VICKIE BOGGS HATTEN V. FIRST NATIONAL BANK OF GRAYSON; ESTATE OF MURIEL JACKSON BOGGS, DECEASED, D/B/A BOGGS MOTOR SPORTS; ROBERT L. CAUMMISAR, PUBLIC ADMINISTRATOR OF THE ESTATE OF MURIEL JACKSON BOGGS; M. JACK BOGGS, INC.; CARTER COUNTY, KENTUCKY; CLASSIC BANK, N.A.; AND LAWRENCE COUNTY, KENTUCKY
Annotate this Case
Download PDF
RENDERED: May 6, 2005; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-002731-MR
VICKIE BOGGS HATTEN
APPELLANT
APPEAL FROM CARTER CIRCUIT COURT
HONORABLE SAMUEL C. LONG, JUDGE
CIVIL ACTION NO. 00-CI-00133
V.
FIRST NATIONAL BANK OF GRAYSON;
ESTATE OF MURIEL JACKSON BOGGS,
DECEASED, D/B/A BOGGS MOTOR SPORTS;
ROBERT L. CAUMMISAR, PUBLIC ADMINISTRATOR
OF THE ESTATE OF MURIEL JACKSON BOGGS;
M. JACK BOGGS, INC.;
CARTER COUNTY, KENTUCKY;
CLASSIC BANK, N.A.; AND
LAWRENCE COUNTY, KENTUCKY
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
JUDGE.1
COMBS, CHIEF JUDGE; MINTON, JUDGE; AND MILLER, SENIOR
MINTON, JUDGE:
1
Senior Judge John D. Miller sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the
Kentucky Constitution and KRS 21.580.
I.
INTRODUCTION.
While Vickie Hatten and Jack Boggs were married, they
borrowed money at different times from the First National Bank
of Grayson (FNBG) and secured these debts by separately
mortgaging two properties.
In their divorce settlement, Jack
received Vickie’s interest in these properties along with the
mortgage payments.
Under the settlement, Vickie was entitled to
receive money from Jack in installments which she later secured
by a judgment lien covering the mortgaged properties.
When FNBG
moved to foreclose following Jack’s death, Vickie claimed that
her judgment lien had priority over FNBG’s mortgage liens.
She
asserted that KRS2 382.385 mandates that a mortgage instrument
securing a line of credit must explicitly say so or the mortgage
is void or, alternatively, subordinated to an otherwise inferior
lien.3
Lacking a specific statement “in substance or effect”
2
Kentucky Revised Statutes.
3
The relevant parts of KRS 382.385 state:
1)
As used in this section:
(a)
"Line of credit" means a note, commitment, instrument,
or agreement in writing between a lender and a debtor
pursuant to which:
1.
The lender may extend loans, advances, or other
extensions of credit to, or for the benefit of,
the debtor; and
2.
The total amount of loans, advances, or extensions of credit outstanding may increase or
decrease from time to time.
-2-
that identified the mortgage as a credit line mortgage, Vickie
argued that FNBG’s mortgages were thus flawed making them void
or, at least, totally subordinate to her judgment lien.
The trial rejected Vickie’s argument, ruling that
FNBG’s mortgage liens were valid and superior to the full extent
of the original principal amount, plus future advances.
The
court concluded that KRS 382.385 was not the exclusive method of
securing the debt and that as a signatory to the original notes
and mortgages, Vicki was fully apprised of the bank’s debt and
its secured position when she settled the divorce and filed her
judgment lien.
We find no error in the circuit court’s decision
and affirm.
. . . .
2)
(a)
Any mortgage of real property may secure payment of
any or all sums due and payable by the debtor under a
line of credit or under a revolving credit plan if the
mortgage:
1.
States, in substance or effect, that the parties
intend that the mortgage secures the line of
credit or revolving credit plan;
2.
Specifies the maximum principal amount of credit
which may be extended under the line of credit or
the maximum credit limit of the revolving credit
plan which, in each case, may be outstanding at
any time or times under the line of credit or
plan, and which is to be secured by the mortgage.
-3-
II.
THE BACKGROUND FACTS AND PROCEEDINGS IN CIRCUIT COURT.
Jack died in 2000.
At that time, he owed Vickie about
$82,000.00 which represented about half of the total dollars
Jack had promised to pay Vickie in annual installments when they
settled their divorce in 1997.
