On July 3, 2012, the Indiana Court of Appeals, in the case of Wells Fargo Bank, N.A., f/ka/ Wachovia Commercial Mortgage, Inc. v. PNC Bank, N.A., f/k/a National City Bank of Indiana, addressed the issues of “dragnet” clauses and prior finding of res judicata in favor of PNC Bank, et al. and against Wells Fargo.  The facts and procedural history underlying this case were set out in Money Store Investment Corporation v. Summers, 849 N.E.2d 544 (Ind. 2006).  Briefly, those facts were that from 1992 to 1996, Summers granted eleven mortgages on three parcels of his real estate to Fort Wayne National Bank as security for a series of loans.  Three of this mortgages contained dragnet clauses.  In February of 1998, Phillips sued Summers in a dispute over the ownership of a trademark/trade name.  The parties entered into a settlement agreement and the suit was dismissed without prejudice.

On September 15, 2000, Summers borrowed over $508,000 from the Money Store and granted a mortgage on the same three parcels used to secure the Fort Wayne National mortgages to which National City had succeeded, plus an additional six lots.  Summers, as President and Secretary of a separate corporation, also borrowed $471,000 from Money Store and granted a mortgage on the same real estate.

Prior to these loans, on August 30, National City had sent to Money Store’s title company three pay-off statements that included the daily interest.  National City assured the title company that eight mortgages and two assignments of rent and leases would be released upon the proper payoff of the three loans.  On September 15, National City received three payments, but one payment came up $375 short.  National city did not release any of the mortgages and was still owed $4700 on an overdrawn checking account.

Phillips filed a motion to enforce the settlement agreement on August 10, 2001.  Money Store subsequently filed a complaint for foreclosure and appointment of a receiver.  On February 5, 2002, the trial court in the Phillips action found that Summers and his company had failed to comply with an earlier order and granted Phillips a $205,700 judgment.

Phillips then purchased National City’s nine mortgages and two assignments of rent and leases, and National City assigned all of its interest to Phillips.  In March 2002, Phillips filed a complaint to foreclose these mortgages and also moved to intervene in the Money Store foreclosure action.  Phillips and Money Store both moved for summary judgment.

The trial court entered its judgment and decree foreclosing both Phillips’ and Money Store’s mortgages.  It held that “dragnet” clauses contained in three of the mortgages assigned to Phillips secured “all debts or obligations owed to Paula Phillips by Summers,” which included Phillips’ judgment lien against Summers, the overdrawn checking account, collection fees and attorney fees, and interest.  It granted Phillips priority over Money Store on the three Summers’ lots used as collateral in the mortgages.

The Court of Appeals affirmed, holding that “the mortgage dragnet clauses support the trial court’s conclusion that the monetary judgment resulting from Summers’ failure to comply with his written settlement agreement was, after Phillips acquired the mortgage through assignment by National City, ‘secured by’ by the dragnet mortgages.” The Money Store Inv. Corp v. Summers, 822 N.E.2d 223, 229 (Ind. Ct. App. 2005) vacated.

On transfer, the Indiana Supreme Court affirmed the Court of Appeal’s disposition of the issues about the admissibility of the affidavits, Summers’ personal liability, and attorney fees.  The Supreme Court, however, reversed the trial court’s grant of priority to Phillips over Money Store on the lots in question, reversing therefore the Indiana Court of Appeals in part. 

On December 29, 2008, Wells Fargo filed a complaint against National City with eight counts stemming from National City’s refusal to release nine mortgages.  Wells Fargo alleged various theories including breach of contract, promissory estoppels, unjust enrichment, duty to deal in good faith, tortious injury to property interest, slander of title, and bad faith.  On May 12, 2011, National City filed a motion for summary judgment, which the trial court granted.

On appeal, the Indiana Court of Appeals went through a detailed analysis of the prior decision, and the issues raised by Wells Fargo including privity/mutuality of estoppel and “the same issues” being raised in a separate action.  In conclusion, the court found that National City and Phillips were in privity for purposes of the present action and the issues were the same for the purposes of res judicata.  The Indiana Court of Appeals concluded that the trial court did not error when it concluded that National City was entitled to summary judgment under the doctrine of res judicata.