Kelli Alvarez f/k/a Kelli Galanos v. Horizon Bank, N.A. (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), this Apr 06 2015, 9:43 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.
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Theodore L. Stacy Rebecca H. Fischer
Valparaiso, Indiana Laderer & Fischer, P.C.
South Bend, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Kelli Alvarez April 6, 2015
f/k/a Kelli Galanos, Court of Appeals Case No.
46A03-1404-CC-129
Appellant-Defendant,
Appeal from the Laporte Superior
v. Court; The Honorable Jennifer L.
Koethe, Judge;
46D03-1205-CC-401
Horizon Bank, N.A.,
Appellee-Plaintiff.
May, Judge.
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[1] Kelli Alvarez f/k/a Kelli Galanos (Kelli) appeals judgment in favor of Horizon
Bank, N.A. (Horizon). She presents three issues for our review, which we
consolidate and restate as:
[2] 1. Whether the court erred when it denied Kelli’s Motion to Dismiss based
on Trial Rule 12(B)(1); and
[3] 2. Whether the trial court abused its discretion when it entered summary
judgment in favor of Horizon regarding Horizon’s original claim.
Facts and Procedural History1
[4] Kelli was married to George Galanos (George). Their divorce was final on
May 18, 2011. As part of the divorce decree, George was awarded “all rights,
title, interest, and exclusive use and possession” of all four properties the couple
owned during their marriage. (App. at 56.) For each property, the court
ordered, “[George] shall be responsible for and pay the outstanding mortgage(s)
and utilities billed to the premises.” (Id.) Kelli was ordered to “execute and
deliver to [George] a Quit Claim Deed” to each property within thirty days of
the divorce decree. (Id.) One of those properties, located at 1915 Redwood
Lane (Redwood Property) in Munster, Indiana, is the subject of the instant
matter.
1
We held oral argument on this case on February 27, 2015, as part of the Women’s Bench Bar Retreat at
Culver Cove in Culver, Indiana. We thank the Women’s Bench Bar for their hospitality and counsel for their
presentations.
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[5] During the divorce proceedings, George was also in the midst of bankruptcy
proceedings, and the divorce court order noted George testified “he was
confident that he would be able to pay the installment debt owed against the
four properties through his bankruptcy plan. Additionally, [George] testified
that he would sell the properties if this was not possible for any unforseen [sic]
reason.” (Id. at 55.) One of the creditors in the bankruptcy proceedings was
Horizon, which held a second mortgage on the Redwood Property. Horizon’s
mortgage was created to secure a $150,000 promissory note.
[6] On May 7, 2012, the bankruptcy court issued an “Agreed Order for Relief of
Status as Co-Debtor” which stated:
1. On January 19, 2010, [George] filed a Bankruptcy Petition
under Chapter 13 of the United States Bankruptcy Code.
2. The jurisdiction of this proceeding is invoked pursuant to 28
U.S.C. § 151 and 1334. [sic]
3. On or about February 7, 2007, [Kelli] executed and delivered to
Horizon a promissory note in the original principal amount of
$150,000.00 (the “Note”).
4. In order to secure payment of the Note and other obligations
contained in the Note, [Kelli] and [George] executed and delivered to
Horizon on February 7, 2007 a second mortgage with respect to
[Redwood Property].
5. As of September 30, 2009 the total amount owing on the Note
was principal of $152,975.68 with interest accruing after that date at
the rate of $38.71 per diem. The Note is in default for the June 2009
payment and payments due thereafter.
6. Horizon wishes to file an action against [Kelli] to collect the
Note, and has agreed to the entry of an order stripping its lien on
[Redwood Property], in Adversary Proceeding No. 12-02008 filed by
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[George], effective upon [George’s] completion of the Chapter 13 plan
and the entry of discharge.
(Id. at 20.)
[7] On May 30, 2012, Horizon filed the cause against Kelli that underlies this
appeal, a “Complaint on Promissory Note” alleging Kelli was “in default under
the terms of the [Promissory Note] in that she has failed to make the payment
due for June 2009 or any month after.” (Id. at 16.) Horizon noted in its
complaint the bankruptcy court’s order allowing Horizon to file a claim against
Kelli, and asked for a judgment against Kelli of “$190,497.52, together with
accrued interest after May 11, 2012, plus Horizon’s cost of collection, including
reasonable attorney fees, the costs of this action and all other just and proper
relief in the premises.” (Id. at 17.)
