Indiana District Court Holds Amendment To Indiana Recording Statute To Be Retroactive

Unable to meet the obligations on, inter alia, their $49,300 home loan, the Gysins filed for Chapter 13 bankruptcy on October 18, 2007. Bankruptcy Trustee Debra Miller initiated an adversary proceeding by filing a complaint to avoid lien, asserting a claim under 11U.S.C. § 544 to avoid the lien of Defendant LaSalle Bank National Association as trustee for the holders of Merrill Lynch Investors Trust Series 2002-AFCI.

On or about April 25, 2001, Timothy and Donna Gysin executed and delivered a mortgage against their home in Peru, Indiana. The mortgage was filed in the Recorder's office for the appropriate county on May 1, 2001. The notary block following the Gysins' signatures read as follows:

Before me, a Notary Public in and for said County and State, this 25th day of April, 2001, __________________________ acknowledged the execution of the foregoing mortgage.

Unable to meet the obligations on, inter alia, their $49,300 home loan, the Gysins filed for Chapter 13 bankruptcy on October 18, 2007. Bankruptcy Trustee Debra Miller initiated an adversary proceeding by filing a complaint to avoid lien, asserting a claim under 11U.S.C. § 544 to avoid the lien of Defendant LaSalle Bank National Association as trustee for the holders of Merrill Lynch Investors Trust Series 2002-AFCI. LaSalle and Miller filed cross-motions for summary judgment. The trustee argued that the recoding of the LaSalle mortgage was void because the document did not set forth who appeared and acknowledged signing it, as required by Ind. Code §§ 32-21-2-3 and 32-21-2-7. The trustee's argument was supported by a line of Indiana cases.

However, effective July 1, 2007, the Indiana General Assembly had amended Ind. Code § 32-21-4-1(c) to provide that a mortgage recording did not need to comply with the requirements of the Ind. Code §§ 32-21-2-3 or 32-21-2-7. Thus, LaSalle argued, its mortgage was validly recorded and provided constructive notice of its interest to the Trustee.

The crucial question before the court was whether the 2007 amendment applied to a mortgage recorded prior to the amendment's effective date, when the Trustee's bona fide purchaser rights arose after the amendment's effective date. The bankruptcy judge held that the 2007 amendment did not apply to the 2001 recording of the mortgage. The district judge reversed, holding that the language in a 2008 amendment to the same statute providing that it was to apply regardless of when a mortgage was recorded strongly suggested that the legislative intent behind the 2007 amendment was the same - that the amendment be applied regardless of when the mortgage was recorded. Gysin, et al., v. LaSalle Bank National Association, 409 B.R. 485 (N.D. Ind. 2009).

Posted by: Thomas E. Satrom

Categories: Bankruptcy & Banking Law