Frances Jane Embry v. Towd Point Mortgage Trust 2015-6 U.S. Bank National Association, as Indenture Trustee

RENDERED: FEBRUARY 11, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0493-MR
FRANCES JANE EMBRY AND
BOBBY R. EMBRY APPELLANTS
APPEAL FROM LARUE CIRCUIT COURT
v. HONORABLE JOSEPH GUINAN BALLARD, JUDGE
ACTION NO. 18-CI-00104
TOWD POINT MORTGAGE TRUST
2015-6 U.S. BANK NATIONAL
ASSOCIATION, AS INDENTURE
TRUSTEE APPELLEE
OPINION
AFFIRMING
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BEFORE: CLAYTON, CHIEF JUDGE; COMBS AND JONES, JUDGES.
COMBS, JUDGE: Bobby R. Embry and Frances Jane Embry, his wife, appeal
from the summary judgment and order of sale granted by the LaRue Circuit Court
in a foreclosure action brought by Towd Point Mortgage Trust 2015-6, U.S. Bank
N.A. as Indenture Trustee (“Towd Point”). The Embrys argue that Towd Point
failed to establish its standing as the real party in interest capable of bringing an
action on the note seeking foreclosure on the property. They also challenge the
sufficiency of the affidavits provided by Select Portfolio Servicing, Inc., Towd
Point’s servicing agent for the loan. After our review, we affirm.
On September 7, 2007, Bobby Embry executed a note in the amount
of $91,500.00 to Select Mortgage Group Ltd. The note was secured by real
property located at 400 Mill Road in Magnolia, Kentucky. Later, the mortgage,
executed by both Bobby and Frances Embry, was assigned to Towd Point. On
November 1, 2017, with the note in default, the Embrys entered into a loan
modification agreement with Towd Point.
On June 25, 2018, Towd Point filed this in rem action claiming that
the note remained in default. It sought to foreclose its mortgage lien. Towd Point
attached a copy of the original note and the various assignments of the mortgage to
its complaint.
The Embrys answered and contended that Towd Point had failed to
prove “by credible documentation” that it possessed the original note. They also
challenged the amount owed, but they failed to provide any basis for their
conclusion that the calculations were erroneous.
On December 4, 2018, Towd Point filed a motion for summary
judgment. It filed a memorandum in support of the motion and attached several
exhibits: (1) a copy of the original note executed by Bobby Embry to Select
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Mortgage Group, Ltd., and an allonge; (2) an assignment of the mortgage to Towd
Point, dated January 23, 2017; and (3) an affidavit from Towd Point’s servicing
agent, Select Portfolio Servicing, Inc. (“SPS”), stating that information of the prior
servicer had been integrated accurately into the business records of SPS and setting
out the amounts of the unpaid balance and accrued interest. Towd Point argued
that there were no genuine issues of material fact concerning the Embrys’ breach
of the note’s provisions, the amounts owed, or its right to foreclosure.
In response, the Embrys filed a motion to stay the proceedings while
they attempted to negotiate another loan modification agreement. The motion for
summary judgment was rescheduled for a hearing on April 1, 2019, and then again
on April 15, 2019. The motion was finally heard on June 17, 2019. However, on
July 25, 2019, Towd Point withdrew its motion for summary judgment because a
loss mitigation plan had been established for the Embrys.
Thereafter, on December 27, 2019, Towd Point filed an amended
motion for summary judgment. It explained that the Embrys had breached the
terms of the parties’ recent loan modification agreement. The matter was
scheduled to be heard on February 3, 2020; March 2, 2020; March 16, 2020; and
April 20, 2020. On April 14, 2020, Towd Point again withdrew its motion for
summary judgment on the basis that it was attempting to negotiate a new payment
plan with the Embrys.
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On March 5, 2021, Towd Point filed a second amended motion for
summary judgment. It filed SPS’s affidavit recapitulating the methods by which
its calculations were maintained and updating the amounts owed.
On April 5, 2021, the Embrys filed their response to the motion for
summary judgment. The Embrys argued that Towd Point had not shown that it
was the real party in interest by producing the original note. They also challenged
the sufficiency of the affidavits filed with the motion for summary judgment.
Towd Point filed a reply. It explained that the original note had been
negotiated by Select Mortgage Group Ltd., to CitiMortgage, Inc., and that
CitiMortgage, Inc., had thereafter endorsed the note in blank. Counsel represented
that Towd Point was in possession of the original note -- now bearer paper -- and
that it would be available for inspection by the court and the Embrys’ counsel.
Following a hearing, the LaRue Circuit Court concluded that Towd Point was
entitled to judgment as a matter of law. Summary judgment and an order of sale
were entered April 7, 2021. This appeal followed.
On appeal, the Embrys argue that the circuit court erred by granting
summary judgment because Towd Point failed to show that it is the real party in
interest. They argue that Towd Point was required to produce the original note to
establish its standing to pursue the litigation. They also contend that the affidavit
of SPS was inadequate to support the judgment because it refers to payment
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information that was merely “integrated” into the business records of SPS. They
argue that the affidavit: failed to claim that Towd Point possesses the note; failed
to verify the servicing agent’s calculations; and failed to itemize the advances that
Towd Point claimed had been made to the Embrys.
