Opinion
NO. 2018-CA-000614-MR
05-24-2019
HEATHER SPALDING APPELLANT v. PNC BANK, NATIONAL ASSOCIATION; JOHN DOE, UNKNOWN SPOUSE OF HEATHER SPALDING; JP MORGAN CHASE BANK, NA; LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT APPELLEES
BRIEF FOR APPELLANT: David B. Mour Louisville, Kentucky BRIEF FOR APPELLEE: Robert K. Hogan Cincinnati, Ohio
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 16-CI-400237 OPINION
AFFIRMING
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BEFORE: ACREE, GOODWINE, AND KRAMER, JUDGES. KRAMER, JUDGE: Heather Spalding appeals from an order of the Jefferson Circuit Court granting summary judgment to PNC Bank in this foreclosure action. We affirm.
FACTUAL AND PROCEDURAL HISTORY
Heather Spalding was formerly married to Thomas Spalding. In 2002, Thomas obtained a $50,000 home equity line of credit ("the Note") from PNC. Although Thomas was the sole borrower, Heather and Thomas jointly conveyed a mortgage to PNC to secure the Note. The real property associated with the mortgage is the subject of the instant foreclosure action.
Heather and Thomas divorced in 2010. Pursuant to the divorce decree, the real property was deeded in fee simple to Heather, but Thomas remained responsible for payment of the Note. Heather has at all relevant times resided in the property. Thomas died testate in February 2014. His then-current wife, JoLynne Spalding, was named executrix of his estate. Filings from the separate probate action contained in the record before us show that Thomas had assets valued approximately between $268,000 - $280,000 at the time of his death. PNC did not file a claim with the estate regarding payment of the Note during the probate proceedings. After Thomas's death, his estate continued to pay on the Note until November 2014, although it was under no legal obligation to do so. JoLynne filed an informal final settlement in the probate action in February 2015.
Jefferson District Court Case No. 14-P-001847.
We note that Heather did not file a claim with Thomas's estate regarding his obligation to pay the Note pursuant to the divorce decree.
In February 2016, PNC filed the instant foreclosure action and eventually motioned the circuit court to grant summary judgment in its favor. The matter was referred to the Master Commissioner who held two hearings and filed two separate reports. The circuit court adopted the findings of the reports, granted summary judgment in favor of PNC, and entered an in rem judgment and order of sale on December 8, 2017. Heather subsequently filed a motion to alter, amend, or vacate the judgment, which the circuit court denied. This appeal followed. Further facts will be developed as necessary.
STANDARD OF REVIEW
When a trial court grants a motion for summary judgment, the standard of review for the appellate court is de novo because only legal issues are involved. Hallahan v. The Courier Journal, 138 S.W.3d 699, 705 (Ky. App. 2004).
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Kentucky Rule of Civil Procedure (CR) 56.03. The movant bears the initial burden of demonstrating that there is no genuine issue of material fact in dispute. The party opposing the motion then has the burden to present, "at least some affirmative evidence showing there is a genuine issue of material fact for trial." Steelvest Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991). A party responding to a properly supported summary judgment motion cannot merely rest on the allegations in his pleadings. Continental Casualty Co. v. Belknap Hardware & Manufacturing Co., 281 S.W.2d 914 (Ky. 1955). "[S]peculation and supposition are insufficient to justify a submission of a case to the jury, and . . . the question should be taken from the jury when the evidence is so unsatisfactory as to . . . resort to surmise and speculation." O'Bryan v. Cave, 202 S.W.3d 585, 588 (Ky. 2006) (quoting Chesapeake & Ohio Ry. Co. v. Yates, 239 S.W.2d 953, 955 (Ky. 1951)).
On appeal, we must consider the evidence of record in the light most favorable to the non-movant (i.e., Heather) and must further consider whether the trial court correctly determined that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).
ANALYSIS
Heather raises numerous issues on appeal. Specifically, she argues that the circuit court: (1) ignored her affirmative defenses and negligence claim; (2) misinterpreted and misapplied KRS 396.011; (3) failed to recognize that PNC had violated the terms of its own mortgage; and (4) erred in finding that there was no "genuine issue of fact."
Kentucky Revised Statute.
