GREAT FINANCIAL BANK, F.S.B. v. HONORABLE EARL RAY NEAL, ADMINISTRATOR OF THE ESTATE OF RUBY ABRAMS; BONITA HUMFLEET; MIKE HUMFLEET; AND ELIZABETH HALE
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September 3, 1999; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
1998-CA-000309-MR
GREAT FINANCIAL BANK, F.S.B.
v.
APPEAL FROM MADISON CIRCUIT COURT
HONORABLE WILLIAM JENNINGS, JUDGE
ACTION NO. 97-CI-00540
HONORABLE EARL RAY NEAL,
ADMINISTRATOR OF THE
ESTATE OF RUBY ABRAMS;
BONITA HUMFLEET;
MIKE HUMFLEET; AND
ELIZABETH HALE
AND:
APPELLEES
NO. 1998-CA-001523-MR
GREAT FINANCIAL BANK, F.S.B.
v.
APPELLANT
APPELLANT
APPEAL FROM MADISON CIRCUIT COURT
HONORABLE WILLIAM JENNINGS, JUDGE
ACTION NO. 97-CI-00540
HONORABLE EARL RAY NEAL,
ADMINISTRATOR OF THE
ESTATE OF RUBY ABRAMS;
BONITA HUMFLEET;
MIKE HUMFLEET;
ELIZABETH HALE;
HONORABLE DAVID BAIRD,
MASTER COMMISSIONER;
JOHN M. BOTKINS,
SALE PURCHASER; AND
CORA JEAN BOTKINS,
SALE PURCHASER
APPELLEES
OPINION
AFFIRMING APPEAL NO. 1998-CA-000309-MR
AFFIRMING APPEAL NO. 1998-CA-001523-MR
** ** ** ** **
BEFORE: CHIEF JUDGE GUDGEL, DYCHE, AND GUIDUGLI, JUDGES.
GUIDUGLI, JUDGE.
Great Financial Bank, F.S.B. (the Bank) brings
this consolidated appeal from several judgments of the Madison
Circuit Court pertaining to real property once owned by Ruby R.
Abrams (Abrams), now deceased.
We affirm.
Abrams died intestate on February 2, 1997, leaving her
daughters, Bonita Humfleet (Humfleet) and Elizabeth Hale (Hale)
as her sole heirs.
At the time of her death, Abrams owned a
parcel of real property, which was encumbered by a first and
second note and mortgage in favor of First Federal Savings and
Loan Association of Richmond (the Bank’s predecessor in title).
Both notes contained the following language:
7. Protection of Lender’s Security. If
Borrower fails to perform the covenants and
agreements contained in this Mortgage, or if
any action or proceeding is commenced which
materially affects Lender’s interest in the
Property, including, but not limited to,
eminent domain, insolvency, code enforcement
or arrangements or proceedings involving a
bankruptcy or decedent, then Lender at
Lender’s option, upon notice to Borrower, may
make such appearances, disburse such sums and
take such action as is necessary to protect
Lender’s interest, including but not limited,
to, disbursement of reasonable attorney
fees....
****
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18. Acceleration; Remedies....upon
Borrower’s breach of any covenant or
agreement of Borrower in this
Mortgage....Lender at Lender’s option may
declare all of the sum secured by this
Mortgage to be immediately due and payable
without further demand and may enforce the
lien of the mortgage by judicial proceeding.
Lender shall be entitled to collect in such
proceeding all expenses of foreclosure,
including, but not limited to, reasonable
attorney fees, and cost of documentary
evidence, abstracts and title reports.
At the time of her death, it appears that Abrams was current on
the obligations of both notes.
Humfleet and Hale commenced administration of Abrams’
estate within several weeks of her death.
Earl Ray Neal (Neal)
was ultimately appointed administrator of Abrams’ estate by order
of the probate court entered February 24, 1997.
Neal presented
his fiduciary bond on March 27, 1997, and was qualified as
administrator by an order entered by the probate court on the
same date.
Following Abrams’ death, no mortgage payments were made
to the Bank and it also appears that the Bank was unaware of
Abrams’ death.
On March 17, 1997, the Bank sent certified
letters to Abrams’ address notifying her of the breach and
seeking payment of two installments on each mortgage along with
late fees.
Humfleet signed for these letters on March 24, 1997.
It appears that the Bank was then notified of Abrams’ death as
the record indicates that foreclosure notices were mailed to
Neal’s office on April 25, 1997.
