Opinion
NO. 2018-CA-000820-MR
05-08-2020
FREEDA M. LOUTHAN (F/K/A FREEDA M. CLARK) APPELLANT v. DOLLAR BANK, FSB; MCKENZIE BANKING COMPANY; UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE; ROBERT CLARK; WATER ART LOUISVILLE, LLC; AND COMMONWEALTH OF KENTUCKY, INDIVIDUAL COLLECTION BRANCH, DIVISION OF COLLECTIONS, DEPARTMENT OF REVENUE APPELLEES
BRIEFS FOR APPELLANT Freeda M. Louthan, pro se The Villages, Florida BRIEF FOR APPELLEE DOLLAR BANK, FSB: Christopher Brooker Jordan M. White Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE BARRY L. WILLETT, JUDGE
ACTION NO. 13-CI-402661 OPINION
AFFIRMING
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BEFORE: COMBS, JONES, AND L. THOMPSON, JUDGES. JONES, JUDGE: The Appellant, Freeda M. Louthan, appeals from a decision of the Jefferson Circuit Court granting summary judgment in favor of the Appellee, Dollar Bank, FSB ("Dollar Bank"), and dismissing her related counterclaim. Having reviewed the record and being otherwise sufficiently advised, we affirm.
Louthan is a practicing member of the Kentucky Bar, having been admitted to practice law in this Commonwealth in 1977. As she did below, Louthan is representing herself in this appeal.
I. BACKGROUND
In 2002, Louthan took out a $479,000 loan to purchase a personal residence in the Woods of St. Thomas, a subdivision in Eastern Jefferson County. On November 22, 2002, Louthan signed an adjustable-rate promissory note ("the Note") and mortgage ("the Mortgage") in favor of Mortgagelt, Inc. ("Mortgagelt"). The Mortgage encumbers the real property and residence located at 2388 Avenue of the Woods in Louisville, Kentucky, and serves as collateral for the $479,000 Note. Mortgagelt first recorded the Mortgage with the Jefferson County Clerk on December 5, 2002, and recorded it again on April 1, 2013. The Mortgage is a first mortgage.
On February 22, 2005, Mortgagelt assigned its interests under the Note and Mortgage to Washington Mutual Bank, FA ("WaMu"). Mortgagelt recorded the assignment of the Mortgage, which also transferred "the debt thereby secured," with the Jefferson County Clerk on March 15, 2005. To transfer its interests under the Note, Mortgagelt placed a stamped indorsement on the final page of the Note making it payable to the order of WaMu "without recourse."
WaMu was liquidated on or about September 23, 2008. Its interests were succeeded by JPMorgan Chase Bank, N.A. ("JPM Chase"). JPM Chase, however, continued doing business under the WaMu name, and even sent Louthan a letter specifically notifying her of that fact. On December 23, 2008, JPM Chase (d/b/a WaMu) transferred its interests in the Note and Mortgage to Dollar Bank, the Appellee herein. To transfer its interests under the Note, JPM Chase placed a blank indorsement in WaMu's name on the final page of the Note and transferred possession of the Note, which due to the blank indorsement was bearer paper, to Dollar Bank.
JPM Chase recorded assignment of the Mortgage, and "the Promissory Note secured thereby and referred to therein," with the Jefferson County Clerk's office on December 30, 2008. Approximately two weeks later, on or around January 13, 2009, Mortgagelt recorded a corrective assignment of the Mortgage with the Jefferson County Clerk, the purpose of which was to simply provide additional information.
Louthan started missing monthly payments in August 2008, a few months before Dollar Bank acquired the Note and Mortgage. Louthan did not make late payments to bring the Note out of default. On December 23, 2008, the same date that Dollar Bank obtained its interests in the Note and Mortgage from JPM Chase (d/b/a WaMu), Dollar Bank filed a foreclosure and collection action against Louthan ("the 2008 Action"). By mutual agreement, however, the 2008 Action was dismissed without prejudice on December 21, 2010.
It is not entirely clear from the record why the 2008 Action was dismissed; however, it appears the complaint may have been defective insomuch as the Complaint contains the latest indorsement from JPM Chase (d/b/a WaMu) to Dollar Bank.
