EARLIE RUPERT and KAREN RUPERT v. OHIO VALLEY NATIONAL BANK
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RENDERED:
OCTOBER 17, 2003; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2002-CA-001527-MR
EARLIE RUPERT and
KAREN RUPERT
v.
APPELLANTS
APPEAL FROM HENDERSON CIRCUIT COURT
HONORABLE STEPHEN A. HAYDEN, JUDGE
ACTION NO. 98-CI-00852
OHIO VALLEY NATIONAL BANK
APPELLEE
OPINION
AFFIRMING
** ** ** ** ** ** ** **
BEFORE: BUCKINGHAM, COMBS, AND TACKETT, JUDGES.
BUCKINGHAM, JUDGE:
Earlie and Karen Rupert appeal from a
judgment of the Henderson Circuit Court resulting from a jury
verdict finding that they were in default on a mortgage loan
from Ohio Valley National Bank and that they owed the bank
$21,106.88.
We affirm.
On August 29, 1997, the Ruperts executed two
promissory notes and mortgages with Ohio Valley.
The first note
was in the amount of $39,000.00 and was secured by a mortgage on
property located at 923 Powell Street in Henderson, Kentucky.
The second note was in the amount of $29,150.00 and was secured
by a mortgage on property located at 508 Eighth Street in
Henderson, Kentucky.
The Ruperts eventually defaulted on the
loans, and on December 4, 1998, Ohio Valley filed a complaint in
the Henderson Circuit Court seeking an order of sale for the two
properties to satisfy the indebtedness owed on the notes.
On January 4, 1999, the Ruperts filed a petition for
Chapter 13 bankruptcy.
Notice of voluntary conversion of the
Chapter 13 bankruptcy to a Chapter 7 bankruptcy was filed on
June 1, 1999, and a discharge in bankruptcy was entered on
September 8, 1999.
In conjunction with the bankruptcy
proceeding, on August 27, 1999, the Ruperts executed
reaffirmation agreements on the August 1997 loans, the validity
of which is disputed.
Following the bankruptcy proceeding, Ohio
Valley renewed its motion for a judgment and an order of sale on
the properties.
On May 31, 2002, Ohio Valley served an amended
complaint.
In the amended complaint, Ohio Valley stated that
the note and mortgage relating to the Powell Street property had
been paid, and it accordingly dropped the claim related to that
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loan.
The amended complaint sought a total of $21,106.88 on the
Eighth Street property note and mortgage.
Further, the
complaint sought to proceed against the Eighth Street property
as an in rem action and stated that Ohio Valley would not
attempt to seek a personal judgment against the Ruperts for any
deficiency which might result from the sale of the property.
After several continuances, the trial was set for June
3, 2002.
Immediately prior to the scheduled start of the trial,
the Ruperts filed a motion for a continuance, which was denied.
At the conclusion of the trial, the jury returned a verdict in
favor of Ohio Valley in the amount of $21,106.88.
This appeal
followed.
At the outset we note that the Ruperts’ brief fails to
comply with CR1 76.12(4)(c).
Nevertheless, we address the
arguments we have been able to garner from our review of their
brief.
First, the Ruperts contend that foreclosure was
improper because they had not executed a valid reaffirmation
agreement.
The Ruperts argue that the reaffirmation agreements
produced by Ohio Valley were fraudulent, not binding, not in
compliance with 11 U.S.C. 524(c), and should be held null and
void.
In conjunction with this argument, the Ruperts allege
that following the discharge in bankruptcy, Ohio Valley was
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Kentucky Rules of Civil Procedure.
3
precluded from going forward with its foreclosure suit in the
absence of valid reaffirmation agreements.
We agree with Ohio Valley that its right to enforce
the mortgage on the Eighth Street property was unaffected by the
discharge of the Ruperts’ personal liability in the Chapter 7
bankruptcy proceeding.
