ATTORNEY FOR APPELLANT:
JAMES G. LAUCK
GEORGE E. PALMER
Kroger, Gardis & Regas
Attorney for Hani Sharaya
COURT OF APPEALS OF INDIANA
CENTEX HOME EQUITY CORPORATION )
f/k/a NOVA CREDIT MORTGAGE CORPORATION, )
vs. ) No. 49A02-0110-CV-644
DAVID S. ROBINSON, CENTURY CELLULAR )
NETWORK, STATE OF INDIANA, DEPARTMENT OF )
REVENUE, FT MORTGAGE COMPANIES, d/b/a )
MNC MORTRGAGE and BANK ONE RICHMOND, NA, )
HANI SHARAYA, )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable David Dreyer, Judge
Cause No. 49D10-9904-CP-490
October 18, 2002
OPINION FOR PUBLICATION
Centex Home Equity Corporation (Centex), appeals the trial courts grant of Hani Sharaya
(Sharaya)s Emergency Motion to Set Aside Judgment and Sheriffs Sale, which set aside
a mortgage foreclosure judgment in favor of Centex as well as the resulting
Sheriffs sale of the mortgaged property to Sharaya. We affirm.
The issues before us are whether the trial court properly set aside Centexs
foreclosure judgment and the resulting sheriffs sale.
Facts and Procedural History
On March 15, 1996, David Robinson (Robinson) obtained a loan from FT Mortgage
Company (FT Mortgage), which was secured by a mortgage on Robinsons property located
at 6219 East 46th Street in Indianapolis, Indiana. FT Mortgage recorded the
mortgage on April 3, 1996. Robinson borrowed additional funds from Centex on
October 7, 1996. This loan was also secured by Robinsons property, and
the related mortgage was recorded on October 15, 1996. Robinson apparently defaulted
on his payments to FT Mortgage, and on October 2, 1997, FT Mortgage
filed a foreclosure action in Marion County Superior Court 11. Among the
defendants FT Mortgage named in its action was Centex. Robinson, however, filed
for bankruptcy on December 3, 1997, and the trial court either dismissed or
stayed FT Mortgages foreclosure action on December 4, 1997.
Superior Court 11 reinstated FT Mortgages action on April 7, 1999. The
same day, Centex filed its own foreclosure action in Marion County Superior Court
10, alleging Robinsons default on the second mortgage. Centex named Robinson, FT
Mortgage, and other creditors of record as defendants. It appears that neither
Robinson nor FT Mortgage responded to Centexs complaint, and on July 9, 1999,
Superior Court 10 entered its In Rem Default Judgment and Decree of Foreclosure
for Centex against Robinson and FT Mortgage for $30,582.68.
See footnote In the decree,
the trial court found that FT Mortgage was in default, and declared that
Centex was entitled to an in rem judgment against the defendants in the
amount of its mortgage lien. The trial court specifically concluded that Centexs
judgment was the first lien upon the real estate. The trial court
thus ruled Centexs mortgage lien foreclosed against all of the defendants. The
decree specified that the judgment was to be satisfied through a Sheriffs sale
of Robinsons property, with proceeds to be applied to satisfy the costs of
the action, Centexs judgment, the claim of another creditor, and the states tax
lien. Although the decree recited that Centex was entitled to judgment against
FT Mortgage, it made no mention of the survival or satisfaction of FT
Mortgages interest in the property through the sheriffs sale.See footnote
On August 6, 1999, a Notice of Sheriffs Sale was issued, indicating that
the property would be sold on September 15, 1999 to satisfy Centexs judgment.
Despite the fact that FT Mortgage declined to defend its interest in
the property and was defaulted, the Notice provided that the property was [s]ubject
to a mortgage in favor of FT Mortgage Companies d/b/a MNC Mortgage dated
March 15, 1996 and recorded April 3, 1996 as Instrument No. 96-43735, in
the original principal sum of $35,000.00. The contents of the notice were
At some point, FT Mortgage amended its complaint in the Superior Court 11
action to reflect the existence of Centexs July 9, 1999 judgment. On
August 31, 1999, after issuing and publishing the Notice of Sheriffs Sale related
to Centexs own judgment in the Superior Court 10 action, Centex answered FT
Mortgages amended complaint in the Superior Court 11 foreclosure action. Centex
alleged in its answer that it held a mortgage on the property, and
asked the trial court to accord Centexs lien its rightful priority, and to
provide for the liens satisfaction through proceeds of any sale resulting from the
trial courts judgment.
On September 15, 1999, Sharaya bought Robinsons property for $29,000 at an auction
held by the Marion County Sheriffs Department. Sharaya was not aware of
FT Mortgages lien at the time of the purchase because he had not
conducted a title search prior to purchasing the real estate, and because he
had learned of the sale not by reading the public notice, but by
visiting the Sheriffs department and consulting the Departments list of properties to be
sold at the monthly auction, which did not contain information regarding FT Mortgages
mortgage. Following the sale, Sharaya was given a Sheriffs Deed for the
property, which repeated verbatim the language from the Notice of Sheriffs Sale indicating
that the property was subject to a mortgage in favor of FT Mortgage.
Sharaya called Centexs attorney, apparently because he was identified on the Sheriffs
Deed, and asked about FT Mortgages interest in the property. The attorney
advised Sharaya to contact FT Mortgage or its attorneys to discuss the matter.
Sharaya then recorded the deed, took possession of the property, and rented
it to a tenant.
On December 21, 1999, FT Mortgages attorneys wrote to Sharaya, advising that they
were aware Sharaya now held title to the property, and inquiring as to
Sharayas intentions with regard to FT Mortgages mortgage. Sharaya apparently offered to settle
the matter, but received no response from FT Mortgage or its attorneys.
