On September 15, 2011, the Indiana Supreme Court issued its decision in Lucas v. U.S. Bank, N.A., ___ N.E.2d ___ (Ind. 2011), Cause No. 28S01-1102-CV-78, an action that arises from an attempt by a bank to foreclose on a home. That case raised the issue of how to tell when defenses in a foreclosure action should be tried to a jury or to a court. In deciding this case, the Court issued an important decision refining the general test for deciding when a case is essentially equitable and, therefore, not triable to a jury.

The Lucases entered into a residential mortgage in 2005, but in 2009, the bank move to foreclose on the loan. The Lucases filed an answer asserting many affirmative defenses and counterclaims, asserting that the bank violated numerous statutes and the common law and that the Lucases were thus entitled to various forms of relief, including money damages. The Lucases requested a jury trial on their affirmative defenses and counterclaims, but the trial court denied that motion. On appeal, the Court of Appeals reversed, holding that the Lucases had the right to have a jury hear their legal claims. The bank then successfully sought transfer.

The Court relied heavily on its decision in Songer v. Civitas Bank, 771 N.E.2d 61 (Ind. 2002), which also addressed the test to be used when deciding whether to have a jury hear issues in a case involving both legal and equitable claims. That test was a fact-based, multi-pronged test.

Ultimately, we believe Songer reveals that a trial court must engage in a multi-pronged inquiry to determine whether a suit is essentially equitable. Drawing on the teachings of Songer, we formulate that inquiry as follows: If equitable and legal causes of action or defenses are present in the same lawsuit, the court must examine several factors of each joined claim—its substance and character, the rights and interests involved, and the relief requested. After that examination, the trial court must decide whether core questions presented in any of the joined legal claims significantly overlap with the subject matter that invokes the equitable jurisdiction of the court. If so, equity subsumes those particular legal claims to obtain more final and effectual relief for the parties despite the presence of peripheral questions of a legal nature. Conversely, the unrelated legal claims are entitled to a trial by jury.

Th Lucases' claims in this case were subsumed into equity because, although they were legal causes of action, when "looking at the cause as a whole, we conclude that the core questions underlying the Lucases' legal claims significantly overlap with the foreclosure action that invoked the equitable jurisdiction of the trial court." Because "the essential features of the suit" were equitable, the entire case must be tried to the bench, rather than to a jury.

Lesson:

If a case involves both legal and equitable claims, the legal claims will be subsumed into equity if the whole action is essentially equitable. This is a fact-based, multi-pronged test.

Brad A. Catlin
Price Waicukauski & Riley, LLC
http://www.indianalawupdate.com/entry/Indiana-Supreme-Court-Refines-Test-of-When-a-Suit-is-Essentially-Equitable