U.S. Bank Trust National Association, as Trustee of the American Homeowner Preservation Trust Series 2013C v. Chester Modesitt and Martha R. Modesitt (mem. dec.) ( 2017 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), FILED
this Memorandum Decision shall not be
Jun 26 2017, 9:24 am
regarded as precedent or cited before any
court except for the purpose of establishing CLERK
Indiana Supreme Court
the defense of res judicata, collateral Court of Appeals
and Tax Court
estoppel, or the law of the case.
ATTORNEYS FOR APPELLANT
Scott J. Fandre
Stacy Walton Long
Krieg DeVault LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
U.S. Bank Trust National June 26, 2017
Association, as Trustee of the Court of Appeals Case No.
American Homeowner 61A01-1612-MF-2897
Preservation Trust Series 2013C, Appeal from the Parke Circuit
Appellant-Plaintiff, Court
The Honorable Samuel A. Swaim,
v. Judge
Trial Court Cause No.
Chester Modesitt, Martha R. 61C01-1405-MF-159
Modesitt, and Unknown
Occupants of RR3 Box 28 a/k/a
10930 South 625 West,
Rosedale, Indiana 47874,
Appellees-Defendants
Crone, Judge.
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 1 of 10
Case Summary
[1] In this appeal, we must untangle a procedural web of motions, responses, and
orders in litigation involving a determination of the proper chain of title of a
note/mortgage that has been assigned at least ten times. The appellant, U.S.
Bank Trust National Association, as Trustee of the American Homeowner
Preservation Trust Series 2013C (“U.S. Bank”), as assignee of a promissory
note and mortgage, filed an action against Chester Modesitt, Martha R.
Modesitt, and Unknown Occupants of RR3 Box 28 a/k/a 10930 South 625
West, Rosedale, Indiana 47874 (“Modesitt”) for default and foreclosure. U.S.
Bank filed a motion for summary judgment, and Modesitt filed a motion to
dismiss pursuant to Indiana Trial Rule 12(B). The trial court denied U.S.
Bank’s summary judgment motion and granted Modesitt’s motion to dismiss
with prejudice.
[2] U.S. Bank filed a motion for leave to amend its complaint. The trial court
granted the motion and deemed U.S. Bank’s amended complaint filed.
Modesitt sought an extension for filing its responsive pleading, which the trial
court granted. Instead of filing a responsive pleading, Modesitt filed a response
in opposition to U.S. Bank’s motion for leave to file an amended complaint,
and the trial court issued an order denying U.S. Bank’s motion for leave to
amend the complaint. U.S. Bank filed a motion to reconsider and clarify the
record, which the court summarily denied. U.S. Bank now appeals. We
reverse and remand.
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 2 of 10
Facts and Procedural History
[3] In 2003, Chester Modesitt and his mother (now deceased) executed a
promissory note for $101,200, secured by a mortgage on their property in
Rosedale, which they owned as joint tenants with rights of survivorship. The
lender, Aegis Funding Corporation, subsequently assigned the note and
mortgage (collectively “Mortgage”), and through a series of allonges, the
Mortgage went through at least ten assignments.
[4] In 2008, the Bank of New York (“BNY”), as trustee for J.P. Morgan Chase
N.A., as assignee of the Mortgage, filed a foreclosure action against Modesitt.
The action was eventually dismissed without prejudice on BNY’s own motion.1
BNY never specified its reason for seeking voluntary dismissal other than to
state, “Plaintiff no longer wishes to pursue this foreclosure action.” Appellant’s
App. Vol. 2 at 208.
[5] In 2014, U.S. Bank, as holder by assignment, filed an action against Modesitt
for collection and foreclosure of the Mortgage for nonpayment dating back to
2012. See id. at 84 (affidavit of indebtedness claiming an outstanding balance of
$171,630.74, including principal, interest, late fees, and unpaid charges).
