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Hays v. Nationstar Mortgage LLC

Court of Appeals of Kentucky

January 6, 2017

CARROLL L. HAYS, APPELLANT
v.
NATIONSTAR MORTGAGE LLC; SHANNON BRIGHT; VALUE FINANCE CORP.; KENTUCKIANA FINANCE, LLC; UNKNOWN SPOUSE (IF ANY) OF ALVIN LLOYD; AND LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, APPELLEES

         APPEAL FROM JEFFERSON CIRCUIT COURT HONORABLE BRIAN C. EDWARDS, JUDGE ACTION NO. 12-CI-400680.

          BRIEF AND ORAL ARGUMENT FOR APPELLANT: James P. McCrocklin Louisville, Kentucky

          BRIEF AND ORAL ARGUMENT FOR APPELLEE NATIONSTAR MORTGAGE LLC: Benjamin M. Rodriguez Cincinnati, Ohio

          BEFORE: D. LAMBERT, THOMPSON AND STUMBO, JUDGES.

          OPINION

          STUMBO, JUDGE:

         Carroll L. Hays appeals from an In Rem Judgment and Order of Sale rendered by the Jefferson Circuit Court. Hays argues that the Court improperly applied Kentucky Legal Sys. Corp. v. Dunn, 205 S.W.3d 235 (Ky. App. 2006), to determine that the lien of Plaintiff/Appellee Nationstar Mortgage LLC is superior to a prior Judgment Lien filed by Hays. Finding error, we REVERSE AND REMAND the Order on appeal.

         FACTS AND PROCEDURAL HISTORY

         On November 22, 2006, Hays filed a Notice of Judgment Lien in Jefferson County, Kentucky, against the Judgment debtor Alvin Lloyd. The Judgment and Lien resulted from child support arrearages owed by Lloyd to Hays in the amount of $13, 534.14.

         Thereafter, Shannon Bright purchased from Lloyd a parcel of real property situated in Louisville, Kentucky. To effectuate the purchase, Bright executed a Note in the amount of $90, 000 in favor of Nationstar. Bright also executed a Mortgage on the parcel to secure the payment of the Note.[1] The Jefferson Circuit Court would later determine that Nationstar had constructive notice of Hays' Lien prior to executing the Bright Note and Mortgage.

         On February 28, 2012, Nationstar filed the instant foreclosure action, alleging that Bright had defaulted on the Note. Nationstar also sought to enforce the Mortgage. Hays asserted an interest in the parcel by virtue of her Judgment Lien against Lloyd.

         On May 22, 2013, Hays moved for partial summary judgment seeking a ruling of lien priority over Nationstar's Mortgage. Relying on Mortg. Elec. Registration Sys., Inc. v. Roberts, 366 S.W.3d 405 (Ky. 2012), Hays argued that a prior interest in real property takes priority over a subsequent interest that was taken with actual or constructive notice of the prior interest. Nationstar filed a Response in Opposition, arguing that under Dunn, purchase money mortgages have priority over judgment lien creditors irrespective of timing and notice. Nationstar argued that under Dunn, a purchase money lender does not need to search for judgment liens, as purchase money lenders automatically have priority regardless of whether they had notice of any other interest.

         On June 21, 2013, Hays filed a Reply Memorandum in support of her Motion for Partial Summary Judgment. Hays argued that the Jefferson Circuit Court should not implicate the doctrine of equitable subrogation, which would have the effect of relieving Nationstar from negligent title examination and is at odds with Roberts.

         The court referred the matter to the Master Commissioner, who recommended that Hays' Motion for Partial Summary Judgment be denied. The Commissioner found that Dunn was controlling. Hays and Nationstar filed an exception and response, respectively, and the matter then went before the Jefferson Circuit Court for adjudication of Hays' Motion for Partial Summary Judgment. On April 29, 2014, the Jefferson Circuit Court rendered an Amended Order Adopting Master Commissioner's Report and Denying Defendant's Motion for Partial Summary Judgment. In support of the Order, the court concluded that "Dunn is the applicable law in this case and it holds that purchase money mortgages are superior to previously entered judgment liens against any property owned by mortgagor. Ms. Hays has failed to address the legal effect of Dunn, or why her lien allows for an unequivocal departure from Dunn." The Jefferson Circuit Court's In Rem Judgment and Order of Sale was rendered on December 22, 2014, and this appeal followed.[2]

         LAW ...


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