MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), this
Aug 18 2015, 9:24 am
Memorandum Decision shall not be regarded as
precedent or cited before any court except for the
purpose of establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Kurt V. Laker James M. Yannakopoulos
Mark S. Gray Koransky, Bouwer, and Poracky, P.C.
Craig D. Doyle Dyer, Indiana
Doyle Legal Corporation, P.C.
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Horizon Bank, N.A., August 18, 2015
Appellant, Court of Appeals Case No.
46A04-1409-MF-408
v. Appeal from the LaPorte Superior Court
The Honorable Richard R. Stalbrink Jr.,
Centier Bank, Judge
Appellee.
Cause No. 46D02-1212-MF-772
Brown, Judge.
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[1] Horizon Bank, N.A. (“Horizon”) appeals the denial of its motion to set aside default
judgment. Horizon raises one issue which we revise and restate as whether the trial
court abused its discretion in denying its motion. We reverse and remand.
Facts and Procedural History
[2] On October 14, 2005, John and Donna Pouzar executed a Prime Line Special
Consumer Open End Agreement in favor of Centier Bank (“Centier”) pursuant to
which they agreed to repay a loan to Centier in the principal amount of $85,000, or
so much of the credit limit as may be advanced under the agreement. On that same
day, the Pouzars also executed a mortgage granting to Centier (the “Centier
Mortgage”) a security interest in certain real estate (the “Property”) to serve as
collateral for Centier’s loan. On January 22, 2007, the Pouzars executed a mortgage
granting Horizon Bank, N.A. (“Horizon”) a security interest in the Property to serve
as collateral for a loan by Horizon to the Pouzars of $295,000. Contemporaneously,
Centier executed a Subordination Agreement of Mortgage in which it agreed that the
2005 Centier Mortgage was inferior to Horizon’s 2007 mortgage. On December 23,
2008, and again on December 30, 2011, the Pouzars refinanced their loan from
Horizon by executing a new note and mortgage of the Property in favor of Horizon
in the principal amounts of $297,000 and $287,500, respectively.1 With each
refinancing, Centier again executed a Subordination Agreement of Mortgage
whereby it agreed that the 2005 Centier Mortgage was inferior to the mortgage held
1
The record does not appear to include copies of the 2007 or 2008 notes and mortgages related to the loan from
Horizon. The loans and mortgages are, however, referenced in recorded Subordination Agreements included in the
record.
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by Horizon. Horizon recorded the most recent mortgage of the Property granted by
the Pouzars in favor of Horizon (the “Horizon Mortgage”) and the accompanying
Subordination Agreement of Mortgage executed by Centier on January 10, 2012.
The Horizon Mortgage identifies Mortgage Electronic Registration Systems, Inc.
(“MERS”) as mortgagee and as nominee for Horizon and its successors and assigns.2
[3] On December 27, 2012, Centier filed a complaint to foreclose on the Property. In
the complaint, Centier alleged in part that John Pouzar defaulted on his obligations
under the Centier Mortgage, entitling Centier to foreclose its interest in the Property,
and Centier named “[MERS], solely as nominee for Lender and Lender’s sucessors
and assigns and Horizon Bank, N.A.” as a defendant and asked that the court
“[d]eclare that all liens, interest, and claims of any of the Defendants to be inferior
and subordinate to” the Centier Mortgage. Appellant’s Appendix at 8, 11. On
February 19, 2013, Centier filed a motion for entry of default against MERS as the
nominee for Lender and Horizon. The court denied that motion on the basis that
service on MERS was returned as undeliverable and was therefore not perfected. On
April 9, 2013, Centier again filed a motion for default judgment against MERS,
stating that it accomplished service upon MERS. On April 12, 2013, the court
granted Centier’s motion, and entered an order of default judgment.3
2
The Indiana Supreme Court has explained that in the 1990s “a consortium of investment banks” created MERS to
maintain “a computer database designed to track servicing and ownership rights of mortgage loans anywhere in the
United States.” Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 809 (Ind. 2012), reh’g denied.
3
An entry in the Chronological Case Summary on April 30, 2013 states “Service Returned Not Served . . . [MERS]
not served.” Appellant’s Appendix at 3.
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[4] Horizon first became aware of Centier’s foreclosure action and the default judgment
on November 6, 2013, when Centier filed an objection to Horizon’s secured claim in
John Pouzar’s Chapter 13 bankruptcy proceedings. On November 15, 2013,
Horizon filed a Motion for Relief from Default Judgment in which it argued, inter
alia, that the judgment against it was void for lack of personal jurisdiction due to
failure to serve Horizon with a summons and should be set aside under Indiana Trial
Rule 60(B)(6). The court heard argument concerning Horizon’s motion to set aside
the default judgment at a hearing on January 17, 2014. On May 27, 2014, the court
granted Horizon’s motion and set aside the default judgment.
