Opinion
NO. 2015-CA-000849-MR
01-26-2018
JAMES L. BOWMAN, JR. APPELLANT v. FIFTH THIRD MORTGAGE COMPANY, COMMONWEALTH OF KENTUCKY, DIVISION OF UNEMPLOYMENT INSURANCE AND MARICELA GUERRA-BOTIEL APPELLEES
BRIEFS FOR APPELLANT: James Craig Louisville, Kentucky BRIEF FOR APPELLEE, FIFTH THIRD MORTGAGE COMPANY: Molly E. Rose Taylor M. Hamilton Bradley S. Salyer Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE AUDRA J. ECKERLE, JUDGE
ACTION NO. 14-CI-400645 OPINION
AFFIRMING
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BEFORE: JOHNSON, NICKELL, AND STUMBO, JUDGES. NICKELL, JUDGE: In this foreclosure action, James L. Bowman, Jr., has appealed from the Jefferson Circuit Court's May 26, 2015, order denying his motion to set aside a prior default judgment and his request for a hearing on his objections to the report of the Master Commissioner. Following a careful review, we affirm.
Judge Janet Stumbo concurred in this opinion prior to retiring from the Kentucky Court of Appeals effective December 31, 2017. Release of this opinion was delayed by administrative handling.
In 2002, Bowman borrowed money from Fifth Third Mortgage Company ("Fifth Third") and executed a note and mortgage on his home to secure the debt. Bowman's account went into default beginning with the payment due on November 1, 2013, and he made no further payments. On December 27, 2013, Fifth Third notified Bowman in writing of his default and informed him failure to cure would result in acceleration of the loan and the institution of foreclosure proceedings. Approximately sixty days later, on March 4, 2014, counsel for Fifth Third notified Bowman it had been retained to commence a foreclosure action. On March 20, 2014, Fifth Third filed the instant action in foreclosure against Bowman's home based on his delinquency in paying amounts due on the note and mortgage.
Upon filing the action, Fifth Third requested personal service of process on Bowman at the property address by the Jefferson County Sheriff's Office. The Sheriff made six attempts at service over a ten-day period, all to no avail. A card was left at the residence requesting a call on each occasion. On April 17, 2014, the Sheriff filed a return stating its inability to effect service on Bowman with the notation, "Appears to be avoiding service." Contemporaneously, a website maintained by the Jefferson County Sheriff related to process service was updated to indicate the summons was "RETURNED—AVOIDING."
Two days prior to the Sheriff's return being filed, and based on knowledge gleaned from a telephone conversation with the Sheriff's Office regarding the difficulty in obtaining service on Bowman, Fifth Third filed an Affidavit for Appointment of Warning Order Attorney. The affidavit, in compliance with CR 4.05(e), stated Bowman was "an individual whose name or place of residence is unknown to the plaintiff." The trial court appointed Hon. Annie O'Connell to act as Warning Order Attorney for Bowman and Hon. Allison Hartley to act in that capacity for his unknown spouse. O'Connell reported she prepared and sent a notice of the pending action to Bowman's home via certified mail, return receipt requested, but the mailing was returned as unclaimed. Hartley reported she had likewise attempted to notify Bowman's unknown spouse via certified mail but had received no return of any kind.
Kentucky Rules of Civil Procedure. --------
On June 17, 2014, Fifth Third moved for default judgment seeking in rem relief and an order of sale. The matter was referred to the Jefferson County Master Commissioner which entered a report on July 8, 2014. The Master Commissioner found Bowman had been constructively served through the appointment of a Warning Order Attorney, more than fifty days had passed with no response being received, and Fifth Third was entitled to default judgment and order of sale. In conformity with the recommendation, the trial court entered default judgment in favor of Fifth Third on July 22, 2014, and the property was sold by the Master Commissioner on September 9, 2014. Following more motion practice, on October 31, 2014, the trial court entered an order to distribute the funds raised through the sale of the property and directed the Master Commissioner to execute a deed conveying the property to the highest bidder. Copies of many of these documents were mailed to Bowman at the property address.
On December 10, 2014, Bowman filed an emergency motion to set aside the default judgment asserting he was unaware of the foreclosure action until the third-party purchaser, Maricela Guerra-Botiel, moved in a separate action to evict him from the premises. The motion was abated due to Bowman's filing of a voluntary petition for bankruptcy relief on December 11, 2014.