Though Modesitt did not dispute his nonpayment, he filed an answer and
counterclaim, alleging that U.S. Bank’s assignment was an illegal assignment
outside the chain of title. He also raised claims of harassment and
1
The 2008 trial court never ruled on a counterclaim filed by Modesitt in that action. In 2015, the pending
counterclaim was consolidated with the present action.
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 3 of 10
unconscionable and usurious interest rates. In January 2016, U.S. Bank filed a
motion for summary judgment on the complaint and counterclaim. On
February 4, 2016, Modesitt went to the county recorder’s office and recorded
the 2008 assignment from Aegis to BNY. In March 2016, Modesitt filed a
memorandum in opposition to summary judgment and a motion to dismiss
pursuant to Trial Rule 12(B)(6) for failure to state a claim upon which relief can
be granted. He also alleged res judicata and lack of personal jurisdiction under
Trial Rule 12(B)(2). In June 2016, the trial court conducted a hearing on all
motions and took matters under advisement. On July 5, 2016, the trial court
issued an order denying U.S. Bank’s motion for summary judgment and
granting Modesitt’s motion to dismiss with prejudice.
[6] On July 18, 2016, U.S. Bank filed a motion for leave to file an amended
complaint. Attached to the motion was an amended complaint in which U.S.
Bank sought to add (1) BNY as a party; (2) a count for declaratory judgment to
correct a previously unrecognized title issue regarding the Mortgage; and (3) a
count for fraud against Modesitt for the alleged fraudulent recording of an
assignment of the Mortgage. Attached to the motion and amended complaint
was a receipt identifying Modesitt as the payor of a $12.00 recording fee on
February 4, 2016. Appellant’s App. Vol. 3 at 60. That receipt indicated a cash
payment to cover the recording fee for the previously unrecorded assignment
from Aegis to BNY. Id.
[7] The trial court granted U.S. Bank’s motion for leave to amend the complaint
and deemed the amended complaint filed. Modesitt filed a motion for a sixty-
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 4 of 10
day extension of time in which to file his responsive pleading, which the trial
court granted. Sixty days later, Modesitt did not file a responsive pleading but
instead filed a response in opposition to U.S. Bank’s motion for leave to amend,
which the trial court had previously granted. This time, the court denied the
motion for leave to amend and reiterated that the case remained dismissed with
prejudice. U.S. Bank filed a motion to reconsider and clarify the record, which
the trial court summarily dismissed.
[8] U.S. Bank now appeals. Additional facts will be provided as necessary.
Discussion and Decision
[9] U.S. Bank challenges the trial court’s denial of its motion to reconsider. A trial
court may reconsider prior rulings through the careful exercise of discretion,
and we will review its decision for an abuse of discretion. Cherokee Air Prods.,
Inc. v. Burlington Ins. Co., 887 N.E.2d 984, 988 (Ind. Ct. App. 2008), trans.
denied.
[10] As a preliminary matter, we observe that Modesitt has not filed an appellee’s
brief. Where an appellee fails to file a brief, we do not undertake to develop
arguments on his behalf; rather, we may reverse upon a prima facie showing of
reversible error. Morton v. Ivacic, 898 N.E.2d 1196, 1199 (Ind. 2008). Prima
facie error is error “at first sight, on first appearance, or on the face [of] it.” Id.
[11] Here, U.S. Bank based its motion to reconsider on the trial court’s reversal of its
earlier order granting U.S.’s Bank’s motion for leave to amend the complaint.
“The stated policy of this court and our Supreme Court is to freely allow such
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 5 of 10
amendments [to pleadings] in order to bring all matters at issue before the
court.” Rusnak v. Brent Wagner Architects, 55 N.E.3d 834, 843 (Ind. Ct. App.