[5] On June 26, 2014, Centier filed a motion to correct errors asserting that the default
judgment was proper and should be reinstated. On July 16, 2014, the court granted
Centier’s motion to correct errors, reinstating the entry of default judgment against
Horizon. On August 26, 2014, the court entered an order that denied Horizon’s
request for relief from the default judgment and directed entry of a final judgment
against Horizon.
Discussion
[6] The issue is whether the trial court abused its discretion in denying Horizon’s motion
to set aside default judgment. When we review a trial court’s ruling on a motion to
set aside a judgment, “[t]he trial court’s ruling is entitled to deference and will be
reviewed for an abuse of discretion.” Front Row Motors, LLC v. Jones, 5 N.E.3d 753,
758 (Ind. 2014) (quoting Allstate Ins. Co. v. Watson, 747 N.E.2d 545, 547 (Ind. 2001)).
An abuse of discretion occurs when the trial court’s judgment is clearly against the
logic and effect of the facts and circumstances before the court, or where the trial
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court misinterpreted the law. Lapalme v. Romero, 621 N.E.2d 1102, 1104 (Ind. 1993),
reh’g denied; see also Wagler v. West Boggs Sewer Dist., Inc., 980 N.E.2d 363, 371 (Ind.
Ct. App. 2012), reh’g denied, trans. denied, cert. denied, 134 S. Ct. 952 (2014). When
reviewing the trial court’s determination, we will not reweigh the evidence. Wagler,
980 N.E.2d at 371. On a motion for relief from judgment, the movant carries the
burden of demonstrating that relief is both necessary and just. Id. at 372.
[7] When deciding a motion to set aside a default judgment, the trial court’s discretion
should be exercised in light of the disfavor in which Indiana generally holds default
judgments. Allstate, 747 N.E.2d at 547; see also Coslett v. Weddle Bros. Constr. Co., 798
N.E.2d 859, 861 (Ind. 2003) (“Indiana law strongly prefers disposition of cases on
their merits.”), reh’g denied. “Any doubt of the propriety of a default judgment
should be resolved in favor of the defaulted party.” Coslett, 798 N.E.2d at 861.
Furthermore, “[a] cautious approach to the grant of motions for default judgment is
warranted in ‘cases involving material issues of fact, substantial amounts of money,
or weighty policy determinations.’ ” Kmart v. Englebright, 719 N.E.2d 1249, 1253
(Ind. Ct. App. 1999) (citing Green v. Karol, 168 Ind. App. 467, 473-474, 344 N.E.2d
106, 110-111 (1976)), trans. denied. In addition, the trial court must balance the need
for an efficient judicial system with the judicial preference for deciding disputes on
the merits. Id.
[8] Horizon argues that the court erroneously granted Centier’s motion to correct error
and erroneously denied its motion to set aside the default judgment. Specifically,
Horizon argues that default judgment should be set aside under Ind. Trial Rule
60(B)(1) due to surprise, mistake, or excusable neglect. Horizon maintains that its
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failure to timely respond to Centier’s complaint was due to surprise or excusable
neglect. Horizon argues that, in searching its archives, it discovered an electronic
mail item from MERS that appears to have not been opened and that this was
neglect, but that the neglect is excusable because the subject line of the email
referenced a previous mortgage to Horizon, which secured a loan that had been paid
in full, that Centier’s complaint referenced the same mortgage, and that setting aside
the default judgment would not harm Centier. Centier asserts that Horizon has
waived its right to request relief under 60(B)(1) for failing to have raised the issue
before the trial court.
[9] Ind. Trial Rule 60(B) provides in part that “[o]n motion and upon such terms as are
just the court may relieve a party or his legal representative from a judgment,
including a judgment by default, for the following reasons: (1) mistake, surprise, or
excusable neglect . . . .” A motion shall be filed not more than one year after the
judgment was entered for purposes of Trial Rule 60(B)(1) and must allege a
meritorious claim or defense. A Trial Rule 60(B)(1) motion does not attack the
substantive, legal merits of a judgment, but rather addresses the procedural, equitable
grounds justifying the relief from the finality of a judgment. Kmart, 719 N.E.2d at
1254. We have held that “relief from judgment is essentially equitable in nature and,
thus, a trial court must balance the alleged injustice suffered by the party moving for
relief against the interests of the winning party and society in general in finality of
litigation.” Id. at 1257 n.7 (citing King v. King, 610 N.E.2d 259, 262 (Ind. Ct. App.
1993), reh’g denied, trans. denied). Additionally,
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[a]lthough a default judgment plays an important role in the
maintenance of an orderly, efficient judicial system as a weapon for
enforcing compliance with the rules of procedure and for facilitating
the speedy determination of litigation, in Indiana there is a marked
judicial deference for deciding disputes on their merits and for giving
parties their day in court . . . .
