from Marion County, Indiana Sheriff's Sale" and "Recording Deeds in Indiana: Don't Forget the Sales Disclosure Form" (Part I and Part II.) Effective August 1, 2009, the Marion County Sheriff's Department has revised some of its sale requirements, which you can review by clicking here. After speaking to the department's staff yesterday, in connection with a sale next week, the following appear to be the most significant changes:
If you have any questions about items 1-3, I recommend that you call the sheriff's department at either 317-327-2450 or 317-327-2459. Pam and Tammy can be reached at those numbers, and they have always been very helpful, patient and cooperative. For more about Marion County sheriff's sales, you can click on its website here. The sale rules identified on that website can be accessed by clicking here. Posted on August 14, 2009 in Sheriff's Sales | Permalink
Moral of the story. If Marion (or a guarantor) had assets in addition to the subject real estate, and if the actual value of the real estate was substantially less than the judgment, then this was an unfortunate result for Titan. The Titan opinion does not provide any insight into why Titan made a full judgment bid. In all fairness, Titan may have had legitimate reasons for doing so. For example, in the residential foreclosure context, a HUD-insured loan may require the lender/mortgagee to bid the full amount of the judgment as a prerequisite to reimbursement by the government. So, I’m not going to second guess Titan or its lawyers. My main point is that, barring a reversal by the Indiana Supreme Court, Titan definitively tells us that a full judgment (credit) bid at a foreclosure sale effectively negates any alleged deficiency. Please see my April 28, 2008 post for more insight or contact me for assistance. Posted on August 01, 2008 in Sheriff's Sales | Permalink
I first wrote about this topic on August 15, 2007, but I've decided to delete that post. Today's post provides a revision of my prior research and analysis, and I believe more accurately articulates the answer to the question. I'd like to thank my partners Tom Dinwiddie and Tom Hanahan for their input.
Your lending institution has an Indiana decree of foreclosure related to commercial real estate. You have reason to believe the judgment amount exceeds the value of the collateral, so you want to preserve the right to collect the deficiency from the borrower or a guarantor. If you’re wondering how low the mortgage foreclosure sale price can be without rendering the sale defective, keep reading.
An extreme example. Conceivably, a lender/senior mortgagee, as the sole bidder, could acquire the property at a sheriff’s sale for a small fraction of the fair market value by submitting a credit bid that expends only a portion of the judgment amount. This would allow the lender to resell the property at a profit and to pursue collection of the deficiency, potentially resulting in a double recovery. The lower the sale price is, the higher the deficiency judgment will be. No statutes. There are no Indiana statutes regulating the price that parties must bid at a mortgage foreclosure sale. Unlike an execution sale, in which a judgment debtor can demand an appraisal under the so-called “valuation and appraisement laws,” mortgage foreclosure sales are exempted from this rule. See, Ind. Code § 32-29-7-9(b); Trial Rule 69(C); Arnold v. Melvin R. Hall, Inc., 496 N.E.2d 63, 65 (Ind. 1986).
The shock test. Indiana appellate court opinions do not articulate a formula for a lawful sale price. They merely provide guidelines. The Indiana Supreme Court’s decision in Arnold is the definitive case on this subject. A borrower/mortgagor, whose interest in property has been sold at a sheriff’s sale, need not accept the results of the sale without question and has the right to file a motion seeking that the sale be set aside. Indiana law presumes that the sheriff’s sale “provides a decent method by which value can be fixed . . ..” Arnold, 496 N.E.2d at 65. “Thus, it is manifest that the purpose of the sale is not to afford some stranger an opportunity to make off with the debtor’s property to his own great advantage and to the great disadvantage of the debtors or creditors.” Id. Where it appears that the results of a sale are such that the entry of a deficiency judgment “is shocking to the court’s sense of conscience and justice,” the sale may be set aside. Id. The burden of proof is on the borrower or guarantor to establish that “the disparity between the value of the property sold, and the price paid, [was] so great as to shock the sense of justice and right.” Id. See also, Newhouse v. Farmers National, 532 N.E.2d 26 (Ind. Ct. App. 1989). Fair market value not the issue. The United States Supreme Court in BFP v. Resolution Trust, et al., 511 U.S. 531 (1994) addressed the question of whether the consideration received from a sheriff’s sale satisfied the Bankruptcy Code’s requirement that transfers of property by insolvent debtors within one year of the filing of a bankruptcy petition be in exchange for “a reasonably equivalent value.” Id. at 533; 11 U.S.C. § 548(a)(2). BFP dispels the notion that the price paid at a sheriff’s sale must equate to fair market value. “Market value, as it is commonly understood, has no applicability in the forced-sale context; indeed, it is the very antithesis of forced-sale value . . .. In short, ‘fair market value’ presumes market conditions that, by definition, simply do not obtain in the context of a forced sale.’” Id. at 537-38. An appraiser’s reconstruction of “fair market value” could show what similar property would be worth if it did not have to be sold within the time and manner strictures of state-prescribed foreclosure. But property that must be sold within those strictures is simply worth less. No one would pay as much to own such property as he would pay to own real estate that could be sold at leisure and pursuant to normal marketing techniques.