The Bank subsequently filed a
proof of claim with the probate court on May 2, 1997.
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On May 5, 1997, the Bank filed a complaint with the
trial court against Neal, Humfleet, and Hale, seeking an in rem
judgment to satisfy payment of the notes as well as foreclosure
and sale of the property.
The complaint further sought an award
of “reasonable attorneys fees in the amount of $2,000.”
On
May 28, 1997, the Bank’s attorney, Septtimous Taylor (Taylor)
filed an affidavit claiming entitlement to attorneys fees in the
amount of $2,137.50.
Neal answered the Bank’s complaint on May 29, 1997.
As
an affirmative defense, Neal contended that the Bank’s action was
premature on the ground that the estate had not yet responded to
the Bank’s proof of claim and that the time period for doing so
had not yet passed.
same day.
Neal also filed a motion to dismiss on the
In the motion, Neal acknowledged receipt of the Bank’s
proof of claim on May 3, 1997, and further alleged:
...
4. He has since spoken with counsel for the
Plaintiff and advised same that this estate
is solvent, that he intends to make payment
in full to the Plaintiff, and that he intends
to formally allow the claim as a valid claim
against the estate in accordance with the
provisions of KRS 396.055. The time within
which to make allowance, as set forth in the
said statute, has not yet elapsed.
5. Pursuant to the provisions of KRS
396.075, he is not, as administrator,
presently at liberty to make payment of the
claim.
6. He has been advised by Plaintiff’s
counsel that only payment in full of the
claim together with attorney’s fees will
suffice to resolve this case.
7. Given the circumstances outlined
hereinabove, it would not appear that
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Plaintiff has an entitlement to attorney’s
fees, and he has so informed Plaintiff’s
counsel.
On June 4, 1997, Neal wrote a letter to Taylor
acknowledging receipt of the Bank’s proof of claim.
In the
letter, Neal stated:
Any part of the claim representing the
balance owed on the promissory notes and
mortgages...is hereby allowed. Pursuant to a
fax transmission from your office, dated May
2, 1997, I understand that you are claiming
attorney’s fees in settlement of this claim.
Please be advised that any portion of [the
Bank’s] claim relating to attorney’s fees is
hereby disallowed.
Neal also made another affirmation of his intent to allow the
Bank’s claim for principal and interest only during oral
arguments on the motion to dismiss.
The Bank’s complaint was
dismissed without prejudice by order entered June 6, 1997.
No
appeal was taken from this dismissal and no action was ever taken
to revive this particular claim.
Approximately twelve days after the dismissal of its
first complaint, the Bank filed another complaint against the
same parties.
The only difference between this complaint and the
previous one was that the Bank was now seeking $3,000 in
attorney’s fees.
Following the filing of the second complaint, Neal
telephoned Taylor and requested pay-off figures on the two notes.
Taylor faxed the pay-offs to Taylor reflecting the amounts
incurred through June 25, 1997.
included attorney’s fees.
Both pay-off calculations
On the same day, Neal mailed two
checks to Taylor in the total amount of $40,317.02, being the
-5-
amount of the pay-offs less the amount sought as attorney’s fees.
In his answer filed with the trial court on July 1, 1997, Neal
sought dismissal of the complaint on the ground that the notes
had been satisfied.
However, in a fax from the Bank to Neal on
July 2, 1997, the Bank refused to accept the checks, stating that
they were not sufficient to pay the notes in full.
Taylor
returned the checks to Neal on July 2, 1997, with a letter
indicating that payment of $43,897.15 was necessary to pay off
the loans.
On August 1, 1997, the Bank propounded discovery in the
form of requests for admissions to the appellees.
Many of the
requests concerned the non-payment of the notes herein.
Most
important to this appeal is Request No. 8:
The mortgages executed by Ruby
Abrams...authorize the [Bank’s] recovery and
entitlement to collect all expenses of
foreclosure including but not limited to,
reasonable attorney fees, and/or costs of
documentary evidence, abstracts and title
reports, and/or costs of title requests.
It appears that the appellees never responded to the requests for
admission.
The Bank filed a motion seeking summary judgment on
August 4, 1997.
Besides seeking payment of the principal and
interest on the notes, the Bank also sought payment of attorney’s
fees in the amount of $3,337.50.
On August 4, 1997, Neal filed a motion seeking, among
other things, abatement of interest on the notes, permission to
pay the amount in dispute to the court clerk, and a release of
the mortgages.
