                                                               FILED
                                                          Dec 06 2016, 5:47 am

                                                               CLERK
                                                           Indiana Supreme Court
                                                              Court of Appeals
                                                                and Tax Court




ATTORNEY FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE
Harry B. O’Donnell IV                                     Tammy L. Ortman
Louisville, Kentucky                                      Jennifer S. Ortman
                                                          Lewis & Kappes, P.C.
                                                          Indianapolis, Indiana



                                           IN THE
    COURT OF APPEALS OF INDIANA

L. Ray Yeager, and Phyllis L.                             December 6, 2016
Yeager,                                                   Court of Appeals Case No.
Appellants-Defendants,                                    22A04-1604-MF-727
                                                          Appeal from the Floyd Superior
        v.                                                Court
                                                          The Honorable Susan L. Orth,
Deutsche Bank National Trust                              Judge
Company, as Trustee of the                                Trial Court Cause No. 22D01-
Residential Asset Securitization                          1201-MF-20
Trust 2005-A1, Mortgage Pass-
Through Certificates, Series
2005-A Under the Pooling and
Servicing Agreement Dated
March 1, 2005,
Appellee-Plaintiff.




Brown, Judge.




Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016            Page 1 of 10
[1]   In this interlocutory appeal, L. Ray Yeager and Phyllis L. Yeager (collectively,

      the “Yeagers”) appeal the trial court’s provisional order for payment of

      mortgage, taxes, and insurance premiums (the “Provisional Order”) in a

      foreclosure action. The Yeagers raise one issue which we revise and restate as

      whether the court abused its discretion by failing to conduct an inquiry into the

      Yeagers’ ability to pay prior to issuing the Provisional Order. We reverse and

      remand.


                                       Facts and Procedural History

[2]   On November 5, 2004, the Yeagers executed a promissory note (the “Note”) in

      favor of First Bank, Inc. promising to make monthly principal and interest

      payments of $1,871.61, and a mortgage (the “Mortgage”) granting a security

      interest in their residential real estate in Floyd County, Indiana (the “Real

      Estate”) in favor of First Bank, Inc. and Mortgage Electronic Registration

      Systems, Inc. as nominee for First Bank. An assignment of Mortgage, dated

      July 13, 2011, and recorded on July 21, 2011, assigned the Mortgage to

      Deutsche Bank (the “Bank”). On January 30, 2012, the Bank filed a complaint

      for Foreclosure of Note and Mortgage alleging that the Yeagers defaulted on

      the Note for failure to make payment. A default judgment and decree of

      foreclosure was entered against the Yeagers on July 10, 2012.


[3]   On February 21, 2014, the Bank filed a motion for leave to amend the entry of

      default judgment and decree of foreclosure to correct an error in the legal

      description of the Real Estate. On August 26, 2015, the Bank, with leave of the

      court, filed an amended complaint, which revised the legal description of the
      Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 2 of 10
      Real Estate and identified additional necessary parties holding a record interest

      in the Real Estate. On October 9, 2015, the Yeagers filed an answer to the

      amended complaint.


[4]   On March 4, 2016, the Bank filed a Motion For Payment of Mortgage, Taxes,

      and Insurance Premiums. In its motion, the Bank requested that the court issue

      a provisional order requiring the Yeagers to make payments in the amount of

      $1,871.61 on the Note and Mortgage and citing Ind. Code § 32-30-10.5-8.6. 1

      The Bank’s motion also requested that the court order the Yeagers to make

      property tax payments, to provide proof of payment of insurance premiums,

      and to provide proof of a hazard insurance policy. On March 8, 2016, the court

      issued a Provisional Order which granted the Bank’s request, and ordered the

      Yeagers to pay $1,871.61 per month and to provide proof of payment of

      property taxes and proof of insurance. On March 18, 2016, pursuant to the

      Provisional Order, the Yeagers provided proof of payment of property taxes

      and proof of insurance. The Yeagers now appeal the court’s Provisional Order.


                                                      Discussion

[5]   The issue is whether the trial court abused its discretion by failing to conduct an

      inquiry into the Yeagers’ ability to pay prior to issuing the Provisional Order.

      We generally review interlocutory orders under an abuse of discretion standard.

