Indiana’s 2012 View Of MERS Persists

Lesson. Under Indiana law, when a mortgage identifies MERS “as nominee” for the original lender, barring a subsequent assignment of mortgage a plaintiff creditor must name MERS as a defendant in a foreclosure action and serve MERS with a summons and complaint.

Case cite. V.L. Davis Props. v. Deutsche Bank Nat’l Tr. Co., 243 N.E.3d 340 (Ind. Ct. App. 2024)

Legal issue. Whether a summons and complaint in a homeowners association (HOA) lien foreclosure action were properly served upon the mortgage holder so as to terminate the subject mortgage lien.

Vital facts. Borrowers granted Original Lender a purchase money mortgage on their property. The mortgage (1) identified Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for Original Lender, its successors and assigns and (2) expressed that MERS was the mortgagee under the security instrument. (Such language is not uncommon in mortgages, especially residential mortgages.)

Procedural history. The HOA sued to foreclose its lien on Borrowers’ property and named Original Lender as a defendant. MERS was not named or served. The HOA proceeded to serve Original Lender by publication, but Original Lender never appeared in the case. This led to Original Lender being defaulted and a sheriff’s sale of the property free and clear of the mortgage. Months after the sale, MERS recorded an assignment of mortgage to Current Lender, which filed its own mortgage foreclosure action. Summary judgment proceedings in that second action brought to bear the matter of whether the HOA’s judgment extinguished the mortgage. The trial court ruled in favor of Current Lender.

Key rules. The V.L. Davis Props case relies upon, and discusses in detail, the Indiana Supreme Court’s opinion in CitiMortgage v. Barabas, 975 N.E.2d 805 (Ind. 2012), which essentially held that the language in the subject mortgage compelled service of process on MERS, as the original lender’s nominee, not the original lender itself. Thus, absent service on MERS, Indiana common law provides that a judgment in a foreclosure action is void as to a subsequent mortgagee (assignee) because the trial court has no personal jurisdiction over it.

In October of 2012, I wrote three posts about Barabas. See below.

Holding. The Indiana Court of Appeals affirmed the trial court, which concluded that the HOA action did not have personal jurisdiction over Current Lender. Thus, the foreclosure decree entered in that case did not extinguish Current Lender’s interest.

Policy/rationale. The MERS-related language in the Barabas and V.L. Davis Props mortgages was the same, as was the procedural posture of the two cases. V.L. Davis Props therefore reached the same result as Barabas “given the closely analogous” fact patterns. The HOA needed to serve MERS, which was clearly identified in the recorded mortgage instrument as the “mortgagee,” as well as the nominee of the Original Lender. Since the HOA did not serve MERS in its case, the foreclosure decree did not extinguish the mortgage.

Related posts. My prior content can be found using the search button on the top right corner of this page. The following posts are particularly relevant:

*Indiana Supreme Court Reverses Trial Court In Landmark Case Involving MERS

*Indiana Supreme Court Concludes That MERS Is Merely The Agent Of The Actual Mortgagee

*In Indiana, Name MERS In Foreclosure Suit If Mortgage Does

*Filing Date Is What Matters When Determining Parties To Name In Mortgage Foreclosure Suit

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My practice includes commercial mortgage foreclosures and contested residential foreclosures. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on X @JohnDWaller or on LinkedIn, or you can subscribe to posts via email as noted on the bottom of this page.