GOLDSMITH (MARTIN) VS. FIFTH THIRD BANK
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RENDERED: OCTOBER 30, 2009; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-001414-MR
MARTIN GOLDSMITH
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE JAMES M. SHAKE, JUDGE
ACTION NO. 03-CI-010566
FIFTH THIRD BANK
APPELLEE
OPINION
VACATING AND REMANDING
** ** ** ** **
BEFORE: ACREE, STUMBO, AND WINE, JUDGES.
WINE, JUDGE: Appellant, Martin Goldsmith (“Goldsmith”), appeals from an
entry of summary judgment in favor of the appellee, Fifth Third Mortgage
Company (“Fifth Third”) concerning four properties he owned which were sold at
foreclosure sale and purchased by Fifth Third. On appeal, he argues that the
foreclosure sales were invalid as he was incarcerated at the time of the proceedings
and a guardian ad litem was not properly appointed pursuant to Kentucky Rules of
Civil Procedure (“CR”) 17.04. He also argues that Fifth Third lacked standing to
submit its motion for summary judgment because it no longer had liens on the
subject properties at the time the motion was filed. We disagree.
Relevant Facts and Procedural History
This action originally arose as a foreclosure action on four investment
properties owned by Goldsmith which were secured by commercial mortgages
through Fifth Third Mortgage Company. The four properties had the following
addresses: 4713 Walnut Grove, Louisville, KY (“Walnut Grove”), 3022 Betty
Lane, Louisville, KY (“Betty Lane”), 3700 Blue Creek Road, Louisville, KY
(“Blue Creek”), and 5004 Wabash Place, Louisville, KY (“Wabash Place”).
Goldsmith rented the properties out to third parties.
On December 3, 2003, Fifth Third filed suit to foreclose on the
Walnut Grove mortgage based upon Goldsmith’s default on the loan. A lis
pendens was filed on the property in accordance with Kentucky Revised Statute
(“KRS”) 382.440. At some point thereafter, Goldsmith defaulted on the other
three mortgages, and Fifth Third was granted leave to file an amended complaint to
include these properties. On February 4, 2004, Fifth Third filed its Amended
Complaint naming the Betty Lane, Blue Creek, and Wabash Place properties. An
amended lis pendens was filed to include these three properties. The following
week, on February 11, 2004, Goldsmith filed a Chapter 7 bankruptcy petition in
the United States Bankruptcy Court for the Western District of Kentucky.
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Goldsmith then filed a pro se answer in the foreclosure action on March 23, 2004,
containing a general denial of the issues in the complaint.
On May 11, 2004, the Bankruptcy Court terminated the automatic stay
with respect to the above four properties, thus allowing Fifth Third to proceed with
the foreclosure action. On September 13, 2004, Fifth Third filed a “Motion for In
Rem Summary Judgment and Order of Sale.” Goldsmith was then incarcerated on
November 9, 2004. Thereafter, on November 19, 2004, Darryl and Tina Roderer
(“the Roderers”), the tenants of the Betty Lane property, moved to intervene in the
action. After intervening in the suit by filing a “Motion to Enter Appearance and
Notice of Interest,” the Roderers filed a cross-claim against Goldsmith. The
Roderers also submitted a motion for the appointment of a guardian ad litem for
Goldsmith.1 Goldsmith filed pro se answers to the motion and the cross-claim
while incarcerated. In each of the answers, Goldsmith stated “I demand that the
Court not appoint a guardian for this matter.” (Emphasis in original). Goldsmith
also conceded that he was in default on the mortgages.
After the Commissioner’s hearing was scheduled, Goldsmith mailed a
handwritten statement to the Jefferson County Master Commissioner’s Office on
February 11, 2005. In that letter, he indicated his desire to be present at the
Commissioner’s hearing. He requested that the hearing be held at a meeting room
in the Jefferson County Jail, or in the alternative, that the hearing be rescheduled
until after February 21, 2005, when he expected to be released from incarceration.
1
Goldsmith was incarcerated in the Louisville Metro Corrections Department while serving
time for a misdemeanor.
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Thereafter, the Master Commissioner rescheduled the hearing to March 1, 2005.
Goldsmith then drafted another letter to the Master Commissioner informing that
his release date was delayed until March 15, 2005, and requesting that the hearing
date be postponed until that time. Although the letter was postmarked February
25, 2005, the Master Commissioner and Fifth Third both contend that they had not
received the letter at the time of the March 1, 2005 hearing.
Thus, on March 1, 2005, the Master Commissioner conducted a
hearing on Fifth Third’s motion for in rem summary judgment and order of sale.
