Court Opinion

ID: 4233008
Source: CourtListenerOpinion
Date Created: 2017-12-28 16:10:30.101273+00
Date Added: 2024-06-11T07:48:00.224356
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be                                     FILED
regarded as precedent or cited before any
court except for the purpose of establishing
                                                                     Dec 28 2017, 5:46 am

the defense of res judicata, collateral                                   CLERK
                                                                      Indiana Supreme Court
estoppel, or the law of the case.                                        Court of Appeals
                                                                           and Tax Court

ATTORNEY FOR APPELLANT                                   ATTORNEY FOR APPELLEE:
Joseph G. Striewe                                        FIRST FINANCIAL BANK, N.A.
Indianapolis, Indiana                                    Christopher C. Hagenow
                                                         Blackwell, Burke & Ramsey, P.C.
                                                         Indianapolis, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Phillip Herron,                                          December 28, 2017
Appellant-Plaintiff,                                     Court of Appeals Case No.
                                                         49A02-1704-PL-873
        v.                                               Appeal from the Marion Superior
                                                         Court
First Financial Bank, N.A.,                              The Honorable James B. Osborn,
Appellee-Defendant/Crossclaimant,                        Judge
                                                         Trial Court Cause No.
and                                                      49D14-1602-PL-7062
First Christian Missionary
Baptist Church, Inc. and First
Christian Charities, Inc.,
Defendants.

Robb, Judge.

Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017       Page 1 of 12
                                Case Summary and Issue
[1]   Phillip Herron appeals the trial court’s order granting summary judgment to

      First Financial Bank, N.A. (“First Financial”), and denying his own motion for

      summary judgment setting the priority and validity of their respective claims to

      certain real estate. Herron raises several issues for our review, which we

      consolidate and restate as whether the trial court properly determined First

      Financial’s mortgage on the real estate had priority over Herron’s judgment

      lien. Concluding the trial court erred in granting summary judgment to First

      Financial because Herron’s judgment lien was first in time, we reverse and

      remand.

                            Facts and Procedural History
[2]   Herron, a contractor, performed repairs on the roof of the First Christian

      Missionary Baptist Church (the “Church”) in March 2011. Herron invoiced the

      Church for the repairs. In September 2011, Herron initiated a small claims

      proceeding against the Church to collect payment in Lawrence Township

      (Marion County) Small Claims Court. On May 14, 2013, the small claims

      court entered judgment in favor of Herron and against the Church in the

      amount of $5,000, plus attorney fees of $6,000. The judgment was recorded in

      the Lawrence Township Judgment Book on that date. The Church did not

      appeal the judgment.

      Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 2 of 12
[3]   Herron initiated proceedings supplemental to obtain payment of the judgment.

      On April 1, 2014, during the proceedings supplemental, the small claims court

      issued an order consistent with the previous judgment, stating the Church is

      “liable for collection and attorney fees associated with the satisfaction of this

      judgment and statutory interest until satisfied.” Appellant’s Appendix, Volume

      2 at 51. Several receipts and a document titled “Transaction Detail,” all dated

      November 7, 2014, purport to show the Church made two payments on that

      date, had paid a total of $11,191, and had a remaining balance of $0.00. Id. at

      156-59. On November 14, 2014, the small claims court awarded Herron an

      additional $5,147.52 for attorney fees incurred in collecting the judgment

      “pursuant to the [C]ourt’s Order entered April 1, 2014.” Id. at 54. The Church

      did not appeal this order, but on April 15, 2015, the court, “having reviewed the

      file,” determined the additional attorney fees were “unreasonable and

      unconscionable” and rescinded its November 14, 2014, order to tax attorney

      fees. Id. at 155. Herron appealed that decision to the Marion Superior Court.

      On November 17, 2015, the superior court found the small claims court had

      improperly set aside the order in the absence of motion by a party and awarded

      judgment to Herron in the total amount of $9,617.22. The judgment was

      ordered to be placed in the Record of Judgments and Orders book.

