United States District Court, E.D. Kentucky, Central Division, Lexington
MEMORANDUM OPINION AND ORDER
L. BUNNING UNITED STATES DISTRICT JUDGE
matter is before the Court on Defendants Heather and Shane
Haffey's Motion to Dismiss (Doc. # 124) and Plaintiff
Deutsche Bank's Motion for Judgment, Order of Sale,
Attorneys' Fees, and Appointment of Master. (Doc. # 125).
Plaintiff having submitted a Response to Defendant's
Motion to Dismiss (Doc. # 126), and the time for filing of
responses and replies under the Local Rules having expired,
See LR 7.1, the Motions are now ripe for the
Court's review. For the reasons set forth below,
Plaintiff's Motion is granted in part
and Defendants' Motion is denied.
FACTUAL AND PROCEDURAL BACKGROUND
action has now been pending before the Court for almost ten
years. On November 12, 2009, Plaintiff Deutsche Bank Trust
Company Americas (“Deutsche Bank”), as trustee
for the 2007 QS-10 Trust, initiated a lawsuit seeking to
foreclose on property located at 3250 Delong Road, Lexington,
Kentucky 40515, which was jointly owned by Heather and Shane
Haffey (“the foreclosure action”). (Doc. # 1). In
the Complaint, Deutsche Bank alleged that the Haffeys, who
are married, had defaulted on their mortgage, owing a sum of
$1, 082, 278.49. Id. The Complaint also named Gentry
Mechanical Systems, Inc. (“Gentry”), which
“may claim an interest on the Property by virtue of a
Mechanics and Materialman's Lien.” Id.
¶ 19. Deutsche Bank also brought a separate action in
this Court for declaratory relief (“the
declaratory-judgment action”), seeking a declaration
that the loan rescission alleged by the Haffeys is invalid
and that the note and mortgage remain effective. See
No. 5:08-cv-459 (E.D. Ky. 2008). The two actions were
consolidated on February 11, 2010. (Doc. # 20).
Haffeys filed a Counterclaim and Third-Party Complaint on
February 9, 2010, naming Deutsche Bank and several other
parties. (Doc. # 17). The Haffeys also moved to dismiss the
Complaint. (Doc. # 19). The Court denied Defendants'
Motion to Dismiss and dismissed the Haffeys' Counterclaim
and Third-Party Complaint. (Docs. # 27, 28, and 39). On
January 23, 2012, the Court granted summary judgment in favor
of Deutsche Bank in the foreclosure action, finding no
genuine issue of material fact as to whether Deutsche Bank
was entitled to foreclose on the Haffeys' property. (Doc.
# 44). In doing so, the court rejected Defendants'
arguments that the promissory note was not valid and
enforceable and that Deutsche Bank was not a valid holder of
the note. Id. at 2. The Court also granted summary
judgment for Deutsche Bank in the parallel
declaratory-judgment action. No. 5:08-cv-459 (E.D. Ky. 2018),
ECF No. 135. The Haffeys appealed the Court's grant of
declaratory relief but not its grant of summary judgment in
favor of Deutsche Bank in the foreclosure action.
See No. 5:08-cv-459 (E.D. Ky. 2018), ECF No. 164.
the Court's grant of summary judgment in the foreclosure
case, Deutsche Bank filed a Motion for Judgment, Order of
Sale, Appointment of Special Master, and Attorneys' Fees.
(Doc. # 47). The Court denied that Motion without prejudice
in light of the Haffeys' pending appeal in the
declaratory-judgment action. (Doc. # 48). Plaintiff then
moved the Sixth Circuit to clarify that the pending appeal
did not implicate any of the orders in the foreclosure
action. See No. 5:08-cv-459 (E.D. Ky. 2018), ECF No.
189 at 3. The Sixth Circuit granted Deutsche Bank's
motion and dismissed Defendants' appeal in part
“insofar as they seek review of any order entered in
[the foreclosure action].” Id. at 3. The Sixth
Circuit remanded the case back to the district court for
further proceedings in the foreclosure action. Id.
the remand, Deutsche Bank filed a Renewed Motion for Order of
Sale. (Doc. # 50). However, before that Motion could be
decided, Defendants filed a suggestion of bankruptcy, and the
Court stayed this matter. (Doc. # 74). The stay was lifted on
June 28, 2017 (Doc. # 76), and the Court granted Deutsche
Bank's Motion to Reopen the Case. (Doc. # 93).
August 24, 2018, Plaintiff filed a Motion to Amend its
Complaint to add parties with an interest in the property at
issue in the foreclosure action. (Doc. # 100). Specifically,
Plaintiff named FIA Card Services, N.A. (“FIA”),
which had a judgment lien against Shane Haffey, and Gentry
Mechanical Systems, Inc., which had a mechanic's lien on
the property. Id. Plaintiffs also named the
Commonwealth of Kentucky and Fayette County, which are the
taxing authorities in the jurisdiction where the property is
located. Id. The Court granted the Plaintiff's
Motion to Amend and ordered that the First Amended Complaint
be filed on the Docket. See (Docs. # 110 and 111).
The record demonstrates that Defendants FIA, the Commonwealth
of Kentucky, and Fayette County, were all properly served
with the First Amended Complaint. (Docs. # 119, 120, 121, and
122). The Commonwealth of Kentucky and Fayette County
answered the First Amended Complaint on June 3, 2019. (Doc. #
117). FIA and Gentry did not file answers.
9, 2019, the Haffeys filed a Motion to Dismiss the First
Amended Complaint, arguing that Deutsche Bank lacks the
capacity to sue on behalf of the 2007 QS-10 Trust. (Doc. #
124 at 3-5). The Haffeys also contend that Deutsche Bank
fails to state a claim for which relief can be granted
because the promissory note at issue is unenforceable under
Kentucky law. Id. at 5-8. In its Response, Plaintiff
Deutsche Bank first asserts that Defendants' arguments
about Plaintiff's right to foreclose on the property are
barred by res judicata. (Doc. # 126 at 4-5). Furthermore,
Plaintiff argues that, as holder of the note, it is entitled
under Kentucky law to enforce the note and to foreclose on
the associated property. Id. at 5.
on July 25, 2019, Deutsche Bank filed a Renewed Motion for
Final judgment, Order of Sale, Appointment of Master, and
Attorneys' Fees. (Doc. # 125). None of the Defendants
have responded to the Motion.
Defendants' Motion to Dismiss
Motion to Dismiss must be denied. Defendants' argument
that Deutsche Bank lacks the capacity to sue is precluded by
this Court's earlier Orders and is otherwise meritless.
The Court has already found Deutsche Bank to be the current
holder of the note and “that Deutsche Bank is entitled
to foreclose on the [Haffeys'] property.” (Doc. #
44 at 2). The holder of a note is “entitled to enforce
the obligations secured thereby.” Stevenson v. Bank
of Am., 359 S.W.3d 466, 470 (Ky. Ct. App. 2011);
accord Ky. Rev. Stat. § 355.3-301 (stating that
a “‘[p]erson entitled to enforce' an
instrument” includes “[t]he holder of the
instrument”). In addition, contrary to Defendants'
assertion, the First Amended Complaint successfully states a
claim because it attaches the promissory note signed by
Heather Haffey and alleges that “Plaintiff is entitled
to enforce a promissory Note made in the original sum of $1,
000, 000.00 and executed by Defendant Heather M.
Haffey.” (Docs. # 100-5 and 111). As such,
Defendants' Motion to Dismiss is denied.
Plaintiff's Motion for Judgment, Order of Sale,