Charnas v. Estate of Loizos, 822 N.E.2d 181, 184-185 (Ind. Ct. App. 2005).
[10] There is no general rule as to what constitutes excusable neglect, mistake, or surprise
under Trial Rule 60(B)(1). Kmart, 719 N.E.2d at 1254 (citing In re Marriage of
Ransom, 531 N.E.2d 1171, 1172 (Ind. 1988)). Each case must be determined on its
particular facts. Id. (citing Boles v. Weidner, 449 N.E.2d 288, 290 (Ind. 1983)). The
following facts have been held to constitute excusable neglect, mistake, or surprise:
(a) absence of a party’s attorney through no fault of party; (b) an agreement
made with opposite party, or his attorney; (c) conduct of other persons
causing party to be misled or deceived; (d) unavoidable delay in traveling;
(e) faulty process, whereby party fails to receive actual notice; (f) fraud,
whereby party is prevented from appearing and making a defense; (g)
ignorance of the defendant; (h) insanity or infancy; (i) married women
deceived or misled by conduct of husbands; (j) sickness of a party, or illness
of member of a family.
Id. (citing Cont’l Assurance Co. v. Sickels, 145 Ind. App. 671, 675, 252 N.E.2d 439, 441
(1969)). Additionally, “[w]hen considering the reinstatement of a cause of action,
trial courts may consider a number of factors, including the amount of money
involved, the existence of a meritorious claim, the length of time between the
judgment’s entry and the request for relief, and the lack of prejudice to the
defendant.” Danov v. Color Tile, Inc., 571 N.E.2d 327, 329 (Ind. Ct. App. 1991)
(citations omitted), reh’g denied, trans. denied.
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[11] To the extent Centier argues that Horizon has waived its argument under 60(B)(1) by
failing to raise the argument before the trial court, we note that it is true that “‘[a]n
appellant who presents an issue for the first time on appeal waives the issue for
purposes of appellate review.’” Evergreen Shipping Agency Corp. v. Djuric Trucking, Inc.,
996 N.E.2d 337, 340 (Ind. Ct. App. 2013) (quoting Mid-States Gen. & Mech. Contr.
Corp. v. Town of Goodland, 811 N.E.2d 425, 438 n.2 (Ind. Ct. App. 2004)). However,
we have previously stated that “[a] litigant’s failure to specify the exact paragraph [of
Ind. Trial Rule 60(B)] under which he seeks relief will not defeat his request for relief
from judgment or dismissal if he can make an adequate showing that there are
sufficient grounds to support his motion.” Greengard v. Ind. Lawrence Bank, 556
N.E.2d 1373, 1375 (Ind. Ct. App. 1990).
[12] Although Horizon did not specifically identify subparagraph (1) of Trial Rule 60(B)
before the trial court, we find that it presented sufficient grounds to the trial court on
which to support a 60(B)(1) motion setting aside the default judgment for surprise,
mistake, or excusable neglect. In its reply to Centier’s response to its motion for
relief from the default judgment, Horizon stated:
3. Attached hereto as “Exhibit A” is the MERS summary for the 2008 loan
referenced in the Complaint, which shows that the loan was paid in full on
January 9, 2012, almost a year prior to the filing of Centier’s Complaint.
MERS as a result received notice only with respect to a loan that had been paid in full
and was no longer active, which was secured by a mortgage which also dated
to 2008.
* * * * *
6. Centier’s Complaint did not give reasonable notice to MERS because it failed to
even reference the 2011 Horizon mortgage which Centier sought to foreclose.
Although Indiana is a notice pleading jurisdiction, a complaint must still put
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a reasonable person on notice as to why the plaintiff is suing them. . . .
Appellant’s Appendix at 165 (emphases added). Horizon’s response to Centier’s
motion to correct errors also alleged surprise, mistake, and excusable neglect in the
following paragraphs:
3. Even if Centier’s service of this complaint upon MERS was sufficient, as
alleged in the Motion to Correct Error, Centier’s complaint itself was
insufficient to allow a default judgment to be entered foreclosing Horizon’s
2011 mortgage. Centier’s complaint references a 2008 Horizon mortgage
that was paid in full a year before Centier’s complaint was even filed. When
MERS received the Centier complaint, it had no reason to appear, answer or forward
the complaint to Horizon, because the 2008 Horizon mortgage that Centier sought to
foreclose no longer existed. The current Horizon mortgage is dated 2011 and is
not referenced anywhere in the Centier complaint. As a result, Centier’s
complaint did not give reasonable notice to MERS that Centier sought to
foreclose the 2011 Horizon mortgage.
