Opinion
NO. 2013-CA-000577-MR
06-20-2014
MARK SUTHERLAND APPELLANT v. DEUTSCHE BANK NATIONAL TRUST COMPANY APPELLEE
BRIEF FOR APPELLANT: Andrew J. Home Louisville, Kentucky BRIEF FOR APPELLEE: Jacqueline K. Heyman Frankfort, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM OLDHAM CIRCUIT COURT
HONORABLE KAREN A. CONRAD, JUDGE
ACTION NO. 11-CI-00238
OPINION
AFFIRMING
BEFORE: CLAYTON, COMBS, AND NICKELL, JUDGES. COMBS, JUDGE: Mark Sutherland appeals from an order of the Oldham Circuit Court granting summary judgment in favor of Deutsche Bank National Trust Company as trustee for the registered holder of Soundview Home Loan Trust 2006 - EQ1 asset-backed certificates, series 2006 - EQ1, in this mortgage foreclosure action. After our review, we affirm.
In April 2001, Mark Sutherland, unmarried, was deeded the property at 6635 Ashbrooke Drive in Pewee Valley. In May 2003, he married Patricia Sutherland, and she took an inchoate dower interest in the property. In June 2006, Patricia borrowed $117,600.00 from EquiFirst Corporation, a subprime mortgage lending unit of Barclays PLC. This loan refinanced an adjustable-rate mortgage on the marital home. Patricia executed a note evidencing the new 30-year, fixed-rate loan with an interest rate of 7.9%. To secure repayment of the loan, Mark and Patricia mortgaged the Ashbrooke Drive property to Mortgage Electronic Registration Systems, Inc., ("MERS") as nominee for EquiFirst.
MERS runs a database which was set up by national banks in the mid-1990s to speed the transfer of mortgages nationwide and to track their ownership. In order to save the costs of recording a mortgage's transfer from one institution to another, MERS acts as mortgagee in county land records. The lender continues to own the note that required the security.
Before September 15, 2006, the Sutherlands' mortgage was bundled (along with more than 11,480 others) into a trust -- Soundview Home Loan Trust 2206-EQ1 -- to be sold to investors. Once it was filled, the trust was valued at $1,692,226,000.00. Deutsche Bank was designated the trustee.
In February 2009, following the collapse of the subprime mortgage market, Barclays closed EquiFirst. In May 2009, after her loan repayment fell into arrears, Patricia signed a loan modification agreement that extended the term of the loan and reduced the interest rate to 1.875% for the next five years. The agreement designated Deutsche Bank as the new lender. In November 2009, MERS assigned the Sutherlands' mortgage to Deutsche Bank in its capacity as trustee of Soundview Home Loan Trust 2006-EQ1. EquiFirst's interest in the promissory note was also transferred to Deutsche Bank as trustee.
Patricia eventually defaulted on the modified loan agreement. She and Mark were divorced on April 30, 2010. Patricia filed for Chapter 7 bankruptcy in October 2010, and her responsibility for the EquiFirst loan was discharged on February 8, 2011.
On March 9, 2011, Deutsche Bank filed the foreclosure action underlying this appeal. The bank sought a judgment in rem based upon Patricia's default and the foreclosure of its mortgage.
On September 14, 2012, Deutsche Bank filed a motion for summary judgment and order of sale. Although Sutherland resisted the motion, it was granted by the Oldham Circuit Court. On February 27, 2013, a judgment and order of sale were entered in favor of Deutsche Bank. This appeal followed.
On appeal, Mark Sutherland argues that the trial court erred by granting summary judgment. His contention is based upon two arguments. First, Sutherland claims that Deutsche Bank failed to show that he understood the nature of the mortgage instrument that he executed in favor of MERS. Second, he asserts that the loan transaction is voidable since he was not advised with respect to his 10-day right of rescission under the provisions of Kentucky Revised Statute[s] (KRS) 367.420(6).
Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, stipulations, and admission 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 judgment as a matter of law." Kentucky Rule[s] of Civil Procedure (CR) 56.03. On appeal, we consider whether the trial court erred by concluding 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).
Sutherland argues that the trial court erred by granting summary judgment since Deutsche Bank failed to show that he understood the nature of the mortgage instrument that he executed in conjunction with the 2006 refinance transaction. We disagree.
