Opinion
2023-CA-0367-MR
09-13-2024
U.S. BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS INDENTURE TRUSTEE FOR THE CIM TRUST 2019-R2 APPELLANT v. WENDALL MCNABB; KIM MCNABB; AND RUSHMORE LOAN MANAGEMENT SERVICES, LLC APPELLEES
BRIEFS FOR APPELLANT: Jeffrey Helms Paul M. Nalepka Fort Lauderdale, Florida BRIEF FOR APPELLEES WENDALL MCNABB AND KIM MCNABB: Emmett Daniel Clifford Cynthiana, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM BRACKEN CIRCUIT COURT HONORABLE JEFFERY L. SCHUMACHER, JUDGE ACTION NO. 22-CI-00100
BRIEFS FOR APPELLANT: Jeffrey Helms Paul M. Nalepka Fort Lauderdale, Florida
BRIEF FOR APPELLEES WENDALL MCNABB AND KIM MCNABB: Emmett Daniel Clifford Cynthiana, Kentucky
BEFORE: CETRULO, GOODWINE, AND KAREM, JUDGES.
OPINION
GOODWINE, JUDGE
U.S. Bank National Association, not in its individual capacity but solely as indenture trustee for the CIM Trust 2019-R2 ("U.S. Bank") appeals from the March 28, 2023 order of the Bracken Circuit Court. We affirm.
In 2006, Wendell and Kim McNabb ("the McNabbs") executed a note and granted Citifinancial Services, Inc. ("Citifinancial") a mortgage which encumbered their residence in Brooksville, Kentucky. In 2016, Citifinancial assigned the mortgage to Bayview Loan Servicing, LLC ("Bayview"). Bayview then assigned the mortgage to J.P. Morgan Mortgage Acquisition Corp. ("J.P. Morgan") in 2018. In 2020, J.P. Morgan assigned the mortgage to Wilmington Savings Fund Society, FSB ("Wilmington"). Later, Wilmington assigned the mortgage to U.S. Bank. Rushmore Loan Management Services, LLC ("Rushmore") is the servicer for the loan on U.S. Bank's behalf and its attorney-in-fact through a limited power of attorney ("POA").
U.S. Bank's assignment was not recorded with the county clerk or otherwise evidenced in the record at the time of the trial court's order.
This document was not recorded with the county clerk or otherwise part of the record at the time of the trial court's order.
The McNabbs filed a complaint on November 4, 2022, against Bayview, Citifinancial, and Rushmore Loan Management Services, LLC O/B/O U.S. Bank National Association, not in its Individual Capacity but Solely as Indenture Trustee for the CIM Trust 2019-R2. The McNabbs raised claims of (1) negligence or gross negligence; (2) quiet title; (3) slander of title; (4) fraud or misrepresentation; and (5) breach of contract. They sought damages in the form of reimbursement of various alleged expenses; punitive damages under KRS 411.184 if there exists sufficient proof of oppression, fraud, or malice; and release of the mortgage.
By agreement, both Bayview and Citifinancial were dismissed without prejudice by order of the trial court. Record ("R.") at 200. For this reason, they are not parties to this appeal. Kentucky Rules of Appellate Procedure ("RAP") 2(A)(1).
Kentucky Revised Statutes.
Rushmore was served but did not file an answer. The McNabbs moved for default judgment against Rushmore on January 30, 2023. On February 10, 2023, Rushmore moved for leave to file its responsive pleading out of time. The trial court denied Rushmore's motion.
The McNabbs renewed their motion on March 6, 2023. On March 9, 2023, U.S. Bank moved for leave to intervene. Patricia L. Johnson ("Johnson"), represented U.S. Bank and Rushmore. Johnson remained counsel for both for the remainder of the proceedings.
The trial court granted the McNabbs' motion for default judgment against Rushmore and denied U.S. Bank's motion to intervene. The court held
[t]his motion is viewed by the Court as not much more than an attempt at an end run around the Court's previous order denying the filing of a late answer by the Defendant, Rushmore Loan Management Services, LLC. The motion claims that the movant is the proper party but that was never filed or brought to the attention of the Court until AFTER the motion to deny the filing of a late answer by the Defendant, Rushmore Loan Management Services, LLC was entered. Further, the motion was filed by the
same law firm as represents Rushmore Loan Management Services, LLC in this action. The motion claims that movant is now the holder of the mortgage that is the subject of this case, but the official assignment filings of record with the Bracken County Clerk's office, as noted in the record, do not support this assertion. As such, the motion seeking to intervene is overruled.R. at 204. The parties did not file any post-judgment motions.
