Cobb v. Wells Fargo Home Mortg., Inc., Kentucky App.

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Cobb v. Wells Fargo Home Mortg., Inc., Kentucky App.

Postby Administrator » Sun Sep 14, 2014 11:20 am

Cobb v. Wells Fargo Home Mortg., Inc.
Not Reported in S.W.3d, 2009 WL 1636281 (Ky.App.)


MOORE, Judge.

*1 This is a foreclosure action wherein the Scott Circuit Court entered a default judgment, an order of sale, and an order confirming sale after Wells Fargo Home Mortgage, Incorporated foreclosed on the mortgage of Theron Cobb and Crystal Cobb. The Cobbs appeal the circuit court's orders (1) denying their motion for leave to file an answer and counterclaims; (2) affirming an April 1, 2004, judgment of foreclosure by default; (3) a May 4, 2006, order of sale; and (4) an order confirming sale on September 7, 2006. We affirm.

The underlying proceedings in this action contain numerous dates, which are of critical importance in this matter to understanding this appeal. Accordingly for ease of understanding this case, we have set forth the following timeline delineating the facts most relevant to this case:

• On May 21, 2001, the Cobbs borrowed $113,596.00 from Wells Fargo. The Cobbs used the proceeds to purchase a residence located at 102 Rabbit Run Road, Georgetown, Kentucky 40324 (“the Property”). The loan was then secured by a mortgage upon their residence.

• On August 1, 2003, a payment of interest and principal was due on the loan, and Wells Fargo claimed that it was never received. Wells Fargo accelerated the loan sometime between August 1, 2003, and November 5, 2003.

• On November 5, 2003, Wells Fargo filed a foreclosure action against the Cobbs.

• On November 6, 2003, the Scott County Sheriff served a summons and complaint upon Crystal in person; however, the Sheriff was unable to serve Theron. The Sheriff's return contained a notation that Theron was “in military for next year.” Nothing in the record reflects that Theron was actually in military service at that time, and the Cobbs do not dispute that he was not in active service with the military on November 6, 2003. There is no explanation in the record regarding the erroneous notation made by the Sheriff that Theron was in the military.

• On December 15, 2003, Wells Fargo investigated Theron's military status by searching the computerized active duty roster maintained by the Department of Defense and obtained a printout from the Department of Defense Manpower Data Center website. The printout indicated that Theron was not on active duty.

• On December 23, 2003, Wells Fargo filed an Affidavit for Warning Order Attorney pursuant to Civil Rule (CR) FN1 4.07 after further unsuccessful efforts to serve Theron. Pursuant to the Affidavit, Edward Thompson was appointed as the Warning Order Attorney.

FN1. Kentucky Rules of Civil Procedure

• On January 8, 2004, Thompson issued a report indicating that his attempt to serve Theron by certified mail, return receipt requested, was unsuccessful. In addition, Thompson's report indicated that he could find no defense Theron may assert, unless “Crystal Cobb is deemed as an individual who can not accept service for Theron Cobb, in which case he may assert the defense of lack of notice to these proceedings.”

*2 • On March 17, 2004, Wells Fargo filed a notice of its motion for default judgment. At that time, the Cobbs had not made an appearance in this case, and Wells Fargo did not send the Cobbs the notice of its motion for default judgment. Wells Fargo sought an in personam judgment against Crystal, and an in rem judgment against Theron.

• On April 1, 2004, the Scott Circuit Court found in favor of Wells Fargo and entered a judgment and order of sale. In its order, the court found that Theron had been summoned more than fifty days earlier by a warning order attorney and had failed to appear. The court also found that Crystal had been duly summoned more than twenty days earlier and also had failed to appear. In addition, the court found no evidence that, at that time, either Theron or Crystal was in the military service.