On May 9, 2000, the trial judge in Superior Court 11 entered an
Agreed and Default Judgment Entry and Decree of Foreclosure in FT Mortgages foreclosure
action. Despite the fact that the interests of former property owner Robinson
and former second mortgage holder Centex in the property were apparently extinguished by
virtue of the foreclosure judgment and sale, the judgment recited that former property
owner Robinson as well as second mortgage holder Centex agreed to the entry
of judgment against Robinson in the amount of $41,778.82, which was to be
satisfied by the sale of the property. Although Sharaya had purchased the
property nearly eight months earlier, apparently leaving Robinson with no interest in the
real estate, and although both FT Mortgage and Centex were aware that Sharaya
had purchased the property and were in communication with Sharaya after the purchase,
no one advised Sharaya about FT Mortgages pending foreclosure action, and Sharaya was
not added as a party. Further, while FT Mortgage had amended its
complaint at some point in August 1999, apparently for the purpose of acknowledging
the existence of Centexs July 9, 1999 judgment, it does not appear that
FT Mortgage amended its complaint again to reflect the fact that the property
it sought to have sold had already been purchased by a third party.
Indeed, there is no indication in the record that the attorneys for
FT Mortgage, Centex, or anyone else, alerted the judge in Superior Court 11
to the fact that the property had been sold and that the new
property owner had been given notice of, or added as a defendant to,
the action pending in Superior Court 11.
On May 15, 2000, just five days after Superior Court 11 entered the
agreed judgment, the property was sold again at the Marion County Sheriffs monthly
auction, this time to FT Mortgage. There is no evidence in the
record suggesting that the Sheriffs Department published the requisite public notice of the
sale, or that Sharaya was notified of the sale. At some point
after the May 15, 2000 sale, someone, presumably FT Mortgage, attempted to evict
Sharayas tenant from the property. There is no indication in the record
that Sharaya or the tenant was given prior notice of the eviction.
It is unclear if the eviction was completed.
On August 8, 2000, Sharaya filed his Emergency Motion to Set Aside Judgment
and Sheriffs Sale in Superior Court 11, seeking to set aside the May
9, 2000 agreed judgment in favor of FT Mortgage, and the resulting May
15, 2000 Sheriffs sale. Although the title of Sharayas motion indicated that
Sharaya was seeking to have the judgment in the Superior Court 11 action
set aside, it appears that Sharaya approved of the validity of the Superior
Court 11 action, but wanted the matter stayed until the Superior Court 10
action could be set aside. In particular, Sharaya argued in his motion
that all questions regarding Robinsons default on his mortgages and all actions for
foreclosure on the real estate should have been litigated together, and that the
action should have proceeded in Superior Court 11 because FT Mortgage, the first
party to seek foreclosure, had filed its action in that court. Sharaya
accordingly asked the judge in Superior Court 11 to set aside the judgment
and to enjoin FT Mortgage from taking possession of the property until the
matter could be resolved.
Sharaya then proceeded to file another Emergency Motion to Set Aside Judgment and
Sheriffs Sale on August 9, 2000 in the Superior Court 10 action.
Sharaya again argued that there should never have been two separate parallel actions
to foreclose on two separate mortgages related to the same real estate, but
rather that both foreclosure claims should have proceeded together in Superior Court 11.See footnote
Sharaya accordingly asked the trial court to set aside the July 9,
1999 foreclosure judgment in favor of Centex, as well as the resulting sheriffs
sale through which Sharaya bought the property.
Around August 22, 2000, FT Mortgage responded to Sharayas motion to set aside
the June 9, 2000 Superior Court 11 judgment in favor of FT Mortgage,
arguing that Sharaya should have intervened in the case to protect his interest
in the property, and that by failing to do so, Sharaya had waived
his right to challenge the judgment.See footnote Superior Court 11 apparently held
a hearing and denied Sharayas motion on August 24, 2000. There is
no indication in the record that Sharaya appealed this decision.
Sharayas Superior Court 10 set-aside request did not proceed as quickly. On
October 5, 2000, Centex responded to the motion, arguing that Sharaya knew or
should have known of the existence of FT Mortgages mortgage when he purchased
the property, and that Sharaya should have intervened in FT Mortgages action to
protect his interest in the property. The judge in Superior Court 10
heard the motion on May 17, 2001. During the hearing, Sharaya asked
the trial court to set aside the resulting Sheriffs sale on the ground
that Sharaya did not know of FT Mortgages first mortgage lien when he
bought the property. The trial court granted Sharayas motion on May 23,
2001. On June 18, 2001, Centex filed a motion to correct errors.
The court heard the motion on August 20, 2001, and denied it
on September 4, 2001. Centex appeals.
Discussion and Decision
A. Scope and Standards of Review
We note that the decision by the trial judge in Superior Court 11
denying Sharayas motion to set aside FT Mortgages May 9, 2000 foreclosure judgment,
and the resulting May 15, 2000 Sheriffs sale, has apparently not been appealed
and is not at issue here.See footnote Our review is limited to determining
whether the trial court in Marion County Superior Court 10 properly set aside
Centexs July 9, 1999 foreclosure judgment and the resulting September 15, 1999 sheriffs
A motion for relief from judgment under Trial Rule 60(B) is entrusted to
the sound discretion of the trial court, and we may neither reweigh the
evidence nor substitute our judgment for that of the trial court.
Oil & Gas, Inc. v. Gingrich, 716 N.E.2d 491, 497 (Ind. Ct. App.
1999). When considering a Trial Rule 60(B) motion, a trial court must
weigh the alleged inequity that would result by allowing a judgment to stand
against the interests of the prevailing party in its judgment, as well as
those of society at large in the finality of litigation in general.
Id. We may reverse the trial courts decision only if the decision
is squarely opposed by the logic and effect of the facts and circumstances.