Id. at 539. The Supreme Court deemed that a fair and proper price, or a reasonably equivalent value, for foreclosed property “is the price in fact received at the foreclosure sale, so long as all the requirements of the State’s foreclosure law have been complied with.” Id. at 545. What to bid? Arnold, coupled with BFP, establish an extremely high evidentiary burden for a borrower or guarantor to set aside a sheriff’s sale. Certainly the most conservative approach for a lender would be to submit a bid based upon fair market value, but Arnold specifically, and BFP generally, reject the proposition that sheriff’s sales must be set aside if the property sells for less than the appraised value. Again, the only question is whether the difference between the price paid and the property’s value will shock the judge’s sense of justice and right. What does that mean? Who knows. This is one of those gray areas in Indiana law. The best bet is to analyze the facts and circumstances of the specific case, and then formulate a logical and fair number. Be prepared to offer evidence (documents and witness testimony) to support the price in the event a party challenges it. Use common sense. There are a multitude of factors that could justify a bid, including a prior appraisal, market conditions, current cash flow, or lack thereof, as well as future fees and expenses associated with resale, taxes, insurance premiums, repairs, maintenance, etc. Be creative, but don’t take extreme or overly-arbitrary positions. Move on. Lenders/senior mortgagees should avoid tendering an absurdly low bid, which would only serve to invite a motion to set aside the sheriff’s sale. Such a motion would result in the loss of valuable time and money in connection with defending the motion and/or holding another sale. A balance should be struck between maximizing the deficiency judgment and preventing court proceedings to set the sale aside. The ultimate goal should be to get the sale and the litigation behind you, so your institution can move forward with liquidation and any post-sale collection proceedings. Posted on April 22, 2008 in Sheriff's Sales | Permalink
In Indiana, mortgage foreclosures must be judicial (through the court system). As a general proposition, real estate collateral must be sold, pursuant to a judge's decree, by the county civil sheriff's office. An alternative. Although not commonly utilized, Indiana has a statute giving parties the option, in mortgage foreclosure actions, to conduct sheriff's sales through a private auctioneer. In other words, an outside auctioneer can hold the sheriff's sale on the sheriff's behalf. The statute is Indiana Code 32-30-10-9(b), which states that either the debtor or a creditor may petition the court to require the property to be sold "by the sheriff through the services of an auctioneer" if: (1) the court determines a sale is economically feasible OR (2) all creditors agree to both the sale method and the auctioneer's compensation. Even if you can't get all the creditors to consent to the method, I think most courts would permit the use of a private auctioneer absent unique, compelling reasons to the contrary. Costs. The auctioneer's fee must be reasonable and stated in the court's order. In the unlikely event such a sale occurs without the consent of all creditors, and if the sale price is less than the judgment, then the auctioneer only is entitled to $100 in fees plus any out-of-pocket advertising expenses. Amounts due the auctioneer (fees and expenses) must be paid as a cost of the sale from the proceeds before the payment of any other payments. So, as a practical matter, the auctioneer is paid by the senior lien holder. This is perhaps the major, if not only, downside to a privately-conducted sale - the fees of the auctioneer. So, be sure to explore the cost issue before even requesting such relief from the court. Although civil sheriff's fees may vary from county to county, generally speaking an auction conducted by a sheriff is going to be cheaper than one conducted by a private auctioneer. Needless to say, a lender's valuation of the collateral will play a significant factor in the decision to pursue the course of action afforded by I.C. 32-30-10-9. A potentially good thing. I.C. 32-30-10-9(b) is a nice option for lenders foreclosing on commercial real estate collateral in Indiana. Some Indiana counties may not hold regular sheriff's sales, or their civil sheriff's offices may not be well-equipped to, or particularly interested in, conducting sophisticated sales of commercial real estate. Or, a private firm may be in a better position to market the collateral before the auction. Indeed there are a multitude of factors that may go into a lender's decision to utilize a private auctioneer versus a civil sheriff. The option should be analyzed on a case-by-case basis. As a lender seeking to squeeze as much cash as possible out of an Indiana sheriff's sale of commercial property, you should be mindful of your right to choose a private auctioneer and conduct a cost/benefit analysis accordingly. Posted on March 29, 2007 in Sheriff's Sales | Permalink