In support of his motion, Neal alleged that
-6-
interest on the notes should cease to accrue as of June 29, 1997,
the date the payment was first tendered to the Bank.
Neal
acknowledged that he was prepared to make full payment of the
notes, including attorney’s fees, to the court clerk pending the
resolution of the matter.
Neal filed his own motion for summary
judgment on September 2, 1997.
On November 20, 1997, it appears that Humfleet,
apparently desperate to end this matter, requested the trial
court to order the property to be sold by the Master Commissioner
free and clear of the Bank’s lien.
Humfleet also requested that
Neal be ordered to pay the Bank’s claim.
As grounds for relief,
Humfleet stated that “[d]elay in payment does nothing more than
injure the estate.”
The Bank responded to Humfleet’s motion on
December 8, 1997, indicating that it had no objection to the sale
of the property provided that its claim was paid in full.
On December 11, 1997, the trial court entered an order
directing that the property be sold by the Commissioner and the
mortgages released of record.
The trial court further directed
the Commissioner to deduct costs of the auction from the proceeds
and deposit the remaining balance with the trial court pending
further orders.
The order recognized the existence of the
controversy regarding the attorney’s fees and indicated that the
issue would be passed pending further order.
The Bank filed a CR
59.05 motion to amend on December 29, 1997.
On January 7, 1998, the trial court entered an
additional order ruling on all pending motions.
The order began
by incorporating by reference the file in 97-CR-375 to provide “a
-7-
complete picture of the abuse of the judicial process that this
case exemplifies.”
the previous action.
The trial court summarized the proceeding in
The trial court then noted that in its
opinion both of the Bank’s lawsuits were of questionable
necessity and stated that “[s]ome might look at these cases and
get the feeling that the only true purpose involved was to see
how much attorney’s fees could be charged to Ruby Abrams’
estate.”
The trial court then entered the following judgment:
1. That the payment for the
principal amount of the mortgage
indebtedness, ad valorem and other fees,
together with all accrued interest thereon,
having been tendered on June 27 to the
plaintiff and subsequently refused, works as
an estoppel for the plaintiff to collect any
further amounts other than that which was
tendered.
2. That both of these civil
actions, while arguably allowed by statute,
were neither warranted nor justified under
the circumstances; and that the actions took
on the character of seeing how much
unnecessary attorney fees can be sought just
because there may exist a right to seek them.
Therefore, good conscience, good faith, and
pure equity demand that the plaintiff not be
allowed to recover any attorney fees in
connection with either of the actions.
3. That although counsel for the
defendants have made requests for attorney
fees (which may very well be justified under
these gross facts), in the interest of
fairness, none shall be awarded. However, in
the event of appeal, which the court would
consider frivolous, and a further total waste
of judicial time and economy the Court will
give thoughtful reconsideration to the issue
of assessment of attorney fees and other
sanctions on behalf of the defendants.
4. That the defendant, Honorable
Earl-Ray Neal, as Administrator of the Estate
of Ruby Abrams, shall deposit with the Clerk
of this Court, the sum of $40,317.02, which
-8-
represents the Estate’s total indebtedness to
the plaintiff (the same to be held in a noninterest bearing account); and that the
plaintiff may within ten days of entry of
this Order withdraw said funds from the Clerk
upon proof of having released its mortgage
lien on the subject property in the Madison
County Court Clerk’s office.
5. In the event the plaintiff
chooses not to comply with the preceding
paragraph, the Master Commissioner is hereby
ORDERED AND AUTHORIZED to release said liens
and to present the Court with an affidavit of
the release fees together with his costs in
so doing; and the same shall be deducted from
the funds being held by the Clerk and the
balance forwarded to the plaintiff.
It appears that Neal complied with the trial court’s order and
deposited the money with the court clerk.
The Bank filed a
CR 59.05 motion to amend on January 20, 1998.
Its motion was
denied on February 5, 1998.
Despite the rather stern tone taken by the trial court,
the Bank persisted.
On January 20, 1998, the Bank filed a motion
seeking to consolidate No. 97-CI-375 with No. 97-CI-540.
The
motion was denied by order entered February 5, 1998, which stated
in part, “motion to consolidate with case that was dismissed on
June 5, 1997, which was never reviewed is overruled.”
On February 6, 1998, the Bank filed a notice of appeal
from the trial court’s orders of December 11, 1997, and January
7, 1998.
No supercedeas bond was filed by the Bank.
The Master Commissioner filed his report of sale on
February 9, 1998.
According to the report, the property sold at
auction on January 31, 1998.