In addition, an action to foreclose a mortgage lien is essentially equitable in
nature, Smith v. Federal Land Bank of Louisville, 472 N.E.2d 1298, 1302 (Ind.
Ct. App. 1985), and trial courts have considerable equitable discretion to set aside
sales of property resulting from their foreclosure judgments. Newhouse v. Farmers Nat.
Bank of Shelbyville, 532 N.E.2d 26, 27 (Ind. Ct. App. 1989). A
trial court should not hesitate to exercise its equitable authority to set aside
a sheriffs sale where there is a gross inadequacy of price or circumstances
showing fraud, irregularity or great unfairness. National Oil & Gas, Inc., 716
N.E.2d at 495. When making this determination, the trial court will consider
a variety of factors, including the price paid, the effect of procedural irregularities,
evidence of mistake or misapprehension, the presence of inequitable conduct, and problems with
title to the purchased property. Id. at 496 (citing Newhouse, 532 N.E.2d
at 27). The trial courts decision in this regard is entitled to
significant deference, and will not be reversed absent an abuse of discretion.
1. The Judgment
Centex argues that the trial court erred when it set aside its July
9, 1999 foreclosure judgment. Pursuant to Trial Rule 60(B), a trial court
may relieve a party from a judgment for a variety of essentially equitable
reasons, provided in most cases that the party seeking relief has a meritorious
defense, and that the request is filed within a reasonable time, in certain
cases within one year of the judgment. Centex advances several arguments in
support of its position that the trial court erred by setting aside the
foreclosure judgment. In particular, Centex contends that Sharayas motion was filed too
late, that Sharaya had no meritorious defense, and that the equities did not
favor Sharayas position because Sharaya should have known prior to the sale that
the property was subject to FT Mortgages lien. We agree that the
trial court should not have set aside Centexs foreclosure judgment, but for reasons
different than those advanced by Centex.
Trial Rule 60(B) specifically provides that a trial court may relieve
a party from a final judgment. This generally means that one who
is not a party to a judgment may not have that judgment set
aside unless he intervenes in the action pursuant to Trial Rule 24.
See Lawyers Title Ins. Corp. v. C&S Lathing and Plastering Co., 403 N.E.2d
1156, 1158 (Ind. Ct. App. 1980). The judgment at issue here was
entered against the debtor Robinson and first mortgage lien holder FT Mortgage.
The judgment was not entered against Sharaya, who was not a party to
the case at the time, and who has apparently never sought to intervene
in the action. It is true, as this Court has noted, that
one who purchases a property at a foreclosure sale becomes a quasi party
to the foreclosure action by subjecting himself to the equitable jurisdiction and authority
of the trial court. Union Realty Co. of Greensburg v. Older, 97
Ind. App. 412, 185 N.E. 522, 524 (1933). This does not mean,
however, that the purchasing party has standing to (or has any need to)
seek relief from the foreclosure judgment itself. In Kneeland v. American Loan
& Trust Co., 136 U.S. 89, 93-94 (1890), the case cited by this
Court in the Union Realty Co. case, the United States Supreme Court explained
that a foreclosure sale purchasers rights as a party to the foreclosure action
extend to questions arising after the sale. Because Sharaya was not a
party to the foreclosure judgment at the time it was entered and never
intervened in the action, he lacked standing to seek relief from the judgment,
and the trial court therefore should not have set the judgment aside.
2. The Sheriffs Sale
While Sharaya had no standing to challenge Centexs foreclosure judgment, he was clearly
entitled to seek relief from the resulting sheriffs sale. As previously noted,
a trial court has considerable equitable discretion to set aside sheriffs sales resulting
from the courts foreclosure judgments in cases involving procedural irregularities, mistake or misapprehension,
inequitable conduct, and title problems.
See National Oil & Gas, Inc., 716
N.E.2d at 496. The trial court set aside the September 15, 1999
Sheriffs sale, but did not explain its reasons for doing so. The
record, however, is replete with various irregularities amply justifying the trial courts exercise
of its equitable discretion to set aside the sale.
a. Centexs Concurrent Foreclosure Action
As explained above, Centex filed its foreclosure action in Marion County Superior Court
10 while FT Mortgages foreclosure action, involving the same real estate and the
same parties, was pending in Marion County Superior Court 11. Sharaya argued
below that Centexs foreclosure judgment and the resulting sale should have been set
aside because Centex was required to seek the foreclosure of its mortgage in
conjunction with FT Mortgages pending foreclosure action. Centexs position is that a
mortgagee should not be compelled to foreclose its lien simply because another mortgagee
chooses to foreclose that partys lien. As will be more fully discussed
below, we agree with Centex that it was not obligated to pursue the
foreclosure of its mortgage just because FT Mortgage sought to foreclose its lien
and named Centex as a defendant in that action. However, we also
agree with Sharaya that because Centex elected to foreclose its mortgage while FT
Mortgages action was pending, Centexs claims should have been joined in FT Mortgages
action so that the claims of all who had an interest could be
adjudicated in a single action.
We begin by recognizing that Trial Rule 13(A) provides as follows:
[a] pleading shall state as a counterclaim any claim which at the time
of serving the pleading the pleader has against any opposing party, if it
arises out of the same transaction or occurrence that is the subject matter
of the opposing partys claim and does not require the presence of third
parties of whom the court cannot acquire jurisdiction.
In general, such claims must be asserted in the initial action, or they
are barred. See Estate of McCullough, 492 N.E.2d 1093, 1095-96 (Ind. Ct.
App. 1986). Centexs foreclosure claims were not, however, compulsory counterclaims under Trial
Rule 13(A). First, while Centex filed a foreclosure action and named FT
Mortgage a defendant, Centex did not exactly have claims against FT Mortgage.