Counsel for the Roderers was not present, nor was Mr. Goldsmith. The hearing
proceeded in their absence and the Master Commissioner issued a report on March
8, 2005.2 The report recommended that judgment be entered in favor of Fifth
Third. Based upon this recommendation, the court entered an in rem judgment and
order of sale on April 4, 2005, directing the Master Commissioner to conduct a
sale of the properties. The properties went to foreclosure sale on June 7, 2005.
Fifth Third purchased all four properties at judicial sale for $216,667.00. The sale
was confirmed by an order of the court entered on June 23, 2005.
Fifth Third obtained Commissioner’s Deeds for the four properties on
June 30, 2005. Between the months of September 2005 and December 2005, Fifth
Third sold each of the properties to third parties. Fifth Third then released their
liens and mortgages on the properties on December 15, 2005.
2
At the hearing, Fifth Third’s counsel opined that he had searched the jail records and found no
record that Goldsmith was incarcerated. Of course, this information later proved to be untrue, as
Goldsmith was incarcerated at the time. This statement appears to be the basis of Goldsmith’s
fraud allegation under CR 60.02 (d).
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On July 5, 2006, Goldsmith filed a CR 60.02 motion to set aside the
April 4, 2005 in rem judgment and order of sale on the grounds that he was
incarcerated at the time of judgment and he was entitled to have a guardian ad
litem appointed under CR 17.04. Fifth Third entered an objection to this motion;
however, the trial court granted Goldsmith’s motion. On September 8, 2006, the
trial court entered an order vacating the in rem judgments, holding that CR 17.04 is
not discretionary, but mandatory, and requires that a guardian ad litem be
appointed for a prisoner prior to entry of a judgment whenever such prisoner is
unable to or ceases to defend.3 Thereafter, Fifth Third filed a motion to reconsider
and motion to re-enter summary judgment, nunc pro tunc, on September 18, 2006.
The trial court denied Fifth Third’s motions on October 11, 2006. Fifth Third then
filed a motion to appoint a guardian ad litem on October 26, 2006, which was
denied by the court as being unnecessary.4
At some point thereafter, Goldsmith learned that his counsel had left
the firm he practiced with and Goldsmith filed a motion to remove him as counsel.
Goldsmith, apparently proceeding as if unrepresented, also filed a pro se motion to
set the matter for mediation in May of 2007. On May 31, 2007, Fifth Third
responded by filing an objection to Goldsmith’s motion to remove his counsel of
record. Fifth Third also filed an objection to Goldsmith’s motion to refer the
3
The Kentucky Supreme Court case of Asset Acceptance v. Moberly, 241 S.W.3d 329 (Ky.
2007) had not yet been decided at the time of the trial court’s order granting Goldsmith CR 60.02
relief. As such, Fifth Third would not have been able to directly appeal from the order as
Kentucky had not yet adopted the rule (as established in Moberly) that an order setting aside a
judgment under CR 60.02 may be directly appealed in certain circumstances.
4
A guardian ad litem was not necessary at this time because Goldsmith had obtained counsel.
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matter to mediation. In addition, Fifth Third filed a “Motion for Order in Aid of
Assignment of Rents” (claiming that any rental income Goldsmith was able to
obtain from the Roderers was assigned to Fifth Third by way of a rider to the
original mortgage) and a renewed motion for in rem summary judgment and order
of sale, nunc pro tunc (arguing that it would be impossible for Goldsmith to
produce evidence at trial to warrant judgment in his favor). The trial court denied
Goldsmith’s motion to set the matter for mediation and referred the remaining
motions to the Master Commissioner for further proceedings and for a
recommendation to the court.
A new Commissioner’s hearing was set for September 6, 2007.
Thereafter, Goldsmith’s counsel5 filed a response to Fifth Third’s renewed motion
for judgment nunc pro tunc, arguing that Fifth Third no longer had any claim to the
properties as the mortgages had all been released. Goldsmith further argued that
the doctrine of nunc pro tunc was not applicable to the case at hand. Instead of a
Commissioner’s hearing, a status conference was held on September 6, 2007,
where counsel for both parties were present. In response to Goldsmith’s
suggestion that Fifth Third had no standing, the Commissioner’s Report suggested
that mortgage liens may be restored in certain circumstances under principles of
equity. The Master Commissioner also requested proof the liens had been
released, which was supplied by Goldsmith’s counsel thereafter.
5
Apparently Goldsmith’s counsel had resumed active representation of Goldsmith by this point.