Pursuant to the order, the court entered a judgment in personam against Crystal Cobb for $112,126.00, with interest from July 1, 2003, until paid, together with late fees, advances for taxes and insurance, expenses of the foreclosure sale, and attorneys' fees. The court also issued a judgment in rem against Theron Cobb and ordered the property be sold by the Master Commissioner to satisfy the amounts owed to Wells Fargo.

• On April 1, 2004, the Clerk of the Scott Circuit Court mailed a copy of the judgment and order of sale to the Cobbs at the Property and issued an order referring the case to the Master Commissioner to conduct a sale of the Property.

• On April 29, 2004, Theron was deployed to combat in Iraq.

• On May 11, 2004, Wells Fargo sent a letter to the Cobbs, confirming receipt of a letter sent to Wells Fargo from a commanding officer on behalf of Theron.

• On May 13, 2004, the Master Commissioner sent a notice of sale to the Cobbs at the Property informing them that the Property would be sold on June 8, 2004.

• On May 27, 2004, Crystal furnished proof of Theron's military service to Wells Fargo's counsel, Thomas Burnett.

• On June 7, 2004, Wells Fargo requested that the foreclosure sale be canceled. The Master Commissioner sent a report of canceled sale to the Cobbs at the Property address on June 8, 2004.

• On October 27, 2004, the court appointed Rand Marshall to act as guardian ad litem to protect Theron's interests while he was in active military service pursuant to the Soldiers and Sailors Civil Relief Act of 1940 (“SSCRA”), 50 APP. U.S.C.A., Section 520 et. seq. Marshall did not file any responsive pleadings on Theron Cobb's behalf, nor did he request a stay of the proceedings. Marshall was not appointed on behalf of Crystal. Marshall's only role was guardian ad litem for Theron while he was on active military duty. Beyond the limited role of Marshall, Theron was unrepresented throughout the proceedings until the motions under review presently were filed. Likewise, Crystal was not represented by legal counsel until the motions presently under review were filed.

*3 • On March 16, 2006, Wells Fargo moved the court to order a Master Commissioner's sale. The Cobbs claim that Wells Fargo sent a copy of its motion to the Cobbs at the Property but did not send a copy of its motion to Marshall.

• On May 4, 2006, a second order of sale was entered, again directing the Master Commissioner to set a date for sale of the property. The court sent a copy of the order to the Cobbs at the Property but did not send a copy of the order to Marshall. A notation on the order stated “DEFENDANTS IN DEFAULT AND NOT REPRESENTED BY COUNSEL OF RECORD.”

• On May 30, 2006, Theron's period of active duty service concluded.

• On July 13, 2006, the Master Commissioner issued a notice of sale set for August 15, 2006. The court sent a copy of the notice to the Cobbs at the Property. They do not dispute that they received this. Thus, Crystal had notice of all the proceedings taking place in the foreclosure action, and Theron had notice that a default judgment had been entered. He also had at least a month's notice that the Property would be sold. Neither was represented by legal counsel at this time.

• On August 15, 2006, the sale was conducted with Wells Fargo's making the highest bid of $125,000 and taking a credit on the purchase price in the amount of the judgment in its favor.

• On September 7, 2006, the court confirmed the sale by order.

• On September 29, 2006, Wells Fargo moved the court for a writ of possession, mailing a notice of its motion to the Cobbs at the Property.

• On January 24, 2007, the Cobbs, now represented by counsel, filed combined motions to void the judgment and order of sale entered on April 1, 2004, and all subsequent orders for the sale of the Property, and to allow the Cobbs to file an answer and counterclaims.

The Cobbs alleged in their motions before the circuit court that it did not have personal jurisdiction over Theron. Also, their motions listed additional defenses and counterclaims alleged to have arisen from actions taken by Wells Fargo on May 7 and October 1, 2004 in violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. , the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. , and the SSCRA.

• On June 13, 2007, the court issued an opinion and order denying the Cobbs' motions. The court concluded the following: the Cobbs had been properly served; the military affidavit was accurate and sufficient to support that Theron was not entitled to protection from the default judgment of April 1, 2004; the Cobbs' motion for relief from judgment was untimely; and the Cobbs failed to demonstrate a meritorious defense.