Rather, Centexs action was in rem, and FT Mortgage was named as a
party only for purposes of providing FT Mortgage with the opportunity to answer
as to its interest in the property. Moreover, to the extent Centex
had claims against FT Mortgage relating to the respective priorities of the parties
liens, those claims did not arise out of the transaction or occurrence that
was the subject matter of FT Mortgages foreclosure action within the meaning of
Trial Rule 13(A). Two causes of action arise from the same transaction
or occurrence if there is a logical relationship between them, which exists when
the counterclaim arises out of the same aggregate of operative facts as the
opposing partys claim. Ratcliff v. Citizens Bank of Western Indiana, 768 N.E.2d
964, 967 (Ind. Ct. App. 2002). Here, the operative facts giving rise
to FT Mortgages foreclosure action were Robinsons default on his loan with FT
Mortgage, while the operative facts giving rise to Centexs action involved Robinsons default
under the Centex mortgage. Thus, Centexs foreclosure claims were not compulsory counterclaims
in FT Mortgages earlier-filed foreclosure action,
See footnote and Centex was not strictly obligated by
Trial Rule 13(A) to pursue its foreclosure claims in FT Mortgages action.See footnote
Rather, Centex could have appropriately chosen not to foreclose its mortgage at that
While one mortgagee is not necessarily obligated under Trial Rule 13(A) to foreclose
its mortgage simply because another mortgagee has sought to foreclose its own lien
and named the mortgagee as a defendant in its action, two separate foreclosure
actions involving the same property and the same parties should not proceed simultaneously
in two different courts. Our Supreme Court has explained that
[o]ne of the leading purposes of a suit to foreclose a mortgage is
to secure such a decree as will enable the plaintiff to sell all
the right and title that his mortgage covers, and enable a purchaser at
the sale to ascertain what title it is that he buys. To
attain this end, it is necessary that all the claims held against the
mortgaged premises should be adjusted in one suit. This the spirit of
our Code requires, for it makes ample provision for bringing all the interested
parties into court. The rule is a salutary one. It tends
to repress litigation, gives confidence to public records, secures respect for judgments and
decrees, and invests sheriffs sales with strength and certainty that does much to
promote the interests of both debtor and creditor.
Craighead v. Dalton, 105 Ind. 72, 4 N.E. 425, 426 (1886). See
also, e.g., OBrien v. Moffitt, 133 Ind. 660, 33 N.E. 616, 617-18 (1893);
Pilliod v. Angola Ry. & Power Co., 46 Ind. App. 719, 91 N.E.
829, 832 (1910). It is true that this general rule has typically
been expressed in the context of discussions regarding a partys obligation to set
up any interest he or she may have in a property in response
to a foreclosure complaint involving the property, and the consequent loss of that
interest for failure to assert it in a timely fashion.See footnote See id.
And we recognize that Centex filed an answer to FT Mortgages foreclosure
complaint, denying FT Mortgages allegations, including those regarding the priority of FT Mortgages
lien, and requesting that its own lien be accorded its rightful priority in
the courts foreclosure judgment. Centex adequately preserved its lien by setting up
its answer, and, as noted above, was not strictly obligated to seek the
foreclosure of its own lien by virtue of the commencement of FT Mortgages
foreclosure action. We take the rule expressed in the passage cited above
to mean, however, that once Centex decided to foreclose its mortgage, it was
obligated to do so in conjunction with FT Mortgages pending foreclosure action.
The modern procedural mechanism for correcting this kind of irregularity is Trial Rule
12(B)(8), which permits dismissal of an action [i]f the same action [is] pending
in another state court of this state. The rule recognizes that two
courts may not simultaneously exercise jurisdiction over what amounts to the same case.
Rather, [w]hen two or more courts have concurrent jurisdiction over the same
case, the jurisdiction of the court first acquiring such jurisdiction is deemed exclusive
until the case is finally disposed of on appeal or otherwise. Pivarnik
v. Northern Indiana Public Service Co., 636 N.E.2d 131, 135 (Ind. 1994) (quoting
State ex rel. International Harvester Co. v. Allen Cir. Ct., 265 Ind. 175,
352 N.E.2d 487, 489 (1976)). Two cases are the same when the
parties, subject matter and remedies sought are substantially the same in both suits
such that the outcome of one will affect the adjudication of the other.
See id. at 134; Indiana and Michigan Elec. Co. v. Terre Haute
Industries, Inc., 467 N.E.2d 37, 40 (Ind. Ct. App. 1984).
Here, the parties in the foreclosure actions filed by FT Mortgage and Centex
similarly consist of the respective plaintiffs, the debtor Robinson, and the other creditors
of record. In addition, the subject matter, while not identical, is substantially
similar. Both cases involve Robinsons alleged default under the respective mortgages and
the parties respective claims of priority and satisfaction of their respective liens.
Finally, the remedies sought in both actions largely overlap. FT Mortgage and
Centex each sought the foreclosure of their respective mortgages, the trial courts declaration
of the priority of all liens, and the sale of Robinsons property to
satisfy the respective liens. The two foreclosure actions filed by FT Mortgage
and Centex were thus substantially the same case.
No party, however, asked the trial court to dismiss Centexs action for this
or any other reason. Trial Rule 12(H)(1)(b) provides that [a] defense of
. . . the same action pending in another state court of this
state is waived to the extent constitutionally permissible . . . if it
is neither made by motion under this rule nor included in a responsive
pleading or an amendment thereof to be made as a matter of course.
It is questionable whether a trial courts lack of jurisdiction over a
case because the same action is pending in another state trial court could
be validly waived such that two state trial courts could simultaneously entertain the
same case. Our Supreme Court suggested in Pivarnik that such waiver may
be appropriate. 636 N.E.2d at 134 n.3 (questioning, but not deciding, whether
certain parties may have waived their own defense under Trial Rule 12(B)(8) .