      In re Estate of Long, 804 N.E.2d 1176, 1178 (Ind. Ct. App. 2004); Hollingsworth v.



      1
       This section, as set forth more fully below, provides that a trial court may order a debtor to continue making
      monthly payments on the mortgage as set forth in the statute.

      Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016                        Page 3 of 10
      Key Benefit Adm’rs, Inc., 658 N.E.2d 653, 655 (Ind. Ct. App. 1995), reh’g denied,

      trans. denied. “‘An abuse of discretion may occur if the trial court’s decision is

      clearly against the logic and effect of the facts and circumstances before the

      court, or if the trial court has misinterpreted the law.’” In re Estate of Long, 804

      N.E.2d at 1178 (quoting Hollingsworth, 658 N.E.2d at 655 (internal citation

      omitted)).


[6]   The Yeagers argue that Ind. Code § 32-30-10.5-8.6, the Indiana Rules of Trial

      Procedure, Floyd County Local Rules, and principles of due process do not

      allow for the entry of an ex parte Provisional Order. They point out that,

      contrary to the Indiana Rules of Trial Procedure and Floyd County Local

      Rules, the Bank’s motion was not accompanied with any notice of hearing,

      that, contrary to the Floyd County Local Rules, the trial court did not set a

      hearing on the matter nor did the Bank request one, the court issued the

      Provisional Order without providing the Yeagers time to respond to the Bank’s

      motion, and the trial court did not modify the Bank’s proposed order or explain

      its reasoning for not holding a hearing.


[7]   The Bank argues that the Provisional Order did not require a hearing, that entry

      of the Provisional Order was “specifically authorized by statute,” and that the

      court’s issuance of the Provisional Order, without a hearing, is neither a due

      process violation nor an abuse of discretion. Appellee’s Brief at 8. It maintains

      that the Provisional Order “did nothing more than direct such matters as

      permitted by statute,” specifically, ordering the Yeagers to pay an amount that

      does not exceed their monthly obligation under the Note and Mortgage. Id. at

      Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 4 of 10
      10. The Bank also asserts that neither the Indiana Rules of Trial Procedure nor

      the Floyd County Local Rules require a hearing prior to the entry of a

      provisional order under the statute. The Bank further contends that a hearing

      was not required to satisfy due process of law because “no protected interest is

      implicated,” and the Yeagers failed to “identify injuries to person, property, or

      reputation” due to the Provisional Order. Id. at 13, 15. In reply, the Yeagers

      contend that the statute does not contain a provision which “‘permits’ or allows

      for consideration or entry of a provisional order under I.C. 32-30-10.5-8.6(b) ex

      parte,” and that the court should have held a hearing on the Bank’s motion.

      Appellant’s Reply Brief at 9.


[8]   Ind. Code § 32-30-10.5-8.6 provides in part:

              (a) This section applies to a mortgage foreclosure action that is
              filed after June 30, 2011.


              (b) During the pendency of an action to which this section
              applies, regardless of any stay that is issued by the court under
              section 8.5 of this chapter, if the debtor continues to occupy the
              dwelling that is the subject of the mortgage upon which the
              action is based, the court may issue a provisional order that
              requires the debtor to continue to make monthly payments with
              respect to the mortgage on which the action is based. The
              amount of the monthly payment:


                       (1) shall be determined by the court, which may base its
                       determination on the debtor’s ability to pay; and


                       (2) may not exceed the debtor’s monthly obligation under
                       the mortgage at the time the action is filed.

      Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 5 of 10
[9]   The record reveals that the court did not hold a hearing or otherwise conduct

      any inquiry on which to base its determination of the monthly payment prior to

      issuing the Provisional Order. Indeed, the court granted the Bank’s motion

      before the Yeagers responded to it. The statute expressly provides that, in

      issuing a provisional order under subsection (b), “[t]he amount of the monthly

      payment . . . shall be determined by the court, which may base its

      determination on the debtor’s ability to pay” and that the amount of the

      monthly payment “may not exceed the debtor’s monthly obligation under the

      mortgage at the time the action is filed.” While the statute does not expressly

      require a hearing, it is implicit that the court have the necessary information on

      which to base its determination, including the debtor’s current financial

      information. The record contains no evidence of the Yeagers’ current financial

      situation, such as earnings from any employment, income from other sources,

      or other assets. The Indiana legislature enacted Indiana Code §§ 32-30-10.5 to

      “avoid unnecessary foreclosures” and to facilitate “the modification of

      residential mortgages in appropriate circumstances.” Nationstar Mortg., LLC v.

