Middleton Factors Support Conclusion That Statutory Amendment Is Clarifying
MILLER v. LASALLE BANK (February 19, 2010)
In 2001, individuals entered into a mortgage on an Indiana property with LaSalle Bank's predecessor. The mortgage was recorded -- but the acknowledgment had a technical defect. In 2007, the individuals petitioned for Chapter 13 bankruptcy. The Trustee initiated an adversary proceeding against La Salle to avoid the mortgage. Indiana law provides that a "properly acknowledged" mortgage is constructive notice of the mortgage to later bona fide purchasers (BFPs). Prior to 2007, Indiana courts held that a mortgage with a technical defect in the acknowledgment did not amount to constructive notice. The Indiana legislature amended the statute in 2007 to overrule the case law and allow constructive notice even with certain technical defects. The legislature amended the statute again in 2008 to provide that the statute applied to all mortgages, regardless of the date of recording. The dispute in the adversary proceeding centered on whether, prior to the 2008 amendment, the 2007 amendment applied to mortgages recorded prior to 2007. The bankruptcy court concluded that the 2007 amendment applied only to mortgages recorded after its effective date. The district court reversed. The Trustee appeals.
In their opinion, Judges Cudahy, Wood, and Evans affirmed. The Court began with the statute and the Indiana rules of statutory construction. Concluding that both parties' constructions of the language of the statute were reasonable, the Court held that the statute was ambiguous and proceeded to apply rules of interpretation. One such rule is the presumption that an amendment to a statute is intended to change the meaning of the statute unless it is clear that the legislature intended to clarify its original intent. The Court applied the factors set forth in Middleton (intheiropinion.com post) to determine whether the 2008 amendment amended or clarified the 2007 amendment. It concluded that the 2008 amendment was a clarifying amendment under Middleton because: a) they were enacted in the same legislative session and sponsored by many of the same legislators, b) the 2007 amendment was ambiguous, and c) the bankruptcy trustees were actively seeking to avoid mortgages on technical grounds after the 2007 amendment.
