FILED
Oct 09 2019, 7:52 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Alan D. Wilson J. Dustin Smith
Kokomo, Indiana Manley Deas Kochalski LLC
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Michael J. Mannion, October 9, 2019
Appellant-Defendant, Court of Appeals Case No.
19A-MF-446
v. Appeal from the Howard Superior
Court
Wilmington Savings Fund The Honorable Brant J. Parry,
Society FSB, Special Judge
Appellee-Plaintiff. Trial Court Cause No.
34D02-1806-MF-455
Sharpnack, Senior Judge.
Statement of the Case
[1] Michael Mannion appeals the trial court’s summary judgment, in rem
judgment, default judgment, and decree of foreclosure in favor of Wilmington
Savings Fund Society FSB (Wilmington). We reverse and remand with
instructions.
Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019 Page 1 of 8
Issue
[2] Mannion presents one issue for our review, which we restate as: whether
dismissal of an in rem foreclosure action under Indiana Trial Rule 41(E) is a bar
to subsequent in rem foreclosure actions on the same note and mortgage.
Facts and Procedural History
[3] On November 5, 1998, Mannion executed a note and mortgage on a residence
in Kokomo, Indiana. Several years later in October 2007, he filed bankruptcy,
and, in February 2009, he received a discharge from the mortgage debt.
Thereafter, Mannion made no payments on the mortgage.
[4] In April 2009, Bank of America, Wilmington’s predecessor in interest, filed an
in rem foreclosure action (“First Foreclosure Action”) against Mannion. In
March 2010, the court noted that Bank of America had taken no action in the
case for a period in excess of sixty days and set the matter for a Trial Rule 41(E)
hearing. Bank of America did not appear for the hearing, and the court
dismissed the action in April 2011 pursuant to Trial Rule 41(E).
[5] In November 2012, Ditech Financial LLC, another of Wilmington’s
predecessors in interest, filed an in rem foreclosure action (“Second Foreclosure
Action”) against Mannion. This action was subsequently dismissed on the
plaintiff’s motion in January 2017.
[6] The present case was initiated in April 2018 when Wilmington filed an in rem
foreclosure action (“Third Foreclosure Action”) against Mannion. The parties
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filed cross motions for summary judgment and responses thereto. In his
motion, Mannion alleged that the Trial Rule 41(E) dismissal in the First
Foreclosure Action is a dismissal with prejudice and on the merits and is
therefore res judicata as to the issues that may have been litigated. Wilmington
claimed that the Third Foreclosure Action is based upon a default by Mannion
that occurred after the dismissal of the First Foreclosure Action and is thus not
barred by res judicata. In January 2019, the trial court granted Wilmington’s
motion for summary judgment and denied Mannion’s. In February, the court
entered a separate in rem summary judgment and decree of foreclosure in favor
of Wilmington. It is from these orders that Mannion now appeals.
Discussion and Decision
[7] On appeal from a summary judgment, we apply the same standard of review as
the trial court: summary judgment is appropriate only where the designated
evidentiary matter shows there is no genuine issue as to any material fact and
the moving party is entitled to judgment as a matter of law. See Ind. Trial Rule
56(C); see also Young v. Hood’s Gardens, Inc., 24 N.E.3d 421, 423-24 (Ind. 2015).
Appellate review of a summary judgment is limited to those materials
specifically designated to the trial court, and all facts and reasonable inferences
drawn from those facts are construed in favor of the nonmovant. Sheehan Const.
Co., Inc. v. Cont’l Cas. Co., 938 N.E.2d 685, 688 (Ind. 2010). Where the parties
make cross motions for summary judgment, we consider each motion
separately to determine whether the moving party is entitled to judgment as a
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matter of law. Pond v. McNellis, 845 N.E.2d 1043, 1053 (Ind. Ct. App. 2006),
trans. denied.
[8] First, the parties agree that Mannion received a discharge in bankruptcy and
that the discharge occurred prior to the initiation of the First Foreclosure
Action. It is further undisputed that, due to his discharge in bankruptcy,
Mannion is no longer personally liable for the debt secured by the mortgage.
Indeed, this is not a novel concept. See McCullough v. CitiMortgage, Inc., 70
N.E.3d 820, 827 (Ind. 2017) (explaining that Chapter 7 bankruptcy discharge
eliminates homeowner’s obligation to pay back mortgage).
[9] While the bankruptcy discharge removed the ability of Wilmington and its
predecessors in interest to seek to collect against Mannion individually (i.e., in
personam), Wilmington or one of its predecessors may still seek to enforce the
mortgage and collect the debt in an action against the property itself (i.e., in
rem). See id. at 827-28 (clarifying distinction between in personam and in rem
liability on mortgage). Hence the initiation of the in rem foreclosure actions in
the present case. However, the First Foreclosure Action, which was filed by
Bank of America, one of Wilmington’s predecessors in interest, was dismissed
pursuant to Trial Rule 41(E).
[10] In this case, Wilmington does not contest that the Trial Rule 41(E) dismissal in
the First Foreclosure Action is a dismissal with prejudice and on the merits.
