SB v. RP2FISH LLC (2025)

MEMORANDUM DECISION

[1] Servbank, SB (“Bank”) appeals from the denial of its motion to correct error, where Bank claimed the trial court erred in granting summary judgment to RP2Fish LLC (“Owner”) in this mortgage foreclosure action. We affirm.

Facts and Procedural History

[2] On October 27, 2021, Christopher Henley (“Borrower”) obtained a mortgage (“the Mortgage”) through Better Mortgage Corporation (“Original Lender”) for property on South East Street in Indianapolis (“the Property”). The Mortgage—which secured a loan in the principal amount of $251,000.00 for the Property—was recorded in the Property's chain of title on November 4, 2021. On April 26, 2022, a document titled “Mortgage Satisfaction Piece” (“the Release”) was also recorded in the Property's chain of title. Appellant's App. Vol. 2 p. 171. The Release purported to reflect the satisfaction and release of the Mortgage. The Release referred to Better Mortgage Company instead of Better Mortgage Corporation, and it contained a signature associated with a “Relationship Manager” named Michael Johnson. The Release also included a notary page that appeared to be executed by a New York notary public with a stamp showing an active commission. The Release accurately identified the Property and the instrument number of the Mortgage, but contained inaccurate and inconsistent dates for the Mortgage, in one instance indicating the date of the Mortgage was November 4, 2021, and in another instance indicating the Mortgage was recorded on November 4, 2022.

[3] On April 28, 2022, a quitclaim deed was recorded reflecting that Borrower conveyed his interest jointly to himself and James Henley of Marion County. On May 26, 2022, a document was recorded reflecting that Borrower and James Henley conveyed the property to M/E Renovations, LLC. On June 3, 2022, Owner acquired the Property from M/E Renovations, LLC for $285,000. On May 2, 2023—about one year after Owner acquired the Property—the Mortgage was assigned to Specialized Loan Servicing LLC (“SLS”).

[4] On August 22, 2023, SLS filed the instant mortgage foreclosure action against Owner and other defendants. On November 9, 2023, the Mortgage was assigned to Bank. Shortly thereafter, Bank was substituted as the plaintiff in the action. Initially, the complaint incorrectly identified the Mortgage as being recorded on June 17, 2022, which was after Owner acquired the Property. On February 2, 2024, Owner moved to dismiss based on (1) the incorrect recording date set forth in the complaint and (2) Owner's contention that it was a bona fide purchaser without notice of any mortgage. Bank then sought leave to amend its complaint to identify the correct recording date. Bank also sought an enlargement of time to respond to Owner's motion to dismiss. Owner objected and attached the Release as an exhibit. In a supporting memorandum, Owner asked the trial court to take judicial notice of the Release. On March 13, 2024, the trial court entered an order indicating that, because Owner referred to matters outside the pleadings, the court was treating the motion to dismiss as a motion for summary judgment. A hearing was scheduled for May 15, 2024, where the trial court would consider both (1) Bank's motion for leave to amend the complaint and (2) the converted motion for summary judgment.

[5] Prior to the hearing, Bank filed a response to Owner's motion and designated the Mortgage. In a footnote, Bank referred to the Release—which had not yet been designated as evidence in the proceedings—and argued the Release was suspicious, stating:

[Bank] is aware of a purported “Mortgage Satisfaction Piece” [(the Release)] that is recorded in the public record, supposedly pertaining to [the] Mortgage. This document has not been designated as evidence by [Owner]. [Owner] does not provide any designated evidence to prove that it relied upon the purported release. Accordingly, it is not relevant to these proceedings. Notably, the [Release] is not signed by the [Borrower] ․ or the [Original Lender], Better Mortgage Corporation. It purports to be signed by a different entity, “Better Mortgage Company.” The document is invalid on its face.

