FOR PUBLICATION



ATTORNEYS FOR APPELLANTS:                      ATTORNEY FOR APPELLEE:

ERIC C. BOHNET                                 JASON A. LOPP
Indianapolis, Indiana                          Wyatt Tarrant & Combs, LLP
                                               New Albany, Indiana
NINAMARY BUBA MAGINNIS
Louisville, Kentucky

                                                                     May 22 2014, 10:42 am

                              IN THE
                    COURT OF APPEALS OF INDIANA

ROBERT R. SETREE, II, and                      )
BEVERLY L. SETREE,                             )
                                               )
       Appellants-Defendants,                  )
                                               )
              vs.                              )     No. 10A01-1311-MF-485
                                               )
RIVER CITY BANK,                               )
                                               )
       Appellee-Plaintiff.                     )


                        APPEAL FROM THE CLARK CIRCUIT COURT
                            The Honorable Daniel E. Moore, Judge
                               Cause No. 10C01-1201-MF-69


                                      May 22, 2014

                              OPINION - FOR PUBLICATION

RILEY, Judge
                              STATEMENT OF THE CASE

       Appellants-Defendants, Robert R. Setree, II and Beverly L. Setree (the Setrees),

appeal the trial court’s summary judgment in favor of Appellee-Plaintiff, River City Bank

(River City), granting River City the right to foreclose on the Setrees’ real estate.

       We affirm.

                                          ISSUES

       The Setrees raise three issues on appeal, one of which we find dispositive and

which we restate as: Whether principles of full faith and credit required the trial court to

consider the judgments of a Kentucky court res judicata to the instant cause.

                            FACTS AND PROCEDURAL HISTORY

       At all times relevant to this action, the Setrees were the owners of several pieces of

real estate located in Kentucky and Indiana. On September 2, 2005, the Setrees executed

a promissory note in favor of River City for the principal sum of $45,667.00. On October

4, 2006, the Setrees executed a second promissory note in favor of River City for the

principal amount of $15,484.19. Both notes were secured by mortgages on real estate

owned by the Setrees at 815 Holly Drive in Jeffersonville, Indiana and at 2095 Virginia

Avenue and 5116 Roederer Drive in Louisville, Kentucky.

       On November 2, 2007, the Setrees executed a third promissory note (2007 Note)

by which they promised to pay River City the principal sum of $91,380.50. To secure

payment on the 2007 Note, the Setrees gave River City a security interest in property

located at 2061 Cardinal Lane, in Jeffersonville, Indiana (the Cardinal Lane Property), as



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well as the property located at 5116 Roederer Drive, in Louisville, Kentucky.

Contemporaneously with the execution of the 2007 Note, the Setrees executed a

mortgage in favor of River City on the Cardinal Lane Property.            Pursuant to the

provisions of the 2007 Note, the Setrees were required to pay all taxes related to the

collateral securing it when due.

       In 2009 and 2010, the Setrees omitted to pay Indiana real estate taxes on the

Cardinal Lane Property, bringing the Setrees in default of the terms of their 2007 Note.

As a result of their failure to pay the real estate taxes, the Cardinal Lane Property was

sold at a tax sale in the fall of 2010. On September 29, 2011, River City paid $9,455.73

to redeem the Cardinal Lane Property from the tax buyer and an additional $3,116.55 in

taxes to bring the delinquent real estate taxes current.

       The mortgage securing the 2007 Note included a right to cure provision, which is

triggered if a breach of one of the conditions of the Note is curable. Specifically, the

clause states:

       Right to Cure. If such a failure is curable and if [River City] has not given
       a notice of a breach of the same provision of this Mortgage within the
       preceding twelve (12) months, it may be cured (and no Event of Default
       will have occurred) if [the Setrees], after [River City] sends written notice
       demanding cure of such failure: (a) cures the failure within twenty (20)
       days; or (b) if the cure requires more than twenty (20) days, immediately
       initiates steps sufficient to cure the failure and thereafter continues and
       completes all reasonable and necessary steps sufficient to produce
       compliance as soon as reasonably practical.

