Split COA orders refund of $12K in foreclosure deficiency payments

A Court of Appeals panel wrote Friday that justice demands an attack on an improper 2009 garnishment order and a refund to a couple that paid $50 a week in deficiency payments after losing their home to foreclosure.

The panel ordered plaintiffs be refunded more than $12,000 they were improperly ordered to pay.

Judges Rudolph R. Pyle III and Terry Crone reversed a trial court order denying plaintiffs’ motion for a refund in William C. Elliott and Mary Kay Elliot v. Dyck O'Neal, Inc., Successor in interest to Fifth Third Mortgage Company, 82A05-1411-MF-518. The Elliotts’ Evansville home was foreclosed upon in 2007, and an in rem judgment was entered. The home later sold at a sheriff’s sale, leaving a deficiency of about $16,900 on the mortgage.

Dyck O’Neal Inc. obtained interest in the deficiency and sued the Elliotts, winning a garnishment order in 2009. After representing themselves in the past, the Elliotts sought counsel who appealed the garnishment order and denial of a motion to correct error. The Elliotts argued that because the foreclosure order did not contain an in personam judgment, there was no basis for the garnishment.

“Here, in the foreclosure proceeding against the Elliotts, the trial court entered a default judgment and entered only an in rem judgment,” Pyle wrote for the majority, finding Dyck O’Neal “improperly initiated proceedings supplemental from the in rem judgment and sought an order for garnishment of wages. … (G)iven the specific facts of this particular case, we conclude that equity demands that the Elliotts are entitled to a refund, and we remand with instructions to determine the total amount paid by the Elliotts to Dyck O’Neal and enter an order for the refund of that amount including the applicable interest.”

Pyle wrote in a footnote that the ruling appears to be a collateral attack on the court’s garnishment order. “(W)e find there are ‘extraordinarily compelling reasons’ to address the merits of such an attack on that order, which improperly ordered the Elliotts to pay a deficiency judgment based on an in rem judgment in a foreclosure order.”

Judge Elaine Brown dissented and would affirm the trial court. “I would find no such extraordinarily compelling reasons exist in this case, especially given the long delay in the challenge to the propriety of the garnishment order,” she wrote, noting any challenges would be untimely.

The panel also affirmed the trial court’s denial of Dyck O’Neal’s motion to amend the foreclosure order to add an in personam judgment.