Deutsche Bank Trust Company Americas v. Haffey et al
Filing
129
MEMORANDUM OPINION AND ORDER: (1) Defendants' Joint Motions for Extension of Time (Docs. # 127 and 128 ) are denied; (2) Defendants' Motion to Dismiss Plaintiff's First Amended Complaint (Doc. # 124 ) is denied; (3) Plaintiff' s Renewed Motion for Final Judgment, Order of Sale, Attorneys' Fees, and Appointment of Master (Doc. # 125 ) is granted in part; (4) A separate Judgment and Order of Sale shall be entered contemporaneously herewith. Signed by Judge David L. Bunning on 8/20/19. (JLM)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
AT LEXINGTON
CIVIL ACTION NO. 09-362-DLB
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
v.
PLAINTIFF
MEMORANDUM OPINION AND ORDER
HEATHER McKEEVER HAFFEY, et al.
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DEFENDANTS
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This matter is before the Court on Defendants Heather and Shane Haffey’s Motion
to Dismiss (Doc. # 124) and Plaintiff Deutsche Bank’s Motion for Judgment, Order of Sale,
Attorneys’ Fees, and Appointment of Master. (Doc. # 125). Plaintiff having submitted a
Response to Defendant’s Motion to Dismiss (Doc. # 126), and the time for filing of
responses and replies under the Local Rules having expired, See LR 7.1, the Motions are
now ripe for the Court’s review. For the reasons set forth below, Plaintiff’s Motion is
granted in part and Defendants’ Motion is denied.
I.
FACTUAL AND PROCEDURAL BACKGROUND
This action has now been pending before the Court for almost ten years. On
November 12, 2009, Plaintiff Deutsche Bank Trust Company Americas (“Deutsche
Bank”), as trustee for the 2007 QS-10 Trust, initiated a lawsuit seeking to foreclose on
property located at 3250 Delong Road, Lexington, Kentucky 40515, which was jointly
owned by Heather and Shane Haffey (“the foreclosure action”). (Doc. # 1). In the
Complaint, Deutsche Bank alleged that the Haffeys, who are married, had defaulted on
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their mortgage, owing a sum of $1,082,278.49. Id. The Complaint also named Gentry
Mechanical Systems, Inc. (“Gentry”), which “may claim an interest on the Property by
virtue of a Mechanics and Materialman’s Lien.” Id. ¶ 19. Deutsche Bank also brought a
separate action in this Court for declaratory relief (“the declaratory-judgment action”),
seeking a declaration that the loan rescission alleged by the Haffeys is invalid and that
the note and mortgage remain effective. See No. 5:08-cv-459 (E.D. Ky. 2008). The two
actions were consolidated on February 11, 2010.1 (Doc. # 20).
The Haffeys filed a Counterclaim and Third-Party Complaint on February 9, 2010,
naming Deutsche Bank and several other parties. (Doc. # 17). The Haffeys also moved
to dismiss the Complaint. (Doc. # 19). The Court denied Defendants’ Motion to Dismiss
and dismissed the Haffeys’ Counterclaim and Third-Party Complaint. (Docs. # 27, 28,
and 39). On January 23, 2012, the Court granted summary judgment in favor of Deutsche
Bank in the foreclosure action, finding no genuine issue of material fact as to whether
Deutsche Bank was entitled to foreclose on the Haffeys’ property. (Doc. # 44). In doing
so, the court rejected Defendants’ arguments that the promissory note was not valid and
enforceable and that Deutsche Bank was not a valid holder of the note. Id. at 2. The
Court also granted summary judgment for Deutsche Bank in the parallel declaratoryjudgment action. No. 5:08-cv-459 (E.D. Ky. 2018), ECF No. 135. The Haffeys appealed
the Court’s grant of declaratory relief but not its grant of summary judgment in favor of
Deutsche Bank in the foreclosure action. See No. 5:08-cv-459 (E.D. Ky. 2018), ECF No.
164.
In addition to the aforementioned foreclosure and declaratory-judgment actions, there are
three other related cases that have been filed in the Eastern District of Kentucky. See Nos. 5:08cv-456; 5:08-cv-510; 5:11-cv-188.
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Following the Court’s grant of summary judgment in the foreclosure case,
Deutsche Bank filed a Motion for Judgment, Order of Sale, Appointment of Special
Master, and Attorneys’ Fees. (Doc. # 47). The Court denied that Motion without prejudice
in light of the Haffeys’ pending appeal in the declaratory-judgment action. (Doc. # 48).
Plaintiff then moved the Sixth Circuit to clarify that the pending appeal did not implicate
any of the orders in the foreclosure action. See No. 5:08-cv-459 (E.D. Ky. 2018), ECF
No. 189 at 3.
The Sixth Circuit granted Deutsche Bank’s motion and dismissed
Defendants’ appeal in part “insofar as they seek review of any order entered in [the
foreclosure action].” Id. at 3. The Sixth Circuit remanded the case back to the district
court for further proceedings in the foreclosure action.2 Id.
