Court Opinion

ID: 3171491
Source: CourtListenerOpinion
Date Created: 2016-01-22 16:04:27.105617+00
Date Added: 2024-06-11T11:59:29.083374
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),                                          Jan 22 2016, 8:15 am
this Memorandum Decision shall not be
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT                                      ATTORNEY FOR APPELLEE
Jason R. Delk                                                Robert C. Beasley
Daniel J. Gibson                                             Beasley Law Office
Delk McNally LLP                                             Muncie, Indiana
Muncie, Indiana

                                             IN THE
     COURT OF APPEALS OF INDIANA

Aaron Lake, National City                                    January 22, 2016
Mortgage Co., The Bank of New                                Court of Appeals Case No.
York Mellon Trust Company,                                   18A04-1503-PL-129
N.A., and Unifund CCR                                        Appeal from the Delaware Circuit
Partners,1                                                   Court
Appellants-Defendants,                                       The Honorable Marianne L.
                                                             Vorhees, Judge
         v.                                                  Trial Court Cause No.
                                                             18C01-1208-PL-21
Kevin Butler d/b/a Butler
Homes,

1
  National City Mortgage Co., The Bank of New York Mellon Trust, N.A., and Unifund CCR Partners are
not actively participating in this appeal; however, under Indiana Appellate Rule 17(A), a party of record in
the trial court shall be a party on appeal.

Court of Appeals of Indiana | Memorandum Decision 18A04-1503-PL-129 | January 22, 2016                 Page 1 of 5
      Appellee-Plaintiff.

      Kirsch, Judge.

[1]   Aaron Lake (“Lake”) appeals the trial court’s denial of The Bank of New York

      Mellon Trust Company’s (“BNYM”) Motion to Enforce the Court’s Priority

      Order and Motion to Reconsider, contending that the trial court erred in failing

      to order the proceeds of a Sheriff’s Sale paid to the first priority lien holder.

[2]   We affirm.

                                  Facts and Procedural History
[3]   Lake was the owner of certain residential real estate in Delaware County,

      Indiana, commonly known as 5300 North County Road 500 West, Muncie,

      Indiana, 47304 (the “Real Property”). BNYM held a mortgage on the Real

      Property which had priority over all other liens. After a fire destroyed a

      significant portion of the residence on the property, Butler was hired in 2011 to

      rebuild it. In 2012, Butler had completed the majority of the work when Lake

      failed to make several payments totaling $48,841.58. Butler stopped working

      and filed a Notice of Mechanic’s Lien and his Complaint to Foreclose

      Mechanic’s Lien and for Breach of Contract.

[4]   After a bench trial, the trial court issued Findings of Fact, Conclusions

      Thereon, and Judgment Concerning Priority Issues. The trial court found that

      Butler had a valid mechanic’s lien that was second in line to BNYM’s mortgage

      Court of Appeals of Indiana | Memorandum Decision 18A04-1503-PL-129 | January 22, 2016   Page 2 of 5
      and that he was entitled to an in rem judgment against the Real Property in the

      amount of $58,505.28. Butler filed a Praecipe for Sheriff’s Sale seeking to

      execute on his in rem judgment and entered into an agreement with BNYM that

      the sale would be subject to its priority lien.

[5]   On July 9, 2014, the Sheriff’s Sale was held. The highest bid for the property

      was submitted by RVZ, Inc. for $40,001.00, subject to BNYM’s priority lien.

      The sale proceeds were distributed to Butler, reducing Lake’s liability to

      $18,504.28. BNYM’s lien on the Real Property, including the Improvements,

      maintained its first priority after the Sheriff’s Sale.2 Lake now appeals, asserting

      that the proceeds from the Sheriff’s Sale should have been applied to BNYM’s

      lien.

                                      Discussion and Decision
[6]   The foreclosure of a junior lien upon real estate subject to prior liens and

      encumbrances is not a frequent occurrence, but it is not without precedent.

