Drake Investments, LTD and Paul D. Huntley v. Peter Ballatan (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), FILED
this Memorandum Decision shall not be Aug 23 2019, 5:32 am
regarded as precedent or cited before any
CLERK
court except for the purpose of establishing Indiana Supreme Court
Court of Appeals
the defense of res judicata, collateral and Tax Court

estoppel, or the law of the case.

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE
J.F. Beatty Kurt V. Laker
Kathryn Merritt-Thrasher Mark S. Gray
Landman Beatty, Lawyers Doyle & Foutty, P.C.
Indianapolis, Indiana Indianapolis, Indiana

IN THE
COURT OF APPEALS OF INDIANA

Drake Investments, LTD and August 23, 2019
Paul D. Huntley, Court of Appeals Case No.
Appellants-Defendants, 18A-PL-2775
Appeal from the Marion Superior
v. Court
The Honorable Cynthia Ayers,
Peter Ballatan, Judge
Appellee-Plaintiff Trial Court Cause No.
49D04-1709-PL-34217

May, Judge.

[1] Drake Investments and Paul D. Huntley (“Doug”) (collectively “Appellants”)

appeal the trial court’s entry of summary judgment in favor of Peter Ballatan.

Appellants raise two issues on appeal, which we restate as whether the trial

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 court erred in denying their motion for summary judgment and granting

Ballatan’s motion for summary judgment. We affirm.

Facts and Procedural History
[2] On September 28, 2007, Ballatan obtained a judgment in the amount of

$125,438.43 against Joanne Huntley (“Joanne”) in a civil case, Cause No.

49D03-0403-PL-000625 (“Cause 0625”). The judgment represented lost rental

income and travel expenses incurred by Ballatan in a real estate dispute with

Joanne. At the time of that dispute, Joanne owned four parcels of land in

Indianapolis, Indiana: 460 North Kealing Avenue; 6464 Brookville Road; 5235

East Washington Street; and 5269 East Washington Street (collectively,

“Properties”).

[3] However, while Cause 0625 was pending, Joanne purported to grant mortgages

on each of the Properties to her son, Doug. The mortgages were executed on

March 1, 2007, via three mortgage documents. The mortgage documents

consist of pre-printed forms with blank spaces for the parties to insert the

requisite information. Each document consisted of one substantive page.

[4] Joanne and Doug completed the documents by hand and had them notarized.

The mortgage documents indicate that Joanne agreed to pay Doug $80,000.00

secured by the Kealing Avenue property, $250,000.00 secured by the Brookville

Road property, and $500,000.00 secured by the two Washington Street

properties (hereinafter collectively, “Huntley Mortgages”). Each document

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 states that Joanne “mortgage[s] and warrant[s] to Paul Douglas Huntley” the

Properties. (Appellants’ App. Vol. II at 131, 134, & 137.) The boilerplate

language of each document states

the mortgagor expressly agree [sic] to pay the sum of money
above secured, without relief from valuation or appraisement
laws; and upon failure to pay any one of said notes, or any part
thereof, at maturity, or the interest thereon, or any part thereof,
when due, or the taxes or insurance as hereinafter stipulated,
then all of said notes are to be due and collectible, and this
mortgage may be foreclosed accordingly. And it is further
expressly agreed, that until all of said notes are paid, said
mortgagor will keep all legal taxes and charges against said
premises paid as they become due, and will keep the buildings
thereon insured for the benefit of the mortgagee, as h [sic]
interest may appear and the policy duly assigned to the
mortgagee, to the amount of [sic] Dollars, and failing
to do so, said mortgagee, may pay said taxes or insurance, and
the amount so paid, with per cent interest thereon, shall be a part
of the debt secured by this mortgage.

Id.

[5] In his affidavit designated at summary judgment, Doug averred Joanne

“mortgaged to me the properties . . . in exchange for me taking care of her

living expenses, including making monthly payment to her lender for her

personal residence in Johnson County, ensuring that all property taxes,

insurance and her other daily living expenses were paid timely.” (Id. at 108 ¶

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 7.) 1 On or about August 27, 2008, Joanne transferred ownership in the

Properties from herself as an individual to herself as trustee of the Joanne B.

Huntley Trust. The purported mortgage interests conveyed by the Huntley

Mortgages were not recorded until October 15, 2009.

