Hair v Schellenberger (IN)

Summary:  In Indiana, a judgment does not constitute a lien on a property unless it is statutorily compliant. If the judgment is not duly entered and indexed in the judgment docket, it does not provide notice to bona fide purchasers.

Hair v Schellenberger, 966 NE2d 693 (Ind. Ct. App., 2012).

Facts:  Mike Schellenberger purchased a property (“Talbott Property”) in Indianapolis at a foreclosure sale; the title search did not turn up a money judgment obtained by Calvin Hair against the former owners, Felix and Sharon Adejare. The Adejares mortgaged the Talbott Property to Argent Mortgage Co. and recorded it in January 2004, which was later assigned to Deutsche Bank in 2005. Shortly thereafter, the property was transferred to a land trust along with three other parcels via quitclaim deed; this deed was recorded in July 2006. In April of 2006, a foreclosure judgment was granted to Homecomings Financial Network on one of the Adejare parcels, which as a crossclaimant, Hair obtained a money judgment for $139,800.89.

Homecomings’ foreclosure judgment was indexed in the judgment docket, but Hair’s money judgment was not separately indexed at that time. In December 2006, Deutsche Bank foreclosed on the Talbott Property and obtained a default judgment against the Adejares, the land trust, Homecomings, and all unknown occupants or tenants. Schellenberger subsequently purchased the home from Deutsche Bank after a title search was conducted. Schellenberger was unaware of a lien until Hair sent a letter claiming he had a judgment on the property.  Meanwhile, Sharon Adejare declared Chapter 7 bankruptcy in 2007 and received a general discharge.

After receiving the letter in 2008, Schellenberger brought action to remove the cloud from the title of the Talbott Street Property. On July 31, 2009, Hair’s 2006 judgment against the Adejares was properly indexed; but nevertheless, the lien was nullified on May 27, 2011, following the trial court’s finding that Schellenberger was a bona fide purchaser as a matter of law. The trial court also denied Hair’s motioned for partial summary judgment seeking a declaratory judgment that the Adejares had fraudulently conveyed the Talbott Property.

Hair appealed the denial of his partial summary judgment and the granting of the summary judgment to the appellees.

Holding:  Affirmed. The Court of Appeals of Indiana agreed with the trial court’s decision to deny the declaratory judgment of Adejares’ fraudulent conveyance. First, the claim was barred by the statute of limitations; and second, even if Hair filed a timely claim, the fraudulent conveyance would not be voidable as to a BFP such as Schellenberger.

The Court of Appeals affirmed the appellees’ motions for summary judgment, agreeing with the trial court that Schellenberger was, as a matter of law, a good faith purchaser. Hair’s argument that Schellenberger did have notice failed because a record outside the chain of title does not provide notice to a bona fide purchaser for value. The court cannot create a judgment lien, rather, a lien’s existence depends purely on compliance with statutory requirements. According to Indiana Code, a judgment constitutes a lien when it is duly entered and indexed in the judgment docket. Because this did not occur until after Schellenberger purchased the Talbott Property, he was not placed on notice and therefore could not cure deficiencies in the record. The court reasoned that Hair as the lienholder was in a better position to prevent these deficiencies by checking the records to ensure his judgment was on record or by bringing the action within the statute of limitations.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Mon, 07/23/2012 - 2:07pm