Their property settlement
agreement, which was incorporated into the final decree,
provided that Jack’s property settlement debt to Vickie would be
treated as a “preferred claim against his estate should he die
prior to final payment . . . .”
Vickie had attempted to secure
her position by recording a notice of judgment lien for the
payments due her under the settlement agreement.
judgment lien on October 2, 1998.
She filed the
This judgment lien applied to
all of Jack’s property located in the county, including the two
parcels mortgaged to FNBG.
Jack owed FNBG about $179,000.00 when he died.
This
debt was the culmination of several banking transactions secured
mainly by two mortgages.
The oldest and largest of the notes
dated back to a transaction in 1994 when Jack and Vickie,
together, signed, individually, a one-year note to permit
M. Jack Boggs, Inc. to borrow the principal amount of
$100,000.00 with an initial draw limited to $35,000.00 and then
in $5,000.00 increments upon request.
This note was secured by
a $100,000.00 mortgage on property called the commercial
building belonging to Jack and Vickie.
-4-
It is undisputed that
this mortgage was properly recorded with the county clerk.
It
contained a future advance clause that allowed advances totaling
$50,000.00 in addition to the $100,000.00 principal amount.
The
future advance clause stipulated that “[s]uch Future Advances,
with interest thereon, shall be secured by this Mortgage when
evidenced by promissory notes stating that said notes are
secured hereby.”
On the one-year anniversary of the note, Jack
and Vickie took up the old note and signed a new one each
consecutive year through 1997.
After the divorce, Jack alone
signed the renewal note in 1998 and 1999.
The last expression
of the original 1994 debt was the note signed by Jack on July
30, 1999, for the principal amount of $99,821.89.
The note
stated that it was secured by the original mortgage on the
commercial building and on the Cooke Hollow mortgage, the
instrument discussed below.
The other mortgage, referred to as the Cooke Hollow
mortgage, secured an $80,000.00 installment note signed by Jack
and Vickie on June 10, 1996.
This mortgage also included a
future advances provision which differed in its term from the
commercial building mortgage in that it did not require that
notes reflecting the future advance specifically state that they
were secured by the mortgage.
The Cooke Hollow mortgage allowed
security for future advances up to $50,000.00 in addition to the
principal amount.
-5-
When FNBG filed the foreclosure action against Jack’s
estate, it demanded a money judgment for the debt represented by
the July 30, 1999, note and four smaller notes.
The four
smaller notes were all signed by Jack and consisted of the
following:
(1) a line of credit checking account known as
Checking Plus Agreement, dated September 15, 1998; (2) an
installment loan, signed October 26, 1998; (3) an additional
line of credit, dated February 5, 1999; and (4) a note, signed
September 7, 1999.
FNBG argued that all of these notes were
secured by either the commercial building mortgage, the Cooke
Hollow mortgage, or by both mortgages.
The bank demanded that
the property described in the mortgages be sold and that it be
adjudged to have a priority claim on the proceeds of the
judicial sale.
FNBG named Vickie as a defendant because of her
judgment lien.
Vickie counterclaimed against FNBG and cross-
claimed against Jack’s estate asserting that her judgment lien
was superior to FNBG’s mortgage liens.
The trial court referred
the dispute to its master commissioner who conducted an
evidentiary hearing on the validity and priority of liens.
After hearing the evidence, the master commissioner filed his
report consisting of recommended findings of fact, conclusions
of law, and judgment in favor of FNBG.
Vickie filed exceptions.
But the circuit judge denied Vickie’s exceptions and signed the
-6-
judgment as recommended by the master commissioner.
Vickie has
now appealed to our Court.
III.
ANALYSIS.
The crux of Vickie’s argument on appeal is the same
one she made unsuccessfully in circuit court:
that FNBG’s
secured position under the commercial building mortgage is, at
most, void or, at least, inferior to her judgment lien because
the commercial building mortgage does not make specific
reference to the fact that it secures a line of credit.
Specifically, she argues that KRS 382.385 provides the
“mandatory and exclusive means” of creating a mortgage to secure
a line of credit.
Similarly, she argues that as to any of the
smaller loans that are lines of credit, the trial court erred to
the extent that it ruled that they are included as a future
advance by either the commercial building mortgage or the Cooke
Hollow mortgage.