Sutherland contends that he was mistakenly identified as a "borrower" on the mortgage instrument and that the mortgage mistakenly indicated that Patricia Sutherland had an interest in the subject property as a joint tenant. Since he was clearly not obligated by the terms of the promissory note, he also contends that he fairly assumed that his property was not at risk for foreclosure -- despite the provisions of the mortgage providing otherwise.
The widely used mortgage form at issue is not a model of clarity. It does (and perhaps merely as a matter of convenience) identify Mark Sutherland as a "Borrower." Patricia Sutherland is also identified as a "Borrower," and the phrase joint tenants immediately follows their typewritten names. However, the mortgage instrument does describe the property at stake and provides plainly and broadly as follows:
[A]ny Borrower who co-signs this Security Instrument but does not execute the Note (a 'co-signer'): (a) is co-signing this Security instrument only to mortgage, grant and convey the co-signer's interest in the Property under the terms of this Security Instrument; (b) is not personally obligated to pay the sums secured by this Security Instrument; and (c) agrees that lender and any other Borrower can agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Note without the cosigner's consent.Mark Sutherland co-signed the mortgage, but he did not execute the promissory note. This arrangement is entirely lawful, and its effect is made reasonably clear by the terms of the mortgage. As derived from the four corners of the instrument, the intention is that the described property be subject to the mortgagee's right to foreclose and to its power of sale upon any "borrower's" failure to repay the loan pursuant to the note or its modifications.
Even though the mortgage mistakenly identifies Patricia as a "joint tenant," we are not persuaded that the instrument has been rendered void or voidable. Both Patricia and Mark Sutherland were wholly aware of the nature of their interests in the property and were not mislead by that boiler-plate terminology. Because Mark Sutherland understood the true nature of the transaction, the mortgage is not invalid on these grounds.
Next, Sutherland argues that the mortgage is voidable since he was not advised of his right to rescind pursuant to statutory provisions protecting consumers involved in home solicitation sales transactions. We disagree.
Kentucky defines home solicitation sale to mean "a sale of goods or services, including consumer loans, in which the seller or a person acting for him engages in a personal solicitation of the sale at a residence of the buyer. . . ." KRS 367.410. The provision specifically excludes from its application "a sale made pursuant to prior negotiations between the parties, by telephone initiated by the buyer or at a business establishment at a fixed location where goods or services, including loans, are offered or exhibited for sale." Id.
For the protection of consumers involved in these transactions, KRS 367.420(6) provides as follows:
For home solicitation sales on loans in which a security interest is taken in the principal dwelling of the buyer, the buyer shall have the right to rescind or cancel the transaction until midnight of the tenth business day following the later of the consummation of the loan transaction or the delivery of the material disclosures required under the Truth in Lending Act, 15 U.S.C. 1601, et seq.
KRS 367.430 provides that the seller must generally obtain the buyer's signature to a written agreement that defines the buyer's right to cancel the transaction. As a consequence of the seller's failure to do so, the buyer may cancel the home solicitation by notifying the seller at any time, in any manner, and by any means, of his intention to cancel. Mark Sutherland contends that the services provided by EquiFirst fall within the scope of the provision and that he was not provided with written notice of his right to cancel the transaction. He submitted his affidavit in support of this contention.
Deutsche Bank argues that these provisions are completely inapplicable to the transaction at issue since it is "unfathomable that [an agent of EquiFirst] appeared at the Sutherland doorstep for the first time and solicited the loan, procured the requisite documents, credit scores, employment verifications, payoff amounts, and the like, and then generated the documents for signature."
We have few details with respect to the facts surrounding Patricia Sutherland's discussions with EquiFirst in 2006; therefore, we are unable to ascertain whether the transaction is governed by the cited statutory notice provisions or is excluded from them. However, we can be certain that Mark Sutherland cannot assert rights under the provisions since his relationship with EquiFirst does not fall within their scope. Mark Sutherland was never indebted to EquiFirst and was not a buyer as that term is used in the statutory provisions. The documentary evidence indicates that Patricia Sutherland alone procured the loan from EquiFirst. Patricia was the "buyer" with the right to rescind or cancel the loan transaction, and she alone was entitled to the statutory notice.
Under these circumstances, the trial court did not err by concluding that Deutsche Bank was entitled to judgment as a matter of law. The summary judgment and order of sale of the Oldham Circuit Court are affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Andrew J. Home
Louisville, Kentucky
BRIEF FOR APPELLEE: Jacqueline K. Heyman
Frankfort, Kentucky