Horizon Bank, N.A. v. Centier Bank (mem. dec.)

Indiana Court of Appeals·Decided November 19, 2015·No. 46A04-1409-MF-408·Published

Opinion

MEMORANDUM DECISION

ON REHEARING Pursuant to Ind. Appellate Rule 65(D), this Nov 19 2015, 9:19 am 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 Kurt V. Laker James M. Yannakopoulos Mark S. Gray Koransky, Bouwer, and Poracky, Craig D. Doyle P.C. Doyle Legal Corporation, P.C. Dyer, Indiana Indianapolis, Indiana

IN THE COURT OF APPEALS OF INDIANA

Horizon Bank, N.A., November 19, 2015 Appellant-Defendant, Court of Appeals Case No. 46A04-1409-MF-408 v. Appeal from the LaPorte Superior Court Centier Bank, The Honorable Richard R. Appellee-Plaintiff. Stalbrink Jr., Judge

Trial Court Cause No. 46D02- 1212-MF-772

Brown, Judge.

Court of Appeals of Indiana | Memorandum Decision on Rehearing 46A04-1409-MF-408 | November 19, 2015 Page 1 of 5 [1] Horizon Bank, N.A. (“Horizon”) appealed the denial of its motion for relief

from default judgment, and in a memorandum decision this court found that

Horizon established that its failure to timely respond to the complaint of

Centier Bank (“Centier”) constituted excusable neglect, that it had alleged a

meritorious defense, and thus that it was entitled to relief from the default

judgment under Trial Rule 60(B)(1). Horizon Bank, N.A., v. Centier Bank, No.

46A04-1409-MF-408, slip op. at 10-12 (Ind. Ct. App. August 18, 2015). We

concluded that Horizon demonstrated excusable neglect based on the

relatively short length of delay, the security interest of Horizon and the

amounts at issue, the fact the complaint referenced a mortgage securing a

previous loan which had been paid in full, the absence of evidence of prejudice

to Centier and the substantial evidence of prejudice to Horizon, and the

severity of the sanction of default judgment. Id. at 10. We also concluded that

Horizon alleged a meritorious defense by claiming that Centier had entered

into the Subordination Agreement pursuant to which it agreed to subordinate

the Centier Mortgage to the Horizon Mortgage. Id. at 11. We reversed the

trial court’s denial of Horizon’s motion for relief from default judgment and

remanded for further proceedings. Id. at 11-12. Centier has petitioned for

rehearing asserting a lack of evidence presented by Horizon in support of its

motion. We grant its petition, not for the reason asserted, but in light of a

recent decision by our Supreme Court.

[2] Since our decision in this case, the Indiana Supreme Court handed down

Huntington Nat. Bank v. Car-X Associates Corp. (filed August 21, 2015), Ind. No. Court of Appeals of Indiana | Memorandum Decision on Rehearing 46A04-1409-MF-408 | November 19, 2015 Page 2 of 5 64S04-1504-MF-187, slip op. at 6-8, finding no grounds for relief under Trial

Rule 60(B)(1), but remanding for consideration under Trial Rule 60(B)(8).

Under Trial Rule 60(B)(8), a judgment may be set aside for “any reason

justifying relief from the operation of the judgment” other than those set forth

in sub-paragraphs (1) through (4). In Huntington, after discussing whether

Huntington was entitled to relief under Trial Rule 60(B)(1), the Court turned

its attention to Trial Rule 60(B)(8) “in order to resolve whether under the

circumstances the trial court abused its discretion in failing to set aside the

default judgment for equitable reasons . . . .” Huntington, slip op. at 6. The

Court observed that, in addition to claiming its prior mortgage as a

meritorious defense to Car-X’s underlying suit, Huntington listed five

considerations in support of setting aside the default judgment for equitable

reasons: (1) its substantial interest in the real estate through its mortgage; (2)

its “excusable reason” for untimely responding; (3) its quick action to set aside

the default judgment once the complaint and summons were discovered; (4)

its significant loss if the default judgment was not set aside; and (5) the

minimal prejudice to Car-X should the case be reinstated. Id. at 7. The Court

then concluded: “We think it best to remand to the trial court to reevaluate

Huntington’s motion upon consideration of these and all relevant

circumstances—especially Huntington’s meritorious defense to the underlying

suit, the substantial amount of money involved, and the lack of prejudice to

Car-X.” Id. (footnote omitted). The Court also noted that default judgment is

Court of Appeals of Indiana | Memorandum Decision on Rehearing 46A04-1409-MF-408 | November 19, 2015 Page 3 of 5 an extreme remedy and is not a trap to be set by counsel to catch unsuspecting

litigants and should not be used as a “gotcha” device. Id.

[3] Although sub-paragraph (8) was not specifically identified in this case, we note

that Horizon, similar to Huntington in Huntington, identified equitable

considerations in support of its motion for relief from the default judgment.

First, Horizon alleged in its Trial Rule 60(B) motion that it has a lien on the

Property under the Horizon Mortgage which, according to the Subordination

Agreement recorded in 2012, has priority over the Centier Mortgage, and thus

that it has a substantial interest in the Property. Second, Horizon identified its

“excusable reason” for untimely responding, specifically, that Centier’s

complaint referenced Horizon’s 2008 mortgage, which had secured a loan that

had been paid in full. Third, Horizon alleged facts that it took quick action to

file its motion for relief from default judgment once the foreclosure action was

discovered, and it attached an affidavit to its motion stating that it first became

aware of the foreclosure action on November 6, 2013 when it received a copy

of an objection in John Pouzar’s Chapter 13 bankruptcy proceedings, and it

filed its motion for relief nine days later. Fourth, Horizon set forth facts that it

would incur a substantial loss if the default judgment was not set aside. Fifth,

Horizon presented facts that there would be no prejudice to Centier should the

case be reinstated. As noted in our memorandum decision, the priority of the

parties’ security interests in the Property can be resolved based on the 2005

Centier Mortgage, recorded in October 2005, and the 2011 Horizon Mortgage

and the Subordination Agreement of Mortgage recorded in January 2012, and Court of Appeals of Indiana | Memorandum Decision on Rehearing 46A04-1409-MF-408 | November 19, 2015 Page 4 of 5 the availability of those documents was not impacted by Horizon’s delay.

Horizon’s counsel argued at the January 17, 2014 hearing that Centier knew

that Horizon was still involved with the loan, that Centier had signed

subordination agreements in 2007, 2008, and 2011 with respect to Horizon’s

mortgages which specifically subordinated the 2005 Centier Mortgage, and

thus that Centier “was well aware [it was] in a second position and that

Horizon was actively involved with this loan.” Transcript at 6. Horizon

made these and other equitable arguments on appeal. Finally, Horizon

alleged a meritorious defense to the underlying suit based on the

subordination agreements as discussed in our memorandum decision.

[4] Based on the record and in light of Huntington, we remand to the trial court to

evaluate whether Horizon is entitled to relief from the default judgment under

sub-paragraph (8) upon consideration of these circumstances. See Huntington

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