The United States Supreme Court
addressed this issue in Johnson v. Home State Bank, 501 U.S. 78,
111 S.Ct. 2150, 115 L.Ed.2d 66 (1991), as follows:
A mortgage is an interest in real property
that secures a creditor's right to
repayment. But unless the debtor and
creditor have provided otherwise, the
creditor ordinarily is not limited to
foreclosure on the mortgaged property should
the debtor default on his obligation;
rather, the creditor may in addition sue to
establish the debtor's in personam liability
for any deficiency on the debt and may
enforce any judgment against the debtor's
assets generally. See 3 R. Powell, The Law
of Real Property P467 (1990). A defaulting
debtor can protect himself from personal
liability by obtaining a discharge in a
Chapter 7 liquidation. See 11 U. S. C. §
727. However, such a discharge extinguishes
only "the personal liability of the debtor."
11 U. S. C. § 524(a)(1). Codifying the rule
of Long v. Bullard, 117 U.S. 617, 29 L. Ed.
1004, 6 S. Ct. 917 (1886), the Code provides
that a creditor's right to foreclose on the
mortgage survives or passes through the
bankruptcy. See 11 U. S. C. § 522(c)(2);
Owen v. Owen, 500 U.S. 305, 308-309, 114 L.
Ed. 2d 350, 111 S. Ct. 1833 (1991); Farrey
v. Sanderfoot, 500 U.S. 291, 297, 114 L. Ed.
2d 337, 111 S. Ct. 1825 (1991); H. R. Rep.
No. 95-595, [p. 361 (1977)].
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501 U.S. at 82-83, 111 S.Ct. at 2153, 115 L.Ed.2d at 74.
As
Ohio Valley’s mortgage lien survived the Ruperts’ discharge of
personal liability on the Eighth Street loan, Ohio Valley was
entitled to pursue foreclosure on the lien regardless of the
Ruperts’ Chapter 7 bankruptcy filing or the execution of a valid
reaffirmation agreement.
Next, the Ruperts contend that the trial court
improperly denied their motion to compel Ohio Valley to produce
all notes and mortgages entered into between them and the bank.
On July 16, 2001, the trial court entered an order requiring
“that the Plaintiff, Ohio Valley National Bank shall provide to
the Ruperts within fifteen (15) days of this Order a copy of any
and all notes and mortgages entered into between Ohio Valley
National Bank and the Ruperts from January 1, 1992 to date, as
well as a summary of all payments made by the Ruperts to Ohio
Valley National Bank from January 1, 1992 to date.”
Alleging that Ohio Valley had failed to provide the
necessary documents, on April 15 and April 17, 2002, the Ruperts
filed motions to compel Ohio Valley to provide the unsupplied
documents.
The motions were argued before the court on April
22, 2002, at which time Ohio Valley asserted that it had filed
all of the documents required under the July 16, 2001, order.
Further, it agreed to file additional documents requested by the
Ruperts but not covered by the July 2001 order.
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The bank also
stated that it did not have certain documents sought by the
Ruperts because of expiration under the applicable record
retention requirements.
On the basis of Ohio Valley’s
representations, the trial court denied the Ruperts’ motion to
compel.
"It is a well established principle that a trial court
has broad discretion over disputes involving the discovery
process.”
Sexton v. Bates, Ky. App., 41 S.W.3d 452, 455 (2001).
From their brief it is unclear precisely what documents the
Ruperts contend Ohio Valley failed to produce or how they were
prejudiced by Ohio Valley’s failure to produce the documents.
Ohio Valley claims that it produced all documents to the Ruperts
well in advance of trial.
Under these circumstances, we cannot
say that the trial court abused its discretion by denying the
Ruperts’ motion to compel.
Next, the Ruperts contend that the trial court erred
by permitting Ohio Valley to amend its complaint.
The amended
complaint was served on May 31, 2002, and did three basic
things.
First, because the Powell Street loan had been paid in
full, the amended complaint deleted those portions of the
original complaint seeking to collect on the Powell Street
mortgage.
Second, the amended complaint reduced the amount
being claimed as due on the Eighth Street mortgage.
Third, the
amended complaint sought to proceed on the Eighth Street
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mortgage as an in rem action and disclaimed any entitlement to
seek a personal judgment against the Ruperts or to collect any
deficiency which could result from the sale of the property.
