


Attorneys for Appellant

Robert L. Nicholson
Sarah A. Hiestand
Beckman Lawson, LLP
Fort Wayne, Indiana

Attorneys for Appellee

James T. Hodson
Cheryl M. Knodle
Ball, Eggleston, Bumbleburg, McBride, Walkey & Stapleton, PC
Lafayette, Indiana



      IN THE
      INDIANA SUPREME COURT


INDIANA LAWRENCE BANK,
        Appellant (Defendant below),
        v.
PSB CREDIT SERVICES, INC.,
        Appellee (Plaintiff below),
      and
JAMES W. ZIMMERMAN, and
SALIN BANK & TRUST COMPANY,
        Appellees (Defendants below).



INDIANA LAWRENCE BANK,
        Appellant (Plaintiff below),
      v.
UNITED STATES OF AMERICA,
        Appellee (Defendant below).



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)     Court of Appeals No.
)     25A03-9801-CV-00024
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      APPEAL FROM THE FULTON CIRCUIT COURT
      The Honorable Douglas B. Morton, Judge
      Cause Nos. 25C01-9607-CP-202 & 25C01-9704BCP-109



      DISSENT FROM DENIAL OF PETITION TO TRANSFER



      March 7, 2000


SULLIVAN, Justice, dissenting from denial of petition to transfer.
        In this case, the Court of Appeals affirmed an order of  the  trial
court to marshal assets, and the majority of this Court has  voted  to  deny
transfer.  I dissent from the denial of transfer  because  I  conclude  that
the marshaling request was untimely.

        Indiana Lawrence Bank ("Bank") had a first lien and a third lien on
an  office  building  ("Office")  owned  by  James  and  Merilee   Zimmerman
("Debtors").  Sandwiched between these liens was a second lien in  favor  of
PSB Credit Services ("PSB").  The Bank also had a first lien  and  a  second
lien  on  a  duplex  ("Duplex")  owned  by  the  Debtors.  These  liens  are
summarized as follows (amounts are approximate):

|                                 |              |           |
|                                 |Date          |Amount     |
|                                 |              |           |
|Bank's lien on Office and Duplex |1988          |$70,000    |
|                                 |              |           |
|PSB's lien on Office only        |1991          |$178,000   |
|                                 |              |           |
|Bank's lien on Office and Duplex |1993          |$77,000    |
|                                 |              |           |

        After the Debtors defaulted, PSB brought an action to foreclose its
lien on the Office ("Office Foreclosure Case"), naming the Bank as a  party.
 The Bank then filed a separate action to foreclose only its  1993  lien  on
the Duplex ("Duplex Foreclosure Case").  The Bank bought the Duplex  at  the
eventual sheriff's sale for about $66,000, which  it  applied  to  the  1993
lien, leaving its 1988 lien wholly unsatisfied.  PSB then filed a motion  in
the Office Foreclosure Case to marshal the Debtors' assets, which the  trial
court granted in part, ordering that the proceeds of the sale of the  Duplex
be prorated between Bank's 1988 and 1993 liens on the Duplex  in  proportion
to the amounts of the liens on the date of sale.  If,  as  it  appears,  the
proceeds from selling the Office will be insufficient to pay all  the  liens
against it, the Bank will probably realize about $32,000 less on  its  liens
than it would in the absence of  the  marshaling  order.   A  more  complete
description of the liens and events leading up to this  appeal  is  provided
by the Court of Appeals.  See Indiana Lawrence Bank v.  PSB  Credit  Servs.,
Inc., 706 N.E.2d 570, 571-72 (Ind. Ct. App. 1999).

        Marshaling of assets is an equitable remedy that may be appropriate
when a senior creditor has access to two funds or  properties  of  the  same
debtor for payment of its claims and a junior creditor has  access  to  only
one of those funds or properties.  Marshaling requires the  senior  "double-
funded" creditor to exhaust  the  source  that  the  junior  "single-funded"
creditor cannot access ("singly-charged property") before resorting  to  the
source that both  can  access  ("doubly-charged  property").   See  Bank  of
Commerce v. First Nat=l Bank,  150  Ind.  588,  590-91,  50  N.E.  566,  567
(1898); 53 Am.Jur.2d Marshaling Assets and Inverse Order  of  Alienation  ''
1, 10 (1996) (hereinafter Marshaling Assets).

        The Bank raises several challenges to  the  ordered  marshaling  in
this case, including that  the  marshaling  order  improperly  modified  the
final judgment in the Duplex Foreclosure  Case,  that  the  Office  and  the
Duplex were not in the hands of a common debtor when PSB  sought  marshaling
because the Bank had already bought the Duplex  in  the  Duplex  Foreclosure
Case, and that marshaling is improper because it will harm the Bank.   While
the Bank might be entitled to prevail on some or all of these arguments,  it
is not necessary to reach these points to resolve this  case  because  PSB's
request for marshaling was untimely.

        The doctrine of marshaling may be enforced  by  (1)  enjoining  the
double-funded creditor from proceeding against the  doubly-charged  property
until it exhausts  the  singly-charged  property,  or  (2)  subrogating  the
single-funded creditor to the  double-funded  creditor's  lien  against  the
singly-charged property.  See Bank of Commerce, 150 Ind. at 591, 50 N.E.  at
567; 53 Am.Jur.2d Marshaling Assets ''  29-32.   In  this  case,  the  trial
court did not enjoin the Bank from proceeding against the  Office  until  it
exhausted the Duplex as a source of payment, nor did  it  subrogate  PSB  to
the Bank's interests in the Duplex.   Indeed,  by  the  time  PSB  requested
marshaling, the trial court could do neither because the Bank's  foreclosure
on the Duplex was complete.  The trial court  instead  ordered  reallocation
between the Bank's 1988 and 1993 liens of  the  proceeds  from  the  already
completed Duplex foreclosure C relief that is not  a  recognized  method  of
effectuating marshaling.

        The doctrine of marshaling does not give the single-funded creditor
a lien on or a vested interest  in  the  singly-charged  property,  and  the
right to invoke marshaling may be lost by failure to invoke the doctrine  in
a timely manner.  See 53 Am. Jur. 2d Marshaling Assets ' 9;  cf.  Louden  v.
Ball, 93 Ind. 232, 238 (1884) (The right  to  marshaling  must  be  asserted
"promptly and before  sale"  of  the  doubly-charged  property.).   Although
equity involves some flexibility,  it  is  not  an  unbridled  free-for-all.
Predictability and  finality  are  important,  especially  in  a  commercial
context.  There are limits on the equitable relief a court may fashion,  and
at some point requests for such  relief  become  untimely.   In  this  case,
PSB's request for marshaling simply came  too  late,  and  the  trial  court
exceeded its equitable powers in reallocating the proceeds  of  the  already
completed Duplex foreclosure.  I would therefore grant transfer and  reverse
the trial court's marshaling order.

        SHEPARD, C.J., concurs.