      Curatolo, 990 N.E.2d 491, 493-94 (Ind. Ct. App. 2013) (citing Ind. Code § 32-

      30-10.5-1(b)). Under these circumstances, we conclude that the trial court

      abused its discretion when it failed to hold a hearing or to otherwise obtain




      Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 6 of 10
       information to determine the amount of the Yeagers’ provisional monthly

       payment. 2


                                                     Conclusion

[10]   For the foregoing reasons we reverse and remand for further proceedings

       consistent with this decision.


[11]   Reversed and remanded.


       Robb, J., concurs.


       Mathias, J., dissents with opinion.




       2
        Because we remand for a determination of the Yeagers’ ability to pay based on Ind. Code § 32-30-10.5-8.6,
       we need not address the other arguments raised by the Yeagers.

       Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016                     Page 7 of 10
                                                  IN THE
           COURT OF APPEALS OF INDIANA

       L. Ray Yeager, and Phyllis L.                             Court of Appeals Case No.
       Yeager,                                                   22A04-1604-MF-727

       Appellants-Defendants,

               v.

       Deutsche Bank National Trust
       Company, as Trustee of the
       Residential Asset Securitization
       Trust 2005-A1, Mortgage Pass-
       Through Certificates, Series
       2005-A Under the Pooling and
       Servicing Agreement Dated
       March 1, 2005,
       Appellee-Plaintiff.



       Mathias, Judge, dissenting.


[12]   I respectfully dissent from the majority’s conclusion that the trial court abused

       its discretion by ruling on the Bank’s motion without a hearing.


[13]   The majority concludes that Indiana Code section 32-30-10.5-8.6 could be read

       to dispense with a hearing, but only if the trial court has before it “a debtor’s
       Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016            Page 8 of 10
       current financial information on which to base its determination of a debtor’s

       monthly obligation.” Slip op. at pp. 6-7. Because the trial court here did not

       have before it “information from which it could determine the Yeagers’ ability

       to pay, such as their earnings from any employment, income from other

       sources, or other assets,” the majority concludes that a hearing is required at

       which such evidence can be presented. Id. at p. 7.


[14]   This, however, presumes that the trial court is required to consider the debtor’s

       ability to pay. The language of section 32-30-10.5-8.6, however, imposes no

       such obligation. To be sure, the statute provides that amount of the monthly

       payment “shall” be determined by the trial court. However, it also clearly

       provides that the trial court “may base its determination on the debtor’s ability

       to pay.” I.C. § 32-30-10.5-8.6(b)(1). This is permissive, not mandatory,

       language. United Rural Elec. Membership Corp. v. Indiana & Michigan Elec. Co., 549

       N.E.2d 1019, 1022 n.9 (Ind. 1990).


[15]   The only restriction on the trial court’s discretion is contained in the following

       subsection, which provides that the monthly payment determined by the trial

       court “may not exceed the debtor’s monthly obligation under the mortgage at

       the time the action is filed.” Id. at § 8.6(b)(2).


[16]   I, therefore, read the statute as stating that the trial court permissively “may”

       consider the debtor’s ability to pay but is not required to do so, so long as the

       monthly payment determined by the trial court does not exceed the debtor’s

       monthly mortgage obligation at issue.


       Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 9 of 10
[17]   Here, the trial court determined that the monthly payment should be equal to

       the monthly mortgage obligation. This was within the trial court’s discretion

       under the statute, and I see no reason to remand for a hearing to require the

       trial court to consider something, i.e., the debtor’s ability to pay, which the

       controlling statute does not require the trial court to consider. Although it might

       be a better policy to require the trial court to consider the debtor’s ability to pay,

       the statute does not require this, and I do not believe we are at liberty to engraft

       such a requirement onto the clear language of the statute.




       Court of Appeals of Indiana | Opinion 22A04-1604-MF-727 | December 6, 2016   Page 10 of 10