(Appellee’s App. p. 28). On October 13, 2011, the Setrees, by certified mail, notified

River City that




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       We know these taxes are our responsibility. We notified [River City] more
       than a year ago to let you know we didn’t have the means to pay them
       because they had increased so much. We asked if you could pay them and
       do some refinancing so our payments would be lower and we would be able
       to handle them.

(Appellee’s App. p. 34).

       By virtue of cross-default provisions in the notes, the Setrees’ nonpayment of real

estate taxes on the Cardinal Lane Property also triggered River City’s right to accelerate

all debts due and owing under the other two notes and to foreclose on all of the

mortgages it held on the Setrees’ various properties. River City exercised its right by

initiating four different foreclosure actions under the mortgages related to the three notes:

the current action, a companion case—at the time of filing the instant appeal—pending in

Clark Circuit Court No. 2, and two actions in Jefferson Circuit Court, Kentucky.

       On September 25, 2012, the Jefferson Circuit Court entered a final judgment and

order of sale in favor of River City with respect to the Setrees’ property on Roederer

Drive in Louisville, Kentucky. On January 15, 2013, the Jefferson Circuit Court entered

a similar order with respect to the property on Virginia Avenue. In its order of January

15, 2013, the Jefferson Circuit Court concluded, in pertinent part, as follows:

               The record is undisputed that [the Setrees] failed to pay property tax
       on the Indiana property. As was noted by Commissioner Harrison in the
       Commissioner’s Report, [the Setrees] have repeatedly alleged that failure to
       pay Indiana taxes in no way constituted a default under the terms of any of
       their mortgages, and that [the Setrees] argue that the default, if one
       occurred, on the payment of an Indiana debt could not constitute a default
       on regard [to] the Kentucky collateral. Commissioner Harrison also noted
       that the [Setrees] argue that they were never given notice of any default and
       were never given an opportunity to cure the same. [The Setrees] continue
       to make such arguments in their exceptions and objections to the



                                             4
Commissioner’s Report. As was stated by Commissioner Harrison in the
Commissioner’s Report:

       Failure to pay the taxes on the Indiana property constituted a
       default on the note secured by such property[.] That default
       authorized foreclosure on the properties securing payment of
       that note. Both of the notes secured by the subject property
       herein contained a provision stating that the notes will be in
       default if [the Setrees] fail “to make any payment when due
       under this note or any note payable to [River City].” Default
       under the terms of one note thereby constitutes a default on
       all notes payable to that lender, including those note [sic] set
       out herein.

       Although [the Setrees] deny any default, they also argue that
       if a default occurred, it occurred in Indiana in regard to an
       Indiana property and only that Indiana property can be
       foreclosed. [The Setrees] [have] failed to present any statute
       or case law supporting this argument. [The Setrees’] position
       simply ignores the cross-default provisions in the various
       notes. As aforesaid [River City] was entitled to accelerate all
       debts owed to it by the [Setrees] once any of these notes were
       in default. In the absence of law or some agreement between
       the parties, [River City] is not obligated to look to certain
       collateral for satisfaction of its claim. Upon the acceleration
       of the debt, [River City] was entitled to proceed against any
       collateral securing that debt, including collateral located in
       Kentucky.

The Court adopts Commissioner Harrison’s analysis and finding that a
failure to pay the taxes on the Indiana property constituted a default on the
note secured by such property, and that the default under the terms of one
note thereby constituted a default on all notes payable to that lender,
including those note set out herein.
        [The Setrees’] contention that they were not provided notice or an
opportunity to cure is refuted by the record. As was confirmed by [River
City’s] response to the [Setrees’] Exceptions, the Indiana mortgage
instrument permits [the Setrees] the opportunity to cure a default for a
period of 20 days after they were notified of a defaulting event. By [the
Setrees’] own admission in a letter, dated October 13, 2011, in the record,
they were given in excess of one year to cure the defaults; however, they
were either unwilling or unable to do so. Accordingly, the record reflects



                                      5
       that [the Setrees] were provided notice and an opportunity to cure the
       default, yet failed to do so.