[8] On August 20, 2012, Horizon filed a Motion for Summary Judgment, and the
trial court set a hearing on the matter for October 29, 2012. On August 24,
2012, Kelli filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction.
Horizon responded, and on November 1, 2012, the trial court denied Kelli’s
Motion to Dismiss.
[9] On December 4, Kelli filed her response to Horizon’s Motion for Summary
Judgment and added a counterclaim alleging constructive fraud. Horizon
moved to dismiss Kelli’s counterclaim on December 20, and on December 28,
the trial court entered final judgment in favor of Horizon without addressing
Kelli’s counterclaim.
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[10] On January 10, 2013, Kelli responded to Horizon’s motion to dismiss her
counterclaim. On January 28, Kelli filed a motion to correct error regarding the
trial court’s December 28 judgment. After a hearing, the trial court denied
Kelli’s motion to correct error and decided, based on the pleadings, that
Horizon’s motion to dismiss would be more properly considered a motion for
summary judgment. It directed the parties to designate evidentiary materials in
support of their arguments.
[11] Kelli appealed the denial of her motion to correct error, and we dismissed her
appeal as untimely. See Alvarez v. Horizon Bank, N.A., 46A03-1304-CC-155 (Ind.
Ct. App. December 11, 2013) (Alvarez’s appeal was untimely because she did
not appeal a final judgment; Judge May’s concurrence reasoned the appeal
should be dismissed because, while it was interlocutory in nature because it
involved the payment of money, Alvarez did not file her appeal within thirty
days of the summary judgment for Horizon). On January 8, 2014, the trial
court entered summary judgment for Horizon on Kelli’s counterclaim.
Discussion and Decision
1. Kelli’s Motion to Dismiss
[12] The standard for reviewing a ruling on a motion to dismiss for lack of subject
matter jurisdiction depends on whether the trial court resolved disputed facts
and, if so, whether it conducted an evidentiary hearing or ruled on a paper
record. Johnson v. Patriotic Fireworks, Inc. 871 N.E.2d 989, 992 (Ind. Ct. App.
1997). If the facts before the trial court are not disputed, the question of subject
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matter jurisdiction is one of law that we review de novo. Id. Likewise, if the
facts are disputed but the trial court rules on a paper record, the standard of
review is also de novo. Id.
[13] In her Motion to Dismiss, Kelli argued:
1. That Kelli was married to [George] during the time the alleged
promissory note upon which [Horizon] now sues was allegedly
executed.
2. That by its own terms, the alleged promissory note was secured
by a mortgage lien on [Redwood Property].
3. That after making the alleged promissory note, Kelli and
George’s marriage was dissolved pursuant to court order entered in
cause number 46D02-0911-DR-373, on May 18, 2011, by the Special
Judge then sitting in LaPorte Superior Court Number 2. The decree is
attached hereto as “Defendant 1”. [sic]
4. That the dissolution decree assigned the rights and duties of the
parties as well as divided all marital property including the rights to the
real estate serving as security interest for the alleged promissory note;
and, also assigned the obligations on that alleged debt upon which
Horizon now sues.
5. That the dissolution decree ordered Kelli to assign to George all
of her rights in the real property that is cited as security for the alleged
promissory note (as that real property is identified within the alleged
note, 1915 Redwood Lane) in exchange for George’s assumption of
debt on that property and for all other consideration and obligations
contemplated and ordered in the decree.
6. That Horizon is well aware of the dissolution of the marriage of
Kelli and George, having litigated the issue of relief from stay with
George regarding the alleged promissory note and its alleged security
known as 1915 Redwood Lane in the bankruptcy court.
7. That Horizon and George entered into an agreed order
(“agreed order”) regarding the alleged promissory note secured by
1915 Redwood Lane as evidenced by the exhibits attached to
Horizon’s complaint.
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8. That Kelli was not a party to Horizon and George’s agreement
or their agreed order.
9. That the agreed order entered into between George and
Horizon in the bankruptcy court releases Horizon’s mortgage lien on
[Redwood Property], in exchange for George consenting to Horizon’s
pursuit of Kelli for payment of the alleged promissory note secured by
the same real estate Kelli was ordered by the dissolution court to
convey to George who was ordered to assume the debt thereon.