Summary judgment is properly granted where
the pleadings, depositions, answers to interrogatories,
stipulations, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.
CR1 56.03.
On appellate review, we must consider whether the circuit court
correctly determined that Towd Point was the real party in interest and that there
were no genuine issues of material fact concerning its right to foreclose the
mortgage lien. See Scifres v. Kraft, 916 S.W.2d 779 (Ky. App. 1996). Because
summary judgment involves only questions of law and not the resolution of
disputed material facts, we do not defer to the trial court’s decision. Goldsmith v.
Allied Building Components, Inc., 833 S.W.2d 378 (Ky. 1992). Instead, we review
the trial court’s interpretations of law de novo. Cumberland Valley Contrs., Inc. v.
Bell County Coal Corp., 238 S.W.3d 644 (Ky. 2007).
1
Kentucky Rules of Civil Procedure.
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The Embrys contend that the circuit court erred by concluding that
Towd Point was the real party in interest entitled to foreclose on the mortgage. We
disagree.
Kentucky’s rules of civil procedure provide that an action must be
prosecuted in the name of the real party in interest. CR 17.01. In foreclosure
actions, the real party in interest is the current holder of the note and mortgage.
Acuff v. Wells Fargo Bank, NA, 460 S.W.3d 335 (Ky. App. 2014). KRS2 355.1-
201(2)(u)1. defines a “holder” as “[t]he person in possession of a negotiable
instrument that is payable either to bearer or to an identified person that is the
person in possession[.]” When a note is endorsed in blank, it becomes a bearer
instrument. See Caruth v. Thompson, 55 Ky. 572, 575, 16 B. Mon. 572 (1856) (a
blank endorsement enables the holder of a note to negotiate, collect, or transfer it
to another by mere delivery). If a negotiable instrument is payable to bearer, it
may be negotiated by transfer of possession of the instrument alone. KRS 355.3-
201. Lawful possession of the note is sufficient to entitle the holder to enforce the
obligation secured by it. Stevenson v. Bank of America, 359 S.W.3d 466 (Ky. App.
2011).
The record reflects that CitiMortgage endorsed the original note in
blank, converting it to bearer paper. Towd Point asserts that it is the holder of the
2
Kentucky Revised Statutes.
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note and in lawful possession of it. It attached copies of all relevant documents to
its complaint and to its several motions for summary judgment. Counsel offered to
produce the original note. The Embrys never challenged the authenticity of the
documents produced by Towd Point; they never alleged that the note or mortgage
had been acquired unlawfully; and they never asked to inspect the original note.
Under these circumstances, we cannot conclude that Towd Point failed to establish
adequately that it was lawfully in possession of the note when it brought the
foreclosure action. Moreover, the assignment of the mortgage to Towd Point was
additional proof that it was the holder of the note. Consequently, there was
sufficient evidence to support the circuit court’s conclusion that Towd Point was
the real party in interest with standing to bring the foreclosure action.
Next, the Embrys challenge the sufficiency of the affidavits submitted
by Select Portfolio Servicing, Inc., Towd Point’s servicing agent for the loan.
Summary judgment may be granted on the basis of affidavits alone. Critser v.
Critser, 591 S.W.3d 846 (Ky. App. 2019). “If ‘uncontroverted affidavits fairly
disclosing the facts show that a genuine issue does not exist,’ the opposing party
must produce at least some evidence that amounts to more than mere allegations in
order to survive summary judgment.” Id. at 850 (quoting Hill v. Fiscal Court of
Warren County, 429 S.W.2d 419, 423 (Ky. 1968)). A party opposing a properly
supported motion for summary judgment must present some “affirmative evidence
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demonstrating that there is a genuine issue of material fact[.]” Hubble v. Johnson,
841 S.W.2d 169, 171 (Ky. 1992) (citing Steelvest, Inc. v. Scansteel Service Center,
Inc., 807 S.W.2d 476 (Ky. 1991)).
In its affidavits, SPS included statements attesting to the accuracy of
its records and an accounting of the amounts due. The attachments to the affidavits
included: copies of hundreds of pages of loan history; advance calculations; loan
status reports; foreclosure reports; a bailee agreement from Select Mortgage
Group, Ltd., to CitiMortgage delivering the original note; an endorsement of the
note by CitiMortgage in blank; and a bailee agreement from SPS to counsel
conveying the original assignment.
Despite a period of written discovery, the Embrys made no showing
that the sworn statements of SPS were untrue or inaccurate. In the absence of
countervailing proof or any reason whatsoever to believe that SPS’s records,
statements, or calculations were untrustworthy, the submitted affidavits were
sufficient evidence to support the motion for summary judgment.
Because there were no genuine issues of material fact, the circuit
court properly granted summary judgment and ordered a sale of the real property.
Accordingly, we affirm the judgment and order of the LaRue Circuit Court.
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ALL CONCUR.
BRIEF FOR APPELLANTS: BRIEF FOR APPELLEE:
Robert Frederick Smith Sarah S. Mattingly
Prospect, Kentucky K. Cassandra Carter
Louisville, Kentucky
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