After the remand, Deutsche Bank filed a Renewed Motion for Order of Sale. (Doc.
# 50). However, before that Motion could be decided, Defendants filed a suggestion of
bankruptcy, and the Court stayed this matter. (Doc. # 74). The stay was lifted on June
28, 2017 (Doc. # 76), and the Court granted Deutsche Bank’s Motion to Reopen the Case.
(Doc. # 93).
On August 24, 2018, Plaintiff filed a Motion to Amend its Complaint to add parties
with an interest in the property at issue in the foreclosure action.
(Doc. # 100).
Specifically, Plaintiff named FIA Card Services, N.A. (“FIA”), which had a judgment lien
against Shane Haffey, and Gentry Mechanical Systems, Inc., which had a mechanic’s
lien on the property. Id. Plaintiffs also named the Commonwealth of Kentucky and
Fayette County, which are the taxing authorities in the jurisdiction where the property is
located. Id. The Court granted the Plaintiff’s Motion to Amend and ordered that the First
The Sixth Circuit would eventually affirm the district court’s decision in the declaratoryjudgment action. See GMAC Mortg., LLC v. McKeever, 651 F. App’x 332 (6th Cir. 2016).
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Amended Complaint be filed on the Docket. See (Docs. # 110 and 111). The record
demonstrates that Defendants FIA, the Commonwealth of Kentucky, and Fayette County,
were all properly served with the First Amended Complaint. (Docs. # 119, 120, 121, and
122). The Commonwealth of Kentucky and Fayette County answered the First Amended
Complaint on June 3, 2019. (Doc. # 117). FIA and Gentry did not file answers.
On July 9, 2019, the Haffeys filed a Motion to Dismiss the First Amended
Complaint, arguing that Deutsche Bank lacks the capacity to sue on behalf of the 2007
QS-10 Trust. (Doc. # 124 at 3-5). The Haffeys also contend that Deutsche Bank fails to
state a claim for which relief can be granted because the promissory note at issue is
unenforceable under Kentucky law. Id. at 5-8. In its Response, Plaintiff Deutsche Bank
first asserts that Defendants’ arguments about Plaintiff’s right to foreclose on the property
are barred by res judicata. (Doc. # 126 at 4-5). Furthermore, Plaintiff argues that, as
holder of the note, it is entitled under Kentucky law to enforce the note and to foreclose
on the associated property. Id. at 5.
Finally, on July 25, 2019, Deutsche Bank filed a Renewed Motion for Final
judgment, Order of Sale, Appointment of Master, and Attorneys’ Fees. (Doc. # 125).
None of the Defendants have responded to the Motion.3
The Haffeys have moved for an extension of time to file a reply in support of their Motion
to Dismiss and a Response to Plaintiff’s Motion for Final Judgment and Order of Sale. (Docs. #
127 and 128). Both Motions will be denied. First, Defendants’ Motions do not comply with Local
Rule 7.1(b), which requires that a party seeking an extension of time state whether other parties
consent. Second and more importantly, given the age of this case and the fact that summary
judgment was granted over seven years ago, any further delay in the resolution of this case would
be undue delay. As such, Defendants have not demonstrated good cause for extending the
response and reply deadlines in this case. See Fed. R. Civ. P. 6(b); Ginett v. Fed. Express Corp.,
166 F.3d 1213, No. 97-5481, 1998 WL 777998, at *5 (6th Cir. Oct. 21, 1998) (unpublished table
decision) (“The decision to deny an extension of time to respond to a motion for summary
judgment is within the district court’s discretion.”).
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II.
ANALYSIS
A.
Defendants’ Motion to Dismiss
Defendants’ Motion to Dismiss must be denied.
Defendants’ argument that
Deutsche Bank lacks the capacity to sue is precluded by this Court’s earlier Orders and
is otherwise meritless. The Court has already found Deutsche Bank to be the current
holder of the note and “that Deutsche Bank is entitled to foreclose on the [Haffeys’]
property.” (Doc. # 44 at 2). The holder of a note is “entitled to enforce the obligations
secured thereby.” Stevenson v. Bank of Am., 359 S.W.3d 466, 470 (Ky. Ct. App. 2011);
accord Ky. Rev. Stat. § 355.3-301 (stating that a “‘[p]erson entitled to enforce’ an
instrument” includes “[t]he holder of the instrument”). In addition, contrary to Defendants’
assertion, the First Amended Complaint successfully states a claim because it attaches
the promissory note signed by Heather Haffey and alleges that “Plaintiff is entitled to
enforce a promissory Note made in the original sum of $1,000,000.00 and executed by
Defendant Heather M. Haffey.” (Docs. # 100-5 and 111). As such, Defendants’ Motion
to Dismiss is denied.
B.
