Ruling for homeowner in quiet title action after bankruptcy vacated

An Indiana Magistrate’s Court order in favor of a Hammond owner in his low-key bankruptcy lawsuit was overturned by the Indiana Court of Appeals on Friday, which found that the court of first instance did not have jurisdiction.

The Indiana Court of Appeals overturned the summary judgment for the owner in Ocwen Loan Servicing, LLC v. Dorothy Chambliss, 20A-PL-1050, and remitted to Superior Lake Court with directions to dismiss the action.

Dorothy Chambliss and her husband purchased the subject property 50 years ago, but refinanced several times before filing for Chapter 13 bankruptcy in 2004. The Northern District of Indiana Bankruptcy Court discharged the petition in 2009, after which they continued to make mortgage payments. Chambliss’ husband died in 2011.

In 2014, Chambliss obtained a mortgage modification with a principal balance of over $ 65,000, monthly payments of $ 335 for three years, followed by a lump sum payment for the balance. However, the change was never saved, so Chambliss came up with a low-key title. She and Ocwen both sought summary judgment and the trial court ruled in Chambliss’ favor.

“The parties agreed that the issue in the trial court was based on an interpretation of the Chambliss bankruptcy case to determine whether Ocwen had a valid lien on the property, or stated differently, whether the mortgage executed by Chambliss in 2002 had survived the Chapter 13 bankruptcy “, wrote Justice Rudy Pyle III. Ocwen presented evidence that the mortgage survived the discharge of the bankruptcy petition. Chambliss argued that Ocwen had not protected her security because she had not registered the mortgage.

But the COA concluded that the trial court had no jurisdiction at all.

“By filing his complaint on a discreet basis, Chambliss initiated adversarial proceedings to challenge the viability of Ocwen’s secured debt following his Chapter 13 bankruptcy. Essentially, Chambliss attempted to use title action discreet as a sword to cut Owen’s rights under the mortgage by claiming that his Chapter 13 bankruptcy extinguished the mortgage and Owen’s rights under it, ”Pyle wrote.

“If – after paying on the mortgage for more than eight years after his discharge from bankruptcy, including three years of payment on the loan modification agreement – Chambliss was unclear as to the legal effect of his Chapter 13 bankruptcy discharge order with respect to the mortgage with Ocwen, she should have sought relief or clarification from the bankruptcy court that made the order in question instead of bringing an action in state court for that the court of first instance interprets the legal effect of its bankruptcy case.

COA cited Goodman v. Serine, 6 NE3d 481, 483-84 (Ind. Ct. App. 2014) to illustrate the limited jurisdiction of Indiana trial courts over bankruptcy proceedings. “Because this appeal concerns only a bankruptcy case which was subject to the jurisdiction of the bankruptcy court, we set aside the judgment of the trial court and direct it to dismiss this silent title action,” the panel concluded.

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