Certainly, unless the court specifies otherwise in its order for dismissal, a
dismissal pursuant to Trial Rule 41(E) operates as an adjudication on the
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merits. Ind. Trial Rule 41(B); Ind. Dep’t of Nat. Res. v. Ritz, 945 N.E.2d 209, 213
(Ind. Ct. App. 2011), trans. denied. “Clearly, this means that unless the trial
court indicates that the dismissal is without prejudice, it must be deemed to be
with prejudice.” Brimhall v. Brewster, 835 N.E.2d 593, 597 (Ind. Ct. App. 2005),
trans. denied. Here, the CCS for the First Foreclosure Action states, “No
persons having appeared in objection to this matter being dismissed pursuant to
TR 41(E), Court now on its own motion orders this cause dismissed pursuant to
TR 41(E).” Appellant’s App. Vol. II, p. 73. The court does not indicate that
the dismissal was without prejudice; accordingly, the order dismissing the First
Foreclosure Action pursuant to Trial Rule 41(E) is deemed an adjudication on
the merits and a dismissal with prejudice.
[11] Additionally, “‘[i]n Indiana, it is well settled that a dismissal with prejudice is a
dismissal on the merits, and as such, it is conclusive of the rights of the parties
and res judicata as to the questions that might have been litigated.’” Hart v.
Webster, 894 N.E.2d 1032, 1037 (Ind. Ct. App. 2008) (quoting Mounts v.
Evansville Redevelopment Comm’n, 831 N.E.2d 784, 791 (Ind. Ct. App. 2005),
trans. denied). The question here, then, is whether the adjudication in the First
Foreclosure Action is a bar to the present action.
[12] The doctrine of res judicata serves to prevent repetitious litigation of disputes
that are essentially the same. Hilliard v. Jacobs, 957 N.E.2d 1043, 1046 (Ind. Ct.
App. 2011), trans. denied. The doctrine has two components: claim preclusion
and issue preclusion. Id. Claim preclusion applies when a final judgment on
the merits has been rendered in an action, and it acts to bar a subsequent action
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on the same claim between the same parties. Evergreen Shipping Agency Corp. v.
Djuric Trucking, Inc., 996 N.E.2d 337, 340 (Ind. Ct. App. 2013). More
specifically, claim preclusion applies when the following four factors are
satisfied: (1) the former judgment must have been rendered by a court of
competent jurisdiction; (2) the former judgment must have been rendered on
the merits; (3) the matter now in issue was, or could have been, determined in
the prior action; and (4) the controversy adjudicated in the former action must
have been between the parties to the present suit or their privies. Id.
[13] Basically, Wilmington is asserting that res judicata does not apply in this case
because the third element is not satisfied. Specifically, Wilmington claims the
two foreclosure actions are not the same because they are based on different
acts of default and because they seek different judgment amounts. Essentially,
Wilmington’s argument is that, regardless of his discharge in bankruptcy,
Mannion’s obligation under the mortgage was ongoing such that any non-
payment subsequent to his discharge amounted to a default that served as a
basis for the First Foreclosure Action. The basis for the Third Foreclosure
Action, however, is the default arising from the nonpayment of the mortgage
subsequent to the dismissal of the First Foreclosure Action, thereby creating a
new and independent default and basis for foreclosure not contemplated by the
First Foreclosure Action.
[14] Wilmington’s assertion ignores the undisputed fact that Mannion’s personal
liability under the mortgage had been discharged in bankruptcy. The essentials
of the controversy are the same in both foreclosure actions: the debt is unpaid;
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Mannion is discharged from liability for the debt; the creditor can foreclose on
the property; and the creditor is seeking an in rem judgment. Thus, both
foreclosure actions were based on the nonpayment of the mortgage due to the
mortgagor’s discharge in bankruptcy.
[15] Moreover, the relief sought in both foreclosure actions was an in rem judgment
for the amount due on the mortgage. The fact that a different amount was
alleged in each of the foreclosure actions is of no consequence. Due to the
creditors’ lack of success in their attempts to foreclose, the litigation has
spanned many years, thus increasing the amount of the debt; this does not
create a new and independent basis for foreclosure. See Grant v. Bank of New
York Mellon Tr. Co., 30 N.E.3d 733 (Ind. Ct. App. 2015) (following dismissal
with prejudice of foreclosure action pursuant to T.R. 41(E), note and mortgage
holder was precluded from filing second complaint that raised same legal and
factual issues as first action; mortgagors’ personal liability under note and
mortgage had been discharged in bankruptcy, and thus, relief sought in both
foreclosure actions was same and based on the same alleged default), trans.
denied.
[16] Finally, Wilmington includes a public policy argument that Mannion should
not receive the property “free and clear” of its lien. Appellee’s Br. p. 18.
However, where, as here, the creditor created the situation as a direct result of
its failure to prosecute, and the homeowner obtained a judgment on the merits,
the judgment should have its full res judicata effect in accordance with res
judicata principles.
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Conclusion
[17] For the reasons stated, we conclude the trial court erred by entering summary
judgment in favor of Wilmington. We reverse and remand with instructions to
enter judgment in favor of Mannion.
[18] Reversed and remanded with instructions.
Bradford, J., and Pyle, J., concur.
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