Plaintiff’s Motion for Judgment, Order of Sale, Attorneys’ Fees, and
Appointment of Master
As explained above, the Court previously granted summary judgment for Plaintiff
in this matter and issued a separate Judgment. See (Docs. # 44 and 45). Now, Plaintiff
asks the Court to issue another judgment, which, inter alia, specifically orders the sale of
the property, awards damages and attorneys’ fees, and appoints a master. (Doc. # 1253 at 2).
Upon a finding of liability for a plaintiff in a foreclosure action, district courts in
Kentucky have issued “judgments and orders of sale” in order to specifically set out the
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amount and nature of damages. See, e.g., TD Bank, N.A. v. SNP Sairam Hospitality,
LLC, No. 4:15-cv-66-HBB, 2015 U.S. Dist. LEXIS 126489, at *9, *11 (W.D. Ky. Sept. 22,
2015); U.S. Bank Nat’l Ass’n v. Georgetown Mobile Estates, LLC, No. 5:14-170-DCR,
2015 WL 711294, at *2 (E.D. Ky. Feb. 18, 2015). As the Court has found that Plaintiff is
entitled to foreclose on the property in question, a separate Judgment with an order of
sale is appropriate in this case. In addition, the Court will enter judgment in favor of
Deutsche Bank in the amount of $1,844,990.23, which, as demonstrated by the affidavit
accompanying Plaintiff’s Motion, is the sum of the unpaid balance on the loan, accrued
interest, and escrow balance. (Doc. # 125-2).
What remains to be decided is if Plaintiff should be awarded attorneys’ fees and
whether the Court should appoint a master to manage the foreclosure proceedings.
These two issues are addressed in turn.
Plaintiff requests the court award $206,443.36 in expenses, which includes its
attorneys’ fees incurred in enforcing the note. In the Memorandum supporting its Motion,
Deutsche Bank cites to two affidavits from attorneys representing Deutsche Bank in the
foreclosure action. (Doc. # 125-3 at 9). The affidavits demonstrate that Deutsche Bank
incurred attorneys’ fees and costs in the amount of $119,026.17. (Docs. # 47-1 ¶ 7 and
47-2 ¶ 6).
As a rule, attorneys’ fees are not recoverable “in the absence of a statute or
contract expressly providing therefor.” Cummings v. Covey, 229 S.W.3d 59, 61 (Ky. Ct.
App. 2007) (citing Dulworth & Burress Tobacco Warehouse Co. v. Burress, 369 S.W.2d
129 (Ky. 1963)). Kentucky statute provides that fee-shifting provisions “in a writing that
create[s] a debt [] or create[s] a lien on real property” are enforceable to the extent those
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fees are “actually paid or agreed to be paid.” Ky. Rev. Stat. § 411.195. Here, the note
which Heather Haffey signed states that “the Note Holder will have the right to be paid
back by [the debtor] for all of its costs and expenses in enforcing this Note to the extent
not prohibited by applicable law. Those expenses include, for example, reasonable
attorneys’ fees.” No. 5:08-cv-459 (E.D. Ky. 2018), ECF No. 114-1 at 20. Furthermore,
section 22 of the mortgage signed by both Heather and Shane Haffey states that “Lender
shall be entitled to collect all expenses incurred in pursuing the remedies provided in this
Section . . . including, but not limited to, reasonable attorneys’ fees and costs of title
evidence.” Id. at 15. In light of these contractual provisions, the Court is satisfied that the
Haffeys are obligated to pay reasonable attorneys’ fees. However, the Court will not
award the full $206,443.36 requested, as the evidence Deutsche Bank has submitted
establishes that it “actually paid” only $119,026.17. Ky. Rev. Stat. § 411.195; see (Docs.
# 47-1 ¶ 7 and 47-2 ¶ 6).4
Finally, the Court grants Deutsche Bank’s request to appoint James H. Frazier III
to serve as a master under Federal Rule of Civil Procedure 53. (Doc. # 125-3 at 12). The
master will perform the functions that would normally be performed by the Master
Commissioner if this action had been filed in Kentucky state court. See Ky. Rev. Stat. §
31A.010; Travelers Ins. Co. v. Corporex Props., Inc., 798 F. Supp. 423, 429 (E.D. Ky.
1991).
Deutsche Bank may move for the award of additional fees, providing that it can sufficiently
demonstrate that it in fact incurred those fees.
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III.
CONCLUSION
Accordingly, IT IS ORDERED as follows:
(1)
Defendants’ Joint Motions for Extension of Time (Docs. # 127 and 128) are
denied;
(2)
Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint (Doc. #
124) is denied;
(3)
Plaintiff’s Renewed Motion for Final Judgment, Order of Sale, Attorneys’
Fees, and Appointment of Master (Doc. # 125) is granted in part;
(4)
A
separate
Judgment
and
Order
of
Sale
shall
contemporaneously herewith.
This 20th day of August, 2019.
J:\DATA\ORDERS\Lexington\2009\09-362 MOO Granting 125 and Denying 124.docx
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be
entered
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