2016), trans. denied. Indiana Trial Rule 15(A) provides for one amendment as a
matter of right in certain circumstances and otherwise allows a complaint to be
amended by leave of the trial court, and “leave shall be given when justice so
requires.” In the latter circumstances, the trial court has broad discretion when
ruling on whether to allow such amendments and should consider factors such
as undue delay, bad faith, or dilatory motive by the movant or undue prejudice
to the opposing party. Gen. Motors Corp. v. Northrop Corp., 685 N.E.2d 127, 142
(Ind. Ct. App. 1997), trans. denied (1998) (citation omitted).2
[12] Here, U.S. Bank sought redress not in the form of a direct appeal following
dismissal but through a motion for leave to amend its complaint. Although
Modesitt did not file an appellee’s brief, we glean from his filings below a claim
that U.S. Bank could seek redress only through a direct appeal and not through
an amended complaint. We disagree. Although the trial court’s summary
order of dismissal did not explain its basis for dismissal, the only basis not
otherwise waived was under Trial Rule 12(B)(6) for failure to state a claim upon
2
In General Motors, another panel of this Court affirmed the trial court’s denial of the plaintiff’s motion for
leave to file a second amended complaint to add fraud claims where four years had passed since the initial
complaint; two years had passed since the plaintiff’s first amended complaint; and the plaintiff had failed to
assert that it had discovered new evidence that might justify the delay in seeking the amendment. 685
N.E.2d at 142.
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 6 of 10
[13] which relief can be granted.3 When the trial court issued its order denying U.S.
Bank’s motion for summary judgment and granting Modesitt’s motion to
dismiss, it dismissed the case with prejudice. Trial Rule 12(B) states in pertinent
part,
When a motion to dismiss is sustained for failure to state a claim
under subdivision (B)(6) of this rule the pleading may be
amended once as of right pursuant to Rule 15(A) within ten [10]
days after service of notice of the court’s order sustaining the
motion and thereafter with permission of the court pursuant to
such rule.
“Because the complaining party remains able to file an amended complaint, a
dismissal under Trial Rule 12(B)(6) is without prejudice.” Hartig v. Stratman,
729 N.E.2d 237, 239 (Ind. Ct. App. 2000) (emphasis added), trans. denied
(2002). “A Trial Rule 12(B)(6) dismissal becomes an adjudication on the merits
only after the complaining party opts to appeal the order instead of filing an
amended complaint.” Id. (citation omitted). Here, U.S. Bank filed its motion
for leave to amend the complaint thirteen calendar days after the date of the
dismissal order. Because the record is silent as to when notice of the court’s
dismissal order was served on U.S. Bank and weekend days potentially came
into play, it is impossible to know with certainty whether U.S. Bank’s Monday
3
Modesitt failed to raise res judicata or lack of personal jurisdiction as affirmative defenses in his answer or
counterclaim and therefore waived those issues. See Paint Shuttle, Inc. v. Cont’l Cas. Co., 733 N.E.2d 513, 525
(Ind. Ct. App. 2000) (to avoid waiver, defendant/respondent must include within its responsive pleading any
affirmative defense it seeks to assert), trans. denied (2001). Even so, res judicata does not apply where BNY
sought and was granted a voluntary dismissal without prejudice in the 2008 litigation. See Zaremba v. Nevarez,
898 N.E.2d 459, 463 (Ind. Ct. App. 2008) (dismissal without prejudice is not determination of merits of
complaint and does not bar later trial of issues).
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 7 of 10
filing fell within the ten-day period outlined in Trial Rule 12(B)(6). In its
motion for leave to amend, U.S. Bank submits that its filing date of July 18,
2016, falls within the ten-day period for an amendment “as of right.”
Appellant’s App. Vol. 3 at 6. Whether as of right or discretionary, U.S. Bank’s
filing put the trial court on notice of its intent to opt for an amendment instead
of appealing the dismissal. As such, the trial court erred in entering dismissal
with prejudice.