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Finally, a Commissioner’s hearing was held and a report was issued
on March 18, 2008. The Master Commissioner recommended in her report that
Fifth Third’s motion for an “Order Reinstating Mortgages, and In Rem Judgment
and Order of Sale” be entered as Goldsmith failed to supplement the record (as
previously requested by the Master Commissioner) with a response presenting any
defenses to Fifth Third’s motion for summary judgment. On June 24, 2008, the
Jefferson Circuit Court entered the “Order Reinstating Mortgages, and In Rem
Judgment and Order of Sale” upon recommendation of the Master Commissioner.
The order purported to reinstate Fifth Third’s mortgages on the properties and
additionally directed the judicial sale of each property. As the properties had
already been sold, the order reaffirmed the judicial sales previously conducted.
Goldsmith now appeals from this judgment and order.
Analysis
On appeal, Goldsmith argues: (1) that the trial court lacked the power
to enter judgment on mortgages that no longer existed and that Fifth Third lacked
standing to tender the motion for judgment for the same reason; (2) that Fifth Third
failed to follow the mandates of KRS 426.006; and (3) that the trial court’s ruling
reduces CR 17.04 to a nullity.
We need not address these issues, however, as we find that the trial
court improperly granted CR 60.02 relief in its September 8, 2006 order. In the
September 8, 2006 order, the trial court vacated the in rem summary judgment and
order of sale, concluding that CR 17.04 is not discretionary, but mandatory, and
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requires the appointment of a guardian ad litem where a defendant is incarcerated
and is unable to defend or ceases to defend in an action.
The trial court cited to Davidson v. Boggs, 859 S.W.2d 662 (Ky. App.
1993), in determining that Goldsmith was entitled to the appointment of a
guardian ad litem, noting that Goldsmith ceased to defend when he failed to
respond to Fifth Third’s motion for in rem summary judgment and failed to appear
at the Commissioner’s hearing. The trial court determined that Goldsmith did not
waive his right to a guardian ad litem, citing the language in Davidson that the
appointment of a guardian ad litem under “CR 17.04 is intended, in part, to
prevent the failure of a prisoner to obtain counsel as being deemed a waiver of his
right to due process.” Id. at 665. Indeed, in Davidson, we stated that CR 17.04 “is
not discretionary with the trial court. The rule does not distinguish between
voluntary and involuntary absences nor does it allow consideration of whether the
[defendant] possessed sufficient funds to obtain counsel of his own choosing.” Id.
In Davidson, however, we acknowledged that due process rights may
be waived where such waiver is “made voluntarily, intelligently and knowingly,
with awareness of the legal consequences.” Id. Although we did not expressly
acknowledge the ability of a prisoner to waive his right to a guardian ad litem in
Davidson, we now do so. We now expressly state that the right to the appointment
of a guardian ad litem under CR 17.04 may be waived. However, we recognize
the importance of the right and caution against careless application of the doctrine
of waiver. Notably,
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A convict may waive his right to the appointment of a
legal representative, but the importance of the right is
such that some courts have required that the convict
make an expressed (sic) written waiver before the right
will be deemed waived.
18 C.J.S. Convicts § 8. We agree with those jurisdictions which require waiver to
be express, and find that waiver should not be assumed or implied in regard to CR
17.04. See, e.g., Craigo v. Marshall, 331 S.E.2d 510, 514 (W.Va. 1985). As we
stated in Davidson, supra, the rule is designed, in part, to prevent this. However,
when (as here) a defendant expressly states in writing to the court that he does not
wish a guardian ad litem to be appointed, we will recognize a waiver.
In the present case, the defendant Goldsmith stated: “I demand that
the Court not appoint a guardian for this matter.” (Emphasis in original). In cases
such as this, where an incarcerated defendant makes an express and written waiver,
he shall not be entitled to the appointment of a guardian ad litem.6
Accordingly, we find that CR 60.02 relief should not have been
granted as a matter of law in this case because Goldsmith had expressly waived his
right to a guardian ad litem. Furthermore, there are additional grounds why CR
60.02 relief was inappropriate in this action. To begin, CR 60.02 is not properly
invoked where the movant is alleging errors which could have, in the exercise of
due diligence, been raised in a direct appeal. See, e.g., McQueen v.
Commonwealth, 948 S.W.2d 415, 416 (Ky. 1997). See also, Baze v.
Commonwealth, 276 S.W.3d 761, 765-66 (Ky. 2009). Here, the issue of whether a
6
We might also note that the trial court had a fine line to walk in this case, as Goldsmith’s right
to represent himself may have been infringed if the court had appointed a guardian.
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guardian ad litem should have been appointed could have certainly been raised in a
direct appeal.