. . by failing to raise it together with their motions to dismiss
. . . .). In addition, this court addressed a partys argument
that a Trial Rule 12(B)(8) objection had been waived for lack of specificity,
without questioning the potential implication of such waiver, in Grand Trunk Western R.
Co. v. Kapitan, 698 N.E.2d 363, 365-66 (Ind. Ct. App. 1998). Waivability
of the issue, however, would appear to contravene the very purpose of the
rule, which is to prevent two courts from concurrently entertaining the same case.
Crawfordsville Apartment Co. v. Key Trust Co., 692 N.E.2d 478, 480 (Ind.
Ct. App. 1998). And in a case such as this, waiver of
the issue of the second courts jurisdiction would defeat the general rule that
all claims held against a property should be adjusted in a single action.
We need not decide the question today. It is enough for our
purposes to recognize that Centexs simultaneous pursuit of what amounted to the same
case that FT Mortgage had already filed in another court was sufficiently irregular
to warrant the exercise of the trial courts equitable discretion to set aside
the sheriffs sale.
b. FT Mortgages Default in Centexs Foreclosure Action
Centexs decision to pursue a separate simultaneous foreclosure action, and the failure of
any party to bring this improper situation to the attention of Superior Court
10 so that Centexs action could be dismissed in favor of the action
pending in Superior Court 11, spawned a variety of additional procedural irregularities similarly
justifying the setting aside of Centexs foreclosure sale. In particular, as will
be more fully discussed below, FT Mortgages lien was extinguished as a result
of FT Mortgages default in Centexs action. The trial court recognized this
fact in its judgment defaulting FT Mortgage and ruling that Centexs mortgage was
the most senior lien. Thus, the purported sale of the property as
subject to FT Mortgages lien was improper, and the trial court was entitled
to recognize this and to set aside the sale in its equitable discretion.
As noted above, when a party is made a defendant to answer to
his interest in a property that is the subject of a mortgage foreclosure
action, he must defend his interest in the property, or it may be
See Craighead, 4 N.E. 425, 426; OBrien, 33 N.E. 616, 618.
A partys default under such circumstances ought to be construed as an
admission that at the time he failed to appear, as required, he had
no interest in the property in question . . . . OBrien,
33 N.E. 616, 618. As this Court noted long ago,
[a] proceeding to foreclose a mortgage is essentially a proceeding in rem; and,
in actions of this character, which seek to establish a right or interest
in the thing which is the subject-matter of the litigation, all who are
made parties defendant thereto, and challenged by the plaintiff therein to assert their
rights, are bound to assert every then existing fact which would defeat the
plaintiffs action, and are forever concluded by a finding and judgment in favor
of the plaintiff as to all such facts, and this has been the
law in this state, since the case of Fischli v. Fischli, 1 Blackf.
360, 12 Am. Dec. 251.
Pilliod v. Angola Ry. & Power Co., 46 Ind. App. 719, 91 N.E.
829, 832 (1910). See also Clay v. Wright, 629 N.E.2d 857, 860
(Ind. Ct. App. 1994) (noting that a party who had been made a
defendant in a prior mortgage foreclosure action was estopped from raising any question
that was or could have been litigated in the foreclosure action).
Centex suggests that FT Mortgage was not strictly obligated to respond to Centexs
foreclosure complaint in order to maintain the seniority of its lien.
There is authority supporting the general proposition that a junior mortgagees foreclosure action
cannot affect the lien rights of a senior mortgagee. See Bateman v.
Miller, 118 Ind. 345, 21 N.E. 292, 294 (1889) (recognizing that in general,
the title of a purchaser at a foreclosure sale relates back to the
date of the foreclosed mortgage). This general rule accounts for the fact
that a junior mortgagees security is the property subject to any existing prior
encumbrances, and because the purpose of foreclosure in general is to give the
foreclosure sale purchaser essentially the same title to the land as that possessed
by the mortgagor when the foreclosed mortgage was executed. See Grant S.
Nelson & Dale A. Whitman, Real Estate Finance Law § 7.14 (4th ed.
2001). Nevertheless, as our Supreme Court recognized in the passage quoted above
from Craighead, 4 N.E. 425 at 426, it is desirable as a matter
of sound public policy that a foreclosure sale of a property subject to
a prior mortgage proceed upon an accurate valuation and bring a maximum amount.
See also Nelson & Whitman, supra, § 7.12. For this reason,
it is appropriate for senior mortgagees to be included as defendants in foreclosure
actions brought by junior mortgagees. See, e.g., Masters v. Templeton, 92 Ind.
447, 451 (1884) (explaining that senior mortgagors are not necessary parties to a
foreclosure action, but may properly be made defendants to answer to their interest).
It would make little sense to permit an ostensibly senior mortgage holder
to decline to respond to a foreclosure complaint solely on the basis of
the seniority of the partys lien. As our Supreme Court stated in
It follows, as of course, that if any one who has an interest
is made a party, he must assert and maintain his interest, since, to
hold otherwise, would be to declare that making him a party was merely
an unmeaning and empty form. We take it to be very clear
that if a person may be properly brought into a case there may,
and should be, an adjudication determining his rights. If this be not
true, then it is perfectly useless to bring him to court. It
seems equally clear that if his rights are to be investigated, it must
be all and not merely a part that must receive consideration.
92 Ind. at 450. Thus, once named as a defendant in Centexs
action, FT Mortgage was obligated to respond. FT Mortgage did not, and
Centex further suggests that even if FT Mortgage was required to answer its
complaint, the complaint was drafted so that any default on the part of
FT Mortgage would not operate as a forfeiture of FT Mortgages interest.