Before addressing Heather's specific claims, we must address the issue of hearsay in the record before us. Heather asserts that an alleged email dated March 2, 2016, shows PNC knew about Thomas's death in February 2014 (i.e., even before JoLynne was appointed executrix) because JoLynne informed the bank. The email, purportedly written by JoLynne states, in relevant part, "I notified PNC Bank, Eastgate Branch in Middletown, with branch manager Ann Stevens in February 2014 immediately after Tom Spalding's death. I also gave her the paperwork of death certificate and executor shortly after that date." The circuit court declined to consider the email when deciding the issue of summary judgment. As part of our de novo review, we also decline to consider the email because it is inadmissible hearsay.
The email is alleged to be from JoLynne to Heather's prior counsel.
CR 56.05 requires that a party opposing a motion for summary judgment must offer some facts of which he has personal knowledge and which would be admissible. KRE 801 defines hearsay as an oral or written assertion, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. KRE 802 provides that hearsay is not admissible "except as provided by these rules or by rules of the Supreme Court of Kentucky." Heather relies on the email to prove the truth of the matter asserted (i.e., that PNC knew about Thomas's death in February 2014 because JoLynne informed the bank). Heather does not argue that the email falls into any hearsay exception. JoLynne is not a party to this action. Heather did not depose JoLynne nor offer into the record an affidavit from her based on personal knowledge. Accordingly, the email is hearsay. Hearsay evidence cannot be considered on a motion for summary judgment. See, e.g., Wiley v. United States, 20 F.3d 222, 226 (6th Cir. 1994) (internal citations omitted); Nelson v. Martin, 552 S.W.2d 668 (Ky. App. 1977). Therefore, we will not consider it herein.
Kentucky Rule of Civil Procedure.
Kentucky Rule of Evidence.
See KRE 803 - 804.
We next turn to Heather's argument that the circuit court erred by ignoring her affirmative defenses and her negligence claim against PNC. This argument is completely refuted by the record. The Master Commissioner's report entered into the record on September 20, 2017, devotes approximately two and one-half pages to analysis of Heather's affirmative defenses as well as her negligence claim. The circuit court subsequently adopted the Master Commissioner's report. Heather's argument is without merit and must fail.
This is approximately half of the five-page report. --------
Heather next asserts that the circuit court misinterpreted and misapplied KRS 396.011. She argues that PNC should have filed a claim with the estate pursuant to KRS 396.011, prior to filing the foreclosure action. KRS 396.011 states, in relevant part,
[a]ll claims against a decedent's estate which arose before the death of the decedent . . . are barred against the estate, the personal representative, and the heirs and devisees of the decedent, unless presented within six (6) months after the appointment of the personal representative[.]
(2) Nothing in this section shall affect or prevent:
(a) To the extent of the security only, any proceeding to enforce any mortgage, pledge, lien or other security interest securing an obligation of the decedent or upon property of the estate[.]
Heather makes two assertions related to KRS 396.011. First, she claims that PNC knew about Thomas's death within six months of JoLynne's appointment as executrix of the estate and therefore the claim was not time barred. This assertion will not be considered because it is based upon the email that we have determined is inadmissible hearsay. Heather's second argument is that, notwithstanding her first assertion, KRS 396.011(2)(a) allows PNC to bring legal action against the estate even after the expiration of six months. Heather argues that Thomas's estate was solvent and balance owed on the Note could have been paid out of estate funds, thus enabling her to keep her home. We disagree.
Heather only speculates that Thomas's estate had sufficient funds to pay the balance due and owing on the Note. She has submitted no evidence in support of her assertion. Although the probate filings contained in the record suggest that the estate may have had sufficient funds to pay the Note, Heather's "hope or bare belief . . . that something will 'turn up' cannot be made [the] basis for showing that a genuine issue [of] material fact exists." Benningfield v. Pettit Environmental, Inc., 183 S.W.3d 567, 573 (Ky. App. 2005) (internal citation omitted). Even if we accept Heather's argument, she has failed to point out any language in the Note or mortgage that require PNC to first file a claim with Thomas's estate before proceeding to foreclosure. Heather also fails to offer a citation to any statute or caselaw to support same. Although KRS 396.011 indicates that PNC could file a claim against Thomas's estate, Heather fails to articulate a legal argument for her assertion that PNC was obligated to first file a claim with Thomas's estate. PNC argues that the terms of the Note and mortgage entitle it to pursue recovery against the real property outside of the estate administration and that no statute contained in KRS Chapter 396 prevents it from doing so. We agree.