Rushmore separately appealed the trial court's order granting the McNabbs' motion for default judgment. Appeal No. 2023-CA-0366-MR. This Court dismissed the appeal as interlocutory. Johnson filed both U.S. Bank and Rushmore's notices of appeal. On appeal, separate counsel was substituted for Johnson in each appeal, but all of the attorneys were from the same firm, Diaz Anselmo & Associates, P.S.C.
After this appeal was initiated, the McNabbs moved this Court to modify the record on appeal under RAP 25(D)(2) to add to the record the limited POA executed by U.S. Bank and Rushmore. This Court denied the motion but instructed that "nothing in this order shall preclude [the McNabbs] from filing such a motion in the circuit court, as the circuit court is in a better position to address the propriety of including the subject document in the appellate record[.]" The McNabbs filed such a motion and, over U.S. Bank's objection, the trial court granted it. The court found the
power of attorney document is dated 12/06/2019 and was apparently in the possession and control of Rushmore and/or U.S. Bank during the pendency of this case but was not actually filed of record with the Bracken County Clerk's office until 5/12/2023. Such filing was AFTER the final order was entered in this case. U.S. Bank has
appealed this Court's ruling which denied its motion seeking to intervene in this case.
During the pendency of this action at the trial level, [the McNabbs] were unable to find said power of attorney in the deed records because it was never actually filed until after the final order was entered in this case. [The McNabbs] seek to have that document made a part of the record in this case to show/evidence that Rushmore was already representing U.S. Bank's interests involved in this case via said power of attorney document and therefore U.S. Bank had no need or right to intervene.
The disputed power of attorney was in the possession and control of Rushmore and/or U.S. Bank during the pendency of this action and would have been part of the trial court record had it been timely filed with the county clerk's office before or during this action. All of this occurred without fault of [the McNabbs] who did not have access to, or control of, the possibly dipositive document in question. Without said document being filed of record with the county clerk and thereby being a public record, it was impossible for [the McNabbs] to know who the real party in interest was and/or who had the authority to seek foreclosure of the lien.R. at 271-72. In relevant part, the limited POA grants Rushmore the power to "[e]xecute and/or file such documents and take such other action as is proper and necessary to defend [U.S. Bank] in litigation and to resolve any litigation where [Rushmore] has an obligation to defend [U.S. Bank], including but not limited to dismissal, termination, cancellation, recission and settlement." Id. at 275-76.
This Court reviews denials of motions to intervene as a matter of right for clear error. Hazel Enterprises, LLC v. Community Financial Services Bank, 382 S.W.3d 65, 67 (Ky. App. 2012) (citation omitted). Clear error exists only where there is not substantial evidence in the record to support the trial court's decision. Elsea v. Day, 448 S.W.3d 259, 263 (Ky. App. 2014) (citation omitted).
On appeal, U.S. Bank argues the trial court erred by (1) denying its motion to intervene under CR 24.01 and (2) denying it the opportunity to file an answer because it was not properly served.
Kentucky Rules of Civil Procedure.
At the crux of this appeal are two documents - the limited POA and the assignment of the McNabbs' mortgage to U.S. Bank - which were not recorded in the county clerk's office nor were they in the trial court record when it decided U.S. Bank's motion to intervene. Both were recorded with the county clerk in May 2023, after the trial court's decision. While the limited POA was added to the record thereafter, documentation of the assignment remains absent. With this in mind, we will proceed with our review of the merits of U.S. Bank's arguments.
CR 24.01(1) governs when someone may intervene in a lawsuit as a matter of right, either because "a statute confers an unconditional right to intervene" or "the applicant claims an interest relating to the property or transaction[.]" Under this rule, the party requesting to intervene must prove: "(1) the motion was timely; (2) the party has an interest in the subject of the action; (3) the party's ability to protect his or her interest may be impaired or impeded; and (4) none of the existing parties can adequately represent his or her interest." Covington v. Commonwealth, 678 S.W.3d 918, 921 (Ky. App. 2023) (citation omitted).
