Here, DeKaalb County Farm Bureau Cooperative Association Credit Union had three mortgages on two different pieces of the members’ real estate. The Credit Union instituted foreclosure on one of its mortgages secured by real estate that the debtors were leasing to another party.

In the foreclosure action, the Credit Union requested the trial court to appoint a “receiver” to collect the lease payments that were being received by the debtors on that property.

A “receiver” is an independent person who will manage the property in question by collecting income from the property and paying ordinary expenses to maintain said property.

Debtors maintained that the trial court should not appoint a receiver, since the property was not in jeopardy of being lost or damaged. The trial court, however, appointed a receiver during the foreclosure proceedings, which effectively caused the debtors to be unable to collect lease payments during the foreclosure.

The Court of Appeals held that not only was the trial court’s appointment of a receiver appropriate, but it was mandatory under the facts. Here, as in many foreclosure proceedings, the debtors were attempting to collect lease payments without submitting those payments to the lender. This court upheld the lender’s rights. DeKaalb County Farm Bureau Cooperative Association Credit Union v. Robert Farver et al., (Court of Appeals of Indiana, No. 57A03-9008-CV-338).

Author: Charles R. Harroun, Attorney at Law