[4]   In the meantime, on November 21, 2014, First Financial and the Church

      executed a business loan agreement and promissory note secured by a mortgage

      Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 3 of 12
      on the real estate. The mortgage was recorded in the Office of the Marion

      County Recorder on February 23, 2015.1

[5]   On February 25, 2016, Herron filed a complaint seeking to foreclose his

      judgment lien. Herron named First Financial as a necessary party. First

      Financial filed an answer and cross-claim, asserting the Church was in default

      of the promissory note it signed with First Financial and that First Financial

      was entitled to foreclose on its mortgage. First Financial requested the trial

      court enter judgment in its favor, foreclose on the mortgage, determine the

      priority of all interests in the real estate, and order a sheriff’s sale of the property

      to satisfy the debts.

[6]   Herron filed a motion for summary judgment on June 21, 2016, alleging no

      genuine issues of material fact existed regarding his first and prior judgment lien

      on the real estate and asserting that he was entitled to foreclosure on the

      property to satisfy his judgment lien. First Financial filed a cross motion for

      summary judgment on August 3, 2016, alleging its mortgage had priority over

      Herron’s. At a hearing on October 24, 2016, the parties presented argument to

      the trial court regarding priority. The trial court denied Herron’s motion and

      granted First Financial’s, finding First Financial’s “mortgage lien is senior in

      1
       On March 15, 2012, while Herron’s small claims complaint was pending, the Church donated its real
      property to “First Christian Charities, Inc.” See Appellant’s App. at 74. On appeal, Herron raises an issue
      about whether First Financial has a valid interest in the real estate at all, given the mortgage on the real estate
      was granted by the Church. Because of our resolution of this appeal, we need not decide this issue.

      Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017               Page 4 of 12
priority attaching to the subject real estate.” Appellant’s App., Vol. 2 at 34.

Specifically, the court found as follows:

         4. Pursuant to Indiana Code § 32-21-4-1(b), interests in real
         estate, including mortgages, take priority according to the time of
         their filing. A money judgment becomes a lien on the debtor’s
         real property when the judgment is recorded in the judgment
         docket in the county where the realty is located. A prior
         mortgage lien will prevail over a subsequently recorded judgment
         lien.

         5. First Financial’s Mortgage was properly recorded more than
         nine (9) months before the Superior Court entered the Third
         Herron Judgment de novo. The [Superior Court] Judgment does
         not provide that [it] was retroactively effective prior to the date it
         was entered by the Superior Court, nor could it under Indiana
         law. Therefore, First Financial’s prior Mortgage is superior to
         the subsequent lien created in favor of Herron as a result of the
         entry of the [Superior Court] Judgment.

Id. at 13 (citation omitted). Herron filed a motion to correct error, which the

parties agree was denied.2 Herron then initiated this appeal.3

2
  In the record appears a seven-page order titled “Order Correcting Errors and Granting Summary
Judgment” that purports to grant summary judgment to Herron. Appellant’s App., Vol. 2 at 18-24. The
order is signed by the trial court judge on the last page. Id. at 24. However, on the first page, there is a stamp
that says “Denied.” Id. at 18. The Chronological Case Summary (“CCS”) contains an entry dated April 3,
2017, for an Order Denying Motion to Correct Error. Regardless of the existence of the order in the record
that purports to grant Herron’s motion to correct error and grant him summary judgment on his claim, we
follow the CCS and proceed on the assumption that the motion to correct error was denied as both parties
agree.
3
 After this appeal was initiated, the trial court entered a decree of foreclosure for First Financial and a
sheriff’s sale was set. Herron sought and obtained a stay from this court to preserve the status quo of the real
property until the resolution of this appeal.

Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017              Page 5 of 12
                                 Discussion and Decision
                  I. Summary Judgment Standard of Review
[7]   When reviewing the grant or denial of summary judgment, we apply the same

      test as the trial court: summary judgment is appropriate only if the designated

      evidence shows there is no genuine issue of material fact and the moving party

      is entitled to judgment as a matter of law. Ind. Trial Rule 56(C); Sedam v. 2JR

      Pizza Enterps., LLC, 84 N.E.3d 1174, 1176 (Ind. 2017). Our review is limited to

      those facts designated to the trial court, T.R. 56(H), and we construe all facts

      and reasonable inferences drawn from those facts in favor of the non-moving

      party, Meredith v. Pence, 984 N.E.2d 1213, 1218 (Ind. 2013). On appeal, the

      non-moving party carries the burden of persuading us the grant of summary

      judgment was erroneous. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). A

      grant of summary judgment will be affirmed if it is sustainable upon any theory

      supported by the designated evidence. Miller v. Danz, 36 N.E.3d 455, 456 (Ind.

