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Inc.

Court of Appeals of Indiana

November 13, 2015

William C. Elliott and Mary Kay Elliott, Appellants/Cross-Appellees-Defendants,
v.
Dyck O'Neal, Inc., Successor in interest to Fifth Third Mortgage Company, Appellee/Cross-Appellant-Plaintiff

Page 449

          Appeal from the Vanderburgh Superior Court. Lower Court Cause No. 82D03-0701-MF-185. The Honorable Robert J. Tornatta, Judge.

         ATTORNEY FOR APPELLANTS: Douglas K. Briody, Law Office of Doug Briody, Evansville, Indiana.

         ATTORNEYS FOR APPELLEE: Eric C. Welch, E. Phillip Gregg, Jr., Welch & Company, LLC, Muncie, Indiana.

         Pyle, Judge. Crone, J., concurs. Brown, J., dissents with opinion.

          OPINION

Page 450

          Pyle, Judge.

         Statement of the Case

         [¶1] This appeal stems from an in rem mortgage foreclosure default judgment against William C. Elliott (" William" ) and Mary Kay Elliott (" Mary Kay" ) (collectively " the Elliotts" ) and post-judgment proceeding supplemental--which was initiated by Dyck O'Neal, Inc. (" Dyck O'Neal" ) as successor in interest to Fifth Third Mortgage Company (" Fifth Third" )--to collect on the deficiency from that in rem foreclosure judgment. After the trial court entered a garnishment order for the deficiency, the Elliotts, who were not represented by counsel, agreed to pay and began paying $50.00 per week toward the foreclosure deficiency. More than four years later, the Elliotts, then represented by counsel, filed a motion for a refund for the money paid toward the deficiency, arguing that the foreclosure order included only an in rem judgment against them. Thereafter, Dyck O'Neal filed a motion to amend the foreclosure order to add an in personam judgment. The trial court denied both motions.

         [¶2] On appeal, the Elliotts argue that the trial court erred by denying its motion for refund from payments made pursuant to the garnishment order because the foreclosure order, which did not contain an in personam judgment, provided no basis for such payments. Dyck O'Neal cross-appeals the trial court's denial of its motion to amend the foreclosure judgment, arguing that the omission of an in personam judgment in the foreclosure order was a clerical error. Concluding that the trial court did not err by denying Dyck O'Neal's motion to amend the foreclosure judgment, we affirm the trial court's ruling on that motion. However, based on the specific facts in this case, including the lack of an in personam judgment in the original default foreclosure order, we conclude that the Elliotts are entitled to the equitable relief of a refund of their payments made pursuant to the garnishment order. Accordingly, we reverse the trial court's ruling on the Elliotts' motion for refund and remand to the trial court.

         [¶3] We affirm in part, reverse in part, and remand.

         Issues

1. Cross-Appeal Issue -- Whether the trial court erred by denying Dyck O'Neal's motion to amend the foreclosure judgment.
2. Appeal Issue -- Whether the trial court erred by denying the Elliotts' motion for refund.

         

Page 451

         Facts[1]

         [¶4] In March 2002, the Elliotts borrowed $92,200.00 from Fifth Third to finance the purchase of a house located at 701 South Norman Avenue in Evansville, Indiana (" the Property" ). To secure payment of the note, the Elliotts executed a thirty-year mortgage with a 6.75% interest rate in favor of Fifth Third. In their note, the Elliotts agreed to be " fully and personally obligated to keep all of the promises made in th[e] Note, including the promise to pay the full amount owed." (App. 14).

         [¶5] Three years later, in March 2005, the Elliotts filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code. They reaffirmed the Property in their bankruptcy proceeding, and their bankruptcy case was discharged and closed in June 2005.