10. That the agreed order did not create in Horizon any new rights
or remedies superior to those previously decided by the dissolution
court, but merely released Horizon from the automatic stay against
prosecution of its alleged interests regarding the alleged promissory
note.
11. That the exchange of interests between George and Horizon via
their agreed order did not modify the dissolution decree containing
and ordering the property settlement between George and Kelli.
12. That Horizon is, however, attempting to use its agreement with
George to work a modification of the marital dissolution order,
specifically the former real property and the debt attaching to it,
without Kelli’s consent; and, more importantly, without the
knowledge or consent of the dissolution court.
13. That Horizon’s complaint in this action seeks to convert its
agreement with George into an enforceable right of collection against
Kelli, which is nothing more than a collateral attack on the marital
dissolution order and its property settlement.
(App. at 41-44.)
[14] In support of her argument for dismissal, Kelli cited Fackler v. Powell, 839
N.E.2d 165 (Ind. 2005). In Fackler, the parties were divorced, and as part of the
dissolution, Powell, the husband, was to assign payment of a promissory note
and mortgage to Fackler, the wife. Fackler sued Powell, contending she was
owed a lump sum of $103,000.00. Powell moved to dismiss the action, arguing
the dissolution court had exclusive jurisdiction over the matter. The trial court
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disagreed, and granted summary judgment in favor of Fackler. On appeal we
agreed the trial court had jurisdiction over the matter.
[15] Our Indiana Supreme Court reversed, holding the property settlement was
within the exclusive jurisdiction of the dissolution court. It noted:
In her brief and in oral argument, Fackler maintained that her claim of
entitlement to the $103,000 was brought both against Powell and
Powell’s “Living Trust, two separate legal entities. The Family Court
which issued the [dissolution decree] would not have had personal
jurisdiction or subject matter jurisdiction over the non-party to the
divorce action, that being the Living Trust.” Appellant’s Br. in Resp.
to Pet. to Trans. at 9. Fackler did not present any authority for this
proposition in her brief; at oral argument, she cited Miller v. Partridge,
734 N.E.2d 1061, 1064 (Ind. Ct. App. 2000), and Kiltz v. Kiltz, 708
N.E.2d 600, 602 (Ind. Ct. App. 1999), transfer denied, 726 N.E.2d 302.
These cases both address the question of whether a child designated in
a property settlement agreement as the beneficiary of a parent’s life
insurance policy is a third-party beneficiary of the settlement
agreement, entitled to enforce the designation. But neither case
involved a claim by one of the parties to the dissolution nor addressed
the propriety of bringing such a claim in a court other than the
dissolution court. Fackler has not persuaded us that it would have
been improper to join the Living Trust in an enforcement action in the
Dissolution Court or that she would not have been able otherwise to
enforce a judgment obtained from the Dissolution Court against the
Living Trust.
Id. at 170.
[16] In her motion, Kelli argued, pursuant to Fackler:
14. That the court issuing Kelli and George’s dissolution decree has
exclusive and continuing jurisdiction to interpret and adjudicate all
property issues designated within and emanating from the dissolution
decree. Fackler v. Powerl, [sic] 839 N.E.2d 165 (S. Ct. Ind. 2005). [sic]
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15. That the alleged promissory note, the real property securing it,
and the rights and obligations between George and Kelli regarding that
real property and its debt are issues that “emanate” from the
dissolution decree, which allocated the rights, property, and
obligations of the parties.
16. That this court did not issue the dissolution decree dissolving
Kelli and George’s marriage; and, therefore lacks subject matter
jurisdiction over Horizon’s collateral attack on the dissolution decree.
Id.
17. That the issues alleged by Horizon, and pursuant to its deal
with George, concern the division of marital property and the division
of marital obligations on debt secured by that marital property. Id.
18. That Horizon’s choice of this forum to litigate the rights and
obligations of the parties to the marital dissolution according to the
terms of the agreement Horizon reached in its agreement with George,
is a collateral attack upon the dissolution decree entered by the
dissolution court, which divided the property cited as security for the
alleged promissory note upon which Horizon now sued. Id. At [sic]
168-169.
(App. at 44-45.)