[6] On February 17, 2011, Doug paid Joanne $30,000.00, and Joanne transferred

her ownership interests in the Properties to Doug, who purchased the Properties

for investment purposes. On May 22, 2017, Doug transferred his ownership

interest in the Properties to Drake Investments, LTD. Doug is the president of

Drake Investments.

[7] On September 7, 2017, Ballatan filed his complaint to renew and foreclose

judgment lien against real property from Cause 0625. Doug asserted in his

affidavit that he did not know about Ballatan’s judgment in Cause 0625 until

Ballatan filed suit on September 7, 2017. Joanne died on September 25, 2017.

She did not make any payment to Ballatan toward satisfaction of the judgment

before her death.

1
The Appellants’ Brief describes the arrangement as such:

The undisputed material fact is that the Huntley Mortgages secured a debt owed by
Joanne Huntley to Doug Huntley. While the specific nomenclature is not used, it
appears from the undisputed facts the Huntley Mortgages were intended to serve as
‘reverse mortgages’ in which the Real Estate at Issue would secure payments made by
Doug Huntley on behalf of Joanne Huntley as part of her retirement and/or estate plan.

(Appellants’ Br. at 16 n.5.)

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[8] Ballatan moved for summary judgment on April 3, 2018. Appellants responded

to Ballatan’s motion for summary judgment and cross-moved for summary

judgment on June 2, 2018. The trial court held a hearing on the cross-motions

for summary judgment on September 25, 2018. The trial court issued findings,

granted Ballatan’s motion for summary judgment, and denied Appellants’

cross-motion for summary judgment on October 23, 2018. The trial court

ordered the Properties be sold and the proceeds used to satisfy the sums due to

Ballatan.

Discussion and Decision
[9] When reviewing the grant or denial of a motion for summary judgment, we

apply the same standard as the trial court: whether there is a genuine issue of

material fact and whether the moving party is entitled to judgment as a matter

of law. Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968, 973 (Ind.

2005). We grant summary judgment “only if the evidence sanctioned by

Indiana Trial Rule 56(C) shows that there is no genuine issue of material fact

and the moving party deserves judgment as a matter of law.” Id. Further, we

construe all evidence in favor of the nonmoving party and resolve all doubts as

to the existence of a material issue of fact against the moving party. Id. While

the moving party must first put forth evidence to support the motion, “the

opposing party may not rest on his pleadings, but must set forth specific facts,

using supporting materials contemplated by Trial Rule 56, which demonstrate

that summary judgment is not appropriate.” Conrad v. Waugh, 474 N.E.2d 130,

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 134 (Ind. Ct. App. 1985). “A genuine issue of material fact exists where facts

concerning an issue which would dispose of the litigation are in dispute or

where the undisputed material facts are capable of supporting conflicting

inferences on such an issue.” Poyser v. Peerless, 775 N.E.2d 1101, 1105 (Ind. Ct.

App. 2002).

[10] We do not resolve questions of credibility or weigh evidence at the summary

judgment stage of proceedings. See Kader v. State, 1 N.E.3d 717, 727 (Ind. Ct.

App. 2013) (“Assessments of credibility and weight are the province of the fact-

finder at trial, not the trial court at summary judgment.”). Summary judgment

is not meant to be a substitute for trial and should not be granted merely

because the party appears likely to prevail at trial. Hughley v. State, 15 N.E.3d

1000, 1005 (Ind. 2014).

[11] We do not modify our standard of review when the parties make cross motions

for summary judgment. State Auto Ins. Co. v. DMY Realty Co., LLP, 977 N.E.2d

411, 419 (Ind. Ct. App. 2012). “Instead, we must consider each motion

separately to determine whether the moving party is entitled to judgment as a

matter of law.” Id. The trial court’s entry, in its summary judgment order, of

findings of fact and conclusions of law does not change our standard of review.

Id. We are not bound by the trial court’s findings of fact and conclusions of

law. Id. However, they may aid our review. Id.

