L. Ray Yeager, and Phyllis L. Yeager v. Deutsche Bank National Trust Company, as Trustee of the Residential Asset Securitization Tust 2005-A1, Mortgage Pass-Through Certificates

FILED
Dec 06 2016, 5:47 am

CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court

ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE
Harry B. O’Donnell IV Tammy L. Ortman
Louisville, Kentucky Jennifer S. Ortman
Lewis & Kappes, P.C.
Indianapolis, Indiana

IN THE
COURT OF APPEALS OF INDIANA

L. Ray Yeager, and Phyllis L. December 6, 2016
Yeager, Court of Appeals Case No.
Appellants-Defendants, 22A04-1604-MF-727
Appeal from the Floyd Superior
v. Court
The Honorable Susan L. Orth,
Deutsche Bank National Trust Judge
Company, as Trustee of the Trial Court Cause No. 22D01-
Residential Asset Securitization 1201-MF-20
Trust 2005-A1, Mortgage Pass-
Through Certificates, Series
2005-A Under the Pooling and
Servicing Agreement Dated
March 1, 2005,
Appellee-Plaintiff.

Brown, Judge.

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 1 of 10
[1] In this interlocutory appeal, L. Ray Yeager and Phyllis L. Yeager (collectively,

the “Yeagers”) appeal the trial court’s provisional order for payment of

mortgage, taxes, and insurance premiums (the “Provisional Order”) in a

foreclosure action. The Yeagers raise one issue which we revise and restate as

whether the court abused its discretion by failing to conduct an inquiry into the

Yeagers’ ability to pay prior to issuing the Provisional Order. We reverse and

remand.

Facts and Procedural History

[2] On November 5, 2004, the Yeagers executed a promissory note (the “Note”) in

favor of First Bank, Inc. promising to make monthly principal and interest

payments of $1,871.61, and a mortgage (the “Mortgage”) granting a security

interest in their residential real estate in Floyd County, Indiana (the “Real

Estate”) in favor of First Bank, Inc. and Mortgage Electronic Registration

Systems, Inc. as nominee for First Bank. An assignment of Mortgage, dated

July 13, 2011, and recorded on July 21, 2011, assigned the Mortgage to

Deutsche Bank (the “Bank”). On January 30, 2012, the Bank filed a complaint

for Foreclosure of Note and Mortgage alleging that the Yeagers defaulted on

the Note for failure to make payment. A default judgment and decree of

foreclosure was entered against the Yeagers on July 10, 2012.

[3] On February 21, 2014, the Bank filed a motion for leave to amend the entry of

default judgment and decree of foreclosure to correct an error in the legal

description of the Real Estate. On August 26, 2015, the Bank, with leave of the

court, filed an amended complaint, which revised the legal description of the
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 Real Estate and identified additional necessary parties holding a record interest

in the Real Estate. On October 9, 2015, the Yeagers filed an answer to the

amended complaint.

[4] On March 4, 2016, the Bank filed a Motion For Payment of Mortgage, Taxes,

and Insurance Premiums. In its motion, the Bank requested that the court issue

a provisional order requiring the Yeagers to make payments in the amount of

$1,871.61 on the Note and Mortgage and citing Ind. Code § 32-30-10.5-8.6. 1

The Bank’s motion also requested that the court order the Yeagers to make

property tax payments, to provide proof of payment of insurance premiums,

and to provide proof of a hazard insurance policy. On March 8, 2016, the court

issued a Provisional Order which granted the Bank’s request, and ordered the

Yeagers to pay $1,871.61 per month and to provide proof of payment of

property taxes and proof of insurance. On March 18, 2016, pursuant to the

Provisional Order, the Yeagers provided proof of payment of property taxes

and proof of insurance. The Yeagers now appeal the court’s Provisional Order.

Discussion

[5] The issue is whether the trial court abused its discretion by failing to conduct an

inquiry into the Yeagers’ ability to pay prior to issuing the Provisional Order.