      Indeed, the legitimacy of the process was recognized by our Supreme Court

      more than one hundred years ago.                 See, e.g., Vadevender v. Moore, 146 Ind. 44,

      44 N.E. 3 (Ind. 1896). The foreclosure of a junior lien subject to prior liens has

      no effect on the prior liens, and the purchaser of the property at a foreclosure

      sale takes the property subject to the prior liens. See id. The senior mortgage or

      2
       On March 11, 2015, the trial court entered its Final Judgment in Favor of Plaintiff and Against Defendant
      Aaron Lake granting Butler an in personam judgment for the balance of Lake’s obligation to Butler remaining
      after the Sheriff’s Sale.

      Court of Appeals of Indiana | Memorandum Decision 18A04-1503-PL-129 | January 22, 2016           Page 3 of 5
      other lien is still attached to and secured by the property. See id. See also

      Hancock v. Fleming, 103 Ind. 533, 3 N.E. 254, 256 (1885) (“There should have

      been a decree of foreclosure in favor of the appellant for the amount of the debt,

      subject to the lien of the judgment.”) and Union Realty Co. of Greensburg v. Older,

      97 Ind. App. 412, 185 N.E. 522, 524 (1933) (Purchaser at a foreclosure sale

      “became entitled to all the right, title, and interest of the mortgagor in the premises . . .

      and necessarily took the estate . . . subject to all prior liens to which it would have been

      subject in the hands of the mortgagor.”)

[7]   Applying this long-established procedure to the facts of this case, the Sheriff’s

      Sale of the real estate subject to prior liens and encumbrances conveyed Butler’s

      second priority position in the real estate to the purchaser at the sale and only

      Butler’s second priority position. It had no effect on the BNYM mortgage, and

      BNYM retained its mortgage priority on the real estate.

[8]   As a result, BNYM was not harmed in any way by the Sheriff’s Sale of the

      property here at issue, subject to prior liens or by the distribution of the sale

      proceeds to Butler. Prior to the sale, it was the holder of a note and mortgage in

      the original loan amount of $180,000.00. After the Sheriff’s Sale, BNYM’s

      rights regarding its first mortgage lien were unaffected; it retained its first

      mortgage upon the property in the original amount of $180,000.00, and Lake’s

      personal liability to BNYM for the indebtedness securing the mortgage was

      likewise unaffected. Indeed, we note that BNYM, which was at all times

      represented before the trial court by counsel and is a party to these proceedings

      pursuant to Indiana Appellate Rule 17(A), has not participated in these

      Court of Appeals of Indiana | Memorandum Decision 18A04-1503-PL-129 | January 22, 2016   Page 4 of 5
       proceedings or made any claim of harm. Because the sale conveyed only

       Butler’s secondary lien position in the real estate, it had no effect on the

       BNYM’s mortgage. Both its in rem rights in the property arising from its

       mortgage and its in personam rights in regard to the indebtedness were

       unaffected by the trial court’s judgment, the foreclosure sale, and this appeal.

[9]    Similarly, Lake was not harmed in any way by the foreclosure and subsequent

       sale subject to the first mortgage of BNYM.                Prior to the Sheriff’s Sale, he was

       personally liable for the indebtedness on the original $180,000.00 promissory

       note to BNYM secured by a first mortgage upon the real estate here at issue.

       After the sale, he was personally liable for the indebtedness on the original

       $180,000.00 promissory note to BNYM secured by a first mortgage upon the

       real estate here at issue. In regard to the mechanic’s lien which is the subject of

       this appeal, Lake was liable for the indebtedness owed to Butler in the amount

       of $58,505.28, which was secured by a mechanic’s lien on Lake’s real estate.

       The sale proceeds of $40,001.00 paid to Butler reduced Lake’s liability to

       $18,504.28.

[10]   The sale of Lake’s property subject to the BNYM mortgage was conducted in

       accordance with Indiana law, and we affirm the trial court’s order denying

       BNYM’s Motion to Enforce the Court’s Priority Order and Motion to

       Reconsider.

[11]   Affirmed.

       Najam, J., and Barnes, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 18A04-1503-PL-129 | January 22, 2016   Page 5 of 5