The Commissioner filed a further
affidavit on February 12, 1998, indicating that the Bank’s
mortgages were released of record on February 11, 1998.
-9-
On February 18, 1998, the Bank filed exceptions to the
sale of the property and the Commissioner’s report.
The Bank
argued that enforcement of the December 11, 1997, order was
stayed by the filing of its CR 59.05 motion filed on December 29,
1997.
The Bank further argued that:
In the event the Court’s [1/7/98 order] was
intended as an adjudication to the
Plaintiff’s Motion to Amend Judgment, the
enforcement of said judgment was stayed...as
a result of the Plaintiff’s CR 59.05 Motion
served January 16, 1998, and filed on January
20, 1998... . The Plaintiff’s later Motion
to Amend Judgment was not adjudicated by the
Trial Court until February 5, 1998.
The Bank contended that the sale of the property was invalid
because no enforceable judgment existed at the time of the sale.
On March 12, 1998, the trial court entered an order
confirming the sale of the property.
In a second order of the
same date entered at motion hour, the trial court noted that no
supercedeas bond had been filed by the Bank, confirmed the sale,
and ordered that the balance of the sale proceeds be paid to
Humfleet and Hale.
On May 15, 1998, the trial court overruled
the Bank’s exceptions to the Commissioner’s sale and report on
the ground that the exceptions were mooted by confirmation of the
sale.
The Bank filed a notice of appeal from this order on
June 15, 1998.
Although the two appeals were ultimately consolidated
by order of this Court, we will address each appeal separately.
NO. 1998-CA-0309-MR
This section will address the Bank’s appeal from the
trial court’s orders of December 11, 1997, and January 7, 1998.
-10-
The Bank alleges that the trial court erred in not
granting its motion for summary judgment and order of sale.
support of its argument, the Bank alleges that (1)
In
Abrams
defaulted on her obligations, (2) the Bank complied with its
obligation to give notice of its intent to accelerate the debt,
(3) foreclosure proceedings were initiated in June 1997 due to
default; and (4) foreclosure was necessary due to Neal’s denial
of the claim on June 5, 1997.
The Bank also argues that due to
the appellees’ failure to respond to its requests for admissions,
all of them stand admitted pursuant to CR 36.01(2) and 36.02.
The standard of summary judgment is as follows:
The function of summary judgment is to
terminate the litigation when it appears that
it would be impossible for the respondent to
produce evidence at the trial warranting a
judgment in his favor. It is proper where
the movant shows that the adverse party could
not prevail under any circumstances.
[citations omitted]. The only duty of the
court on a motion for summary judgment is to
determine whether there are genuine issues to
be tried and not to resolve them... .
Generally when any claim has no substance or
controlling facts are not in dispute, summary
judgment can be proper... .
James Graham Brown Foundation, Inc. v. St. Paul Fire & Marine
Ins. Co., Ky., 814 S.W.2d 273, 276-277 (1991).
If this case merely involved a simple foreclosure
action seeking payment of principal and interest as well as
related late fees due to non-payment of the notes, we would agree
that summary judgment in favor of the Bank would have been
proper.
In fact contrary to the Bank’s allegations, appellees
have never denied payment of the principal and interest of both
notes.
-11-
What the Bank fails to see is that there is a genuine
issue of material fact in this case, mainly, whether it is
entitled to payment of attorney’s fees.
As the Bank points out,
the note provides that it is entitled to reasonable attorney’s
fees upon default.
Appellees have constantly and consistently
alleged that the Bank is not reasonably entitled to attorney’s
fees and the Bank has refuted appellees’ position.
This clearly
constitutes a genuine issue of material fact which precludes
summary judgment in favor of the Bank.
The Bank’s argument concerning appellees’ failure to
respond to its requests for admission is also without merit.
If
we accept the Bank’s argument that the requests stand admitted,
the only facts that are admitted are (1) the notes are in
default; (2) the outstanding principal and interest totals
$38,095.40 as of January 1, 1997, and that the mortgages allow
for recovery of reasonable attorney’s fees upon default.
There
was no request for admission dealing with whether the Bank was
entitled to $3,000 in attorney’s fees or whether the fee sought
was reasonable.
Again, there is a question of fact remaining to
be decided as to whether any award of attorney’s fees is
reasonable in this case.
Thus, summary judgment in favor of the
Bank would not have been proper.
The Bank also claims that the trial court’s January
order resulted in a short-fall to the Bank in the amount of
$6,831.72.
