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Deutsche Bank Trust Co. Americas v. Haffey

United States District Court, E.D. Kentucky, Central Division, Lexington

August 20, 2019

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee PLAINTIFF
v.
HEATHER McKEEVER HAFFEY, et al. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          DAVID L. BUNNING UNITED STATES DISTRICT JUDGE

         This 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.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         This 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.[1] (Doc. # 20).

         The 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.

         Following 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.[2] Id.

         After 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).

         On 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.

         On July 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.

         Finally, 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.[3]

         II. ANALYSIS

         A. Defendants' Motion to Dismiss

         Defendants' 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.

         B. Plaintiff's Motion for Judgment, Order of Sale, Attorneys' ...


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