Dollar Bank filed a second foreclosure action against Louthan in Jefferson Circuit Court on April 29, 2011 ("the 2011 Action"), after she failed to bring her loan current. A copy of the Note with all indorsements, including the latest JPM Chase (d/b/a WaMu) indorsement, was attached to the complaint in the 2011 Action. Louthan filed a counterclaim against Dollar Bank, which the trial court dismissed with prejudice because it: (1) failed to set forth any factual allegations, (2) failed to allege any present injury caused by Dollar Bank, (3) failed to plead fraud with particularity, and (4) failed to state any claim against Dollar Bank. Thereafter, Dollar Bank's claim against Louthan was dismissed without prejudice on February 18, 2013.
Louthan, however, did not resume payments after the dismissal of the 2011 Action, and on October 10, 2012, Dollar Bank sent notices through its servicing agent, informing Louthan that Dollar Bank intended to accelerate her loan and foreclose on her property if she did not pay the overdue amount. The notices were sent to Louthan at the two different addresses on file with Dollar Bank, one in Kentucky and one in Florida. After Louthan failed to make any payments in response, Dollar Bank accelerated the outstanding balance under the Note. On September 6, 2013, Dollar Bank filed the current action seeking to foreclose on the Mortgage and collect a personal judgment against Louthan for the amount she owed under the Note. Dollar Bank also sought an in rem judgment giving it priority to the proceeds from the sale of Louthan's property. It further asked the trial court to order a public sale of the property and to distribute the proceeds to it in an amount sufficient to satisfy any personal judgment against Louthan. Dollar Bank attached a copy of the Note, with all indorsements, to its complaint.
Louthan filed a "counterclaim" against Dollar Bank. It is difficult to make sense of Louthan's pleading. She references numerous different legal theories and violations by Dollar Bank such as bad faith, predatory lending, negligence, fraud, deception, discrimination, slander of title, breach of contract, a violation of unspecified "Kentucky statutes," consumer protection laws, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Kentucky Consumer Protection Act, the Uniform Commercial Code, and the Fair Debt Collections Practices Act. While Louthan's counterclaim is long on citations to various common law and statutory causes of action, it is devoid of any particulars related to Dollar Bank's actual conduct. For example, paragraph 3 of the counterclaim states as follows:
In the alternative to the allegations of paragraphs 1 through 14 of the above Answer, if [Dollar Bank] is finally adjudicated herein to be the owner, legal owner, purchaser, transferee, assignee, 'Note Holder' (as defined in Exbibit B to the complaint herein) of the note and mortgage Alleged in the Complaint, or is otherwise finally adjudicated to be entitled to assert the rights under said note and mortgage, the Plaintiff is not a holder in due course, and is subject to and liable for the claims of [Louthan] against [Dollar Bank] and/or [Dollar Bank's] predecessor(s) in ownership of said note and mortgage and [Dollar Bank] is liable for default of the terms of an agreement of said note and mortgage, for whose actions [Dollar Bank] is liable and that due to negligence, fraud, deception, discrimination, predatory lending, and or bad faith on the part of [Dollar Bank], [Dollar Bank's] loan service and other agents, and/or [Dollar Bank's] predecessor(s), and/or their loan service or other agents in right to the alleged note and mortgage, in their processing or other conduct pertaining to said note and/or mortgage, in their processing or other conduct pertaining to said note and/or mortgage, [Louthan] is entitled to damages from [Dollar Bank] for slander of title, for breach of contract, including failure to properly account for escrowed funds, and for other unfair or fraudulent predatory lending practices.
After Dollar Bank failed to timely respond to Louthan's counterclaim, she filed a motion for default judgment. Dollar Bank timely objected and requested an extension of time to respond to the counterclaim. Specifically, Dollar Bank informed the court that it was in the process of changing counsel, and that additional time was needed for its new counsel to prepare and file a response. Louthan objected to Dollar Bank's request. After hearing the motions, the trial court denied Louthan's default judgment motion and granted Dollar Bank a twenty (20) day extension of time to respond to the counterclaim.
On December 16, 2013, Dollar Bank's new counsel timely replied to Louthan's counterclaim by filing a CR 12.02(f) motion to dismiss for failure to state a claim upon which relief can be granted. Louthan did not respond to the substantive arguments in Dollar Bank's motion to dismiss. Instead, she filed a renewed motion for default judgment claiming that Dollar Bank had not timely responded to her counterclaim, and advancing the same arguments that the trial court previously rejected. The trial court denied Louthan's second default judgment motion. Next, Louthan moved to vacate the order granting Dollar Bank 20 additional days to respond to her counterclaim; this motion was also denied.