• On June 25, 2007, the Cobbs filed a motion for reconsideration, which the court denied on August 1, 2007.

Having set forth the factual and procedural history of this case, we turn to the basis of the Cobbs' appeal, which is threefold: (1) the Cobbs contend that Wells Fargo's failure to give notice to Marshall of its March 16, 2006, motion for an order of sale “made all orders void” pursuant to CR 5.02 and/or the SSCRA; (2) the Cobbs contend that it was error for the court to deny their motion to file an answer and counterclaims; and (3) the Cobbs contend that the court erred in sustaining its prior judgment of April 1, 2004, its order of sale of May 4, 2006, and its order confirming sale on September 7, 2006, as these orders should have been voidable at their request pursuant to the SSCRA.

*4 “Although default judgments are not favored, a trial court is vested with broad discretion when considering motions to set them aside, and an appellate court will not overturn the trial court's decision absent a showing that the trial court abused its discretion .” PNC Bank. v. Citizens Bank of Northern Kentucky, Inc., 139 S.W.3d 527, 530 (Ky.App.2003). This standard of review applies equally to a denial of relief from judgment. White v. Commonwealth, 32 S.W.3d 83, 86 (Ky.App.2000). For a trial court to have abused its discretion, its decision must have been arbitrary, unreasonable, unfair, or unsupported by sound legal principles. Clark v. Commonwealth, 223 S.W.3d 90, 95 (Ky.2007).

The Cobbs first claim that the court's order of May 4, 2006, and the court's subsequent September 7, 2006, confirmation of that order are void for lack of notice. They rely on CR 5.02 FN2 and argue that as a result of Wells Fargo's failure to send notice of its March 16, 2006, motion and the circuit court's subsequent failure to send copies of either of its two above-referenced orders to Theron's guardian ad litem, Marshall, that these orders are void. FN3

FN2. In relevant part, CR 5.02 mandates that “[w]henever under these Rules service is required or permitted to be made upon a party represented by an attorney ... the service shall be made upon the attorney....”

FN3. As Crystal was not represented by counsel and does not dispute that she was noticed on the motion and orders, she cannot claim that the orders are void in regard to her.

Wells Fargo does not dispute that Marshall was not noticed on the March 16, 2006, motion to set a date for the sale of the Property. However, in light of the surrounding circumstances of this case, we conclude that the circuit court did not abuse its discretion in denying the relief sought by the Cobbs, i.e., that the lack of notice to Marshall of the motion to set a date to sell the Property warrants voiding the May and September orders of the court or the August 15, 2006, sale. Our decision rests on the facts of this matter.

As an initial matter, the scope of Marshall's representation must be decided. During the period Marshall served as Theron's guardian ad litem, there were only two events that are relevant to this discussion: (1) the March 16, 2006, motion to set a date for the sale of the Property; and (2) the May 4, 2006, order of sale directing the Master Commissioner to set a date for sale of the Property.

We conclude that Marshall's representation of Theron as guardian ad litem terminated, at the latest, on May 30, 2006, upon Theron's return from active military duty. In general, the role of a guardian ad litem is to protect the interests of a person who, because of a disability, cannot protect his own interests. By operation of statute, Theron's active military duties were the very disability requiring the appointment of Marshall as his guardian ad litem. In general, the duties of a guardian ad litem “continue until the final termination of the cause, unless he is removed by the court, or the guardianship is terminated by the arriving of the infant at the age of majority.” Staggenborg v. Bailey, 118 Ky. 301, 80 S.W. 1109, 26 Ky.L.Rptr. 188, 188 (Ky.App.1904). In other words, the guardianship terminates when the disability is removed.