         [¶6] On January 4, 2007, Fifth Third filed a " Complaint on Note and for Foreclosure on Mortgage" against the Elliotts. (App. 10). On January 29, 2007, Fifth Third filed an amended complaint, adding a subsequent mortgagee bank as a defendant. In Fifth Third's amended complaint, it sought the following relief:

B. Enter judgment, in favor of Plaintiff and against the Defendants, William C. Elliott and Mary Kay Elliott, in the sum of $87,525.99, plus reasonable attorneys' fee[s], and further interest and costs continually accumulating and all other costs herein, and all other relief proper in the premises;
C. Enter an Order foreclosing the Mortgage of Plaintiff on the above-described Real Estate and foreclosing and barring the Defendants' equity of redemption and interest in the Real Estate;
D. Enter an Order directing the sale of the above-described Real Estate in order to pay the Judgment of Plaintiff, at such sale the Plaintiff will be empowered to bid for the subject Real Estate or any part thereof with the indebtedness to be credited with any amount paid by Plaintiff; and if the proceeds from such sale are not sufficient to satisfy the Plaintiff's claim and debt herein found to be due and owing, for a further order directing the Sheriff to immediately levy upon the goods and chattels of the Defendants William C. Elliott and Mary Kay Elliott, until such Judgment is satisfied in full[.]

(App. 33-34). The Elliotts and the junior mortgagee did not file an answer.

         [¶7] On March 7, 2007, Fifth Third filed an " Application and Affidavit for Default Judgment" (" motion for default judgment" ), an " Affidavit of Indebtedness and Non-Military Affidavit[,]" and an " Affidavit in Support of Attorney Fees[.]" (App. 36, 38, 41). In its motion for default judgment, Fifth Third " request[ed] that the Court enter judgment IN REM in its favor[.]" (App. 37) (emphasis in original).

         [¶8] Along with its motion for default judgment, Fifth Third submitted a proposed order, entitled " Default Judgment of Foreclosure" (" foreclosure order" ),

Page 452

which the trial court adopted and signed that same day.[2] (App. 44). In its foreclosure order, the trial court " granted [Fifth Third] judgment IN REM in the amount of Ninety-two Thousand Nine Hundred Eleven Dollars and Nineteen Cents ($92,911.19) . . . with interest thereon from February 9, 2007, until the date of the Judgment at the per diem rate of $16.19 and with a post-judgment statutory interest rate of 6.75% thereupon until paid . . . ." (App. 45-46). The chronological case summary (" CCS" ) entry for March 13, 2007 contains the following notation to show that this foreclosure order was entered into the order book: " REM JUDGMENT FILED 3-7-07 FOR 3-7-07 RECEIVED AND ENTERED INTO ORDER BOOK THIS DATE." (App. 3). Additionally, on the front of the foreclosure order, someone handwrote " Rem" near the title of the order. (App. 44). Because this foreclosure order is the basis of both parties' arguments on appeal, we include a copy of it at the end of this opinion.

         [¶9] Approximately one month later, on April 4, 2007, Fifth Third filed a " Praecipe for Sheriff's Sale[,]" and the Vanderburgh County Sheriff began the necessary steps to sell the Property at a sheriff's sale. (App. 56).

         [¶10] In the meantime, on June 26, 2007, Fifth Third assigned its foreclosure judgment to Federal Home Loan Mortgage Corporation (" FHLMC" ). Two days later, on June 28, 2007, the Vanderburgh County Sheriff held a sheriff's sale for the Property, and FHLMC purchased the Property for $76,000.00, leaving a deficiency of $16,911.19 from the foreclosure judgment amount.

         [¶11] Thereafter, on May 5, 2008, FHLMC assigned its interest in the foreclosure judgment to Dyck O'Neal. On October 27, 2008, Dyck O'Neal filed a motion to substitute itself as plaintiff in the mortgage foreclosure proceeding. Dyck O'Neal also filed a motion for discovery to a non-party, the Indiana Department of Workforce Development, seeking employment records for the Elliotts, and the trial court granted this motion.