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 Validity of Huntley Mortgages
[12] The parties do not dispute that Ballatan’s judgment is a valid lien against the

Properties pursuant to Indiana Code section 34-55-9-2. 2 However, Appellants

assert that Doug’s purported mortgage interests should take priority over

Ballatan’s judgment lien, because Indiana law places judgment liens

subordinate to other liens. See Huntingburg Prod. Credit Ass’n v. Griese, 456

N.E.2d 448, 452 (Ind. Ct. App. 1983) (“Liens for judgments are subordinate to

all prior legal or equitable liens[.]”). Ballatan asserts the Huntley Mortgages

cannot have priority over his judgment lien because these purported mortgages

are invalid.

[13] A “mortgage” is defined as a “conveyance of title to property that is given as

security for the payment of a debt or the performance of a duty and that will

become void upon payment or performance according to the stipulated terms.”

MORTGAGE, Black’s Law Dictionary (11th ed. 2019). The term “mortgage”

is also used to refer to the instrument specifying the terms of such a transaction.

Id. In Indiana, the proper form for mortgages is defined by a statute that states:

A mortgage of land that is:

worded in substance as “A.B. mortgages and warrants to C.D.”
(here describe the premises) “to secure the repayment of” (here

2
That statute provides, in relevant part: “All final judgments for the recovery of money or costs . . . constitute
a lien upon real estate and chattels real liable to execution in the county where the judgment has been duly
entered and indexed.” Ind. Code § 34-55-9-2.

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 recite the sum for which the mortgage is granted, or the notes or
other evidences of debt, or a description of the debt sought to be
secured, and the date of the repayment); and

dated and signed, sealed, and acknowledged by the grantor;

is a good and sufficient mortgage to the grantee and the grantee’s
heirs, assigns, executors, and administrators, with warranty from
the grantor (as defined in IC 32-17-1-1) and the grantor’s legal
representatives of perfect title in the grantor and against all
previous encumbrances. However, if in the mortgage form the
words ‘and warrant’ are omitted, the mortgage is good but
without warranty.

Ind. Code § 32-29-1-5.

[14] All mortgages must be secured by a debt. Plummer & Co., Inc. v. Nat’l Oil & Gas.

Inc., 642 N.E.2d 291, 292 (Ind. Ct. App. 1994), trans. denied. The debt need not

be described with literal accuracy but it “must be correct so far as it goes, and

full enough to direct attention to the sources of correct information in regard to

it, and be such as not to mislead or deceive, as to the nature or amount of it, by

the language used.” Bowen v. Ratcliff, 39 N.E. 860, 862 (Ind. 1895). It is

necessary for the parties to the mortgage to correctly describe the debt “so as to

preclude the parties from substituting debts other than those described for the

mere purpose of defrauding creditors.” Plummer & Co., Inc., 642 N.E.2d at 292.

As our federal sister court has observed, “most Indiana cases have examined

the description of the debt as a whole to decide whether it puts a potential

purchaser on in essence inquiry notice of an encumbrance, and whether it is

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 specific enough to prevent the substitution of another debt.” In re Kraft, LLC,

429 B.R. 637, 653 (Bankr. N.D. Ind. 2010) (emphasis in original).

[15] In SPCP Group, LLC v. Dolson, Inc., Earlene Holland owned four lots in Jasper,

Indiana. 934 N.E.2d 771, 772-773 (Ind. Ct. App. 2010). She leased the

property to Dolson, Inc., and Dolson’s president and secretary/treasurer,

Shanna and Maurice Doll, signed the lease. Id. at 773. On December 24, 2001,

Holland and Dolson purported to execute a new mortgage in favor of Terre

Haute First National Bank for the purpose of refinancing. Id. The mortgage

document described the secured debt by referencing a promissory note dated

December 27, 2001, and executed by the two Dolls and C. Wayne Thompson.

Id. The Dolls executed a promissory note, but Thompson did not execute the

note. Id. at 774. Terre Haute First National Bank assigned its interests to

SPCP, and SPCP initiated a foreclosure action against Holland and others. Id.

The trial court granted summary judgment in favor of Holland and against

Dolson after concluding the December 24, 2001, mortgage was invalid because

the debt was not accurately described. Id. at 775.