[17] Fackler does not control, because Horizon was not a party to the dissolution
action and Kelli was liable for the Promissory Note regardless of the dissolution
court’s order. In Hazifotis v. Citizens Federal Savings and Loan, 505 N.E.2d 445,
447 (Ind. Ct. App. 1986), Citizens Federal Savings and Loan sued Hazifotis for
nonpayment of a debt he thought he had transferred to another person when
Hazifotis sold his interest in a business to his business partner, Thureanos. We
noted:
As part of the transaction, Hazifotis intended that Thureanos would
assume his outstanding mortgage explaining his desire to Dominic
Cefali, president of Gary Federal [a subsidiary of Citizens Federal
Savings and Loan]. However, there were no further discussions
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because interest rates were too high. No paperwork was prepared to
effect an assumption nor was Gary Federal’s permission sought.
When Hazifotis completed the sale he knew that there had been no
transfer of his obligation. Thureanos never assumed the mortgage.
Only the Gary Federal Board could approve an assumption and as a
matter of policy, such an assumption would never release the original
obligor.
[18] Id. at 447. We held: “The conveyance by a mortgagor of the mortgaged
premises to another does not exonerate him from personal liability for the debt
secured.” Id.
[19] Additionally, the trial court did not err, as Horizon noted the “divorce decree
itself acknowledges that Kelli remained liable on the Note until George
refinanced the Note . . . Horizon never agreed to a refinancing of the Note.
Horizon could not be ordered by the divorce court to refinance the Note.”
(App. at 75.) Finally, the terms of the Note Kelli signed indicated:
CHOICE OF VENUE. If there is a lawsuit, I agree upon Lender’s
request to submit to the jurisdiction of the courts of LaPorte County,
State of Indiana.
*****
GENERAL PROVISIONS….. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no party who
signs this Note, whether as a maker, guarantor, accommodation maker
or endorser shall be released from liability.
(Id. at 75-76.) Accordingly, the trial court did not err when it denied Kelli’s
motion to dismiss because Horizon’s action was properly filed in the trial court,
as Horizon was not under the jurisdiction of the dissolution court, as Kelli
asserted.
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2. Summary Judgment
[20] We review summary judgment de novo, applying the same standard as the trial
court. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). Drawing all
reasonable inferences in favor of the non-moving party, we will find summary
judgment appropriate if the designated evidence shows there is no genuine issue
as to any material fact and the moving party is entitled to judgment as a matter
of law. Id. A fact is material if its resolution would affect the outcome of the
case, and an issue is genuine if a trier of fact is required to resolve the parties’
differing accounts of the truth, or if the undisputed material facts support
conflicting reasonable inferences. Id.
[21] The initial burden is on the summary-judgment movant to demonstrate there is
no genuine issue of fact as to a determinative issue, at which point the burden
shifts to the non-movant to come forward with evidence showing there is an
issue for the trier of fact. Id. While the non-moving party has the burden on
appeal of persuading us a summary judgment was erroneous, we carefully
assess the trial court’s decision to ensure the non-movant was not improperly
denied his day in court. Id.
[22] Our summary judgment policies aim to protect a party’s day in court. Id.
While federal practice permits the moving party to merely show that the party
carrying the burden of proof lacks evidence on a necessary element, we impose a
more onerous burden -- to affirmatively negate an opponent’s claim. Id. That
permits summary judgment to “be precluded by as little as a non-movant’s
‘mere designation of a self-serving affidavit.’” Id. (quoting Deuitch v. Fleming,
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746 N.E.2d 993, 1000 (Ind. Ct. App. 2001), trans. denied). Summary judgment
is not a summary trial, and it is not appropriate just because the non-movant
appears unlikely to prevail at trial. Id. at 1003-04. We “consciously err[] on the
side of letting marginal cases proceed to trial on the merits, rather than risk
short-circuiting meritorious claims.” Id. at 1004.
[23] Horizon argued in its motion for summary judgment there was no genuine
issue of material fact and it was entitled to judgment as a matter of law. It
designated as evidence an Affidavit in Proof of Damages, and Affidavit of Non-
Military Status, Affidavit of Attorney Fees, and Designation of Proof. After her
Motion to Dismiss was denied, Kelli filed a response to Horizon’s motion,
reasserting lack of jurisdiction over the matter, and arguing:
Horizon’s action against Kelli constitutes an equitable foreclosure and
foreclosure at law of her mortgage interest in Redwood Lane without
offering her a recourse of redemption in violation of Indiana law, and
in violation of the mortgage foreclosure notice provisions in Indiana
Code 32-30-10.5, and the requirement of strict foreclosure. Patterson v.
