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.
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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
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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.
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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
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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.
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