(Appellee’s App. pp. 51-52). The Setrees are appealing both judgments rendered by the

Kentucky courts.

       On January 12, 2012, River City initiated the current action, seeking to foreclose

on the Cardinal Lane Property due to the Setrees’ default on the 2007 Note and

requesting that its mortgage lien be foreclosed and the Property sold. On November 8,

2012, the Setrees moved for summary judgment. On February 22, 2013, River City filed

its response, as well as its cross-motion for summary judgment and decree of foreclosure.

       On October 29, 2013, following a hearing on the parties’ motions, the trial court

entered summary judgment in favor of River City and denied the Setrees’ motion,

concluding, in pertinent part, that, based on the principles of full faith and credit, res

judicata prevented the relitigation of the Setrees’ default on the terms of the 2007 Note

and mortgage. Nevertheless, the trial court also held that “[r]egardless of the findings of

the Kentucky [c]ourts and the exclusionary [e]ffect of the Doctrine of Res Judicata,

sufficient undisputed evidence exists to grant summary judgment as a matter of law in

favor of [River City] in this Indiana court.” (Appellant’s App. p. 15).

       The Setrees now appeal. Additional facts will be provided as necessary.

                             DISCUSSION AND DECISION

                                  I. Standard of Review

       Summary judgment is appropriate only when there are no genuine issues of

material fact and the moving party is entitled to a judgment as a matter of law. Ind. Trial



                                             6
Rule 56(C). A fact is material if its resolution would affect the outcome of the case, and

an issue is genuine if a trier of fact is required to resolve the parties’ differing accounts of

the truth . . . , or if the undisputed facts support conflicting reasonable inferences.

Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009).

       In reviewing a trial court’s ruling on summary judgment, this court stands in the

shoes of the trial court, applying the same standards in deciding whether to affirm or

reverse summary judgment. First Farmers Bank & Trust Co. v. Whorley, 891 N.E.2d

604, 607 (Ind. Ct. App. 2008), trans. denied. Thus, on appeal, we must determine

whether there is a genuine issue of material fact and whether the trial court has correctly

applied the law. Id. at 607-08. In doing so, we consider all of the designated evidence in

the light most favorable to the non-moving party. Id. at 608. The party appealing the

grant of summary judgment has the burden of persuading this court that the trial court’s

ruling was improper. Id. When the defendant is the moving party, the defendant must

show that the undisputed facts negate at least one element of the plaintiff’s cause of

action or that the defendant has a factually unchallenged affirmative defense that bars the

plaintiff’s claim. Id. Accordingly, the grant of summary judgment must be reversed if

the record discloses an incorrect application of the law to the facts. Id.

       We observe that, in the present case, the trial court entered findings of fact and

conclusions of law in support of its judgment. Special findings are not required in

summary judgment proceedings and are not binding on appeal. Id. However, such

findings offer this court valuable insight into the trial court’s rationale for its decision and

facilitate appellate review. Id.


                                               7
                                  II Full Faith and Credit

       The Setrees now contend that the trial court erred in concluding that the dispute

was barred by res judicata arising from the full faith and credit our courts are mandated

to award to the Kentucky judgments.

                                  A. Full Faith and Credit

       The Full Faith and Credit Clause of the United States Constitution requires that

“[f]ull faith and credit shall be given in each state to the public acts, records, and judicial

proceedings of every other state.” U.S. Const. Art IV, §1. Full faith and credit provides

that “the judgment of a state court should have the same credit, validity, and effect in

every other court of the United States, which it had in the state where it was pronounced.”

Gardner v. Price, 838 N.E.2d 546, 550 (Ind. Ct. App. 2005). Indiana has codified this

notion at Indiana Code section 34-39-4-3, which establishes that records and judicial

proceedings from courts in other states “shall have full faith and credit given to them in

any court in Indiana as by law or usage they have in the courts in which they originated.”

