Horizon Bank, N.A. v. Centier Bank (mem. dec.) ( 2015 )

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.
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[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.
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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
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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
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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
Nat. Bank v. Car-X Associates Corp. (filed August 21, 2015), Ind. No. 64S04-
1504-MF-187, slip op. at 7.
[5] We grant Centier’s petition for rehearing and remand to the trial court to
evaluate whether equitable reasons under sub-paragraph (8) support granting
Horizon’s motion for relief from the default judgment.
Crone, J., and Pyle, J., concur.
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