                                                                                FILED
                                                                            Oct 09 2019, 7:52 am

                                                                                CLERK
                                                                            Indiana Supreme Court
                                                                               Court of Appeals
                                                                                 and Tax Court




      ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEE
      Alan D. Wilson                                             J. Dustin Smith
      Kokomo, Indiana                                            Manley Deas Kochalski LLC
                                                                 Indianapolis, Indiana


                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Michael J. Mannion,                                        October 9, 2019
      Appellant-Defendant,                                       Court of Appeals Case No.
                                                                 19A-MF-446
              v.                                                 Appeal from the Howard Superior
                                                                 Court
      Wilmington Savings Fund                                    The Honorable Brant J. Parry,
      Society FSB,                                               Special Judge
      Appellee-Plaintiff.                                        Trial Court Cause No.
                                                                 34D02-1806-MF-455



      Sharpnack, Senior Judge.


                                       Statement of the Case
[1]   Michael Mannion appeals the trial court’s summary judgment, in rem

      judgment, default judgment, and decree of foreclosure in favor of Wilmington

      Savings Fund Society FSB (Wilmington). We reverse and remand with

      instructions.



      Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019                            Page 1 of 8
                                                       Issue
[2]   Mannion presents one issue for our review, which we restate as: whether

      dismissal of an in rem foreclosure action under Indiana Trial Rule 41(E) is a bar

      to subsequent in rem foreclosure actions on the same note and mortgage.


                                Facts and Procedural History
[3]   On November 5, 1998, Mannion executed a note and mortgage on a residence

      in Kokomo, Indiana. Several years later in October 2007, he filed bankruptcy,

      and, in February 2009, he received a discharge from the mortgage debt.

      Thereafter, Mannion made no payments on the mortgage.


[4]   In April 2009, Bank of America, Wilmington’s predecessor in interest, filed an

      in rem foreclosure action (“First Foreclosure Action”) against Mannion. In

      March 2010, the court noted that Bank of America had taken no action in the

      case for a period in excess of sixty days and set the matter for a Trial Rule 41(E)

      hearing. Bank of America did not appear for the hearing, and the court

      dismissed the action in April 2011 pursuant to Trial Rule 41(E).


[5]   In November 2012, Ditech Financial LLC, another of Wilmington’s

      predecessors in interest, filed an in rem foreclosure action (“Second Foreclosure

      Action”) against Mannion. This action was subsequently dismissed on the

      plaintiff’s motion in January 2017.


[6]   The present case was initiated in April 2018 when Wilmington filed an in rem

      foreclosure action (“Third Foreclosure Action”) against Mannion. The parties


      Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019        Page 2 of 8
      filed cross motions for summary judgment and responses thereto. In his

      motion, Mannion alleged that the Trial Rule 41(E) dismissal in the First

      Foreclosure Action is a dismissal with prejudice and on the merits and is

      therefore res judicata as to the issues that may have been litigated. Wilmington

      claimed that the Third Foreclosure Action is based upon a default by Mannion

      that occurred after the dismissal of the First Foreclosure Action and is thus not

      barred by res judicata. In January 2019, the trial court granted Wilmington’s

      motion for summary judgment and denied Mannion’s. In February, the court

      entered a separate in rem summary judgment and decree of foreclosure in favor

      of Wilmington. It is from these orders that Mannion now appeals.


                                    Discussion and Decision
[7]   On appeal from a summary judgment, we apply the same standard of review as

      the trial court: summary judgment is appropriate only where the designated

      evidentiary matter shows there is no genuine issue as to any material fact and

      the moving party is entitled to judgment as a matter of law. See Ind. Trial Rule

      56(C); see also Young v. Hood’s Gardens, Inc., 24 N.E.3d 421, 423-24 (Ind. 2015).

      Appellate review of a summary judgment is limited to those materials

      specifically designated to the trial court, and all facts and reasonable inferences

      drawn from those facts are construed in favor of the nonmovant. Sheehan Const.

      Co., Inc. v. Cont’l Cas. Co., 938 N.E.2d 685, 688 (Ind. 2010). Where the parties

      make cross motions for summary judgment, we consider each motion

      separately to determine whether the moving party is entitled to judgment as a



      Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019         Page 3 of 8
       matter of law. Pond v. McNellis, 845 N.E.2d 1043, 1053 (Ind. Ct. App. 2006),

       trans. denied.


[8]    First, the parties agree that Mannion received a discharge in bankruptcy and

       that the discharge occurred prior to the initiation of the First Foreclosure

       Action. It is further undisputed that, due to his discharge in bankruptcy,

       Mannion is no longer personally liable for the debt secured by the mortgage.

       Indeed, this is not a novel concept. See McCullough v. CitiMortgage, Inc., 70

       N.E.3d 820, 827 (Ind. 2017) (explaining that Chapter 7 bankruptcy discharge

       eliminates homeowner’s obligation to pay back mortgage).


[9]    While the bankruptcy discharge removed the ability of Wilmington and its

       predecessors in interest to seek to collect against Mannion individually (i.e., in

       personam), Wilmington or one of its predecessors may still seek to enforce the

       mortgage and collect the debt in an action against the property itself (i.e., in

       rem). See id. at 827-28 (clarifying distinction between in personam and in rem

       liability on mortgage). Hence the initiation of the in rem foreclosure actions in

       the present case. However, the First Foreclosure Action, which was filed by

       Bank of America, one of Wilmington’s predecessors in interest, was dismissed

       pursuant to Trial Rule 41(E).


[10]   In this case, Wilmington does not contest that the Trial Rule 41(E) dismissal in

       the First Foreclosure Action is a dismissal with prejudice and on the merits.