Id. at 120 n.2. Owner subsequently filed a summary judgment memorandum designating, among other things, the Mortgage, the Release, and an affidavit from Owner's manager indicating that Owner (1) paid $285,000.00 for the Property, (2) received a title commitment showing no unreleased mortgages, and (3) had no notice of any outstanding rights of others. See id. at 150–199.

[6] On July 3, 2024, the trial court granted Owner's motion for summary judgment. The court also determined there was no just reason for delay and entered its judgment as a final appealable judgment under Trial Rule 54(B). Id. at 24. In a separate order, the trial court remarked that the Release “had been recorded” and that the Release “release[ed] the ․ Mortgage[.]” Id. at 210. The trial court said that, because of the Release, granting Bank's motion to amend the complaint would be “futile[.]” Id. at 211.

[7] On August 2, 2024, Bank filed a motion to correct error, arguing the Release was fraudulent. Bank presented evidence outside the record, which consisted of a link to a database of notaries in the State of New York and an online listing for a notary stamp at Amazon.com. Bank identified inconsistencies between the database and the notary information in the Release and claimed the stamp used in the Release “was obtained from Amazon and was used as a fake stamp on the [Release] prior to being recorded[.]” Id. at 218. Owner filed a response arguing that the motion to correct error was improper because, among other things, Bank failed to comply with Trial Rule 59(H), which requires an affidavit to support the presentation of evidence outside the record. Owner moved to strike the evidence included with Bank's motion to correct error. Bank filed a response asking the trial court to take judicial notice of the proffered evidence.

[8] On September 12, 2024, the trial court entered orders denying Bank's request to take judicial notice and Bank's motion to correct error. Bank now appeals.

Discussion and Decision

[9] Bank appeals following the denial of its motion to correct error, where Bank challenged the trial court's grant of summary judgment to Owner. We review a ruling on a motion to correct error for an abuse of the trial court's discretion, which occurs when the ruling is clearly against the logic and effect of the facts and circumstances or the court misinterpreted the law. Bruder v. Seneca Mortg. Servs., LLC, 188 N.E.3d 469, 471 (Ind. 2022). Here, the motion to correct error challenged the propriety of granting summary judgment to Owner in the foreclosure action. We review summary judgment de novo, applying the same standard as the trial court. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014).

[10] Under Trial Rule 56(C), summary judgment is proper only “if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact. Id. Once that burden is met, the burden shifts to the non-movant to come forward with contrary evidence demonstrating an issue for the trier of fact. Id. The non-movant must “designate to the court each material issue of fact which that party asserts precludes entry of summary judgment and the evidence relevant thereto.” Ind. Trial Rule 56(C). In summary judgment proceedings, “neither arguments of counsel nor allegations in memoranda qualify as evidentiary material[.]” 487 Broadway Co., LLC v. Robinson, 147 N.E.3d 347, 353 (Ind. Ct. App. 2020).

[11] Owner argues that the designated evidence established it was a bona fide purchaser of the Property, which meant that Owner took title to the Property free from the Mortgage lien asserted in the Bank's foreclosure Complaint. Principles of equity establish that “every reasonable effort should be made to protect a purchaser of legal title for ․ valuable consideration without notice of a legal defect[,]” i.e., a bona fide purchaser. Keybank Nat. Ass'n v. NBD Bank, 699 N.E.2d 322, 327 (Ind. Ct. App. 1998). “[T]o qualify as a bona fide purchaser, one has to purchase in good faith, for ․ valuable consideration, and without notice of the outstanding rights of others.” Id. When it comes to notice, a landowner “will be held to have constructive notice of any instrument recorded within his chain of title.” Id. Indeed, “[t]he recording of an instrument in its proper book is fundamental to the scheme of providing constructive notice through the records[,]” and “[t]he duty rests on the lienholder to ensure that his mortgage is properly recorded within the chain of title.” Id.