Finally, we find that the CR 60.02 motion was untimely and that the
trial court was without jurisdiction to grant it because of the holding in Asset
Acceptance v. Moberly, 241 S.W.3d 329 (Ky. 2007). In Moberly, the Court
decried the use of the “extraordinary circumstances” provision in CR 60.02(f) as a
way to avoid the one-year time limitation found in CR 60.02(a), (b), and (c). Id. at
334-35. Here, Goldsmith’s CR 60.02(f) claim is really one of “excusable neglect”
rather than some other extraordinary circumstance. Indeed, no extraordinary
circumstance exists where one waits for more than one year to seek relief to a
judgment of which he must have certainly known of (or should have known of
through the exercise of due diligence) much sooner. We also note that the Court in
Moberly established that a direct appeal could be maintained from an order
granting CR 60.02 relief where the movant was proceeding under CR 60.02 (f) and
it appears that the movant “invoked [CR 60.02(f)] to, in effect, evade the one-year
limitations period.” Id. Moberly made clear that CR 60.02(f) should only be
invoked with extreme caution and “is available only for reasons not otherwise set
forth in the rule and ought not to be invoked so as to undermine the time
constraints applicable to other subsections.” Id. at 332. The Court’s holding
stemmed from the fact that many federal courts “have recognized a right to appeal
from a trial court order setting aside a judgment . . . if the trial court lacked
jurisdiction to enter it.” Id. at 333.
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While we acknowledge that Goldsmith also claimed to be proceeding
under CR 60.02(d) and (e), his claims thereunder alleged fraud on the part of Fifth
Third and that the judgment was void either because of such fraud or the failure to
appoint a GAL. We note that Goldsmith was wholly unable to prove fraud on the
part of Fifth Third. CR 60.02 requires extrinsic fraud or “fraud upon the court.”
Rasnick v. Rasnick, 982 S.W.2d 218, 219-220 (Ky.App. 1998). Indeed,
Fraud upon the court is “that species of fraud which does
or attempts to subvert the integrity of the court itself.”
Such fraud has been construed to include only the most
egregious conduct, such as bribery of a judge or a
member of the jury, evidence fabrication, and improper
attempts to influence the court by counsel. Generally,
fraud between the parties, without more, does not rise to
the level of fraud upon the court. Id., quoting Wise v.
Nirider, 862 P.2d 1128 (Mont. 1993) (Internal citations
omitted).
Further, extrinsic fraud does not include “fraudulent representations or
concealments made during court proceedings.” Id., citing Miller v. Miller, 902
P.2d 1019, 1023 (Mont. 1995). Here, it could not be said that the statement by
Fifth Third, even if knowingly false, would support a finding of “extrinsic fraud”
as contemplated in CR 60.02(d). In light of the foregoing, it was an abuse of
discretion for the trial court to grant CR 60.02 relief.
A trial court loses jurisdiction over a matter ten days after the entry of
final judgment. See, e.g., Silverburg v. Commonwealth, 587 S.W.2d 241, 244 (Ky.
1979). Such jurisdiction can only revived by rule or statute. Here, since the trial
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court erroneously invoked the post-judgment relief of CR 60.02, it had no
jurisdiction to proceed. Therefore all orders of the court following the improvident
order setting aside the original judgment and order of sale are void. Although Fifth
Third did not cross-appeal on this issue, an appellate court may raise jurisdiction at
any time. See, e.g., Kentucky High School Athletic Ass’n v. Edwards, 256 S.W.3d
1, 4 (Ky. 2008); Kentucky Employers Mut. Ins. v. Coleman, 236 S.W.3d 9 (Ky.
2007).
As we find that the September 8, 2006 post-judgment order of the trial
court vacating the in rem summary judgment and order of sale was in error, and
that the trial court was without jurisdiction to proceed, the issues raised by
Goldsmith on appeal have been rendered moot. Thus, we need not address
whether Fifth Third had standing to file the motion for in rem summary judgment
and order of sale after the release of its mortgages. Further, questions concerning
whether joinder of the current property owners was necessary and whether Fifth
Third violated KRS 426.006 are also moot.
Accordingly, we vacate the trial court’s September 8, 2006 order
granting Goldsmith CR 60.02 relief and all orders of the court thereafter. We also
remand with instructions to the trial court to reinstate the in rem summary
judgment and order of sale as entered by the trial court on April 4, 2005. As the
original judgment and order of sale will be reinstated, the titles of the current
owners of the subject properties will no longer be clouded by the Jefferson Circuit
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Court’s June 24, 2008 “Order Reinstating Mortgages, and In Rem Judgment and
Order of Sale.”
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Kevin M. Adams
Louisville, Kentucky
M. Thurman Senn
Louisville, Kentucky
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