Opinion
NO. 2016-CA-000012-MR
06-22-2018
MICHAEL ALLAN GRIM APPELLANT v. REPUBLIC BANK & TRUST COMPANY APPELLEE
BRIEFS FOR APPELLANT: Michael A. Grim, Pro se Frankfort, Kentucky BRIEF FOR APPELLEE: M. Thurman Senn J. Morgan McGarvey Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE A.C. MCKAY CHAUVIN, JUDGE
ACTION NO. 15-CI-005401 OPINION
REVERSING AND REMANDING
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BEFORE: CLAYTON, CHIEF JUDGE; D. LAMBERT AND THOMPSON, JUDGES. THOMPSON, JUDGE: Michael Allan Grim filed an action in the Jefferson Circuit Court against Republic Bank & Trust Company alleging that a prepayment penalty provision contained in a residential mortgage violates the predatory lending provision contained in Kentucky Revised Statute (KRS) 360.100 and is a prohibited unfair and deceptive trade practice under KRS 367.170. Republic filed a motion for judgment on the pleadings pursuant to Kentucky Rules of Civil Procedure (CR) 12.03. Two days after Republic filed its motion, an order was entered by the circuit court granting the motion to dismiss.
Grim argues that reversal and remand is required because: (1) he was not given the opportunity to respond to Republic's motion to dismiss; (2) he did not receive notice of the order dismissing until after expiration of the time to file a motion to alter, amend or vacate the order pursuant to CR 59.05; (3) the trial court made improper factual findings; and (4) the trial judge's failure to disclose his pre-existing mortgagor/mortgagee relationship with Republic requires reversal. We agree that the failure to provide Grim the opportunity to respond to Republic's motion constitutes reversible error and reverse and remand. The remaining issues are moot.
In October 2010, Grim executed a mortgage with Republic in the principal amount of $180,000 with an adjustable rate of 4.125% for a single-family residence located in Louisville, Kentucky. The promissory note included an addendum, which provided an early prepayment penalty equal to two percent of the original loan amount if the mortgage was paid off within the first five years of its origination. A separate "Truth-In-Lending Disclosure" signed by Grim also disclosed the prepayment penalty.
In February 2015, Grim decided to refinance the loan with L&N Federal Credit Union and contacted Republic requesting that it waive the prepayment penalty. Republic responded that Republic would charge only a prorated penalty if Grim refinanced the mortgage with Republic. Grim declined the offer and refinanced the residence with L&N. As part of the refinancing, Grim paid off the Republic mortgage of $169,914.13, including a $3,600 penalty for early payment.
Grim filed this action on October 22, 2015, seeking to recover the $3,600 penalty, costs and attorney fees. On November 30, 2015, Republic filed an answer and motion for judgment on the pleadings, accompanied by a memorandum and numerous attachments. Republic argued as follows: (1) Grim's loan was not a "high-cost loan" as defined in KRS 360.100; (2) because Grim could not demonstrate a violation of KRS 360.100 he could not proceed under KRS 367.170; (3) Republic's prepayment penalty is not unconscionable under KRS 367.170(1); (4) any limitation on Republic's prepayment penalty is preempted by federal law; and (5) Grim voluntarily paid the prepayment penalty.
Just two days after Republic filed its motion, on December 2, 2015, the trial court signed Republic's tendered order and the case was dismissed. The trial court's order recited that Republic's prepayment penalty charged to Grim was legal for the reasons stated in Republic's motion and memorandum and that Grim waived any objection to the penalty by proceeding with early prepayment of his loan.
Grim alleges he did not learn of the order dismissing until December 16, 2015, when he contacted Republic's counsel to request an extension of time to respond to the motion. Grim also alleges that later in December 2015, he learned that Republic held a mortgage on the trial judge's residence, which he maintains the trial judge was required to disclose.
We conclude that the lack of opportunity for Grim to respond to Republic's motion is dispositive. Although Republic stated its motion was pursuant to a CR 12.03 motion for judgment on the pleadings, Republic attached ten separate appendices to its supporting memorandum. Consequently, the trial court's consideration of matters outside the pleadings "effectively [converted Republic's] motion to dismiss into a motion for summary judgment." D.F. Bailey, Inc. v. GRW Eng'rs, Inc., 350 S.W.3d 818, 821 (Ky.App. 2011). However, for purposes of affording an opportunity to respond to a motion requesting that the litigation be terminated, the distinction between a CR 12 motion and a motion pursuant to CR 56 is a "distinction without a difference." Storer Commc'ns of Jefferson Cty., Inc. v. Oldham Cty. Bd. of Educ., 850 S.W.2d 340, 342 (Ky.App. 1993). As noted in Storer, "[l]ike CR 12, motions under CR 56 must be served on non-moving parties, who are given time to respond, and a hearing is required." Id.
CR 56.03 provides that "[t]he [summary judgment] motion shall be served at least 10 days before the time fixed for the hearing." That provision relates to the minimum response time that must be given when a summary judgment motion is filed. While CR 56.03 provides the minimal response time, the Thirtieth Judicial Circuit, Jefferson Circuit Court, Rules of Practice and Procedure 401 provides a twenty-day response time to a motion to dismiss, for judgment on the pleadings and for summary judgment.
Republic candidly admits that Grim was not given the opportunity to respond to its motion. However, it argues that the denial of that opportunity was harmless because Grim could not prevail on the merits and, therefore, there was no prejudice.
The opportunity to be heard is among the "minimal procedures" that ensure due process. Storer Commc'ns of Jefferson Cty., Inc, 850 S.W.2d at 341. As our Supreme Court observed in Perkins v. Hausladen, 828 S.W.2d 652, 656 (Ky. 1992) (quoting Bertelsman and Philipps, Kentucky Practice, 4th ed. Civil Rule 56.03, Comment 3): "the 10-day lead time provided before hearing the motion [for summary judgment] is extremely important and, although not jurisdictional, may not be lightly disregarded[.]" Although unwilling to hold that a violation of the ten-day notice requirement requires automatic reversal, the Court cautioned that decisions made without providing the opportunity to be heard would be affirmed only in the "unusual situations where no possible prejudice could have resulted[.]" Id.
As indicated by the arguments presented in Republic's memorandum, there were legal issues to be determined. Although Republic invites this Court to resolve those issues in this appeal, Grim's right to be heard must first be afforded in the trial court. While Grim may or may not be correct in his interpretation of the applicable law, he was certainly disadvantaged by not having the opportunity to respond to Republic's legal arguments and, further, to raise any factual dispute.
Because we are reversing and remanding for Grim to be given an opportunity to respond to Republic's motion and the entry of a new order, the remaining issues are moot. We note that if Grim believes there is a basis for recusal of the trial judge, a proper motion can be filed on remand.
For the reasons stated, the order of the Jefferson Circuit Court is reversed, and the case remanded for proceedings consistent with this opinion.
ALL CONCUR. BRIEFS FOR APPELLANT: Michael A. Grim, Pro se
Frankfort, Kentucky BRIEF FOR APPELLEE: M. Thurman Senn
J. Morgan McGarvey
Louisville, Kentucky