Opinion
NO. 2012-CA-001872-MR
02-28-2014
ELBERT STEVE ILES AND JO ANN ILES APPELLANTS v. BAC HOME LOAN SERVICES APPELLEE
BRIEF FOR APPELLANT: Steve and Jo Ann Iles, Pro Se California, Kentucky BRIEF FOR APPELLEE: Richard A. Vance Katherine A. Bell Louisville, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM CAMPBELL CIRCUIT COURT
HONORABLE JULIE REINHARDT WARD, JUDGE
ACTION NO. 09-CI-01763
OPINION
AFFIRMING
BEFORE: CLAYTON, MAZE, AND NICKELL, JUDGES. CLAYTON, JUDGE: Elbert Steve Iles and Jo Ann Iles, pro se, appeal the order of the Campbell Circuit Court confirming the August 24, 2012 Report of the Master Commissioner, which denied their Kentucky Rules of Civil Procedure (CR) 60.02 motion alleging fraud. After careful consideration, we affirm.
FACTS
The Iles owned property in Campbell County, Kentucky, for which they executed a promissory note on June 16, 2006, in the amount of $170,000.00 to Midwest Financial & Mortgage Services, Inc. As security for the loan, the Iles granted a mortgage interest on their property. This interest was granted solely as a nominee for Lender and the Lender's successor and assigns. At the same time the promissory note was executed, the Iles also executed a mortgage for $170,000.00 to Mortgage Electronic Registration Systems, Inc. (hereinafter "MERS") as mortgagee. MERS acted as nominee for Midwest Financial & Mortgage Services, Inc.
The promissory note was executed by the Iles to Midwest Financial & Mortgage Services, Inc. which was assigned without recourse to Michigan Mutual, Inc. on June 16, 2006. Further, the promissory note was assigned in blank, without recourse, to Michigan Mutual, Inc. The assignments of this promissory note are attached as an allonge to the promissory note. Allonge is defined in Black's Law Dictionary (9th ed. 2009) as "[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements . . . [.]"
A promissory note becomes a bearer instrument by virtue of the endorsement in blank. On November 17, 2009, MERS assigned the mortgage to BAC Home Loan Servicing, LP, f/n/a Countrywide Home Loans Servicing, LP (hereinafter, "BAC"). Thus, the promissory note executed by the Iles to Midwest Financial & Mortgage Services, Inc. was assigned, properly, to BAC because of the endorsements set forth on the allonge attached to the promissory note.
On November 25, 2009, BAC filed a foreclosure action against the Iles on the mortgage encumbering their property. They had failed to make payments on the mortgage for three and a half years and defaulted.
Throughout the circuit court action, the Iles have repeatedly challenged whether BAC truly held the mortgage and attacked the authenticity of the assignment. These challenges were rejected by the trial court, and on March 10, 2010, the trial court granted BAC's summary judgment motion and noted that BAC was the real party in interest.
The Iles appealed the summary judgment on April 8, 2010. In the prehearing statement, the Iles alleged that the summary judgment was inappropriate because BAC made false claims and failed to negotiate a settlement. Further, the Iles claimed that the trial court ignored the indications of fraud. However, in that appeal, the Iles failed to timely file their brief even after successfully obtaining additional time. Subsequently, on October 22, 2010, BAC made a motion to dismiss the appeal with prejudice. The Court of Appeals denied this motion and gave the Iles until March 2, 2011, to file their brief.
Iles v. BAC Home Loan Servicing, 2010-CA-000694.
But rather than file a brief, the Iles filed a CR 60.04 motion to abate the appeal. BAC opposed this motion and filed a second motion on March 14, 2011, to dismiss the appeal. The Iles did not respond to this motion, and on September 8, 2011, the Court of Appeals denied the Iles' CR 60.04 motion and granted BAC motion to dismiss the first appeal. Following the Iles' motion to the reconsider, the Court of Appeals, on November 23, 2011, denied the motion to reconsider.
During the pendency of the first appeal, the Iles, on February 28, 2011, filed a motion pursuant to CR 60.02 (b), (c), and (d) with the trial court seeking relief from the summary judgment. The Iles claimed, for the third time, that the execution of the assignment was fraudulent. Additionally, they contended that they were not permitted to conduct discovery in order to establish BAC's falsity in the foreclosure complaint. The trial court postponed consideration of the motion until the first appeal was resolved.
Following the dismissal of the first appeal, the parties filed briefs with the trial court. BAC argued that the Iles had failed to present any newly discovered evidence to support its CR 60.02 motion. As to the Iles' claim that they were not allowed to conduct discovery, BAC maintained that at no time did the Iles attempt to seek discovery nor was any order in the record denying them the opportunity to do so.