[16] On appeal, we first assessed the accuracy of the description of the debt and

concluded the description was inaccurate because Thompson did not execute

the note and therefore was not a primary obligor. Id. at 776. Thompson was a

guarantor rather than a co-maker of the note. Id. Next, we looked to see

whether the inaccuracy was sufficiently material to mislead or deceive as to the

nature and amount of the debt. Id. We concluded that it was sufficiently

material to mislead because it permitted SPCP to release Thompson while

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 seeking recovery of the debt from Holland. Id. at 777. Also, Thompson’s status

as guarantor rather than co-maker of the note altered Holland’s remedies

against Thompson in the event of default. Id.

[17] The Huntley Mortgage documents describe three debts Joanne purportedly

owed to Doug as debts for $80,000.00; $250,000.00; and $500,000.00

respectively. The Huntley Mortgage documents refer to notes evidencing these

debts, (see Appellants’ App. Vol. II at 131, 134, & 137 (“[M]ortgagor expressly

agrees to pay the sum of money secured, without relief from valuation or

appraisement laws; and upon failure to pay any one of said notes, or any part

thereof…then all of said notes are to be due and collectible.”)), but Doug did

not designate the notes purportedly referred to in the Huntley Mortgage

documents. Instead, Doug’s affidavit and his averments in his appellate brief

reveal the true nature of the debts – the mortgages were not meant to secure

monetary loans he gave to Joanne; rather, the amounts listed represented

expected future expenses Doug would incur in covering Joanne’s living

expenses. (See Appellants’ App. Vol II at 108 ¶ 7.) See supra n.1.

[18] Like in SPCP Group, LLC, the Huntley Mortgage documents fail to accurately

describe the debt. The Huntley Mortgage documents describe the debt in a

misleading and deceiving manner because, on their face, Joanne “expressly

agree[s] to pay the sum of money above secured.” (Appellants’ App. Vol. II at

131, 134, & 137.) However, Joanne did not owe money to Doug; Doug was

paying Joanne’s future living expenses. Further, the Huntley Mortgage

documents do not include a date of repayment as required by Indiana Code

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 section 32-29-1-5. Therefore, one cannot tell from looking at the Huntley

Mortgage documents when Doug’s purported mortgage interest in the

Properties was scheduled to expire. See In re Canaday, 376 B.R. 260, 270

(Bankr. N.D. Ind. 2007) (listing failure to include the date of repayment secured

by a purported mortgage in the mortgage instrument as one of the reasons a

purported mortgage did not satisfy the requirements of the statute). In short,

the descriptions of the debts in the Huntley Mortgage documents are

inaccurate.

[19] Next, we evaluate whether the inaccuracies are sufficiently material to mislead

or deceive as to the nature and amount of the debt. The Huntley Mortgage

documents make no mention of Doug’s agreement to cover his mother’s living

expenses in exchange for mortgage interests in the Properties. Further, the

Huntley Mortgage documents do not connect the debts described therein with

the expenses intended to be incurred in covering Joanne’s living expenses. The

descriptions of the debts are so vague that they do not preclude Joanne and

Doug from substituting other debts for the debts described. Thus, the

inaccuracies contained in the Huntley Mortgage documents are materially

misleading regarding the nature and amount of the debt, and we therefore hold

the Huntley Mortgages are invalid. See SPCP Group, LLC, 934 N.E.2d at 779

(holding plaintiff could not foreclose on mortgage because it contained an

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 inaccurate and materially misleading description of the debt it purported to

secure). 3

Bona Fide Purchaser Status
[20] Nevertheless, we must still evaluate whether a genuine issue of material fact

exists regarding whether Doug and/or Drake Investments were bona fide

purchasers when they took ownership of the Properties. The bona fide

purchaser doctrine protects a bona fide purchaser against prior interests in land.

Clarkson v. Neff, 878 N.E.2d 240, 244 (Ind. Ct. App. 2007), trans. denied. A bona

fide purchaser buys real estate “in good faith, for . . . valuable consideration,

and without notice of the outstanding rights of others.” Keybank Nat. Ass’n v.

NBD Bank, 699 N.E.2d 322, 327 (Ind. Ct. App. 1998). It is an equitable

doctrine that recognizes “every reasonable effort should be made to protect a

purchaser of legal title for . . . valuable consideration without notice of a legal

defect.” Id. A person may have either constructive or actual notice of prior

interests in the land. Id. “Constructive notice is provided when a deed or

mortgage is properly acknowledged and placed on the record as required by

statute.” Id. Actual notice occurs

when notice has been directly and personally given to the person
to be notified. Additionally, actual notice may be implied or
inferred from the fact that the person charged had means of

3
For the same reasons we reject Appellants’ arguments that these documents are legal mortgages, we also
decline to hold the Huntley Mortgages could survive as equitable mortgages. 59 C.J.S. Mortgages § 148 (“A
mortgage[,] to be effective, must describe or identify the debt or liability intended to be secured thereby.”)