Kentucky Rules of Civil Procedure.
The trial court referred Dollar Bank's motion to dismiss to the Master Commissioner for review and recommendation. The Master Commissioner recommended that Louthan's counterclaim be dismissed with prejudice on multiple grounds. On March 24, 2014, the trial court adopted the Master Commissioner's report in full, granting Dollar Bank's motion to dismiss "because Ms. Louthan's counterclaim is barred by the doctrine of res judicata, and in any event fails to set forth any factual allegations, fails to allege any present injury to Ms. Louthan caused by Dollar Bank, fails to plead fraud with particularity, and fails to state any claim against Dollar Bank upon which relief may be granted." Louthan filed several motions seeking to have the trial court vacate its order dismissing her counterclaim. Those motions were ultimately denied.
Following dismissal of the counterclaims, the foreclosure action proceeded. Ultimately, Dollar Bank moved for summary judgment. The trial court granted the motion and entered judgment in favor of Dollar Bank. Specifically, the trial court found:
Dollar Bank is entitled to an in in rem judgment against all named defendants giving it priority to the proceeds from the sale of Ms. Louthan's property up to the amount of $664,962.24 plus any interest, attorney's fees, court [costs], and other expenses permitted under the terms of the note and mortgage. . . . For the foregoing reasons, Dollar Bank's judgment and order of sale is GRANTED. This is a final and appealable Order, there being no just cause for delay.
This appeal followed.
II. ANALYSIS
A. Louthan's Counterclaim
Louthan first argues that the trial court erred when it denied her motion for default judgment on her counterclaim. "[D]efault judgments are not looked upon with favor as it is the policy of the law to have every case decided on its merits." Dressler v. Barlow, 729 S.W.2d 464, 465 (Ky. App. 1987). "Since every cause of action should be tried upon the merits, the rendering of judgments by default ought to be withheld where seasonable objection is made unless a persuasive reason to the contrary is submitted." Childress v. Childress, 335 S.W.2d 351, 354 (Ky. 1960). For this reason, "[a] trial court has broad discretion when it comes to default judgments[.]" First Horizon Home Loan Corp. v. Barbanel, 290 S.W.3d 686, 688 (Ky. App. 2009).
Default judgment is not automatic even though the opposing party may have failed to file a timely response. The trial court has the discretion to consider a motion for default and may deny it where appropriate. Dollar Bank timely responded to the motion for default judgment, proffered an explanation for its failure to timely respond, and sought an extension of time to do so. We cannot agree with Louthan that the record shows the trial court abused its discretion in granting Dollar Bank's requested extension or in denying Louthan's motion for default judgment.
Under CR 6.02(2), permission to do an act is conditioned upon a showing that the failure to act was the result of excusable neglect. While the briefs filed herein have sought to 'wheelbarrow' into the record the respective justification or condemnation of counsel, the record is silent as to what was considered by the trial court in arriving at the decision made. In the absence of such a showing, it cannot be said that there was an abuse of discretion. The presumption is that the ruling of the trial court was justified.Moffitt v. Asher, 302 S.W.2d 102, 103 (Ky. 1957).
Additionally, "[a] default judgment may not be based upon a complaint which fails to state a cause of action." Dalton v. First Nat. Bank of Grayson, 712 S.W.2d 954, 956 (Ky. App. 1986). "Although the modern rule is to require only the most general and conclusory pleadings in order to sustain a cause of action, some minimum standard in the art of pleading must be met." Id. "[A] claim for relief [must] be stated with brevity, conciseness and clarity." Nat. Resources and Environmental Protection Cabinet v. Williams, 768 S.W.2d 47, 51 (Ky. 1989) (citations omitted). Louthan's counterclaim fails on all three accounts. Granting default judgment on such ill-plead and ill-conceived allegations would have been an abuse of discretion; denying default judgment in the face of such claims certainly was anything but an abuse of the trial court's discretion.