*5 Moreover, the stated purpose of the SSCRA is “to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of service members during their military service.” 50 App. U.S.C.A. § 502(2). Thus, it has been stated by one of the few courts addressing the scope of representation of an attorney appointed under this act that:

[t]he utmost service of a person appointed to appear for a soldier in the military service, either required or suggested, is towards procuring such temporary stay of proceedings as is necessary to protect the soldier's interests.

In re Ehlke's Estate, 250 Wis. 583, 27 N.W.2d 754, 757 (Wis.1947).

The Cobbs have not favored this Court with any authority, statutes, or caselaw that would lead us to conclude that once the purpose of the appointment of Marshall as Theron's guardian ad litem was removed on May 30, 2006, Theron would be allowed Marshall's continued representation as guardian ad litem. However, we find as persuasive authority, John S. Vento and Scott A. Kornspan, Protection Under the Soldiers' and Sailors' Civil Relief Act for United States Military and Activated Reservists, 65-FEB FLBJ 32, 33 (1991), suggesting that if a serviceman wishes to work out an arrangement for the appointed attorney's full and independent service beyond the limited scope of the guardian ad litem relationship, the appointed counsel must agree to this change in the attorney-client relationship; notice should be provided to the plaintiff and the court; and fee arrangements should be made directly between the attorney and the serviceman. Certainly, Theron could have worked out an arrangement for Marshall's continued service, but Theron has not represented anything to this Court to indicate such an arrangement ever occurred.

We conclude that upon his discharge from military service on May 30, 2006, Theron was no longer “disabled” ( i.e., absent), and Marshall's role as guardian ad litem terminated. Consequently, the July 13, 2006, notice of sale was effectively served upon Theron, a nonrepresented party, at the Property, giving him ample notice of the August 15, 2006, sale date.

Moreover, we conclude that despite the lack of notice to Marshall, truly all that he could have done was file a response requesting the date for the sale be set after May 30, 2006, or that the matter be stayed until May 30, 2006, when Theron returned from active military duty. Thus, had Marshall been noticed and responded, the outcome would not have been different because it was not until July 13, 2006, that the Master Commissioner issued a notice of sale to take place on August 15, 2006.

The only avenue available for Theron to void the May 4, 2006, order, the September 7, 2006, order, and the resulting sale, would have been to resort to relief available under CR 60.02. Under that rule, a party claiming that an order or judgment is void may set it aside, provided that they act to do so within a reasonable amount of time. See Gross v. Commonwealth, 648 S.W.2d 853 (Ky.1983).

*6 Here, the July 13, 2006, notice of sale, the August 16, 2006, report of sale, September 29, 2006, notice of motion for writ of possession, and November 13, 2006, re-notice of motion for writ of possession were either mailed to the Cobbs at the Property, or posted on the front door of the Property. Theron's period of active duty ended on May 30, 2006, and he was unrepresented at that time. Consequently because these notices were sent to the Cobbs' Property, Theron cannot argue that he did not have actual notice of the proceedings. In light of this, combined with a default judgment and order of sale having been entered over two years earlier, as well as an impending sale date of August 15, 2006, (for which Theron had at least 30 days' notice), we conclude that that it was unreasonable for the Cobbs to do nothing to protect their interests until January 24, 2007, when motions to set aside the various orders of the court were filed.

The Cobbs' unreasonable delay in challenging the validity of the orders and sale date weighs in favor of concluding the trial court did not abuse its decision in denying the relief they sought. Because Theron was not in active military service at the time the default judgment and order of sale were entered, he has no grounds to seek relief from the judgment and order. He has not supplied us with any authority that would entitle him to such relief. Accordingly, we find no abuse of discretion or error on the circuit court's part.

The Cobbs' second and third arguments each claim, in substance, that it was error for the court to refuse to set aside the April 1, 2004, entry of default judgment and to refuse to allow their answer and counterclaims. We find that both arguments lack merit.

