Servicer’s error in foreclosing on a previously satisfied mortgage justifies vacating default and foreclosure sale

Described by the Indiana Court of Appeals as Kafkaesque the facts in Elliott v. JPMorgan Chase Bank, 920 N.E.2d 793, 794 (Ind. Ct. App. Feb. 3, 2010) involved a uniquely bizarre situation where a mortgage had been paid and released by the mortgagee but, unbeknownst to the mortgagee, its servicer commenced foreclosure proceedings. The owners later learned that a default judgment had been entered against them and their home had been sold at a sheriff’s sale to the mortgagee. Once the mortgagee learned of the case it filed a satisfaction and release of the mortgage but the servicer continued to prosecute the case in the mortgagee’s name. Finding this situation untenable, the Court of Appeals reversed and remanded the case for trial. The Court found that both elements of Indiana Trial Rule 60(B) had been shown. First, the submission of evidence that the mortgage was paid in full and released justified relief from the judgment and also constituted a meritorious defense to the foreclosure. As for the requirement that the motion for relief from judgment be filed within a reasonable time, the court noted that as soon as the owners learned of the foreclosure and sheriff’s sale, they contacted the Indiana Attorney General who reviewed their complaint and referred them to the State Comptroller, who eventually concluded that it had no jurisdiction over the servicer. Within one week of that finding the owners filed the motion for relief from judgment. The Court concluded that their reliance on the advice of professionals from the Attorney General’s and Comptroller’s offices, and the fact that they were never advised to hire an attorney and challenge the default judgment, was sufficient to show they acted diligently.