Grace, 661 N.E.2d 580, 586 (Ind. Ct. App. 1996). [sic]
[24] (App. at 107.) Kelli designated as evidence the marital dissolution order
attached to her Motion to Dismiss and a copy of the mortgage securing the
promissory note.
[25] The trial court granted summary judgment for Horizon, finding “no genuine
issues as to the material facts alleged in Horizon’s Complaint and that Horizon
is entitled to judgment as a matter of law.” (Id. at 10.) The trial court ordered
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Kelli to pay Horizon $190,644.96 “plus interest accruing after May 12, 2012.”
(Id.)2
[26] On appeal, Kelli argues summary judgment was improper because she
presented genuine issues of material fact in her response to Horizon’s Motion
for Summary Judgment. She incorporates her arguments regarding the Motion
to Dismiss. Regarding her foreclosure argument, Kelli asserts her rights as a
mortgagor under Ind. Code chapter 32-30-10.5 and argues Horizon did not
properly inform her as required by Ind. Code § 32-30-10.5-8 that the debt owed
to Horizon was in default. She asserts, “[t]he deal that Horizon brokered with
George affects Kelli’s rights under I.C. 32-30-10.5, and Horizon offered no
evidence that it had complied with the notice provisions of the statute.” (Br. of
Appellant at 20.)
[27] However, Ind. Code chapter 32-30-10.5 does not apply to a promissory note,
and the action filed against Kelli was not a foreclosure action, as evidenced by
the cause number filed with the trial court, which “indicates that the action was
filed as a civil collection matter (CC) and not a mortgage foreclosure (MF).”
(Br. of Appellant at 14.)
2
Kelli filed a Motion to Correct Error, in which she argued the summary judgment was error because the
order was not dispositive of all the issues before the court; it did not include judgment on Kelli’s
counterclaim, the court’s order prejudged her counterclaim, and the court did not have jurisdiction over the
matters before it. Kelli does not argue the trial court erred when it denied her Motion to Correct Error, and
our standard of review for appeal of a Motion to Correct Error directs us to consider the underlying order,
here the summary judgment for Horizon. See In re Paternity of H.H., 879 N.E.2d 1175, 1177 (Ind. Ct. App.
2008) (review of motion to correct error includes review of underlying order).
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[28] Horizon was not required to file foreclosure proceedings against Kelli, and
could instead sue on the note and obtain a judgment. See National City Bank of
Indiana v. Morris, 717 N.E.2d 934, 939 n.2 (Ind. Ct. App. 1999) (“Of course, a
mortgagee is not obligated to seek foreclosure. She may sue on the note and
obtain a judgment.”), trans. denied. The collection of the promissory note is not
governed by Ind. Code chapter 32-30-10.5 because that chapter applies only to
first mortgages, and the promissory note was a second mortgage on the
Redwood Property. Ind. Code § 32-30-10.5-5 defines mortgage as a “loan” or
a:
consumer credit sale; that is or will be used by the debtor primarily for
personal, family or household purposes and that is secured by a
mortgage (or other consensual security interest) that constitutes a first
lien on a dwelling or on residential real estate upon which a dwelling is
constructed or intended to be constructed.
[29] Finally, Ind. Code chapter 32-30-10.5 does not apply if “the mortgage is
secured by a dwelling that is not occupied by the debtor as the debtor’s primary
residence.” Ind. Code § 32-30-10.5-8(e). Kelli was not living in the Redwood
Property when Horizon filed its claim, as she had been ordered to vacate the
real estate thirty days after the divorce court entered its order on May 18, 2011. 3
3
Horizon also argues the trial court properly granted summary judgment in favor of Horizon with regard to
Kelli’s counterclaim alleging constructive fraud. As Kelli makes no argument regarding that portion of the
trial court’s order, we do not address it.
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[30] As Kelli’s response to Horizon’s motion for summary judgment did not raise
genuine issues of material fact, and her assertions of the law are incorrect, the
trial court did not err when it granted summary judgment in favor of Horizon.
[31] Affirmed.
Riley, J., and Robb, J., concur.
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