We turn first to the Cobbs' contention that the April 1, 2004, default judgment was voidable because it was entered in violation of a stay existing under the SSCRA. The relevant provision of the SSCRA in effect during the circumstances of this case provides, in pertinent part, as follows:

If in an action covered by this section it appears that the defendant is in military service, the court may not enter a judgment until after the court appoints an attorney to represent the defendant. If an attorney appointed under this section to represent a servicemember cannot locate the servicemember, actions by the attorney in the case shall not waive any defense of the servicemember or otherwise bind the servicemember.

50 U.S.C.App. § 521(b)(2).

In short, until the court appoints an attorney to represent a person who is in military service, a stay is in place and default judgment may not be entered against that person. Here, the court entered default judgment on April 1, 2004. It is undisputed that Theron was not in military service at that time and did not begin his military service until April 29, 2004. Therefore, a stay was not in place when the default judgment was entered, and the SSCRA provides no relief to the Cobbs. Consequently, this argument fails as a matter of law.

*7 We turn finally to the contention that the trial court should have vacated its entry of default judgment because the Cobbs claim to have meritorious defenses arising from lack of personal jurisdiction and violations of the SSCRA, FDCPA, and FCRA. We likewise find these arguments to lack merit.

“The moving party cannot have a default judgment set aside and achieve his day in court if he cannot show good cause and a meritorious defense.” Green Seed Co., Inc. v. Harrison Tobacco Storage Whse., Inc., 663 S.W.2d 755, 757 (Ky.App.1984). Moreover, a trial court does not abuse its discretion in declining to set aside a default judgment where no timely showing of the circumstances or meritorious defense was made. See Jacobs v. Bell, 441 S.W.2d 448, 449 (Ky.1969). Here, we cannot find that the trial court's refusal to allow the answer and counterclaims was arbitrary, unreasonable, unfair or unsupported by sound legal principals in reaching its conclusion.

Regarding the issue of lack of personal jurisdiction, the court found that both of the Cobbs had been properly served under the Civil Rules, and we agree. Crystal had been personally served; in addition, the court found that constructive service had been affected against Theron for the purpose of an in rem judgment through the Warning Order Attorney procedure and compliance with CR 4.05, CR 4.06, and CR 4.07. The Cobbs fail to challenge the validity of this finding or cite to any authority that would show that this finding was an abuse of discretion. Thus, we find no such abuse.

Similarly, we find no error in the court's refusal to set aside its April 1, 2004, judgment upon the basis of the additional defenses that the Cobbs propose derive from the SSCRA, FDCPA, and FCRA. The Cobbs' arguments regarding these statutes are twofold: first, that that any actions taken by Wells Fargo subsequent to Theron's deployment on April 29, 2004, violated a stay of proceedings arising from the SSCRA; and second, that Wells Fargo charged fees and interest in excess of 6 percent sometime after April 29, 2004, and during Theron's period of military service.

Addressing each argument in turn, we have discussed above and found as a matter of law that no stay under the SSCRA ever existed; thus, we find no abuse of discretion in refusing to vacate the judgment on that basis. Furthermore, the actions the Cobbs claim Wells Fargo took in violation of the SSCRA, FDCPA and FCRA do not constitute a defense to the substance of the underlying foreclosure action that was the subject of the entry of default judgment of April 1, 2004, namely, they do not go to the issue of whether the Cobbs actually defaulted on their mortgage. Furthermore, by the Cobbs' own admission, these acts occurred after the entry of judgment. Any claims arising from these actions would not render the April 1, 2004, judgment itself invalid or offer a relevant basis upon which to vacate it, and the Cobbs offer no authority to the contrary. Thus, we find no merit in these additional proposed defenses, and therefore no abuse of discretion in refusing to vacate the judgment on this basis.

*8 For the reasons as stated, we hereby affirm the Scott Circuit Court.


Cobb v. Wells Fargo Home Mortg., Inc.
Not Reported in S.W.3d, 2009 WL 1636281 (Ky.App.)
David A. Szwak
Bodenheimer, Jones & Szwak, LLC
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