Finally, she argues that any of the smaller
notes that fail to reference the commercial building mortgage as
required by the future advance clause of that mortgage cannot be
considered secured as a future advance of the commercial
building mortgage.
Vickie concedes that the smaller loans,
dated October 26, 1998, and September 7, 1999, appear to be
properly secured under the future advance clause of the Cooke
-7-
Hollow mortgage.
All of the issues presented to us in this
appeal are pure questions of law which we review de novo.
Effective July 14, 1992, the laws of the Commonwealth
explicitly recognized the line of credit type mortgage and the
revolving credit type mortgage in KRS 382.385.
The enactment of
the statute occurred as a legislative response to the sudden
upsurge in the 1980s of demand for credit line mortgages to
secure fluctuating lines of consumer credit.4
“The type of
mortgage which secured a note which had no maturity date and the
balance of which could go up or down daily depending upon draws
or payments by the borrower, was, arguably, not explicitly
recognized by any [prior Kentucky] statute.”5
Presumably, the
statute gave clear and explicit approval to the use of credit
line mortgages; and as a result, financial institutions and
title insurance companies were assured that credit line advances
would receive the original mortgage’s priority and the potential
trouble and expense of performing title examination updates
before every disbursement could be eliminated.6
We must reject Vickie’s argument that an alleged
failure to follow KRS 382.385 invalidates the commercial
4
T. J. Brandt, Kentucky Real Estate Law Survey: 1990 through 1993,
21 N. Ky. L. Rev. 435, 445 (1994).
5
Id.
6
See RESTATEMENT (THIRD) OF PROPERTY:
(1997).
-8-
MORTGAGES § 2.3 reporters’ note
building mortgage or renders subsequent line of credit loans
unsecured by either mortgage.
First, we are not convinced that
the notes and commercial building mortgage as first created in
1994 or as later renewed is truly a line of credit despite the
fact that both sides have given it that name.
The amount of the
loan and the maturity date of the loan were specifically stated
in the documents.
Second, even if it were a line of credit type
mortgage, as the trial court concluded, “KRS 382.385 is not the
exclusive method, manner, or limited writing by which a mortgage
may be created.”
The language of the statute uses the
permissive may.7
And KRS 382.385(7) expressly provides that
“[t]his section is not exclusive and shall not prohibit the use
of other types of mortgages or other instruments given for the
purpose of creating a lien on real property permitted by law.”
To decide the contest between competing lienholders,
we look to this fundamental rule:
priority of liens.8
chronology governs the
Application of this rule decides this case.
At root, there is no dispute that FNBG’s mortgages were both
recorded before Vickie’s judgment lien.
After that, renewals
and extensions of the original FNBG notes continued to be
secured by the original mortgages and with their original
7
Ocean Accident & Guar. Corp. v. Milford Bank, 236 Ky. 457,
33 S.W.2d 312, 313 (1930).
8
KRS 382.280.
-9-
priority.9
clauses.
Both FNBG mortgages also contained future advance
And in Kentucky, future advances take the priority of
the original mortgage, making no distinction between advances
that the mortgagee is contractually obligated to make and those
that are optional.10
Thus, applying these basic principles of
law, we hold that the trial court did not err when it found that
FNBG’s claim had priority over Vickie’s claim.
Moreover, we
must agree with the trial court that giving priority to FNBG’s
mortgages over Vickie’s judgment lien, even though unfortunate
for Vickie, is not unfair.
As the trial court aptly noted in
its judgment, Vickie participated in the creation of the debts
and the recorded mortgages.
When she and Jack eventually
settled the property division in their divorce, she was fully
aware that Jack took the property and the debt it secured.
Finally, since we have upheld the validity of the
mortgages, Vickie’s argument regarding the failure of certain of
the smaller notes to contain the required reference to the
commercial building mortgage to be valid, though correct, is
moot.
The future advance clause of the Cooke Hollow mortgage
adequately secures those notes that fail to reference the
commercial building mortgage.
9
KRS 382.520(1).
10
KRS 382.520(2).
-10-
IV.
CONCLUSION.
For the reasons discussed in this opinion, the
judgment of the circuit court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Rebecca K. Phillips
Grayson, Kentucky
W. Jeffrey Scott
Grayson, Kentucky
-11-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.