      2015).

[8]   “Specific findings and conclusions by the trial court are not required, and

      although they offer valuable insight into the rationale for the judgment and

      facilitate our review, we are not limited to reviewing the trial court’s reasons for

      granting or denying summary judgment.” Doe v. Donahue, 829 N.E.2d 99, 106

      (Ind. Ct. App. 2005), trans. denied, cert. denied, 547 U.S. 1162 (2006). In

      addition, the “fact that the parties [made] cross-motions for summary judgment

      does not alter our standard of review. Instead, we must consider each motion

      Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 6 of 12
       separately to determine whether the moving party is entitled to judgment as a

       matter of law.” Id.

                                        II. Priority of Liens
[9]    In granting summary judgment to First Financial and denying summary

       judgment to Herron, the trial court determined that First Financial’s mortgage

       had priority over Herron’s judgment lien. The trial court reasoned that

       Herron’s appeal to the Marion Superior Court from small claims court

       constituted a separate action and Herron’s judgment lien therefore dated back

       only to November 17, 2015, when the Marion Superior Court entered its order;

       whereas First Financial’s mortgage dated to February 23, 2015.

[10]   Pursuant to Indiana Code section 34-55-9-2, a money judgment becomes a lien

       on the debtor’s real property when the judgment is entered and indexed in the

       judgment docket in the county where the real estate is located. See Arend v.

       Etsler, 737 N.E.2d 1173, 1175 (Ind. Ct. App. 2000). A mortgage takes priority

       according to the time of its filing in the recorder’s office of the county where the

       real estate is located. Ind. Code § 32-21-4-1. “Consistent with the common law

       rule that ‘priority in time gives a lien priority in right,’ a prior equitable interest

       or lien will prevail over a judgment lien while the judgment lien will generally

       prevail over subsequently-manifesting equitable interests or liens.” Amici Res.,

       LLC v. Alan D. Nelson Living Trust, 49 N.E.3d 1046, 1053 (Ind. Ct. App. 2016).

       In Yarlott v. Brown, 86 Ind. App. 479, 149 N.E. 921 (1925), the court considered

       whether a judgment lien had priority over a mortgage lien that was perfected

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 7 of 12
       subsequent to the creation of the judgment lien. Concluding the judgment lien

       attached to the property before the mortgage lien, we held the judgment lien

       was the prior lien and had priority over the subsequent mortgage lien. Id. at

       484, 149 N.E. at 922.4

[11]   The issue here is whether Herron’s judgment lien is effective as of May 14,

       2013, when the small claims court entered judgment for him and against the

       Church—which would give his lien priority over First Financial’s mortgage—or

       November 17, 2015, when the Marion Superior Court entered its judgment on

       his appeal—which would give First Financial’s mortgage priority. At the

       summary judgment hearing, Herron defended his priority by noting the $11,000

       judgment was entered on May 14, 2013 and indexed in the county records.

       Although the Church had paid slightly over $11,000 on November 7, 2014, the

       small claims court had collected only principal and filing fees, not attorney fees

       or interest, so there remained amounts outstanding to satisfy the judgment. The

       appeal to the superior court regarding the rescinded order for additional

       attorney fees was “nothing but more [sic] than a continuation of the underlying

       case[.]” Transcript, Volume II at 7. Herron summarized, “my argument is that

       the judgment of . . . May 14, 2013, the underlying judgment attached as a

       judicial lien as to the parties on the date it was rendered. It was also indexed on

       4
         A purchase money mortgage—one that is given as security for a loan, the proceeds of which are used to
       acquire legal title to the real estate being mortgaged—has priority over any other mortgage, lien or other
       claim, even a prior mortgage or lien. Ind. Code § 32-29-1-4. First Financial’s mortgage is not a purchase-
       money mortgage.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017          Page 8 of 12
       that same date, and that’s completely consistent with Indiana Code 34-55-9-2.

       So it’s a valid judgment. It attached to the property.” Id.

[12]   First Financial did “not contest that Mr. Herron had a perfectly valid lien in

       advance of the bank being granted its mortgage.” Id. at 11. Nor did it “contest

       that he currently has a perfectly valid lien . . . as a result of the de novo entry by

       a Superior Court in November of 2015 . . . .” Id. It argued, however, that

       because a November 7, 2014 receipt purported to show a balance of zero

       remaining on the judgment, “there is no judgment lien” as of that date. Id.

