RICHARD CLAY AND ELEANOR M. CLAY APPELLANTS
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
FROM BOYLE CIRCUIT COURT HONORABLE HUNTER DAUGHTERY, SPECIAL
JUDGE ACTION NO. 16-CI-00039
AND ORAL ARGUMENT FOR APPELLANT: Theodore H. Lavit Lebanon,
AND ORAL ARGUMENT FOR APPELLEE: David P. Nutgrass
Lawrenceburg, Kentucky Elizabeth R. Sief Lexington, Kentucky
BEFORE: ACREE, COMBS AND MAZE, JUDGES.
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). 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.
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
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.
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
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.
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.
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.
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.
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 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.
raises several issues on appeal. We address each separately.
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
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 ...