Full faith and credit commands deference to the judgments of foreign courts, and “the

judgment of a sister state, regular and complete upon its face is prima facie valid.”

Gardner, 838 N.E.2d at 550.

       A foreign judgment is, however, open to collateral attack for want of jurisdiction.

Id. “Before an Indiana court is bound by a foreign judgment, it may inquire into the

jurisdictional basis for that judgment; if the first court did not have jurisdiction over the

subject matter or relevant parties, full faith and credit need not be given.” Id. Thus, we




                                              8
do not give full faith and credit to orders entered by a court without subject matter

jurisdiction or personal jurisdiction.

       Synopsizing the holding in Durfee v, Duke, 375 U.S. 106 (1963), as “[i]f the

parties litigate whether land is located in one state or another state, that issue will not be

re-litigated in another court,” the Setrees distinguish Durfee and find it inapplicable to the

cause at hand since the issue before us is not the location of the real estate, but rather

involves litigation “in regard to unique real estate, unique contracts, and unique conduct.”

(Appellants’ Br. p. 16). In Durfee, our Supreme Court held that a state court judgment

resolving a property dispute between two private parties could not be attacked collaterally

by one of the parties who had fully litigated the matter. Id. at 108. The case involved a

fully litigated factual finding by a Nebraska court that it had subject matter jurisdiction

because the disputed land was in Nebraska; this finding precluded Missouri courts from

considering a collateral attack on the Nebraska court’s jurisdiction on the factual basis

that the disputed river-bottom land was in Missouri. Id. In reaching this holding, Durfee

relied on the well-established principle that

       [a] judgment is entitled to full faith and credit—even as to questions of
       jurisdiction—when the second court’s inquiry discloses that those questions
       have been fully and fairly litigated and finally decided in the court which
       rendered the original judgment.

Id. at 111.     With respect to cases involving real property, the Supreme Court

unequivocally stated:

       It is argued that an exception to this rule of jurisdictional finality should be
       made with respect to cases involving real property because of this Court’s
       emphatic expressions of the doctrine that courts of one State are completely



                                                9
       without jurisdiction directly to affect title to land in other States. This
       argument is wide of the mark.

Id. at 115. While Durfee’s facts are different from those presented here, the general

principle recognized by the Supreme Court—“once [a] matter has been fully litigated and

judicially determined” in one state, it cannot be “retried in another State in litigation

between the same parties”—nonetheless applies. See id.

       Turning to Indiana case law, the Setrees rely on In re Estate of Latek, 960 N.E.2d

193 (Ind. Ct. App. 2012), and Evansville Ice & Cold-Storage Co. v. Winsor, 48 N.E. 592

(Ind. 1897), in an attempt to carve out an exception to Durfee’s well-established

precedent. Specifically, they contend that “[j]udgments in a sister jurisdiction have no

influence in a foreclosure action on separate property in Indiana as real property is

unique.” (Appellants’ App. p. 13). Both Latek and Winsor addressed the preclusive

effect of decisions of other states related to the disposition of property under wills. In

Winsor, the daughter of a testatrix, who owned property in Indiana but whose will had

been probated in New York, sought to challenge the will as it related to the Indiana real

estate. Id. at 593. Our supreme court analyzed whether a three-year statute of limitations

for challenges to foreign wills which were filed, recorded, or probated in Indiana applied

to the daughter’s case. Id. Our court noted that while “a probate of the will in the state

where the testation was domiciled at the time of his death is [] entitled to full faith and

credit,” the title “to and the disposition of real property, whether by deed, a last will, or

otherwise, must be governed exclusively by the law of the county where it is situated.”

Id.