This brings us to Louthan's next argument wherein she asserts the trial court erred in granting Dollar Bank's motion to dismiss her counterclaim for failure to state a claim. The trial court concluded that Louthan's counterclaim "fail[ed] to set forth any factual allegations, fail[ed] to allege any present injury to Ms. Louthan caused by Dollar Bank, fail[ed] to plead fraud with particularity, and fail[ed] to state any claim against Dollar Bank upon which relief can be granted." We could not agree more. The counterclaim was little more than a mishmash of legal claims separated by commas with the terms "plaintiff" and "defendant" interspersed throughout. Despite having read the counterclaim several times, we cannot make any sense of it. In short, we wholeheartedly agree with the trial court's dismissal of the counterclaim in its entirety.
B. Summary Judgment in Favor of Dollar Bank
Our standard of review regarding summary judgment is well-established:
In considering a motion for summary judgment, a trial court must view the record in a light most favorable to the non-moving party, resolving all doubts in its favor. Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky. 1991). The trial court may grant summary judgment only if it concludes that no disputed issues of material fact exist for trial. Id. On appeal of a summary judgment, we must determine whether the trial court correctly found that the moving party was entitled to a judgment as a matter of law. Id. Because summary judgment involves questions of law, we need not defer to the trial court's conclusions; accordingly, we review the record de novo. Blevins v. Moran, 12 S.W.3d 698, 700-01 (Ky. App. 2000).Waugh v. Parker, 584 S.W.3d 748, 750-51 (Ky. 2019).
The trial court concisely and correctly summarized the undisputed facts and appropriately determined they entitled Dollar Bank to judgment as a matter of law. We can find no error in the trial court's summation of the undisputed facts or its conclusions of law. Because we do not believe it is possible to improve upon the trial court's thorough and well-reasoned opinion; we adopt it as our own as set forth below:
Dollar Bank contends it is entitled to summary judgment on its claims against Ms. Louthan because the record shows that (1) it is the current holder of the adjustable-rate note and mortgage executed by Ms. Louthan on November 22, 2002, (2) Ms. Louthan defaulted on her obligations by failing to make monthly installment payments due on the note, (3) after Ms. Louthan failed to pay the amount that was overdue, it accelerated all unpaid principal and interest due under the note, and (4) Ms. Louthan currently owes $664,922.24 in unpaid principal, interest, and other "allowable charges." To support its motion, Dollar Bank has presented an affidavit from an employee, an authorized signer of its mortgage servicer, JPM, copies of the note and mortgage executed by Ms. Louthan, and copies of the assignments of the mortgage between MortgageIt, WaMu, and it, among other documents.
In two lengthy response briefs, Ms. Louthan identifies several issues that she believes should prevent the Court from granting summary judgment in favor of Dollar Bank. Ms. Louthan, for example, contends that Dollar Bank is not entitled to summary judgment because (1) Dollar Bank cannot prove that it has actual physical possession of the original note, (2) the assignment from WaMu to Dollar Bank was invalid, (3) Dollar Bank failed to give adequate notice of default and of its intention to accelerate the outstanding balance due under the note, and (4) Dollar Bank waived its rights to accelerate the outstanding balance due under the note and foreclose on the mortgage by inducing her not to make any additional payments while negotiating with her over a potential loan modification. Ms. Louthan also asserts that Dollar Bank's attempt to enforce the note and mortgage is unconscionable, against public policy, an act of bad faith and a violation of its duties under the note and mortgage.
. . .
Having reviewed the record, the Court finds that no genuine issues of material fact exist and that Dollar Bank is entitled to judgment as a matter of law. The documents presented by Dollar Bank unequivocally show that Ms. Louthan failed to make the monthly installment payments due under the note. Those documents further show that Ms. Louthan failed to take any action to bring her loan out of default after she first started to miss payments in August 2008, that Dollar Bank accelerated her loan after giving her notice of default, and that Ms. Louthan currently owes $664,962.24 in unpaid principal, interest, and other allowable charges. Ms. Louthan does not seem to contest Dollar Bank's calculation of the amount that is still due under the note, but does challenge Dollar Bank's ability to enforce the note on the ground that it lacks physical possession of the original note. The affidavit from JPM, however, shows that Dollar Bank was in actual possession of the original note when it filed this action in September 2013. Dollar Bank also maintains that it has shown the original note to Ms. Louthan on several different occasions. To counter, Ms. Louthan's persistent assertion that it did not have the original note, Dollar Bank even produced the original note before the Court during oral arguments on January 18, 2018. As a result, Ms. Louthan no longer has any basis whatsoever to dispute Dollar Bank's possession of the original note. More importantly, by producing the original note, Dollar Bank has established that it has the right to enforce it. See Stevenson v. Bank of America, 359 S.W.3d 466, 470 (Ky. App. 2011) (holding that a bank's possession of an original note, which was also bearer paper, was sufficient to establish that the bank was "lawfully in possession of the original note" and "entitled to enforce the obligations secured thereby" as its holder). Because Dollar Bank has produced evidence demonstrating its right to enforce the note, the amount of unpaid principal and interest due under the note after acceleration, and the existence of the mortgage securing the note, it has established a prima facie case for
enforcement of the note and for foreclosure of the mortgage securing the note.
