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Clay v. WesBanco Bank, Inc.

Court of Appeals of Kentucky

April 5, 2019

RICHARD CLAY AND ELEANOR M. CLAY APPELLANTS
v.
WESBANCO BANK, INC. f/k/a UNITED BANK & CAPITAL TRUST COMPANY f/k/a FARMERS BANK AND CAPITAL TRUST CO.; DAVID P. NUTGRASS, ITS ATTORNEY; AND BOYLE HEATING AND AIR CONDITIONING, INC. APPELLEES

          APPEAL FROM BOYLE CIRCUIT COURT HONORABLE HUNTER DAUGHTERY, SPECIAL JUDGE ACTION NO. 16-CI-00039

          BRIEF AND ORAL ARGUMENT FOR APPELLANT: Theodore H. Lavit Lebanon, Kentucky

          BRIEF AND ORAL ARGUMENT FOR APPELLEE: David P. Nutgrass Lawrenceburg, Kentucky Elizabeth R. Sief Lexington, Kentucky

          BEFORE: ACREE, COMBS AND MAZE, JUDGES.

          OPINION

          ACREE, JUDGE

         Appellants Richard and Eleanor Clay (Clay) appeal the February 7, 2017, judgment and order of sale of property by a special judge in the Boyle Circuit Court in favor of United Bank & Capital Trust, formerly known as Farmers Bank & Capital Trust Company and now known as WesBanco Bank, Inc. (UBCT).[1] Clay raises issues regarding acceleration of the mortgage, discovery practice, lien superiority, failure to recuse, and the supersedeas bond amount set by the court. After careful review, we affirm.

         FACTS AND PROCEDURE

         This appeal emanates from a mortgage executed by Clay in favor of UBCT on property located in Mercer and Boyle Counties. On February 27, 2006, UBCT's predecessor recorded the mortgage on Clay's property located at 319 West Main Street, Danville, Kentucky, in the Boyle County Clerk's office to secure payment of a promissory note in the original principal amount of $172, 000, with interest. Boyle Heating and Air Conditioning, Inc. became a party to this action to assert its claim secured by a mechanic's lien on the subject property.

         On February 15, 2016, UBCT filed an action to collect the note and to foreclose on Clay's Boyle County property securing it. Clay's motion to dismiss delayed his answer. Additionally, the original trial judge's recusal necessitated the appointment of the Honorable Hunter Daugherty as Special Judge. When Clay filed an answer in September 2016, it was accompanied by a counterclaim alleging abuse of process and malicious prosecution against UBCT.

         Soon after filing his answer and counterclaim, Clay filed an affidavit for the recusal of the special judge. The judge declined to recuse. Clay then pursued his right pursuant to KRS[2] 26A.020 and requested the Chief Justice of the Kentucky Supreme Court to order recusal. The Chief Justice entered an order stating that Clay "failed to demonstrate any disqualifying circumstance" that would require recusal; however, the order was entered without prejudice of any party to seek appellate review after entry of the final judgment.

         Shortly thereafter, UBCT filed a motion for summary judgment on its foreclosure claim. The record shows, and the trial court found after trial, that Clay made his most recent mortgage payment on July 27, 2015, and that since February 17, 2016, Clay was delinquent in paying taxes assessed by Boyle County and the Danville School District relative to the subject property. On December 16, 2016, the trial court found these material facts were still the subject of genuine dispute and denied UBCT's summary judgment motion.

         In the same order, the trial court bifurcated UBCT's equity-based foreclosure claim and Clay's law-based counterclaims and set the matter for trial on the former in late January 2017. Clay's motions to continue were denied. The court conducted a bench trial on January 25, 2017, and found, based on facts already noted regarding mortgage payments and tax delinquency, that Clay was in default on the note and the remedy provisions of the mortgage were applicable, including foreclosure.

         The trial court issued an order of sale for the property on February 7, 2017. Clay filed a motion to alter, amend, or vacate on February 17, 2017, which the trial court denied on March 6, 2017. A notice of appeal was filed on March 17, 2017, in conjunction with the supersedeas bond. UBCT objected to the bond form and surety and a hearing was conducted on this matter on June 17, 2017, when the court increased the amount of the supersedeas bond.

         STANDARD OF REVIEW

         We will not set aside a judgment following a bench trial unless it is "clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." CR[3] 52.01. A factual finding is not clearly erroneous if it is supported by substantial evidence, which is defined as evidence of sufficient probative value to induce conviction in the mind of a reasonable person. Gosney v. Glenn, 163 S.W.3d 894, 898-99 (Ky. App. 2005). The trial court's conclusions of law, however, are reviewed de novo. Id.

         ANALYSIS

         Clay raises several issues on appeal. We address each separately.

         Default payments

         Clay argues that UBCT did not properly accelerate the loan secured by the mortgage because it did not make a demand that the note be paid. Clay further asserts that it was error for UBCT to refuse mortgage payments that would have brought the debt current and ahead. UBCT responded by asserting that any such refusal was permitted because Clay had already defaulted on the mortgage and, under the terms of the mortgage, that permitted UBCT to accelerate the debt and refuse any subsequent payments. UBCT also points out that Clay did not raise this specific argument as to the demand for payment at trial.

         Clay relies upon KRS 355.1-309 as the basis for his argument that UBCT be required to make a demand. The statute states:

A term providing that one (1) party or that party's successor in interest may accelerate payment or performance or require collateral or additional collateral "at will" or when the party "deems itself insecure," or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired. The burden of establishing lack of good faith is on the party against which the power has been exercised.

KRS 355.1-309. In response, UBCT argues the statute applies only to an acceleration that permits acceleration "at will" - i.e., at the unilateral option of the creditor - or when the creditor can accelerate by unilaterally deeming itself insecure. The statute is inapplicable, UBCT continues, when express terms of the mortgage set out ...


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