Indiana lender’s twin-track loan collection lands before state supreme court
The guaranties were built to favor the lender. The guarantors waived “all defenses based on suretyship or impairment of collateral” and “all rights Guarantor may have under any anti-deficiency statute or other similar protections.” On paper, Merchants could go straight at the guarantors without first working through the collateral.
Then the loans went bad. The borrowers defaulted in July 2022. That September, Merchants sued the guarantors in federal court. In March 2023, with those suits still live, the bank filed foreclosure actions on both properties in state courts. By August 2024, the two loans, with recoverable expenses, had grown to $11,039,569.40 and $17,571,920.51.
The guarantors fought back with a statute: Indiana Code § 32-30-10-10, the state’s “One Action” rule, which bars a lender from foreclosing while running a separate suit “for the same debt or matter” secured by the mortgage. The trial judge agreed, and went further than either side asked, ruling on his own initiative that the guaranty debt was the “same debt” as the notes and that the guarantors’ waivers were void on public policy grounds.
The Seventh Circuit was not convinced either way. It found the statute ambiguous on whether it reaches guaranties at all, and found little Indiana law on whether the protection can be waived. So the panel did not rule. It certified two questions to the Indiana Supreme Court and stayed the appeal until that court answers.
The judges did leave lenders a pointed note. Merchants, they observed, had cleaner routes to its money, sell the properties, finish the foreclosure, or sue the guarantors alone, but chose parallel actions instead, “thus bringing this result upon itself.”