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 obtaining knowledge which he did not use. Whatever fairly puts
a reasonable, prudent person on inquiry is sufficient notice to
cause that person to be charged with actual notice, where the
means of knowledge are at hand and he omits to make the
inquiry from which he would have ascertained the existence of a
deed or mortgage. Thus, the means of knowledge combined with
the duty to utilize that means equates with knowledge itself.
Whether knowledge of an adverse interest will be imputed in any
given case is a question of fact to be determined objectively from
the totality of the circumstances.

Id. (internal citations omitted).

[21] Ballatan contends that because his judgment against Joanne was a matter of

public record, Doug should be charged with knowledge of the judgment lien. A

judgment lien is statutory. Lobb v. Hudson-Lobb, 913 N.E.2d 288, 295 (Ind. Ct.

App. 2009). The statute provides: “All final judgments for the recovery of

money . . . constitute a lien upon real estate . . . in the county where the

judgment has been duly entered and indexed in the judgment docket as

provided by law . . . after the time the judgment was entered and indexed.”

Ind. Code § 34-55-9-2. Here, the judgment was duly entered and indexed in the

judgment docket of the Marion County Clerk. (See App. Vol. II at 200-204).

Therefore, the judgment lien became effective when it was entered and indexed.

[22] Doug avers he did not know about Ballatan’s judgment lien before Ballatan

filed his complaint in the case at bar on September 7, 2017. Nevertheless, the

records of the Marion County Clerk are available for public inspection. “Public

records are notice to the world, and it is not necessary to prove that a man has

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 examined a record in order to bind him with notice of its contents.” Keesling v.

Doyle, 35 N.E. 126, 127 (Ind. Ct. App. 1893). 4

[23] Doug does not argue or designate any facts that would have called into question

his ability to obtain knowledge of the judgment. Therefore, as a matter of law,

knowledge of the judgment can be imputed to him. See State v. Cox, 377 N.E.2d

1389, 1392 (Ind. Ct. App. 1978) (holding that subsequent purchaser acquired

land with notice of and subject to State’s judgment lien when State’s lien was

recorded in judgment docket and order book). As Doug’s assertion that he did

not know about the judgment lien does not create a genuine issue of material

fact about whether knowledge of the judgment lien can be imputed to him,

summary judgment for Ballatan was not erroneous. See Herron v. First Financial

Bank, N.A., 91 N.E.3d 994, 999 (Ind. Ct. App. 2017) (holding judgment lien

that attached to property has priority over subsequent mortgage). 5

Conclusion
[24] The Huntley Mortgages are invalid because they fail to accurately describe the

debts to be repaid and the inaccuracies are sufficiently material to mislead or

4
As Ballatan observes, if knowledge of a public record cannot be imputed to a subsequent purchaser, “then
any purchaser subsequent to the attachment of the judgment could defeat the lien merely by ignoring
(declining to search) the county judgment docket.” (Appellee’s Br. at 13.)
5
Because Doug is the president of Drake Investments, it also could not be a bona fide purchaser, and
summary judgment for Ballatan was appropriate against Drake Investments for the same reasons it was
appropriate against Doug.

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 deceive others regarding the nature of the debt. 6 Additionally, Doug was not a

bona fide purchaser when he purchased the Properties and subsequently

conveyed them to Drake Investments. Therefore, we affirm the trial court’s

grant of summary judgment to Ballatan.

[25] Affirmed.

Mathias, J., and Brown, J., concur.

6
Because we hold the Huntley Mortgages were invalid from the beginning, we need not address whether
Ballatan is barred from asserting the Huntley Mortgages are fraudulent, whether Doug’s mortgage interests
merged with his ownership interests when he bought the Properties, or whether Doug is a bona fide
mortgagee who takes free of later claims. The Huntley Mortgages simply do not have priority over Ballatan’s
judgment lien because the purported mortgages are invalid.

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