       Certainly, unless the court specifies otherwise in its order for dismissal, a

       dismissal pursuant to Trial Rule 41(E) operates as an adjudication on the


       Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019          Page 4 of 8
       merits. Ind. Trial Rule 41(B); Ind. Dep’t of Nat. Res. v. Ritz, 945 N.E.2d 209, 213

       (Ind. Ct. App. 2011), trans. denied. “Clearly, this means that unless the trial

       court indicates that the dismissal is without prejudice, it must be deemed to be

       with prejudice.” Brimhall v. Brewster, 835 N.E.2d 593, 597 (Ind. Ct. App. 2005),

       trans. denied. Here, the CCS for the First Foreclosure Action states, “No

       persons having appeared in objection to this matter being dismissed pursuant to

       TR 41(E), Court now on its own motion orders this cause dismissed pursuant to

       TR 41(E).” Appellant’s App. Vol. II, p. 73. The court does not indicate that

       the dismissal was without prejudice; accordingly, the order dismissing the First

       Foreclosure Action pursuant to Trial Rule 41(E) is deemed an adjudication on

       the merits and a dismissal with prejudice.


[11]   Additionally, “‘[i]n Indiana, it is well settled that a dismissal with prejudice is a

       dismissal on the merits, and as such, it is conclusive of the rights of the parties

       and res judicata as to the questions that might have been litigated.’” Hart v.

       Webster, 894 N.E.2d 1032, 1037 (Ind. Ct. App. 2008) (quoting Mounts v.

       Evansville Redevelopment Comm’n, 831 N.E.2d 784, 791 (Ind. Ct. App. 2005),

       trans. denied). The question here, then, is whether the adjudication in the First

       Foreclosure Action is a bar to the present action.


[12]   The doctrine of res judicata serves to prevent repetitious litigation of disputes

       that are essentially the same. Hilliard v. Jacobs, 957 N.E.2d 1043, 1046 (Ind. Ct.

       App. 2011), trans. denied. The doctrine has two components: claim preclusion

       and issue preclusion. Id. Claim preclusion applies when a final judgment on

       the merits has been rendered in an action, and it acts to bar a subsequent action

       Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019           Page 5 of 8
       on the same claim between the same parties. Evergreen Shipping Agency Corp. v.

       Djuric Trucking, Inc., 996 N.E.2d 337, 340 (Ind. Ct. App. 2013). More

       specifically, claim preclusion applies when the following four factors are

       satisfied: (1) the former judgment must have been rendered by a court of

       competent jurisdiction; (2) the former judgment must have been rendered on

       the merits; (3) the matter now in issue was, or could have been, determined in

       the prior action; and (4) the controversy adjudicated in the former action must

       have been between the parties to the present suit or their privies. Id.


[13]   Basically, Wilmington is asserting that res judicata does not apply in this case

       because the third element is not satisfied. Specifically, Wilmington claims the

       two foreclosure actions are not the same because they are based on different

       acts of default and because they seek different judgment amounts. Essentially,

       Wilmington’s argument is that, regardless of his discharge in bankruptcy,

       Mannion’s obligation under the mortgage was ongoing such that any non-

       payment subsequent to his discharge amounted to a default that served as a

       basis for the First Foreclosure Action. The basis for the Third Foreclosure

       Action, however, is the default arising from the nonpayment of the mortgage

       subsequent to the dismissal of the First Foreclosure Action, thereby creating a

       new and independent default and basis for foreclosure not contemplated by the

       First Foreclosure Action.


[14]   Wilmington’s assertion ignores the undisputed fact that Mannion’s personal

       liability under the mortgage had been discharged in bankruptcy. The essentials

       of the controversy are the same in both foreclosure actions: the debt is unpaid;

       Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019        Page 6 of 8
       Mannion is discharged from liability for the debt; the creditor can foreclose on

       the property; and the creditor is seeking an in rem judgment. Thus, both

       foreclosure actions were based on the nonpayment of the mortgage due to the

       mortgagor’s discharge in bankruptcy.


[15]   Moreover, the relief sought in both foreclosure actions was an in rem judgment

       for the amount due on the mortgage. The fact that a different amount was

       alleged in each of the foreclosure actions is of no consequence. Due to the

       creditors’ lack of success in their attempts to foreclose, the litigation has

       spanned many years, thus increasing the amount of the debt; this does not

       create a new and independent basis for foreclosure. See Grant v. Bank of New

       York Mellon Tr. Co., 30 N.E.3d 733 (Ind. Ct. App. 2015) (following dismissal

       with prejudice of foreclosure action pursuant to T.R. 41(E), note and mortgage

       holder was precluded from filing second complaint that raised same legal and

       factual issues as first action; mortgagors’ personal liability under note and

       mortgage had been discharged in bankruptcy, and thus, relief sought in both

       foreclosure actions was same and based on the same alleged default), trans.

       denied.


[16]   Finally, Wilmington includes a public policy argument that Mannion should

       not receive the property “free and clear” of its lien. Appellee’s Br. p. 18.

       However, where, as here, the creditor created the situation as a direct result of

       its failure to prosecute, and the homeowner obtained a judgment on the merits,

       the judgment should have its full res judicata effect in accordance with res

       judicata principles.

       Court of Appeals of Indiana | Opinion 19A-MF-446 | October 9, 2019              Page 7 of 8
                                                  Conclusion
[17]   For the reasons stated, we conclude the trial court erred by entering summary

       judgment in favor of Wilmington. We reverse and remand with instructions to

       enter judgment in favor of Mannion.


[18]   Reversed and remanded with instructions.


       Bradford, J., and Pyle, J., concur.




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