Here, U.S. Bank does not claim an unconditional right to intervene under any statute. Instead, it claims an interest in the property as the current holder of the mortgage and note at issue. The trial court found there was no evidence that U.S. Bank was the mortgage holder according to the filings of record in the county clerk's office at the time it decided the motion. This finding is supported by the record and U.S. Bank acknowledges "the lack of the formal recorded assignment[.]" Appellant's Brief at 7.
However, even if we accept that U.S. Bank is the present mortgage holder, it has failed to prove its ability to protect its interest may be impaired or impeded without intervention, and that none of the existing parties, namely Rushmore, can adequately represent its interest. In its brief, U.S. Bank writes, "the claims against Rushmore, who was in default, appeared to involve the claims made to the McNabbs and not any effect of the Mortgage on the title to the Property (as Rushmore never held the Mortgage); therefore, they involved different claims/defenses as to the parties." Appellant's Brief at 8. This does not explain in what manner U.S. Bank's interest may be impaired or impeded by this action. We will not construct a party's legal argument on appeal. See Hadley v. Citizen Deposit Bank, 186 S.W.3d 754, 759 (Ky. App. 2005) (citations omitted). Even if we were to construe its argument to be that its interest would be impaired because the McNabbs are requesting the release of their mortgage, U.S. Bank's argument still fails.
Within its argument, U.S. Bank alleges the McNabbs failed to record a lis pendens when they filed their complaint. However, this argument was not made in their motion to intervene. We will not address an argument on appeal when it was not first raised before the trial court. Sunrise Children's Services, Inc v. Kentucky Unemployment Insurance Commission, 515 S.W.3d 186, 192 (Ky. App. 2016) (citation omitted).
In December 2019, U.S. Bank executed the limited POA which empowered Rushmore, as servicer, to take actions necessary to defend U.S. Bank in litigation. U.S. Bank does not contest the validity of the limited POA. Instead, it argues we should not consider it because it was not filed with the county clerk or before the trial court when the court denied its motion to intervene.
Disputes regarding the contents of the record should be settled by the trial court. RAP 25(D)(1). However, the trial court's power to modify the record is limited to deciding whether "anything material to either party is omitted from the record on appeal by error or accident or is misstated therein[.]" RAP 25(D)(2).
While the trial court may have exceeded its authority under RAP 25(D)(2) by modifying the record to include the limited POA, U.S. Bank's argument still fails because it does not articulate why its interests cannot be adequately represented by Rushmore. U.S. Bank asks this Court to disregard not only the limited POA, but also the fact that it and Rushmore were represented by the same counsel before the trial court. Johnson entered an appearance for Rushmore and, after the trial court refused to allow Rushmore to file its answer out-of-time and with the McNabbs' motion for default judgment pending, she also represented U.S. Bank on its motion to intervene. Representation of multiple parties by the same counsel indicates an alignment of interests among the parties. See Kindred Healthcare, Inc. v. Henson¸481 S.W.3d 825, 825 n.1 (Ky. App. 2014); see also Wells v. Conley, 384 S.W.2d 496, 498 (Ky. 1964). U.S. Bank fails to explain how its interests diverge from those of Rushmore. Considering this and their shared counsel, we cannot say the trial court's decision was clearly erroneous. Finally, U.S. Bank claims it was the proper party and was not properly served. In denying U.S. Bank's motion, the trial court reasoned that it claimed to be the proper party and that it was "the holder of the mortgage that is the subject of this case, but the official assignment filings of record with the Bracken County Clerk's office, as noted in the record, do not support this assertion." R. at 204. U.S. Bank's motion includes several exhibits, but no evidence that the mortgage had been assigned to it. According to the McNabbs' brief, the assignment of the mortgage from Wilmington to U.S. Bank was recorded in May 2023, almost two months after the trial court's decision and around the same time as the recording of the limited POA.
Regarding the limited POA, U.S. Bank argued this Court must decide an appeal on the same record which was before the trial court when it made its decision. See Fortney v. Elliott's Adm'r, 273 S.W.2d 51, 52 (Ky. 1954) (citation omitted). This principle also applies to the record regarding U.S. Bank's assignment of the McNabbs' mortgage. At the time the trial court decided U.S. Bank's motion, it had not proven its interest in the property. On appeal, U.S. Bank acknowledges the lack of recorded assignment. Without such evidence in the record, the trial court did not err in denying U.S. Bank's motion.
Based on the forgoing, the March 28, 2023 order of the Bracken Circuit Court is affirmed.
ALL CONCUR.