[14] In its motion for leave to amend, U.S. Bank sought to add BNY as a party, add
a count for fraud against Modesitt for the alleged fraudulent recording of an
assignment from Aegis to BNY, and “correct a title issue that was unrecognized
at the commencement of this lawsuit,” namely, that Modesitt’s February 2016
recording of the 2008 BNY assignment was an attempt to make that assignment
(as opposed to U.S. Bank’s assignment) appear to be the one within the proper
chain of title. Id. at 5-7. In its initial order granting U.S. Bank’s motion for
leave to amend the complaint, the trial court found that the motion was “made
for good cause” and that the amended complaint was “deemed filed” as of July
19, 2016. Id. at 61.
[15] On August 5, 2016, Modesitt filed a motion for extension of time to file his
responsive pleading to U.S. Bank’s amended complaint. See id. at 115
(“Defendant now moves the Court to grant them an additional sixty (60) days
in which to file said responsive pleading.” (Emphasis added.)). The trial court
granted the motion, giving Modesitt until October 7, 2016, to file his responsive
pleading. However, Modesitt’s October 7 “response” was not a responsive
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 8 of 10
pleading/answer. Rather, it amounted to legal argument in opposition to the
previously granted motion for leave to amend the complaint. See id. at 124
(Modesitt’s concluding statement that U.S.’s Bank’s “request for leave to
amend their previously dismissed complaint must be denied.”). Instead of
treating Modesitt’s filing as a nonconforming responsive pleading, the trial
court signed a summary order decreeing, “1. That Plaintiff’s Motion for Leave
to File Amended Complaint is hereby DENIED; 2. That the above captioned
cause remained Dismissed WITH Prejudice, as previously stated in the Court’s
Order from July 05, 2016.” Id. at 126.
[16] Faced with conflicting orders, U.S. Bank filed a motion to reconsider and to
clarify the record. In this motion, U.S. Bank correctly observes that it
previously sought and was granted leave to amend the complaint pursuant to
Trial Rule 15(A), and the attached amended complaint was deemed filed. It
further explains that both Modesitt’s motion for extension of time and the trial
court’s order granting that motion were expressly to facilitate Modesitt’s filing
of a responsive pleading to the already-filed amended complaint, not a brief in
opposition to the previously-granted motion to amend the complaint. The trial
court summarily denied U.S. Bank’s motion to reconsider without ruling on or
mentioning its motion for clarification.
[17] Although the trial court is not required to enter findings sua sponte when ruling
on motions such as the ones filed in this case, such findings offer us valuable
insight into the trial court’s rationale and help facilitate our review. Warren v.
Warren, 952 N.E.2d 269, 273 (Ind. Ct. App. 2011). From the record before us,
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 9 of 10
it is difficult to determine the basis of several of the trial court’s rulings. The
record indicates that following dismissal, U.S. Bank promptly requested leave
to amend its complaint based on the discovery of evidence concerning the
sudden recording of BNY’s assigned interest years after BNY obtained its
interest. In other words, evidence surfaced implicating Modesitt in the belated
recording of a previously unrecorded interest that was outside the chain of title.
See Appellant’s App. Vol. 2 at 167, 201 (two copies of Aegis’ 2008 assignment
to BNY, the first bearing no stamp indicating recordation in the county
recorder’s office and the second with a stamped recording date of “02/04,
2016”); Appellant’s App. Vol. 3 at 60 (receipt from county recorder identifying
Modesitt as payor of cash recording fee on “02/04/2016”). Because the new
allegations are crucial to answering the fundamental question of which lender’s
assigned interest was within the proper chain of title, the trial court’s
unexplained reversal of its previous order permitting the filing of the amended
complaint bears explanation and reconsideration.
[18] We conclude that U.S. Bank has met its burden of demonstrating prima facie
error and is entitled to reconsideration and clarification of the trial court’s
reversal of position on its amended complaint. Accordingly, we reverse and
remand for further proceedings consistent with this opinion.
[19] Reversed and remanded.
Mathias, J., and Altice, J., concur.
Court of Appeals of Indiana | Memorandum Decision 61A01-1612-MF-2897 | June 26, 2017 Page 10 of 10