We generally review interlocutory orders under an abuse of discretion standard.

In re Estate of Long, 804 N.E.2d 1176, 1178 (Ind. Ct. App. 2004); Hollingsworth v.

1
This section, as set forth more fully below, provides that a trial court may order a debtor to continue making
monthly payments on the mortgage as set forth in the statute.

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 3 of 10
 Key Benefit Adm’rs, Inc., 658 N.E.2d 653, 655 (Ind. Ct. App. 1995), reh’g denied,

trans. denied. “‘An abuse of discretion may occur if the trial court’s decision is

clearly against the logic and effect of the facts and circumstances before the

court, or if the trial court has misinterpreted the law.’” In re Estate of Long, 804

N.E.2d at 1178 (quoting Hollingsworth, 658 N.E.2d at 655 (internal citation

omitted)).

[6] The Yeagers argue that Ind. Code § 32-30-10.5-8.6, the Indiana Rules of Trial

Procedure, Floyd County Local Rules, and principles of due process do not

allow for the entry of an ex parte Provisional Order. They point out that,

contrary to the Indiana Rules of Trial Procedure and Floyd County Local

Rules, the Bank’s motion was not accompanied with any notice of hearing,

that, contrary to the Floyd County Local Rules, the trial court did not set a

hearing on the matter nor did the Bank request one, the court issued the

Provisional Order without providing the Yeagers time to respond to the Bank’s

motion, and the trial court did not modify the Bank’s proposed order or explain

its reasoning for not holding a hearing.

[7] The Bank argues that the Provisional Order did not require a hearing, that entry

of the Provisional Order was “specifically authorized by statute,” and that the

court’s issuance of the Provisional Order, without a hearing, is neither a due

process violation nor an abuse of discretion. Appellee’s Brief at 8. It maintains

that the Provisional Order “did nothing more than direct such matters as

permitted by statute,” specifically, ordering the Yeagers to pay an amount that

does not exceed their monthly obligation under the Note and Mortgage. Id. at

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 4 of 10
 10. The Bank also asserts that neither the Indiana Rules of Trial Procedure nor

the Floyd County Local Rules require a hearing prior to the entry of a

provisional order under the statute. The Bank further contends that a hearing

was not required to satisfy due process of law because “no protected interest is

implicated,” and the Yeagers failed to “identify injuries to person, property, or

reputation” due to the Provisional Order. Id. at 13, 15. In reply, the Yeagers

contend that the statute does not contain a provision which “‘permits’ or allows

for consideration or entry of a provisional order under I.C. 32-30-10.5-8.6(b) ex

parte,” and that the court should have held a hearing on the Bank’s motion.

Appellant’s Reply Brief at 9.

[8] Ind. Code § 32-30-10.5-8.6 provides in part:

(a) This section applies to a mortgage foreclosure action that is
filed after June 30, 2011.

(b) During the pendency of an action to which this section
applies, regardless of any stay that is issued by the court under
section 8.5 of this chapter, if the debtor continues to occupy the
dwelling that is the subject of the mortgage upon which the
action is based, the court may issue a provisional order that
requires the debtor to continue to make monthly payments with
respect to the mortgage on which the action is based. The
amount of the monthly payment:

(1) shall be determined by the court, which may base its
determination on the debtor’s ability to pay; and

(2) may not exceed the debtor’s monthly obligation under
the mortgage at the time the action is filed.

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 5 of 10
[9] The record reveals that the court did not hold a hearing or otherwise conduct

any inquiry on which to base its determination of the monthly payment prior to

issuing the Provisional Order. Indeed, the court granted the Bank’s motion

before the Yeagers responded to it. The statute expressly provides that, in

issuing a provisional order under subsection (b), “[t]he amount of the monthly

payment . . . shall be determined by the court, which may base its

determination on the debtor’s ability to pay” and that the amount of the

monthly payment “may not exceed the debtor’s monthly obligation under the

mortgage at the time the action is filed.” While the statute does not expressly

require a hearing, it is implicit that the court have the necessary information on

which to base its determination, including the debtor’s current financial

information. The record contains no evidence of the Yeagers’ current financial

situation, such as earnings from any employment, income from other sources,

or other assets. The Indiana legislature enacted Indiana Code §§ 32-30-10.5 to

“avoid unnecessary foreclosures” and to facilitate “the modification of

residential mortgages in appropriate circumstances.” Nationstar Mortg., LLC v.