With respect to the other issues raised by Ms. Louthan in her response briefs, the Court finds that they are insufficient to rebut Dollar Bank's prima facie showing. First, Ms. Louthan has provided absolutely no reasons to doubt the validity of the assignments between Mortgagelt, WaMu, and Dollar Bank. Though the court recognizes that Mortgagelt recorded the corrective assignment after WaMu transferred its interest under the note and mortgage to Dollar Bank, the corrective assignment does not purport to transfer any interests under those documents or to do anything other than alter the description of the property in the first assignment from Mortgagelt to WaMu to reflect the information in the re-recorded mortgage. As a result the corrective assignment does not affect Dollar Bank's right to enforce the note or mortgage in any way. Nor does Ms. Louthan give the Court any reason to believe that JPM, as WaMu's successor in interest somehow lacked the authority to transfer WaMu's interests under the note and mortgage to Dollar Bank. Second, regarding the issue of notice the applicable provisions in the note and mortgage required Dollar Bank to send a notice of default by first-class mail to the address listed in those documents or to another address provided by the borrower. Contrary to Ms. Louthan['s] assertions, those provision[s] do not condition the effectiveness of a notice on the borrower actually receiving it. In other words, all Dollar Bank needed to do to comply with the notice provisions was to send the notice of default to the appropriate address by first-class mail. Dollar Bank presented copies of the notices it sent by first class mail to Ms. Louthan's address in Kentucky, which is the address listed in the note and mortgage, and to the address that it had on file for her in Florida. Because those documents demonstrate that Dollar Bank complied with the notice provisions in the note and mortgage, Ms. Louthan's assertions to the contrary lack all merit. Third, regarding the issue of
waiver, Dollar Bank's efforts to negotiate a loan modification or repayment plan with Ms. Louthan do not necessarily constitute a waiver of its rights to accelerate the unpaid balance due under the note or to foreclose on her mortgage because the note expressly permits the holder to exercise those rights for as long as the payor remains in default. Perhaps more importantly, Ms. Louthan has not presented any evidence that she ever entered into any type of loan modification or refinancing agreement with Dollar Bank or that JPM ever promised to modify her loan, induced her not to make payments due under the note, or expressly waived its rights to accelerate her loan and foreclosure on the mortgage. For those reasons, the Court refuses to find that Dollar Bank waived any of its rights under the note and mortgage. Finally, Ms. Louthan's assertions regarding Dollar Bank's alleged bad faith and the unconscionability of the terms of the note and mortgage that she executed do not raise any genuine issue of material fact because she has not presented any evidence in law or in fact to support them.
In conclusion, the Court finds that Dollar Bank has met its burden of demonstrating that it is entitled to summary judgment on its claims against Ms. Louthan. As a result, Dollar Bank is entitled to a personal judgment against Ms. Louthan in the amount of $664,962.24 plus interest, attorney's fees, court costs, and any other expenses permitted under the terms of the note and mortgage. Dollar Bank is also entitled to an order directing the public sale of Ms. Louthan's property and distribution of the proceeds to it up to the amount of its personal judgment against Ms. Louthan.
III. CONCLUSION
For the reasons set forth above, we affirm the Jefferson Circuit Court.
ALL CONCUR. BRIEFS FOR APPELLANT Freeda M. Louthan, pro se
The Villages, Florida BRIEF FOR APPELLEE DOLLAR
BANK, FSB: Christopher Brooker
Jordan M. White
Louisville, Kentucky