« Ind. Decisions - Court of Appeals issues 2 today (and 5 NFP) | Main | Environment - Attorney General Zoeller files friend-of-the-court brief in the Asian carp dispute »

Friday, February 19, 2010

Ind. Decisions - 7th Circuit interprets Indiana statute in bankruptcy case; Noteworthy discussion of legislative digests [Updated]

In Miller v. LaSalle National Bank (ND Ind., Judge Lee), a 17-page opinion, Judge Cudahy writes:

This is an appeal involving a puzzle of statutory interpretation. The issue comes to us from an adversary proceeding in bankruptcy court between Linda Miller (Trustee) and LaSalle Bank National Association (LaSalle). The bankruptcy court held that an improperly recorded mortgage was avoidable under Indiana law as amended in 2007 because it did not impart constructive knowledge to a bona fide purchaser, here the Trustee. The bankruptcy court held that the 2007 Amendment applied only to mortgages recorded after the Amendment’s effective date of July 1, 2007. The district court reversed, and the Trustee appeals. Because we interpret the statute to apply to all mortgages regardless when recorded, we affirm the district court. * * *

In Indiana, as elsewhere, a recorded, “properly acknowledged” mortgage imparts constructive notice of its existence to subsequent bona fide purchasers (BFPs). * * * Prior to the 2007 Amendment, a mortgage that was not entitled to be recorded because of a technical defect in the acknowledgment did not provide such notice. * * *

In 2007, the Indiana General Assembly amended its recording statute, IND. CODE § 32-21-4-1, to allow recorded mortgages with certain technical defects to provide constructive notice as if the mortgages were properly recorded and acknowledged. The district courts that have interpreted the statute in this case, and both parties in the present appeal, note that the legislature passed the 2007 Amendment in an apparent attempt to overrule In re Stubbs. In 2008, the Assembly again amended the statute and made it clear that the statute applied to all mortgages, regardless when recorded (2008 Amendment). The parties dispute whether, before the 2008 Amendment came into force, the 2007 Amendment applied to purchasers of properties encumbered by certain technically deficient mortgages recorded prior to July 1, 2007. * * *

We recently discussed several factors that aid in determining whether an amendment is clarifying rather than substantive * * *

In sum, the 2007 Amendment is ambiguous, thus, considering the above-discussed indicia of legislative intent including, most importantly, the 2008 Amendment that quickly clarified that the provision applied to all mortgages, the legislature likely intended the 2007 Amendment to apply to all mortgages, whenever filed. And we note that this result was reached by other district courts reviewing bankruptcy court decisions. See Nat’l City Mortgage Co. v. Yoon, No. 2:09-cv-134, 2009 WL 2951122 (N.D. Ind. Sept. 10, 2009); Boston v. The Huntington Nat’l Bank, No. 1:09-cv-0679-DFH-JMS, 2009 WL 2563473 (S.D. Ind. Aug. 17, 2009). For the foregoing reasons, therefore, the district court here is AFFIRMED.

Noteworthy discussion of Indiana legislative digests. Dicta in this opinion is certainly worth noting. First, there is footnote #6 on p. 14:
Although it is unclear what weight a court should give the Indiana legislature’s comments in the synopsis attached to a bill, an Indiana appeals court has recently relied on a bill’s synopsis to establish that the bill was enacted in response to a review by the sentencing policy study committee, see Collins v. State, 911 N.E.2d 700, 709 (Ind. Ct. App. 2009), suggesting that a synopsis is entitled to some weight in the court’s analysis of a statute’s proper interpretation.
On pp. 15-16 of the 7th Circuit opinion, the Court continues in this discussion of bill digests:
Although the foregoing disposes of the case, we pause before the parties’ other arguments regarding legislative intent before concluding. Thus, the Trustee urges that the legislation’s synopsis indicated that the General Assembly only intended the Amendment to apply to certain, but not all, recorded mortgages. It reads the modifier “certain” as classifying types of mortgages based on when they were filed, pre- or post-July 2007. The synopsis is again ambiguous. In contrast to the Trustee’s interpretation, it seems equally, if not more plausible, that the Assembly used the word “certain” to differentiate amongst the technical defects the mortgages suffered— differentiating those specified in the statutes listed in subsection (c) from other possible defects. In addition, the synopsis of the 2008 Amendment notes that the Amendment: “[s]pecifies that a provision in current law, which states that a recorded mortgage not meeting certain statutory requirements constitutes constructive notice, applies regardless of when the mortgage was recorded.” Consequently, the same legislature, 10 months later, omitted the word “certain” when it described its understanding of the law after the 2007 Amendment. While the pronouncements of a subsequent legislative body on a prior statute are not binding, they are “respectfully considered” when interpreting an unclear statute. See Indiana State Police Dept. v. Turner, 577 N.E.2d 598, 602 (Ind. Ct. App. 1991). The synopses of the two statutes are too ambiguous to provide any assistance in interpreting the statute as it stood in the second half of 2007.
Interesting. The "synopsis", or "digest" of a bill in Indiana may be used to interpret the legislature's meaning? Bill digests are written by legislative staffers. They are not part of the enrolled act.

And what of the Court of Appeals opinion cited today by the 7th Circuit, "suggesting that a synopsis is entitled to some weight in the court’s analysis of a statute’s proper interpretation"? The case is Collins v. State (Aug. 21, 2009). See p. 708-709, where Judge Bradford writes:

Here, we conclude that Indiana Code section 35-38-2-1.8 is remedial in that it was intended to clarify that probation can be altered at any time, even in the absence of a probation violation. * * *

In November of 2004, the Indiana Sentencing Policy Study Committee adopted and issued a proposal for "[t]he modification of the statute to permit a Court to hold a new probation hearing and modify a probationer's conditions of probation at any time during the probationary period." Final Report of the Sentencing Policy Study Committee 17 (2004). The Committee also included a draft statute that was later enacted unaltered as Indiana Code section 35-38-2-1.8. Id. at App. 5. In 2005, the 114th General Assembly passed Senate Enrolled Act 101, which contained section 35-38-2-1.8, and it is clear that the bill was the product of the Study Committee's proposals. See Ind. P.L. 14-2005 § 1; Digest of Senate Bill 101 (March 18, 2005) (available at http://www.state.in.us/legislative/bills/2005/PDF/ES/ES0101.1.pdf). In view of this history, the legislature's evident purpose in enacting section 35-38-2-1.8 was to supersede the holding in Jones, and we now give effect to that purpose.

[Updated at 4:10 PM] I just took the time to look at the Digest cited above. The digest referenced is that of the Engrossed Senate Bill -- that means the bill as it passed second reading. As can be seen in the cover page of the 2005 bill linked, which page includes both the Digest and the history to date, this version of the bill had passed second reading in the Senate, been ordered Engrossed, passed third reading in the Senate, and moved on to the House, where it had been reported out of committee. But the version of the bill linked to has not yet passed second reading in the House. One may not automatically presume that the version linked is identical to the Enrolled Act, SEA 101 (2005), which became PL 14-2005. Notice also that there is no Digest attached to SEA 101, as it is not part of the law.

Posted by Marcia Oddi on February 19, 2010 02:20 PM
Posted to Ind. (7th Cir.) Decisions