Centexs foreclosure complaint contained the following allegation pertinent to FT Mortgages lien:
7. FT MORTGAGE COMPANIES d/b/a MNC MORTGAGE is included herein as a party defendant
by virtue of a mortgage dated March 15, 1996 and recorded April 3,
1996 as Instrument No. 96-43735, in the original principal sum of $35,000.00.
(App. 9.) Centex requested the following relief:
A. It have and recover of the Defendant, ROBINSON, judgment, in rem, in the
principal amount of Twenty-Three Thousand Five Hundred Twenty-Nine and 19/100 Dollars ($23,529.19), plus
interest and other charges as specified in the Note from the 11th day
of October, 1998, and all expenses incurred by Centex which are secured by
the Note and Mortgage, including reasonable attorney fees and costs herein.
B. The Court enter its Order declaring the validity and priority of all liens,
interests and claims upon the real estate described hereinabove.
C. The Court enter its Order foreclosing the lien of the Mortgage held by
CENTEX, and foreclosing and barring the interest and equity of redemption in the
real estate described hereinabove of the defendant, ROBINSON, and all persons claiming through
D. The Court enter its Order directing the sale of the subject real estate.
(App. 10.) Centexs argument appears to be that its allegation regarding FT
Mortgages lien and its request that the trial court declare the validity and
priority of that and all of the other liens, constituted an allegation that
FT Mortgages lien in fact had priority over Centexs lien such that FT
Mortgages default could not defeat its lien. We disagree. As a
general rule, a partys default is only conclusive as to those matters that
are properly averred in the complaint. Barton v. Anderson, 104 Ind. 578,
4 N.E. 420, 422 (1886). As our Supreme Court explained in Barton,
however, this rule has a particular application in cases like this:
As applicable, however, to a suit to foreclose a mortgage, and other kindred
suits in the nature of a proceeding in rem, where a party is
made a defendant to answer as to his supposed or possible, but unknown
or undefined, interest in the property, we think that, as against him, a
default ought to be construed as an admission that, at the time he
failed to appear as required, he had no interest in the property in
question, and hence as conclusive of any prior claim of interest or title
adverse to the plaintiff. Any less rigid rule of construction might, and
in many cases doubtless would, defeat the very object properly had in view
in making the party a defendant to answer as to his supposed or
possible interest in the property involved, to the end that all claims to
or against such property might be adjusted by the final judgment or decree,
and further litigation thereby avoided.
4 N.E. 420 at 422. We think that under modern rules of
notice pleading, Centexs allegations placed the validity, priority, and amount of FT Mortgages
lien in issue, and were sufficient to require FT Mortgage to answer to
whatever interest it had in the property. Having failed to do so,
its lien was extinguished.
Centex goes on to assert that the trial courts judgment carefully preserved FT
Mortgages lien despite its default. This is simply not the case.
In its judgment, the trial court granted Centex an in rem judgment against
Robinson, and entered judgment by default against FT Mortgage. The trial court
expressly ruled that Centexs judgment was a first lien upon the Real Estate
as well as upon any proceeds derived from the Sheriffs sale. In
other words, the trial court ruled that Centexs was the most senior lien,
demonstrating that the trial court properly understood that Centexs complaint placed the validity
and priority of FT Mortgages lien directly at issue. The trial court
ordered the property sold, and directed the proceeds to be distributed to Centex
and the other participating lien holders, but not to FT Mortgage. The
judgment thus plainly defaulted FT Mortgage and extinguished its lien.
Despite the unmistakable nature of the trial courts judgment with regard to FT
Mortgages lien, the notice advertising the Sheriffs sale evidently indicated that the property
was to be sold subject to FT Mortgages lien. In addition, the
Sheriffs deed contained language indicating that the property was subject to FT Mortgages
lien. In light of the fact that the trial court had defaulted
FT Mortgage for failure to appear, which had the consequence of the forfeiture
of FT Mortgages lien, the trial court could have concluded that the parties
apparent attempt to circumvent the courts judgment and make the sale subject to
FT Mortgages lien was sufficiently improper to warrant setting aside the sale.
In conclusion, while the validity of Centexs foreclosure judgment is questionable given the
fact that Centex should not have pursued a separate foreclosure action while FT
Mortgages foreclosure action involving the same property and the same parties was pending
in another court, the trial court should not have set aside the judgment
because Sharaya lacked standing to have it set aside. The trial court,
however, did not abuse its broad equitable discretion by setting aside the resulting
sheriffs sale. By defaulting in Centexs foreclosure action, FT Mortgage forfeited its
lien. The trial courts judgment recognized this, and the purported sale of
the property subject to FT Mortgages lien was improper. These irregularities, and
the confusion that resulted, warranted the setting aside of the sale. The
money Sharaya paid for the property at the sheriffs sale should therefore be
returned to him.
NAJAM, J. concurs.
ROBB, J., concurs in result in part and dissents in part with separate
COURT OF APPEALS OF INDIANA
CENTEX HOME EQUITY CORP., ET AL, )
vs. ) No. 49A02-0110-CV-644
DAVID S. ROBINSON, ETAL and )
HANI SHARAYA., )
ROBB, Judge, concurs in result in part and dissents in part
I respectfully dissent. In doing so, I acknowledge the procedural difficulties in
this case; most significantly, that there are two inter-related cases, but we have
before us on appeal only one. Moreover, not all of the relevant
parties are involved in this appeal; FT Mortgage has not appeared to defend
its interests. I also acknowledge the procedural missteps in the trial courts:
Sharaya did not appeal Court 11s denial of his motion to set
aside the judgment and sale from that court. FT Mortgage did not
appear in Centexs action in Court 10, either to seek dismissal based upon
the existence of its own prior lawsuit or to seek relief from the
default judgment, and its failure to do so is in many respects responsible
for this procedural quagmire. However, it seems to me that the majoritys
resolution of this case -- letting Centex retain its judgment -- rewards Centex
for its own failure; that is, its failure to seek redress through FT
Mortgages lawsuit already pending in Court 11 as opposed to instituting its own
separate lawsuit in Court 10. Regardless of the procedural difficulties, I believe
that Court 10 lacked jurisdiction of the case and I would therefore affirm
not just that part of the trial courts order setting aside the sheriffs
sale but also that part setting aside the judgment of foreclosure.