Nearly three months later, and on the eve of the expiration of the statutory redemption period, Bowman moved for an extension of the redemption period and to set a briefing schedule. Fifth Third and Guerra-Botiel filed objections to Bowman's motions. An evidentiary hearing was conducted before the Master Commissioner on April 28, 2015. Following the hearing, the Master Commissioner submitted a report finding the record indicated Bowman was either avoiding service or no longer residing at the property address; no evidence was introduced sufficient to impeach the Sheriff's return of service; Bowman's contention Fifth Third "knew" where he lived was undermined by the failure of delivery of the notices sent via certified mail; and ultimately validated the constructive service on Bowman through the Warning Order process. Thus, the Master Commissioner recommended denial of Bowman's motion to set aside.
Bowman objected to the Master Commissioner's recommendation and requested the trial court schedule a hearing on his objection. After hearing brief arguments from counsel, the trial court orally denied the request for an additional hearing and indicated its belief no additional argument or evidence was necessary. A subsequent written order denied Bowman's motion to vacate the default judgment and overruled his objection to the Master Commissioner's report. This appeal followed.
As an initial matter, we note Bowman's failure to comply with CR 76.12(4)(c)(v) which requires "a statement with reference to the record showing whether the issue was properly preserved for review and, if so, in what manner."
CR 76.12(4)(c)[(v)] in providing that an appellate brief's contents must contain at the beginning of each argument a reference to the record showing whether the issue was preserved for review and in what manner emphasizes the importance of the firmly established rule that the trial court should first be given the opportunity to rule on
questions before they are available for appellate review. It is only to avert a manifest injustice that this court will entertain an argument not presented to the trial court. (citations omitted).Elwell v. Stone, 799 S.W.2d 46, 48 (Ky. App. 1990) (quoting Massie v. Persson, 729 S.W.2d 448, 452 (Ky. App. 1987) (overruled on other grounds by Conner v. George Whitesides Co., 834 S.W.2d 652 (Ky. 1992)). Failing to comply with the civil rules is an unnecessary risk the appellate advocate should not chance. Compliance with CR 76.12 is mandatory. See Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010). Although noncompliance with CR 76.12 is not automatically fatal, we would be well within our discretion to strike the brief or dismiss the appeal for Bowman's failure to comply. Elwell. While we have chosen not to impose such a harsh sanction, we caution counsel such latitude may not be extended in the future.
The main issue in this appeal is whether Bowman showed good cause to set aside the default judgment. A trial court has broad discretion when it comes to default judgments, and such judgments will not be disturbed by this Court unless the trial court abused that broad discretion. S.R. Blanton Development, Inc. v. Investors Realty and Management Co., Inc., 819 S.W.2d 727, 730 (Ky. App. 1991). An abuse of discretion occurs when a trial court's decision is arbitrary, unreasonable, unfair or unsupported by sound legal principles. Clark v. Commonwealth, 223 S.W.3d 90, 95 (Ky. 2007).
According to CR 55.02, if a defaulting party demonstrates good cause, a trial court may set aside a default judgment providing said good cause meets the requirements set forth in CR 60.02. To show good cause, and thereby justify vacating a default judgment, the defaulting party must: (1) provide the trial court with a valid excuse for the default; (2) demonstrate a meritorious defense; and (3) show the absence of prejudice to the non-defaulting party. Perry v. Central Bank & Trust Co., 812 S.W.2d 166, 170 (Ky. App. 1991), citing 7 W. Bertelsman and K. Philipps, Kentucky Practice, CR 55.02, comment 2 (4th ed. 1984). "All three elements must be present to set aside a default judgment." S.R. Blanton Development, Inc. at 729.First Horizon Home Loan Corp. v. Barbanel, 290 S.W.3d 686, 688-89 (Ky. App. 2009) (footnote omitted). See also HP Hotel Management, Inc. v. Layne, ___ S.W.3d ___, 2017 WL 6061821 (Ky. App. 2017).
In support of his position challenging the trial court's entry of default judgment, Bowman contends he was not properly constructively served. If he is correct and service was defective, the underlying default judgment would be void, and reversal would be required. Conversely, if service was not defective as the trial court concluded, Bowman's arguments challenging the judgment on that basis fail. Bowman offers no other justification for his default.