[12] Below, Owner designated the Affidavit indicating it paid $285,000.00 for the Property, received a title commitment showing no unreleased mortgages, and had no notice of outstanding rights of others. See Appellant's App. Vol. 2 pp. 150–199. Owner also designated the Release, which indicated that, before Owner acquired the Property, the Mortgage had been satisfied and released. It is ultimately undisputed that the Mortgage was recorded in the Property's chain of title before Owner purchased the Property, and that—by the time Owner purchased the Property—the Release was also recorded in the chain of title. Indiana Code section 32-29-1-6 relates to release instruments, providing in pertinent part that “[a]n entry in the record showing that a mortgage has been satisfied operates as a complete release and discharge of the mortgage.”

[13] At issue is the validity of the Release. First, Bank argues the Release did not function as an effective mortgage release, and Bank next claims that the Release was fraudulent. In support, Bank points to inaccuracies in the Release, such as the reference to Better Mortgage Company rather than Better Mortgage Corporation. We note, however, that although Bank questioned the validity of the Release in a footnote on summary judgment, the unsworn arguments of counsel did not amount to designated evidence. See Robinson, 147 N.E.3d at 353 (noting “neither arguments of counsel nor allegations in memoranda qualify as evidentiary material” on summary judgment). And although Bank has argued that inconsistencies or inaccuracies within the Release rendered the Release void or voidable—or otherwise compromised Owner's ability to rely on the Release as a bona fide purchaser—Bank has ultimately waived this contention by failing to cite any supporting authority. See Ind. Appellate Rule 46(A)(8)(a) (“Each contention must be supported by citations to the authorities, statutes, and the Appendix or parts of the Record on Appeal relied on[.]”); Shields v. Town of Perrysville, 136 N.E.3d 309, 312 n.2 (Ind. Ct. App. 2019) (identifying appellate waiver due to the failure to cite supporting authority). Under the circumstances, we conclude that Owner made a prima facie showing of its entitlement to summary judgment, such that the burden shifted to Bank to designate evidence establishing that a factual issue remained in the case.

[14] As to Bank's designated evidence, Bank designated the Mortgage itself—which was the subject of the Release—but ultimately failed to designate evidence regarding the validity of the Release. Rather, it was only after the trial court ruled in favor of Owner that Bank proffered evidence challenging the validity of the Release. On appeal, Bank maintains that the motion to correct error included evidence indicating that the Release was fraudulent. In other words, Bank essentially claims that—regardless of whether Owner met its burden on summary judgment—Bank eventually identified a genuine factual issue through the evidence tendered with the motion to correct error. But, as Owner points out, where—as here—a motion to correct error is premised on evidence outside the record, “the motion shall be supported by affidavits showing the truth of the grounds set out in the motion and the affidavits shall be served with the motion.” Indiana Trial Rule 59(H)(1) (emphases added). In this case, Bank failed to include an affidavit in support of its proffered evidence. Thus, Bank's motion to correct error did not comply with Trial Rule 59(H)(1), and therefore, the motion failed to supplement the evidentiary record on summary judgment. Further, to the extent Bank argues the court should have taken judicial notice of the proffered evidence, Bank fails to explain how—absent a compliant motion to correct error—the court could properly consider supplemental designations filed outside the summary judgment deadlines. See T.R. 56(H) (giving the nonmovant thirty days to file a response and designate opposing evidence); Mitchell & 10th & The Bypass, LLC, 3 N.E.3d 967, 972 (Ind. 2014) (explaining Trial Rule 56 sets forth “a bright-line rule” that “precludes the late filing of responses”).

[15] In the end, the summary judgment burden had shifted to Bank, which failed to designate evidence identifying a factual issue precluding summary judgment. Furthermore, although Bank attempted to present evidence in connection with its motion to correct error, Bank's motion was procedurally defective, and the evidence was not properly before the trial court. For the foregoing reasons, we conclude Bank failed to demonstrate the trial court erred in granting Owner's motion for summary judgment or in denying Bank's motion to correct error.

[16] Affirmed.

Foley, Judge.

Judges Mathias and Felix concur. Mathias, J. and Felix, J., concur.