COA reversal reinstates Jackson County foreclosure

A Jackson County foreclosure case was reinstated after the Indiana Court of Appeals determined the mortgagee established a security interest in the property in question.

In December 2016, U.S. Bank Trust filed a foreclosure complaint against Delphine Spurgeon as co-trustee of the Spurgeon Family Trust, alleging Delphine and Forrest Spurgeon, who is now deceased, as trustees executed a mortgage with Wells Fargo Financial Indiana on a $109,498.43 loan. The mortgage granted a security interest in Jackson County property held by the trust to secure the repayment of the loan, which was signed individually by Forrest and had an outstanding principal balance of $99,818.10 at the time of the complaint.

Then in April 2016, the bank filed for default judgment based on the allegation that Spurgeon had failed to file a responsive pleading. The bank also filed an affidavit in support of judgment stating it was the holder of the note and mortgage, but the Jackson Superior Court denied its motion for default judgment.

The trial court then scheduled a dismissal show cause hearing, stating the bank had failed to comply with Indiana Trial Rule 9.2(A) because the note it attached to its complaint was not signed by the mortgagor. Specifically, the trial court found that the note was signed by Forrest Spurgeon individually, but the real estate was in the name of the trust when the mortgage was executed. Thus, because the bank did not file a note that was executed by the trustees, the trial court determined it failed to state a claim for relief and dismissed the case.

But the Indiana Court of Appeals reversed that decision Friday, with Judge Elaine Brown writing the language of the mortgage clearly showed the trust had granted a security interest in its property to secure Forrest’s loan. Further, because the trust failed to file answer the bank’s original complaint or file an appellee’s brief, it was not challenging the bank’s allegations that it was entitled to enforce the mortgage as a result of the note’s default, Brown said.

“Based upon the record, we conclude that U.S. Bank did not fail to comply with Ind. Trial Rule 9.2(A) or fail to state a claim upon which relief could be granted,” she said. “U.S. Bank has established its security interest in the property subject to the Mortgage and that it is entitled to default judgment.”

The case is U.S. Bank, Trust, N.A., as Trustee for LSF9 Master Participation Trust v. Delphine D. Spurgeon, Co-Trustee of the Spurgeon Family Trust, 36A01-1711-MF-2521.