The effect of a 2011 ruling by the Indiana Supreme Court
allowing for a junior lienholder to score a major windfall when it is omitted in a foreclosure action by a senior lienholder(1)
has now been nullified for future similar cases by state lawmakers by their passage of a new law.
This new law (Senate Enrolled Act No. 298
) will, in effect, permit the foreclosing lender to file another lawsuit, a "foreclosure do-over
," to include the omitted junior lienholder in a lawsuit that gives said lienholder an opportunity to redeem the property interest before suffering a 'cut off' of its lienholder's interest therein.
It has been reported by the Northwest Indiana Times
that retiring Indiana Supreme Court Justice Frank Sullivan, Jr.'s lone dissent in the case (a 4-1 ruling), Citizens State Bank of New Castle v. Countrywide Home Loans, Inc.
949 N.E.2d 1195 (2011), formed the basis of Senate Enrolled Act 298,(2)
thereby illustrating another example that when appellate level judges write dissenting opinions, Beware!
They do not do so simply for the intellectual exercise.
This story also serves as another illustration that, when foreclosing banksters (and, possibly in this case, the Indiana Land Title Association, which submitted a friend of the court brief in the case - presumably arguing against the position that ultimately prevailed in court) don't get favorable rulings in court, they can simply have their paid lackeys (ie. lobbyists, etc.) 'grease' lawmakers (through indirect means, of course, like stuffing their campaign coffers with cash, implicit promises of future employment for them and theirs, for two examples) to get the rules changed.
Source: Northwest Indiana Times: New laws overturning Ind. Supreme Court decisions demonstrate balance of power
.(1) See Foreclosing Lender's Failure To Serve Junior Lienholder Leaves Latter With Major Windfall.(2) See Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. 949 N.E.2d 1195 (2011) (Sullivan, J., dissenting with separate opinion) (bold text is my emphasis, not in the original text):
- Unfortunately, the "junior lienholder" was not joined in the foreclosure proceeding and so also became an "omitted party." As such, its interest in the property was not foreclosed. Holmes v. Bybee, 34 Ind. 262, 270 (1870). What should happen here is that the senior lienholder and the omitted party get the practical equivalent of a "do-over" — a second foreclosure — in which the omitted party would be entitled to redeem its (subordinate) interest in the property and if it does not redeem, have its interest foreclosed.
This was the result reached by the trial court. But instead, the Court allows the omitted party to maintain its lien on the property (now owned by Fannie Mae) but provides that the omitted party's lien is no longer subordinate to any senior lien. That is, the Court promotes the omitted party from a junior to the senior lienholder without having to pay anything to redeem its interest.
The trial court correctly followed long-standing precedent in this regard and, furthermore, the Court's result produces an unconscionable windfall for the junior lienholder.