         [¶12] Despite the in rem nature of the foreclosure judgment, on July 27 and August 5, 2009, Dyck O'Neal filed a " Motion for Proceedings Supplemental to Execution[,]" seeking an order for garnishment of William's wages (collectively referred to as " garnishment motion" ). (App. 68, 69). In its garnishment motion, Dyck O'Neal stated that it " own[ed] a judgment against the judgment defendant, William C[.] Elliott, obtained in this Court on March 07, 2007, for the sum of $93,315.94 interest and costs" and that this " judgment was partially satisfied by virtue of a Sheriff's Sale, leaving a balance due on the judgment in the amount of $17,315.94, plus post judgment interest from the date of the judgment[.]" (App. 69). Dyck O'Neal further stated that it had " no cause to believe that levy of execution" against William would " satisfy said judgment[,]" and it sought an " appropriate order to apply [William's] property towards said [foreclosure] judgment pursuant to statute." (App. 69).

         [¶13] On September 22, 2009, the trial court held a hearing on Dyck O'Neal's garnishment motion. That same day, the Elliotts, pro se, filed a " Motion to Set Aside Judgment[,]" in which they alleged as follows:

Page 453

1. That the defendant filed for bankruptcy in March 2005. That defendant consulted with the plaintiff, Fifth Third Bank, prior to filing and was reassured that if defendant reaffirmed the [P]roperty . . . that the plaintiff would work with the defendant if the defendant could not make mortgage payments in the future.
2. That when the defendant could not make said mortgage payment in August 2006, that the plaintiff, Fifth Third Bank, refused to work with the defendant. That the defendant offered [an] interest only payment and [a] partial payment that plaintiff refused[.] That the plaintiff deliberately misled the defendant to keep [the P]roperty out of bankruptcy filing.
3. That defendant listed and tried to sell [the P]roperty and the plaintiff refused short s[ale] of [the P]roperty.
4. That the defendant offered deed in lieu of mortgage and that the plaintiff refused.
5. That defendant has paid the plaintiff $25,273.45 in interest and $4,472.36 in principal for a total sum of $29,745.81.
6. That the plaintiff, Fifth Third Bank, sold the [P]roperty at 701 S. Norman Ave. for the sum of $82,000.00 on January 4, 2008.
7. That the plaintiff has already received $111,945.81 in compensation for the [P]roperty. That awarding plaintiff judgment of $17,315.94 would be excessive compensation for the original mortgage of $92,200.00.
8. That awarding plaintiff the judgment would place an undue hardship upon defendant.

(App. 70). After the hearing, the trial court denied the Elliotts' motion and entered a garnishment order (" September 2009 garnishment order" ).[3] The CCS entry for this hearing provides as follows:

[Fifth Third] by counsel, J. Fuson. [The Elliotts] in person. [The Elliotts] file[d] [a] motion to set aside [the] judgment. Argument heard. [The Elliotts] have not shown excusable neglect in answering the complaint and while [they] may have [had] an equitable defense, they d[id] not have a legal defense. Order of garnishment entered. Voluntary wages agreement for $50.00 per week begin[ning on] 10/01/09.

(App. 4) (capitalization of all letters edited).

         [¶14] Thereafter, William began paying Dyck O'Neal $50.00 per week by personal check. William consistently made the $50.00 weekly payments to Dyck O'Neal for the next four and one-half years until Dyck O'Neal filed a motion alleging that William had " defaulted" on the September 2009 garnishment order. (App. 71). Specifically, on March 24, 2014, Dyck O'Neal filed an " Affidavit of Default as to Voluntary Wage Agreement Order of 09/22/2009[,]" in which it alleged that the Elliotts had " defaulted on the agreed weekly payments as they [we]re submitting payments with the notation of 'Paid in Full' on each payment." (App. 71). Dyck O'Neal attached copies of three of the Elliotts' checks, one dated for March 1, 2014 and two dated for March 15, 2014, to its motion. That same day, the trial court " approved" the garnishment order submitted by Dyck O'Neal (" March 2014 garnishment order" ) and served it on William's employer. (App. 4) (capitalization of all letters edited).

         [¶15] On April 2, 2014, the Elliotts, now represented by counsel, filed a motion to stay the March 2014 garnishment order. ...


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