Heather next argues that the circuit court failed to recognize that PNC violated the terms of its own mortgage because it failed to provide her proper notice prior to the filing of this foreclosure action. We disagree. The language contained in both the mortgage and the Note do not entitle Heather to notice that PNC was about to file a foreclosure action. The mortgage states, in relevant part,
[u]nless prohibited by law, if Mortgagor is in default under this Mortgage, Mortgagee may at its option, after notice required by law, declare due and payable the entire unpaid balance on the sums which are secured by this Mortgage and owing under the Agreement. If Mortgagee so declares such entire balance due and payable, Mortgagee may take possession of the Property, collect any and all rents, apply said rents to the indebtedness secured by this Mortgage, foreclose the Mortgage or take other action upon the Mortgage as permitted or provided by law to collect the balance owing.
The Agreement referred to is the Note. The Note contains the following language:
[u]nless prohibited by law, if this account is Terminated by default, we may, at our option, after any notice required by law and the expiration of any time required by law during which you [defined as "each and every person signing this Agreement as a Borrower"] may cure a default, declare due and payable the entire balance owing on this account. If this happens, you will be required to pay the outstanding balance on this account in one payment at that time. If you [Borrower] are in default under the previous section titled "Termination of the Account upon Default" during the Repayment Period or during any time when this account is already Terminated, we may after any notice required by law and the expiration of any time during which you [Borrower] may cure a default, declare due and payable the entire balance owing on this account. If we declare the entire balance due and payable, we can bring suit for the amounts due, foreclose the Mortgage or take other action as permitted or provided by law to collect the balance owing.
As contained in the language of the Note and mortgage, "Borrower" is defined as Thomas. In the language of the mortgage, "default" refers to default under the Agreement (i.e., the Note). Citing Farmers National Bank v. Commonwealth, Department of Revenue, 486 S.W.3d 872, 884 (Ky. App. 2015), the circuit court below held that
[g]enerally, due process includes some form of notice and an opportunity to be heard. [PNC]'s filing of the foreclosure action against Heather provided her with due process notice and an opportunity to be heard as a matter of law. A review of the Mortgage reveals that [Thomas] and Heather were signatories, securing the Note. [PNC] had a right to proceed against either of the signatories declaring the entire debt secured by the Mortgage due and payable and to enforce its mortgage lien on the [p]roperty. Thus, [PNC] had the right to proceed against [Thomas] or Heather. Accordingly, [PNC] was not required to first pursue an action against [Thomas]'s Estate.PNC argues that Heather has not shown that, as a Mortgagor, she was in default of any obligation of hers to repay the Note; nor has she shown that, as a Mortgagor, she was entitled to notice, required by law, of the Borrower's (i.e., Thomas's) default either under the Note or mortgage. We agree with both PNC and the circuit court that filing of the foreclosure action provided Heather with due process notice. Heather's argument that PNC violated the terms of its own mortgage is unpersuasive and must fail.
Finally, Heather argues that the trial court erred in finding that "no genuine issue of fact existed." We disagree. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986) (emphasis in original). As PNC correctly points out, the following material facts are not in dispute: (1) PNC is the holder of the Note, given to it by Thomas; (2) PNC is the holder of the mortgage, given to it by Thomas and Heather to secure the Note; (3) Thomas, now deceased, is in default of payment of the Note and this default has been continuous since November 4, 2014; (4) PNC has properly exercised its right as set forth in the Note to accelerate the time for payment of the principal balance; and (5) there remains due and owing on the Note the sum of $39,102.05 plus interest. Although the date that PNC became aware of Thomas's death may be a fact that is in dispute, it is not a material fact. Heather's argument to the contrary not only relies on inadmissible hearsay, it is simply repackaging her unsupported assertion that PNC should have pursued a claim with Thomas's estate prior to filing the foreclosure action. Heather has raised no genuine issue of material fact. Accordingly, summary judgment in favor of PNC is proper.
CONCLUSION
For the foregoing reasons, the judgment of the Jefferson Circuit Court is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: David B. Mour
Louisville, Kentucky BRIEF FOR APPELLEE: Robert K. Hogan
Cincinnati, Ohio