Bowman alleges Fifth Third did not comply with the mandates of CR 4.05, thereby rendering its attempt at constructive service ineffectual. He contends Fifth Third's failure to properly serve him renders the judgment void and requires reversal. Bowman's initial challenge centers on the affidavit filed in support of appointment of a Warning Order Attorney which averred he was "an individual whose name or place of residence is unknown to the Plaintiff." He argues Fifth Third "knew" where he lived because it held a mortgage on his residence and only communicated with him by correspondence mailed to that address. Based on this "knowledge," he contends the affidavit was defective and any subsequent reliance thereon to establish constructive service was erroneous. Bowman attempts to bolster his position with his own self-serving statements he did not receive any of the multiple letters and notices mailed to his home, did not see the cards left on six occasions by the Sheriff's office requesting a call back, and did not get notifications from the postal service of either of two certified letters mailed to him. Bowman admits Fifth Third had communicated with him via mail to his home address throughout the period his mortgage had been in effect, but somewhat miraculously and inexplicably all attempts to use the postal service—or even leave calling cards at the residence—failed once his mortgage went into default. Bowman's contentions are unpersuasive.
The trial court found constructive service had been effected against Bowman for the purpose of an in rem judgment through the Warning Order Attorney procedure and compliance with CR 4.05, CR 4.06, and CR 4.07. At the time Fifth Third filed its affidavit, no fewer than five attempts at service had been undertaken by the Sheriff. In addition, two pre-litigation letters had been mailed to the residence. Bowman failed to respond to any of these contacts and subsequently disavowed knowledge of any of them. Based on the evidence adduced during an evidentiary hearing, the Master Commissioner's report—as adopted by the trial court—determined Fifth Third's affidavit was based on a reasonable belief Bowman no longer resided at the subject address or was avoiding service. As such, it was determined the strictures of CR 4.05 were appropriately complied with and constructive service was effective. The decision was based on reasonable evidence, sound legal principles and was neither arbitrary nor unfair under the circumstances. Thus, we discern no abuse of discretion.
Having offered no other reasons for his default, Bowman cannot satisfy the first prong of the "good cause" test to overturn the trial court's default judgment. Barbanel. Similarly, Bowman has utterly failed to provide the trial court with any sort of defense—meritorious or otherwise. He also has failed to show an absence of prejudice to Fifth Third should the default judgment be vacated. Thus, he has failed the second and third prongs as well. As all three prongs must be satisfied to vacate a default judgment, S.R. Blanton Development, Inc., 819 S.W.2d at 729, Bowman is not entitled to the relief he seeks.
Finally, Bowman argues he was entitled to a hearing on his objection to the Master Commissioner's report. Under Kelley v. Fedde, 64 S.W.3d 812, 814 (Ky. 2002), an opportunity to be heard is all that is required, not a full-blown evidentiary hearing. The trial court afforded Bowman this opportunity, but he did not take full advantage of the time allotted to inform the court of the basis for his objection. He now complains the trial court erred in refusing to schedule a further hearing at which he could argue his objections to the Master Commissioner's report—in addition to the hearing he scheduled and which the trial court convened. Bowman argues the language of CR 53.05(2) requires a hearing prior to a trial court taking any action on a Master Commissioner's report. However, the record is clear this argument was not presented to the trial court and Bowman has not requested palpable error review pursuant to CR 61.02. Our Supreme Court has made it clear a party "may invoke CR 61 .02 and claim palpable error if its substantial rights have been affected and a manifest injustice has resulted from the error." Childers Oil Co., Inc. v. Adkins, 256 S.W.3d 19, 27 (Ky. 2008) (emphasis added). But, as Childers states, a party must "invoke" the rule. Bowman did not invoke the rule here. "Absent extreme circumstances amounting to a substantial miscarriage of justice, an appellate court will not engage in palpable error review . . . unless such a request is made and briefed by the appellant." Shepherd v. Commonwealth, 251 S.W.3d 309, 316 (Ky. 2008), as modified on denial of reh'g (May 22, 2008) (emphasis added; applying RCr 10.26). We must ask ourselves then, whether there are extreme circumstances in this case amounting to a substantial miscarriage of justice. We conclude there are not. Thus, Bowman is not entitled to the requested relief.
For the foregoing reasons, the judgment of the Jefferson Circuit Court is AFFIRMED.
ALL CONCUR. BRIEFS FOR APPELLANT: James Craig
Louisville, Kentucky BRIEF FOR APPELLEE, FIFTH
THIRD MORTGAGE COMPANY: Molly E. Rose
Taylor M. Hamilton
Bradley S. Salyer
Louisville, Kentucky