After reviewing the parties' briefs discussing the CR 60.02 motion, the trial court referred the motion to the Master Commissioner. The trial court stated that it would make its final determination after the Master Commissioner's report and recommendations. The Master Commissioner filed his report and moved to confirm it on August 24, 2012. In the report, the Master Commissioner concluded that the trial court properly found that BAC was entitled to enforce the Note and Mortgage and, therefore, BAC was the real party in interest; the Iles never attempted to conduct discovery to substantiate their allegations of fraud regarding the assignment; and, the Iles failed to meet the burden necessary under CR 60.02 to set aside the judgment. Hence, the Master Commissioner recommended that the trial court deny the Iles' CR 60.02(b), (c), and (d) motion.
The trial court gave the parties until September 3, 2012, to file objections to the Report. On September 12, 2012, the trial court held a hearing on the CR 60.02 motion and the Master Commissioner's motion to confirm the Report. At the conclusion of the hearing, the trial judge denied the Iles' CR 60.02 motion and also issued an order confirming the Master Commissioner's Report. The Iles timely appealed from that order.
STANDARD OF REVIEW
"The standard of review of an appeal involving a CR 60.02 motion is whether the trial court abused its discretion." White v. Commonwealth, 32 S.W.3d 83, 86 (Ky. App. 2000). "The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). Accordingly, a trial court's decision is affirmed unless there is a showing of some "flagrant miscarriage of justice." Gross v. Commonwealth, 648 S.W.2d 853, 858 (Ky. 1983). With this standard in mind, we examine the Iles' arguments.
ANALYSIS
The Iles seek relief under CR 60.02, which states:
On motion a court may, upon such terms as are just, relieve a party or his legal representative from its final judgment, order, or proceeding upon the following grounds . . . . (b) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59.02; (c) perjury or falsified evidence; (d) fraud affecting the proceedings, other than perjury or falsified evidence . . .The Iles specifically brought his motion under subsections (b), (c), and (d); that is, newly discovered evidence, falsified evidence, and fraud affecting the proceedings. Applications for relief under (b) and (c) must be filed within one year after judgment, and within a reasonable time for fraud affecting the proceedings.
We begin by observing that action under CR 60.02 is not a part of the normal progression of litigation but is an extraordinary procedure whereby a collateral attack is made upon a judgment based on the specific grounds set forth in the rule. Faris v. Stone, 103 S.W.3d 1, 4 (Ky. 2003). Here, the Iles have claimed that they are entitled to relief based on newly discovered evidence, falsified evidence, and fraud affecting the proceedings. However, the evidence and arguments proffered by them do not implicate the necessary rigors of such a challenge.
Rather than providing evidence that they are entitled to relief based upon newly discovered evidence, the Iles recycle the same arguments that were used in the first trial. Regarding the Iles' claim that the original documents - the promissory note and mortgage - were not produced in the first action, the trial court correctly determined based on the pleadings that BAC was the entity in possession of the promissory note and had been assigned the mortgage. And the trial court repeated its position that BAC was the real party in interest in its summary judgment on March 10, 2010.
The Iles never challenged the authenticity of the documents in the original proceeding. Additionally, under Kentucky Rules of Evidence (KRE) 103, a duplicate copy of a document is admissible to the same extent as the original unless a genuine question as to its authenticity is raised. Lastly, to support the CR 60.02 motion of newly discovered evidence, the Iles must provide evidence of fraud regarding the propounded documents. They did not do so.
Also, the trial court has already found that BAC was the holder of the note and mortgage, making it the real party in interest. The issue has been litigated and does not meet the strictures of a CR 60.02 challenge. Finally, regarding the Iles' contention that they were not allowed to conduct discovery, the record shows that they were allowed to do so. Hence, they have not met their burden under CR 60.02 to set aside the judgment.
CONCLUSION
In conclusion, CR 60.02 is an exceptional remedy, which requires cautious application. Louisville Mall Associates, LP v. Wood Center Properties, LLC, 361 S.W.3d 323, 335 (Ky. App. 2012). Additionally, relief under CR 60.02 is appropriate "only under the most unusual and compelling circumstances." Age v. Age, 340 S.W.3d 88, 94 (Ky. App. 2011). It is for this reason that a decision to grant or deny a CR 60.02 motion lies within the sound discretion of a trial court. Id. Under the appellate standard of review, the trial court's decision, absent an abuse of that discretion, shall not be disturbed. Kurtsinger v. Board of Trustees of Kentucky Ret. Sys., 90 S.W.3d 454, 456 (Ky. 2002). Here, the trial court's decision to confirm the Master Commissioner's Report that the Iles did not meet their burden under CR 60.02 was not "arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Consequently, we affirm the trial court's order of September 25, 2012, that confirmed the report of the Master Commissioner.
MAZE, JUDGE, CONCURS.
NICKELL, JUDGE, CONCURS IN RESULT ONLY. BRIEF FOR APPELLANT: Steve and Jo Ann Iles, Pro Se
California, Kentucky
BRIEF FOR APPELLEE: Richard A. Vance
Katherine A. Bell
Louisville, Kentucky