There are three types of jurisdiction: 1) jurisdiction of the subject matter;
2) jurisdiction of the person; and 3) jurisdiction of the particular
case. In re Guardianship of K.T., 743 N.E.2d 348, 351 (Ind. Ct.
App. 2001). This is clearly an instance in which jurisdiction of the
case is at issue.
Jurisdiction of the case refers to the trial
courts right, authority, and power to hear and decide a specific case within
the class of cases over which a court has subject matter jurisdiction.
Guardianship of K.T., 743 N.E.2d at 351. A judgment rendered by a
court which lacks jurisdiction of the case is voidable, and requires a timely
objection, or the lack of jurisdiction over the case is considered waived.
Id. Accordingly, a reviewing court is not obligated to raise sua sponte
the issue of jurisdiction of the case. Id.
I acknowledge that no challenge was made at the trial court level to
the trial courts jurisdiction to hear Centexs particular case. I also acknowledge
that we have waived consideration of similar issues on appeal for failure to
object. See Jones v. Marengo State Bank, 526 N.E.2d 709, 716 (Ind.
Ct. App. 1988) (appellant contended trial court erred by holding a hearing because
a related case had been filed previously in federal court; we held that
although he had raised the affirmative defense of the same action pending in
another court, his failure to make a motion to dismiss the suit prior
to trial waived the issue). Ideally, FT Mortgage would have appeared in
Centexs Court 10 action and moved to dismiss the case because of its
own case then pending in Court 11. Unfortunately, it did not.
However, when Sharaya became aware of the competing judgments, he moved in both
courts to set aside the judgments because Court 10 lacked jurisdiction to enter
its July 1999 judgment and order for sheriffs sale. I would consider
this, under these unusual and complicated circumstances, to be sufficient to raise the
jurisdictional issue and further, I feel that this is clearly a case in
which granting extraordinary relief would be appropriate.
As our supreme court has stated, it is a fundamental axiom of law
that courts of concurrent jurisdiction cannot exercise jurisdiction over the same subject at
the same time. State ex rel. American Fletcher Natl Bank & Trust
Co. v. Daugherty, 258 Ind. 632, 283 N.E.2d 526, 528 (1972). When
an action is pending before an Indiana court, other Indiana courts must defer
to that courts authority over that case. Crawfordsville Apartment Co. v. Key
Trust Co. of Florida, 692 N.E.2d 478, 479 (Ind. Ct. App. 1998).
Trial Rule 12(B)(8) implements this principle by allowing dismissal of one action on
the grounds that the same action is pending in another Indiana court.
Id at 479-80. Two actions are the same for purposes of the
Rule if the parties, subject matter, and remedies sought are the same or
substantially the same. Id. at 480. The determination of whether two
actions being tried in different state courts constitute the same action depends upon
whether the outcome of one action will affect the adjudication of the other.
Indiana & Michigan Elec. Co. v. Terre Haute Indus., Inc., 467 N.E.2d
37, 40 (Ind. Ct. App. 1984). An unseemly conflict of jurisdiction exists
between two courts of concurrent jurisdiction where both exert authority over the same
case, so the jurisdiction of the court first acquiring jurisdiction is deemed exclusive.
See State ex rel. Intl Harvester Co. v. Allen Circuit Court, 265
Ind. 175, 352 N.E.2d 487, 489 (1976). As a matter of policy
and practicality in the operation of our judicial system, only one court should
be able to exercise jurisdiction over a cause of action at any particular
time. To hold otherwise would create confusion and chaos in our trial
and appellate courts. State ex rel. Coleman v. Hendricks Superior Court II,
272 Ind. 40, 396 N.E.2d 111, 112 (1979). This case is a
prime example of the confusion and chaos our supreme court referenced.
There seems to be no avenue of resolution available to us which would
completely clear up the confusion and chaos these parties have created by their
procedural missteps and lack of candor to the trial courts. However, I
believe by affirming the trial courts order setting aside Centexs judgment, we can
come close. Setting aside Centexs judgment in Court 10 and leaving it
with the relief it was granted by Court 11, the court in which
it should have asserted its rights to begin with, seems appropriate in this
case. Centex was named as a defendant in FT Mortgages original complaint
in Court 11 and ostensibly knew of that pending case when it filed
its own in an entirely different court. The Court 11 judgment preserved
Centexs rights to the proceeds from the sale of the property. Thus,
we would not be leaving Centex entirely without relief for the defaulted mortgage
by affirming Court 10s judgment in its entirety.
I also dissent from that part of the majority opinion which holds that
FT Mortgages lien was extinguished when it failed to appear in Centexs action.
The court in Globe Acc. Ins. Co. v. Reid, 19 Ind. App.
203, 47 N.E. 947 (1897), in examining the validity of a default judgment,
noted that [t]his appeal being from a judgment by default, we cannot assume
that anything was proved beyond what is shown in the complaint . .
. . 47 N.E. at 950. This was reiterated in Christ
v. Jovanoff, 84 Ind. App. 676, 151 N.E. 26 (1926), in which the
court held in reviewing a default judgment that it is the general rule
that the relief granted to a plaintiff in a case where the defendant
has been defaulted cannot exceed that which is demanded in the complaint.
151 N.E. at 30.
Moreover, it is a longstanding rule of construction that allegations, statements, or admissions
contained in a pleading are conclusive as against the pleader and a party
cannot subsequently take a position contradictory or inconsistent with his pleadings. See
Heck v. Selig, 134 Ind. App. 336, 188 N.E.2d 118, 120-21 (1963).