       Therefore, First Financial asserted the order for payment of additional attorney

       fees on November 14, 2014, “created a new judgment at that time” but when

       the order was rescinded, “that judgment lien went away.” Id. at 11-12.

       Further, it argued when the Marion Superior Court overturned the small claims

       court’s order on November 17, 2015, “we have a new judgment lien perfectly

       valid, no contention that Mr. Herron can[’t] foreclose it, but he has to foreclose

       it subject to the bank’s mortgage that was recorded nine months earlier than . . .

       that most recent judgment lien was entered.” Id. at 12.

[13]   First Financial tries to parse the facts of this case too finely in order to find a

       way to priority. First, the documents upon which First Financial relies to assert

       the judgment was paid in full as of November 7, 2014, are not determinative.

       As Herron points out, he was also entitled to payment of attorney fees and

       interest on the judgment. The judgment itself was $11,000. Post-judgment

       interest of 8% per annum is statutorily mandated and Herron’s judgment was

       therefore accruing interest from the day the judgment was entered. See Ind.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 9 of 12
       Code § 24-4.6-1-101. The allegedly “paid in full” amount on the documents

       First Financial designated is $11,191. Clearly, statutory interest alone after

       eighteen months on an $11,000 judgment is greater than $191, let alone

       additional attorney fees incurred in the collection. No release of judgment was

       ever filed and no court order finding the judgment had been paid in full was

       ever entered. Therefore, the evidence fails to prove the judgment had been

       satisfied. Second, proceedings supplemental are extensions of the underlying

       action, not separate and independent actions. Lewis v. Rex Metal Craft, Inc., 831
N.E.2d 812, 817 (Ind. Ct. App. 2005). They are initiated under the same cause

       number in the same court that entered the judgment. Id. Therefore, even if the

       original judgment had been paid in full, the attorney fees accrued in pursuing

       payment of a judgment through proceedings supplemental relate back to the

       original judgment rather than creating a new judgment lien.

[14]   Third, First Financial misunderstands the effect of the small claims court’s

       rescission of its attorney fee order and the appeal to the Marion Superior Court.

       Herron appealed the small claims court’s April 15, 2015, decision to rescind its

       previous order. Therefore, the order did not go into effect pending the outcome

       of the appeal. Indiana Code section 33-34-3-15 governs appeals from Marion

       County small claims courts. “All appeals from judgments of the small claims

       court shall be taken to the circuit court or superior court of the county and tried

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 10 of 12
       de novo.” Ind. Code § 33-34-3-15(b).5 Although the de novo standard

       authorizes litigation which reaches the superior court to, in essence, begin anew

       in regard to the pleadings, the superior court is nonetheless acting as a

       reviewing court in this instance. Martin v. Eggman, 776 N.E.2d 928, 931 (Ind.

       Ct. App. 2002). In other words, the superior court proceedings are not entirely

       new litigation; for instance, questions about the statute of limitations would

       relate back to the original filing in small claims court rather than being decided

       as of the date the case was appealed to the superior court. Therefore, when the

       Marion Superior Court in this case determined the small claims court had

       improperly set aside its earlier judgment, it did not create a new judgment, but

       affirmed the judgment of April 1, 2014.

[15]   In sum, Herron has but one judgment lien which was created on May 14, 2013,

       and has not yet been satisfied. Accordingly, Herron has demonstrated there is

       no genuine issue as to the material fact of priority: his lien is prior in time to

       First Financial’s mortgage recorded on February 23, 2015, and therefore,

       Herron’s lien has priority and he is entitled to judgment in his favor.

                                                 Conclusion

       5
         As of July 1, 2018, “[a]ll appeals from judgments of the [Marion County] small claims court shall be taken
       to the court of appeals in the same manner as a judgment from a circuit or superior court.” Ind. Code § 33-
       34-3-15.1.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017         Page 11 of 12
[16]   The trial court erred in denying summary judgment to Herron and granting

       summary judgment to First Financial. The judgment of the trial court is

       reversed and this cause is remanded to the trial court to enter judgment

       consistent with this opinion.

[17]   Reversed and remanded.

       Riley, J., and Pyle, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 49A02-1704-PL-873 | December 28, 2017   Page 12 of 12