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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA bank seeking to foreclose on an Indiana property can collect interest accrued during the early days of the COVID-19 pandemic despite emergency court orders tolling interest, the Court of Appeals of Indiana has ruled.
In July 2007, Michael Couch executed a $100,000 equity reserve line of credit with PNC Bank’s predecessor in interest, National City Bank, as well as a mortgage to secure payment of a promissory note. A decade later, Couch defaulted on the note.
PNC responded by filing a complaint, seeking a judicial determination of the sums due pursuant to the note and a decree of foreclosure on the mortgage.
Meanwhile, after the COVID-19 public health emergency was declared in Indiana in March 2020, Gov. Eric Holcomb issued an executive order placing a temporary prohibition on evictions and foreclosures. The order stated, in part, “No provision contained in this Executive Order shall be construed as relieving any individual of their obligations to pay rent, to make mortgage payments, or to comply with any other obligation(s) that an individual may have under a tenancy or mortgage.”
Relatedly, the Indiana Supreme Court in In the Matter of the Petition of the Courts of Marion County for Administrative Rule 17 Emergency Relief, 20S-CB-113 (Mar. 13, 2020), granted a petition for relief filed by the Marion Circuit and Superior courts addressing the ability of litigants and courts to comply with deadlines and rules of procedure.
The high court’s order stated, among other things, that no interest would be due or charged during the tolling period of March 16, 2020, through April 6, 2020. The relief was later extended through Aug. 14, 2020.
Meanwhile, in a memorandum regarding foreclosure and eviction proceedings, the Indiana Supreme Court’s Office of Judicial Administration stated that Holcomb’s executive order “does not relieve individuals of their obligations to pay rent, to make mortgage payments, or to comply with other obligations under a … mortgage.”
In June 2021, PNC moved for agreed and default judgment and a decree of foreclosure seeking judgment against Couch for the balance due of principal plus interest. It alleged he owed an unpaid principal balance of $21,272.60 “together with interest from November 24, 2017 to April 30, 2021, in the sum of $3,434.02, and further interest will accrue from April 30, 2021.”
The Marion Superior Court granted PNC’s motion and entered a default judgment and decree of foreclosure, but based on the governor’s emergency orders, held that “[i]nterest accruing 3/16/20-8/14/20 shall not be included in the judgment amount.”
The Court of Appeals reversed that decision and the denial of PNC’s motion to correct error in PNC Bank, National Association v. Paul J. Page, et al., 21A-MF-1974.
Appellate judges agreed with PNC’s argument that the Indiana Supreme Court “could not have intended [the] sentence regarding interest in [the Emergency Orders] to apply to cases involving private mortgage contracts.”
It cited as instructive the case of Denman v. St. Vincent Med. Grp., Inc., 176 N.E.3d 480 (Ind. Ct. App. 2021), trans. denied, which held, among other things, that the emergency orders did not toll or suspend post-judgment interest provided by Indiana Code § 24-4.6-1-101.
“We find the same reasoning applies here,” Judge Robert Altice wrote. “That is, because our Supreme Court could not, by rule, change substantive law, the Emergency Orders’ instruction — that interest would not ‘be charged or due during the tolled period’ — cannot be construed to suspend the automatic accrual of non-discretionary interest provided by the terms of a private loan instrument and as permitted by statute. Our conclusion is consistent ‘with our practice of presuming that each branch of our government acts within their constitutionally prescribed boundaries.’”
On remand, the COA instructed the trial court to award PNC interest from Nov. 24, 2017, to the date of the judgment at the rate specified in the promissory note, including the period of March 16, 2020, through Aug. 14, 2020.
Editor’s note: This article has been corrected.
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