4. Although Indiana is a notice pleading jurisdiction, a complaint must still
put a reasonable person on notice as to why the plaintiff is suing them. . . .
In this case, Centier’s reference in the complaint to a mortgage loan that had been
paid in full caused MERS to believe that it did not need to answer the complaint or
take any other action and did not provide reasonable notice of the relief
requested.
Id. at 179-180 (emphases added). Because Horizon presented sufficient grounds to
support its contention on appeal that the default judgment entered against it should
be set aside due to surprise, mistake, or excusable neglect, we conclude that Horizon
has not waived this argument.
[13] Turning to the merits of Horizon’s motion, the record reveals that the court entered a
default judgment against it on April 12, 2013, and Horizon learned of the default
judgment on November 6, 2013, when Centier filed an objection to Horizon’s claim
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in John Pouzar’s Chapter 13 bankruptcy proceedings. Horizon filed its motion to set
aside the default judgment on November 15, 2013, which was nine days after it
received Centier’s objection in John Pouzar’s bankruptcy case and just under seven
months after the entry of default judgment. In addition, Centier’s complaint
referenced Horizon’s 2008 mortgage, which had secured a loan that had been “paid
in full.” Appellant’s Appendix at 167. Furthermore, Horizon has a lien on the
Property under the Horizon Mortgage that, according to the Subordination
Agreement recorded on January 10, 2012, has priority over the Centier Mortgage.
Additionally, Centier does not argue, and the documentation attached to the various
motions of the parties does not establish, that Horizon’s delay has prejudiced Centier
or that a hearing of the claims on the merits will prejudice Centier given that the
priority of the parties’ security interests in the Property can be resolved based on the
2005 Centier Mortgage, recorded on October 2, 2005, and the 2011 Horizon
Mortgage and Subordination Agreement of Mortgage, each recorded on January 10,
2012, the fact that the availability of those documents was not impacted by
Horizon’s delay, and Centier had executed a Subordination Agreement of Mortgage
with regards to each of the mortgages granted to Horizon concerning the Property.
Based upon the record, and in light of the relatively short length of delay, the security
interest of Horizon and the amounts at issue, the fact the complaint referenced
Horizon’s 2008 Mortgage, the absence of evidence of prejudice to Centier and the
substantial evidence of prejudice to Horizon, and the severity of the sanction of
default judgment, we conclude that Horizon’s failure to timely respond to Centier’s
complaint constituted excusable neglect under Trial Rule 60(B)(1).
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[14] In order to obtain relief under Trial Rule 60(B)(1), Horizon must also show that it
alleged a meritorious claim or defense. The rule by its terms requires only an
allegation of a meritorious defense. See Ind. Trial Rule 60(B) (“A movant filing a
motion for reason[] (1) . . . must allege a meritorious claim or defense.”) “A
meritorious defense is one demonstrating that, if the case was retried on the merits, a
different result would be reached.” Baxter v. State, 734 N.E.2d 642, 646 (Ind. Ct.
App. 2000). To establish a meritorious defense, a party does not need to prove an
undeniable defense. Bunch v. Himm, 879 N.E.2d 632, 637 (Ind. Ct. App. 2008).
Rather, a defendant need only make a prima facie showing of a meritorious defense
that indicates to a trial court that the judgment would change and that the defaulted
party would suffer an injustice if the judgment were allowed to stand. Id.
[15] In its motion to set aside default judgment, Horizon stated that it and Centier had
entered into Subordination Agreements in connection with the 2007, 2008, and 2011
mortgages executed by the Pouzars in favor of Horizon, pursuant to which Centier
agreed to subordinate the Centier Mortgage to the Horizon Mortgage. Horizon
attached each of these Subordination Agreements to its motion for relief from default
judgment along with the Horizon Mortgage. Horizon has alleged that the result of
the proceedings would be different if the judgment were set aside, and accordingly,
we conclude that Horizon has alleged a meritorious defense as required by Trial Rule
60(B).
[16] Finding that Horizon has established that it was entitled to relief from the judgment
by demonstrating excusable neglect and a meritorious defense, we conclude that the
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trial court abused its discretion in denying Horizon’s motion for relief from default
judgment.4
Conclusion
[17] For the foregoing reasons, we reverse the judgment of the trial court and remand for
further proceedings consistent with this opinion.
[18] Reversed and remanded.
Crone, J., and Pyle, J., concur.
4
Horizon also argues that it is entitled to relief under Ind. Trial Rule 60(B)(6). However, we need not reach this
argument as we reverse on the basis that Horizon has demonstrated the default judgment should be set aside due to
excusable neglect. See Vadas v. Vadas, 762 N.E.2d 1234, 1236 (Ind. 2002) (holding that, because it reversed the
judgment of the trial court on other grounds, the Court need not address an argument regarding improper service).
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