                                             10
       Likewise in Latek, the question presented to this court was what effect an order

from an Illinois court denying probate of a testator’s will had on the disposition of real

property in Indiana. Latek, 960 N.E.2d at 198. We concluded that the Illinois order had

no effect on the subsequent admission and probate of the will in Indiana as it concerned

the disposition of real property in Indiana. Id. at 200. While Latek’s pronouncement that

“[p]rinciples of res judicata and full faith and credit have no application in matters

involving probate and title to realty” is an unfortunate generalization, contextually, it is

clear that the Latek court intended that “the probate of a will in another state has no effect

on title of real estate in Indiana unless the will is duly admitted to probate in this state or

filed and recorded as a foreign will in compliance with our laws.” Id. at 200, 201 (citing

Estate of Hofgesang v. Hansford, 714 N.E.2d 1213, 1217 (Ind. Ct. App. 1999)). In the

case sub judice, no will contest is alleged and therefore Latek and Winsor are inapposite.

       Because we conclude that the Kentucky judgments had acquired subject matter

jurisdiction and personal jurisdiction over the parties before it, we must afford full faith

and credit to these opinions. See Gardner, 838 N.E.2d at 550.

                                      B. Res Judicata

       Having resolved that we must grant full faith and credit to the Kentucky orders,

we must now ascertain the res judicata effect of these determinations before this court.

The effect Indiana must accord the Kentucky judgments depends on the treatment that

judgment would receive in Kentucky. Id. at 551.

       Pursuant to Kentucky precedents, res judicata prevents the relitigation of the same

issues in a subsequent appeal. Miller v. Administrative Office of Courts, 361 S.W.3d 867,


                                              11
871 (Ky 2011), reh’g denied. Three elements must be met for res judicata, or claim

preclusion, to apply: (1) there must be an identity of the parties between the two actions;

(2) there must be an identity of the two causes of action; and (3) the prior action must

have been decided on the merits. Id. at 872. A close cousin to the doctrine of res

judicata is the theory of collateral estoppel, or issue preclusion. Id. In order for issue

preclusion to operate as a bar to further litigation, certain elements must be established:

(1) at least one party to be bound in the second case must have been a party in the first

case; (2) the issue in the second case must be the same as the issue in the first case; (3)

the issue must have been actually litigated; (4) the issue was actually decided in that

action; and (5) the decision on the issue in the prior action must have been necessary to

the court’s judgment and adverse to the party to be bound. Id. Res judicata, being the

older term, is thought of as an umbrella doctrine that contains within it both claim and

issue preclusion. Id. at 871. A pending appeal does not affect the finality of a judgment

for preclusion purposes. See Stemler v. City of Florence, 126 F.3d 856, 871 (6th Cir.

1997); Roberts v. Wilcox, 805 S.W.2d 153, 153 (Ky. Ct. App. 1991).

       Here, res judicata is more properly defined as issue preclusion.           The same

issues—the Setrees’ failure to pay Indiana property tax pursuant to their 2007 Note and

their right to cure—between the same parties—the Setrees and River City—governed the

Kentucky cases and this appeal. River City’s right to foreclose on all three notes was

triggered as a result of the Setrees’ failure to pay their Indiana taxes on the Cardinal Lane

Property. Because of cross-default provisions in the three notes executed between the

Setrees and River City, the Setrees’ default under the 2007 Note constituted a default


                                             12
under the previously executed two notes as well.        Therefore, the Kentucky courts’

decisions to grant River City the right to foreclose on the Setrees’ Kentucky properties

necessarily included a determination of default under the 2007 Note—the issue before the

trial court. Moreover, the order issued by the Jefferson Circuit Court on January 15,

2013, analyzed the Setrees’ right to cure under the note, an identical claim made by the

Setrees in the current case, as being without merit. Accordingly, although the Kentucky

cases concerned different mortgages and different property than the instant cause, they

litigated the same issues between the same parties: the Setrees’ failure to pay the Indiana

taxes on the Cardinal Lane Property and the Setrees’ right to cure its failure under the

2007 Note. Therefore, granting the Kentucky judgments full faith and credit, we are

precluded from addressing the Setrees’ claim.

                                     CONCLUSION

       Based on the foregoing, we conclude that principles of full faith and credit

required the trial court to consider the judgments of a Kentucky court res judicata to the

instant cause.

       Affirmed.

ROBB, J. and BRADFORD, J. concur




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