United States District Court, E.D. Kentucky, Central Division
MEMORANDUM OPINION AND ORDER
M. HOOD SENIOR U.S. DISTRICT JUDGE
matter having come before the Court upon the Plaintiff's
Amended Motion for Judgment and Order of Sale [DE 33] against
the interests of the Defendants, Stephanie Harris (a/k/a
Stephanie Andre, a/k/a Stephanie Harris Andre), Paul Davis
Systems of Lexington, Inc. (d/b/a Paul Davis Restoration of
Lexington), Central Kentucky Management Services, Inc., Chase
Manhattan Mortgage Corporation, Unknown Spouse, if any, of
Stephanie Harris, and LVNV Funding, LLC, in and to the real
property which is subject to this action. Ultimately, the
mortgage granted to the United States against the subject
real estate has priority over other liens and Harris's
account is severely delinquent. Thus, Plaintiff's Motion
[DE 33] is GRANTED; Defendant's Motion
to Dismiss Judgment and Sale of House [DE 31] is
DENIED; and Plaintiff's first Motion for
Judgment and Order of Sale [DE 28] is DENIED AS
Factual and Procedural History
March 12, 2004, Defendant Stephanie Harris executed and
delivered a promissory note to the United States of America,
on behalf of the Department of Agriculture
(“USDA”), Rural Housing Service
(“RHS”) or Rural Development (“RD”).
[DE 1-2]. Contemporaneously, Harris executed and delivered a
real estate mortgage, recorded on March 24, 2004, against the
real property that is the subject of this action, which is
located in Jessamine County, Kentucky. [DE 1-3]. The note
contained a default provision, stating in part that:
If I do not pay the full amount of each monthly payment on
the date it is due, I will be in default. If I am in default,
the Government may send me a written notice telling me that
if I do not pay the overdue amount by a certain date, the
government may require me to immediately pay the full amount
of unpaid principal, all the interest that I owe, and any
late charges. . . . Even if, at a time when I am in default,
the Government does not require me to pay immediately as
describe[d] in the preceding sentence, the Government will
still have the right to do so if I am in default at a later
[DE 1-2 at 2, Page ID # 13]. Additionally, paragraph 22 of
the mortgage document states that RHS may accelerate the debt
and foreclose on the property to satisfy the remaining debt
obligation. [DE 1-3 at 5, Page ID # 19].
Complaint was filed in this action on January 1, 2018,
alleging that Harris had failed to make required loan
payments and was in default. [DE 1]. On May 24, 2018,
Defendant Paul Davis Systems answered. [DE 15]. Then, on May
30, 2018, Defendant Stephanie Harris, proceeding pro se,
answered and made general counterclaims against the United
States, alleging breach of contract, fraud, harassment, and
“stress relief.” [DE 18]. Finally, on June 14,
2018, Defendant Central Kentucky Management Services answered
and asserted a counterclaim and cross claim, requesting that
the Court “determine the priority of the liens and
interests in the subject property, order a judicial sale of
the property as a whole, and distribute the sale proceeds to
the parties herein in order of the priority of their
respective interests.” [DE 20].
court-appointed warning order attorney was appointed in an
attempt to notify Defendant Unknown Spouse, if any, of
Stephanie Harris about the pending foreclosure action. [DE
14]. The warning order attorney's reports indicate that
she was unable to locate or notify the Unknown Spouse, if
any, of Stephanie Harris of this litigation and the Court
accepted the report. [DE 23; DE 24; DE 26].
the United States moved for the entry of default against
Defendants Chase Manhattan Mortgage Corporation, Unknown
Spouse, if any, of Stephanie Harris, and LVNV Funding, LLC.
[DE 25]. The Clerk entered default on May 8, 2018, as the
three previously listed defendants were served and failed to
answer or appear. [DE 27].
the United States moved for judgment and order of sale on May
24, 2018. [DE 28]. On August 29, 2018, Defendant Stephanie
Harris moved for an extension of time to retain counsel [DE
29], which was granted. [DE 30]. On October 5, 2018, Harris
filed a pro se motion styled as a “Motion to Dismiss
Judgment and Sale of House.” [DE 31]. On November 5,
2018, the United States filed an amended motion for judgment
and order of sale. [DE 33]. Harris has not responded to the
amended motion. No. other Defendants have responded to the
initial motion for judgment and order of sale or the amended
motion for judgment and order of sale. As a result, this
matter is ripe for review.
is a “race-notice” jurisdiction and in order for
a mortgage to have first priority, one must not only be the
first to file the mortgage, deed or deed of trust, but the
filer must also lack actual or constructive knowledge of any
other mortgages, deeds or deeds of trust related to the
property.” Wells Fargo Bank, Minnesota, N.A. v.
Commonwealth, Fin. & Admin., Dep't of Revenue,
345 S.W.3d 800, 804 (Ky. 2011); see also Mortg. Elec.
Registration Sys., Inc. v. Roberts, 366 S.W.3d 405,
407-08 (Ky. 2012).
Kentucky common law, the first creditor to file a lien enjoys
the first right to the property. Wells Fargo, 345
S.W.3d at 804. This rule is also known as “first in
time, first in right.” Id. (citing Truck
Corp. of Ky. v. Hurry Up Broadway Co., 1 S.W.2d 990 (Ky.
action, the United States seeks to foreclose on and sell the
subject real property to satisfy, or at least partially
satisfy, the amount of its loan to Harris. An affidavit
provided by the United States indicates that as of January 9,
2018, Harris's loan account had been delinquent since
September 12, 2014, and that the account was delinquent in
the amount of $51, 071.58. [DE 1-5].
defendants have answered and appeared in this action.
Defendants' arguments and the priority of Defendants'
interests in the subject property is discussed below.
Interest of Defendant Stephanie Harris
initial matter, the Court primarily construes Harris's
October 5, 2018, “Motion to Dismiss Judgment and Sale
of House” [DE 31] as a response in opposition to
Plaintiff's Motion for Judgment and Order of Sale [DE
28]. The United States is correct that since a judgment has
not been entered in this case that there is no judgment to
set aside, as requested by Harris's motion. [See DE 33 at
3, Page ID # 197]. Still, the Court construes filings
“by their substantive content and not be their
labels.” See Coleman v. Ohio State Univ. Med.
Ctr., No. 2:11-cv-0049, 2011 WL 3273531, at *3 (S.D.
Ohio Aug. 1, 2011). Additionally, the law is clear that
sometimes courts may “ignore the legal label that a pro
se litigant attaches to a motion and recharacterize the
motion in order to place it within a different legal
category” to avoid unnecessary dismissal. See,
e.g., Castro v. United States, 540 U.S. 375,
381 (2003) (discussing a pro se litigant's motion
attacking his sentence and citing cases); Estelle v.
Gamble, 429 U.S. 97, 106 (1976). As such, the Court
primarily construes Harris's Motion [DE 31] as a response
in opposition to the motion for judgment and order of sale.
Harris maintains that she is not in default or, that if she
is in default, the default was caused by the actions of the
USDA. [DE 18 at 1, Page ID # 120]. Harris appears to assert
that the USDA failed to provide relief to assist her in
meeting the loan obligations, causing her loan to be in
default. [See id.]. Harris has attached a subsidy
repayment agreement, partial copies of reamortization