Centexs complaint for foreclosure alleged that FT Mortgage was included as a party
defendant thereto by virtue of a mortgage dated March 15, 1996 and recorded
April 3, 1996 as Instrument No. 96-43735, in the original principal sum of
$35,000.00. Appendix of Appellant at 9. Centexs mortgage was dated October
7, 1996, and recorded on October 15, 1996. Id. The relief
requested by Centexs complaint was that the court enter an order declaring the
validity and priority of all liens, interests and claims upon the real estate
. . . . Appendix of Appellant at 10. Thus, the
allegations of Centexs own complaint acknowledge not only the existence, but also the
priority of FT Mortgages lien, and Centex requested relief consistent with that acknowledgement.
FT Mortgages failure to appear in Centexs foreclosure action may have some
import for Centexs action, but I do not believe that the procedural default
is sufficient to extinguish FT Mortgages lien for all purposes.
Accordingly, I concur in result in that part of the opinion which holds
that the trial court properly set aside the sheriffs sale because of the
irregularity in Centexs simultaneous pursuit of the same case FT Mortgage had already
filed in another court. I dissent from that part of the opinion
in which the majority holds that the sale of the property subject to
FT Mortgages lien was improper because the default judgment had extinguished FT Mortgages
lien because I believe the lien remains viable. Finally, I dissent from
that part of the majority opinion which reverses the trial courts order setting
aside Centexs judgment. I would affirm that order and let the case
be worked out in Court 11, as it should have been all along.
Another defendant, Bank One Richmond, NA, an entity whose specific relationship to
this case is unknown, was also defaulted.
Footnote: There is no indication in the record that FT Mortgage has ever
attempted to have Centexs foreclosure judgment set aside.
Footnote: In his two motions filed August 8 and August 9, 2000, Sharaya
appears to have mixed his references to Superior Courts 10 and 11 in
certain places, but the gist of his argument, that the actions should have
proceeded together in Superior Court 11 because FT Mortgage held the first mortgage
on the property and had filed its action first, remains apparent.
Footnote: FT Mortgages response fails to mention the fact that FT Mortgages attorneys
apparently did not notify Sharaya about the pending action or of its intention
to seek an agreed judgment, and did not add him as a defendant,
despite having been fully aware of Sharayas interest in the property and having
been in communication with him between the time of the Sheriffs sale and
the date the agreed judgment was entered.
Footnote: We accordingly may not decide whether, given the status of FT Mortgages
lien as a result of its default in Centexs foreclosure action, which will
be discussed below, the trial court in Superior Court 11 erred by failing
to set aside FT Mortgages foreclosure judgment and the resulting sale on the
ground that they were voidable. Nor may we decide whether FT Mortgages
foreclosure judgment was otherwise void as to Sharaya by virtue of the fact
that Sharaya was never added to the case as a defendant despite FT
Mortgages specific knowledge that Sharaya was the record owner of the property as
a result of the prior sale.
See, e.g., Armstrong v. Hufty, 156
Ind. 606, 55 N.E. 443, 449 (1899) (stating the general rule that it
is indispensably necessary in the foreclosure of a mortgage upon real estate that
the party to whom the mortgaged property has been conveyed be made a
party or the foreclosure will be void as to him). Similarly, we
cannot here determine whether the sale resulting from FT Mortgages foreclosure judgment was
defective for lack of published notice or for being held just five days
after the judgment was entered, in light of Indiana Code section 32-8-16-1(d), which
provides that a sheriff must advertise a sale by publication once each week
for three successive weeks in a local newspaper, and may not proceed to
sell the property until thirty days have elapsed since the first publication.
In the following section, we explain that the sheriffs sale resulting from
the foreclosure judgment was properly set aside because Centex should not have sought
to foreclose its mortgage in a separate action while FT Mortgages earlier-filed foreclosure
action was pending. Whether this means that Centexs foreclosure judgment should have
been set aside as void is a question we may not address in
the absence of a challenge by a party with proper standing.
Footnote: Centexs claims against FT Mortgage would, of course, have been permissive counterclaims
pursuant to Trial Rule 13(B), which provides that [a] pleading may state as
a counterclaim any claim against an opposing party not arising out of the
transaction or occurrence that is the subject-matter of the opposing partys claim.
Footnote: Additionally, Centex was not obligated to assert its claims against the defaulting
mortgagor Robinson or any of the other defendants in FT Mortgages action because
Centex and those parties were co-parties, and not opposing parties, and Centexs potential
claims against Robinson and the other defendants would have been cross-claims if brought
in FT Mortgages action. The bringing of cross claims is permissive and
not compulsory. T.R. 13(G);
Consolidated Rail Corp. v. Travelers Ins. Cos., 466
N.E.2d 709, 714 (Ind. 1984).
This related point will be addressed below in our discussion regarding FT
Mortgages default in Centexs foreclosure action.
Footnote: To the extent that Centexs foreclosure judgment could be set aside as
void upon motion by a party with proper standing, this discussion regarding the
sale resulting from the foreclosure judgment would necessarily be academic. We include
it here to demonstrate the propriety of the trial courts decision to set
aside the sale in light of the situation presented.
Footnote: Subject matter jurisdiction refers to the power of a court to
hear and decide a particular class of cases.
K.T., 743 N.E.2d at
351. If a court does not have subject matter jurisdiction, any judgment
that it renders is void. Hoang v. Jamestown Homes, Inc., 768 N.E.2d
1029, 1032 (Ind. Ct. App. 2002). Because void judgments may be attacked
directly or collaterally at any time, the issue of subject matter jurisdiction cannot
be waived and may be raised at any point by a party or
by the court sua sponte. Id.