CR2 15.01 provides, in pertinent part, that a party may
amend its pleading, following the twenty-day period after it is
served, "only by leave of court or by written consent of the
adverse party; and leave shall be freely given when justice so
requires."
Although leave to amend shall be freely given when
justice so requires, the decision is within the discretion of
the trial court.
Lambert v. Franklin Real Estate Co., Ky. App.,
37 S.W.3d 770, 779 (2000).
Furthermore, the discretion of the
trial court will not be disturbed absent an abuse of discretion.
Id.;
M.A. Walker Co., Inc. v. PBK Bank, Inc., Ky. App., 95
S.W.3d 70, 74 (2002).
In this case, the modifications proposed by Ohio
Valley in its amended complaint all worked to the benefit of the
Ruperts.
Further, the amended complaint merely recognized
events which had occurred since the filing of the original
complaint, namely, the Chapter 7 bankruptcy proceeding and the
pay-off of the Powell Street loan.
Under these circumstances,
the trial court did not abuse its discretion by permitting Ohio
Valley to amend its complaint.
2
Kentucky Rules of Civil Procedure.
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Next, the Ruperts contend that the trial court erred
by granting Ohio Valley’s motion in limine to exclude any
testimony concerning the reaffirmation agreements.
As
previously noted, under its amended complaint, Ohio Valley
sought only to enforce its mortgage lien, which survived the
Ruperts’ Chapter 7 bankruptcy, as an in rem action, and did not
seek to hold the Ruperts personally liable on the Eighth Street
loan.
Reaffirmation agreements are applicable only in
situations where the debtor and creditor seek to reinstate the
terms of a promissory note which would otherwise be discharged
in bankruptcy, in which case the note "rises from the tomb of
bankruptcy like a latter day Lazarus."
Hibbitts v. Cumberland
Valley Nat. Bank & Trust Co., Ky. App., 977 S.W.2d 252, 254
(1998) (quoting In re Hotujac, 102 B.R. 733, 735 (Bankr.W.D.Mo.
1989)).
Review of the trial court's decision on whether to
exclude evidence based on relevancy is subject to the abuse of
discretion standard. Love v. Commonwealth, Ky., 55 S.W.3d 816,
822 (2001); Partin v. Commonwealth, Ky., 918 S.W.2d 219, 222
(1996).
As Ohio Valley was not seeking to hold the Ruperts
liable under a reaffirmed note but, rather, was seeking to
proceed in rem on the mortgage, the reaffirmation agreements
were irrelevant, and the trial court did not abuse its
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discretion by ruling that evidence of the agreements was
inadmissible.
Finally, in light of Ohio Valley’s amended complaint
and the trial court’s ruling on Ohio Valley’s motion to exclude
mention of the reaffirmation agreements, the Ruperts contend
that they were entitled to a continuance.
The trial court has
broad discretion in granting or denying a continuance.
v. Commonwealth, Ky., 842 S.W.2d 524, 525 (1992).
Pelfrey
This court
will not reverse for failure to grant a continuance absent a
showing that the trial court abused its discretion.
Abbott v.
Commonwealth, Ky., 822 S.W.2d 417, 418 (1992); Grant v. Dortch,
Ky. App., 993 S.W.2d 506, 508 (1999).
Here, the developments just before trial – the
amendment of the complaint and the trial court’s in limine
ruling – if anything, simplified matters.
The Ruperts mention
that they should have been given a continuance to provide them
the opportunity to hire an attorney; however, the case had been
pending for three and one-half years, the Ruperts had retained
at least two attorneys in the course of the litigation, and the
Ruperts had ample time to have retained another attorney well
before the scheduled trial date.
Under these circumstances, we
cannot say that the trial court abused its discretion by denying
the Ruperts’ motion for a continuance.
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For the foregoing reasons, the judgment of the
Henderson Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Earlie Rupert, pro se
Karen Rupert, pro se
Henderson, Kentucky
Dorin E. Luck
Henderson, Kentucky
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