Of this amount, $4,100 is what the Bank maintains it
is entitled to in attorney’s fees above.
The Bank claims that
this amount represents “accrued interest, escrow advances
-12-
incurred for the preservation and protection of the mortgages’
security interest in the property, foreclosure court costs, and
attorney’s fees incurred.
All of the denied items of recovery
are specifically authorized by the mortgage contracts, statutory
authority and appellate decisions cited hereinabove.”
We
disagree.
In regard to the amount of attorney’s fees claimed by
the Bank, we agree with the trial court’s observation that this
entire matter appears to be driven by the accumulation of
attorney’s fees alone.
The Bank knew of Abrams’ death as early
as April 1997, and duly filed its proof of claim in her estate on
May 2, 1997.
Without even waiting to learn whether the claim
would be allowed, the Bank stampeded on to foreclosure court
within three days of filing its proof of claim.
To make matters
worse, the Bank persisted in pressing on with its claim despite
repeated assurances by Neal that the claim would be paid in full
by the estate and despite Neal’s tender of checks sufficient to
cover the principal, interest and late fees on June 25, 1997.
While we realize that there was and always has been a dispute
regarding the Bank’s entitlement to attorney’s fees, we find that
the facts of this case show that the attorney’s fees in this case
were necessitated by the actions of the Bank itself, and not by
any actions of the appellees herein.
We agree with the trial
court that due to the conduct of the Bank in this matter, any
award of attorney’s fees would be unreasonable.
In regard to the Bank’s argument concerning the
remaining $2,731.72 which the Bank claims entitlement to, we
-13-
believe that the trial court was not in error in finding that
Neal’s tender of payment in June 1997 estopped the Bank from
seeking further charges after that date.
Had the Bank accepted
payment in June 1997, we see no reason why it could have
dismissed its claim for payment of the notes while allowing the
dispute over the attorney’s fees to continue without having to
accrue any further charges.
We agree wholeheartedly with Neal’s
assertion in his brief on appeal that
“bearing in mind that the dispute been the
parties was one of [the Bank’s] sole
creation, [the Bank] should not be heard to
complain of the trial court’s ruling on
the...estoppel issue.”
The Bank also maintains that the trial court’s
dismissal of its complaint in No. 97-CI-375 was contrary to KRS
396.011(2).
This issue is not preserved for our review as no
appeal from the trial court’s order of dismissal was ever
perfected and that order is now final.
Contrary to the Bank’s assertion, the trial court’s
incorporation by reference of No. 97-CI-375 into its order of
January 1, 1998, does not open that case up for our review.
It
is clear that the trial court incorporated the earlier case to
document what it perceived to be the Bank’s abuse of judicial
process.
As the trial court noted in its denial of the Bank’s
motion to consolidate, the Bank has never taken any formal steps
to revive or reopen the earlier case.
Having failed to take such
steps, and having failed to timely appeal from the order
dismissing the earlier complaint, the Bank is not entitled to
complain of that dismissal at this time.
-14-
Based upon our review of the parties’ arguments on
appeal, the trial court’s orders of December 11, 1997, and
January 7, 1998 are, affirmed.
NO.1998-CA-1523-MR
This appeal stems from the trial court’s order of
May 15, 1998, which found the Bank’s exceptions to the sale of
the property to be mooted by the confirmation of the sale of the
property.
This same issue was raised by the Bank in No.
98-CA-0309-MR, but we will address it in this section.
We agree with Neal’s contention that the Bank’s appeal
on this aspect is untimely.
As Neal demonstrates, the order
confirming the sale was entered on March 12, 1997, and no appeal
from this order was taken within 30 days as provided by CR 76.04,
that order is now final.
To the extent that the Bank argues that its appeal is
timely based on the fact that it is appealing from the order
denying its previously filed exceptions to the report of sale
entered May 15, 1998, we agree with the trial court’s findings
that the exceptions were mooted by the March 12, 1998 order
confirming the sale.
As no appeal was taken from that order, it
became final, and its finality thus mooted any exceptions that
Bank may have had.
Due to the Bank’s failure to timely appeal
from the order confirming sale it became final, and its finality
thus mooted any exceptions the Bank may have had.
The Bank
cannot attempt to sneak through the back door by challenging the
wrong order.
The trial court’s order of May 15, 1998 is affirmed.
-15-
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE, EARL RAY NEAL:
Septtimous Taylor
Owensboro, KY
Garrett T. Fowles
Richmond, KY
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