Curatolo, 990 N.E.2d 491, 493-94 (Ind. Ct. App. 2013) (citing Ind. Code § 32-

30-10.5-1(b)). Under these circumstances, we conclude that the trial court

abused its discretion when it failed to hold a hearing or to otherwise obtain

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 6 of 10
 information to determine the amount of the Yeagers’ provisional monthly

payment. 2

Conclusion

[10] For the foregoing reasons we reverse and remand for further proceedings

consistent with this decision.

[11] Reversed and remanded.

Robb, J., concurs.

Mathias, J., dissents with opinion.

2
Because we remand for a determination of the Yeagers’ ability to pay based on Ind. Code § 32-30-10.5-8.6,
we need not address the other arguments raised by the Yeagers.

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 7 of 10
 IN THE
COURT OF APPEALS OF INDIANA

L. Ray Yeager, and Phyllis L. Court of Appeals Case No.
Yeager, 22A04-1604-MF-727

Appellants-Defendants,

v.

Deutsche Bank National Trust
Company, as Trustee of the
Residential Asset Securitization
Trust 2005-A1, Mortgage Pass-
Through Certificates, Series
2005-A Under the Pooling and
Servicing Agreement Dated
March 1, 2005,
Appellee-Plaintiff.

Mathias, Judge, dissenting.

[12] I respectfully dissent from the majority’s conclusion that the trial court abused

its discretion by ruling on the Bank’s motion without a hearing.

[13] The majority concludes that Indiana Code section 32-30-10.5-8.6 could be read

to dispense with a hearing, but only if the trial court has before it “a debtor’s
Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 8 of 10
 current financial information on which to base its determination of a debtor’s

monthly obligation.” Slip op. at pp. 6-7. Because the trial court here did not

have before it “information from which it could determine the Yeagers’ ability

to pay, such as their earnings from any employment, income from other

sources, or other assets,” the majority concludes that a hearing is required at

which such evidence can be presented. Id. at p. 7.

[14] This, however, presumes that the trial court is required to consider the debtor’s

ability to pay. The language of section 32-30-10.5-8.6, however, imposes no

such obligation. To be sure, the statute provides that amount of the monthly

payment “shall” be determined by the trial court. However, it also clearly

provides that the trial court “may base its determination on the debtor’s ability

to pay.” I.C. § 32-30-10.5-8.6(b)(1). This is permissive, not mandatory,

language. United Rural Elec. Membership Corp. v. Indiana & Michigan Elec. Co., 549

N.E.2d 1019, 1022 n.9 (Ind. 1990).

[15] The only restriction on the trial court’s discretion is contained in the following

subsection, which provides that the monthly payment determined by the trial

court “may not exceed the debtor’s monthly obligation under the mortgage at

the time the action is filed.” Id. at § 8.6(b)(2).

[16] I, therefore, read the statute as stating that the trial court permissively “may”

consider the debtor’s ability to pay but is not required to do so, so long as the

monthly payment determined by the trial court does not exceed the debtor’s

monthly mortgage obligation at issue.

Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016 Page 9 of 10
[17] Here, the trial court determined that the monthly payment should be equal to

the monthly mortgage obligation. This was within the trial court’s discretion

under the statute, and I see no reason to remand for a hearing to require the

trial court to consider something, i.e., the debtor’s ability to pay, which the

controlling statute does not require the trial court to consider. Although it might

be a better policy to require the trial court to consider the debtor’s ability to pay,

the statute does not require this, and I do not believe we are at liberty to engraft

such a requirement onto the clear language of the statute.

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