Choate v. Bank of Cadiz & Trust Co.

• Decision Date: 17 June 2016
• Docket Number: NO. 2015-CA-000435-MR,2015-CA-000435-MR
• Parties: JEFF H. CHOATE, a.k.a. JEFF L. CHOATE; AND ELLA CHOATE APPELLANTS v. BANK OF CADIZ & TRUST CO. APPELLEE
• Court: Kentucky Court of Appeals

JEFF H. CHOATE, a.k.a. JEFF L. CHOATE; AND ELLA CHOATE APPELLANTS v. BANK OF CADIZ & TRUST CO. APPELLEE

NO. 2015-CA-000435-MR

Commonwealth of Kentucky Court of Appeals

JUNE 17, 2016

NOT TO BE PUBLISHED

APPEAL FROM TRIGG CIRCUIT COURT

HONORABLE CLARENCE A. WOODALL, III, JUDGE

ACTION NO. 13-CI-00152

OPINION

AFFIRMING

** ** ** ** **

BEFORE: CLAYTON, JONES, AND TAYLOR, JUDGES.

CLAYTON, JUDGE:

Appellants Jeff and Ella Choate appeal a grant of summary judgment in the Bank of Cadiz & Trust Co.'s favor. For the following reasons, we affirm.

FACTS

I. Trigg Circuit Court Action No. 02-CI-00189: the Deficiency Judgment.

The instant appeal is of a declaratory judgment action instituted to obtain funds being held in a deficiency judgment. The Trigg Circuit Court had entered a deficiency judgment against Jeff Choate in Civil Action No. 02-CI-00189. During the instant declaratory judgment action's pendency, Jeff Choate was appealing the deficiency judgment.

On July 10, 2015, a panel of this Court affirmed the $337,194.52 deficiency judgment. Choate v. Bank of Cadiz & Trust Co., 2013-CA-001849-MR. This Court laid out the facts as follows:

In 2002, Bank of Cadiz & Trust Company (Cadiz Bank) instituted a foreclosure proceeding in the Trigg Circuit Court. Cadiz Bank claimed that Choate defaulted under the terms of a promissory note which was secured by a mortgage upon certain real property owned by Choate. Cadiz Bank sought to accelerate payment of the promissory note due to Choate's default and to enforce its mortgage lien against the real property to satisfy payment of the note.

By judgment and order of sale entered January 13, 2003, the circuit court determined that Cadiz Bank was entitled to recover $439,785 plus interest upon the promissory note. The court also ordered the sale of the real property subject to the bank's lien by the master commissioner with the net proceeds from the sale to be applied against the judgment debt. Kentucky Revised Statutes (KRS) 426.570; Kentucky Rules of Civil Procedure (CR) 53.02. The real property was duly sold by the mastercommissioner, and the circuit court confirmed the sale by order entered April 16, 2003. KRS 426.571; KRS 426.575. Then, by order of distribution entered June 6, 2003, the circuit court determined that Cadiz Bank was entitled to receive $167,193.61 of the sale proceeds in partial satisfaction of the judgment indebtedness against Choate.

After the sale, the case was dormant until August 7, 2013. On that date, Cadiz Bank filed a Motion for Deficiency Judgment. Therein, Cadiz Bank asserted "there remains a deficiency balance on the foreclosure judgment" in the amount of $337,194.52. Motion for Deficiency Judgment at 2. Choate responded and filed a motion under CR 12.02(a) to deny the motion. Choate argued that the circuit court lost jurisdiction to render a deficiency judgment due to the passage of time. Choate maintained that Cadiz Bank was required to bring an independent action in order to obtain a deficiency judgment.

By order entered September 23, 2013, the circuit court concluded that it retained jurisdiction to render the deficiency judgment and granted Cadiz Bank's motion for deficiency judgment. The court noted that "a separate deficiency judgment will be entered." Order at p.3.

Cadiz Bank then filed an affidavit for Writ of Non-Wage Garnishment on September 25, 2013. Cadiz Bank sought to garnish insurance proceeds payable to Choate held by State Farm Fire and Casualty Company.[] KRS 425.501. The Clerk of the Trigg Circuit Court issued an Order of Garnishment on September 25, 2013.

On September 26, 2013, the circuit court rendered a deficiency judgment against Choate in the amount of $337,194.52 plus interest. Thereafter, on October 2,2013, Choate filed a motion to quash the garnishment issued against State Farm. KRS 425.501(4). Choate argued that the insurance proceeds were exempt from execution per KRS 427.110(1) and that Choate's wife possessed an interest in the insurance proceeds that was not subject to execution.

By order entered October 10, 2013, the circuit court directed $337,194.52 of the insurance proceeds to be deposited with the clerk pending outcome of the proceedings. CR 67. The circuit court also observed that it was "not prepared to decide" the legal issue of whether the insurance proceeds were exempt from garnishment but reserved the ruling for a later time.

On October 25, 2013, Choate filed a notice of appeal in this Court form the September 26, 2013, deficiency judgment. This appeal follows.

Slip Op. at 1-4 (footnote omitted).

In that appeal, Jeff Choate also argued the trial court did not have jurisdiction to render a deficiency judgment almost fifteen years after the January 13, 2003 judgment. A panel of this Court disagreed, holding:

In this case, the September 26, 2013, deficiency judgment merely set forth the current outstanding deficiency owed by Choate under the January 13, 2003, judgment and was simply a step in the enforcement of the January 13, 2003, judgment.[] Accordingly, we conclude that the circuit court possessed jurisdiction to render the September 26, 2013, deficiency judgment.

Slip Op. at 5-6 (footnote omitted).

Jeff Choate also argued that the insurance proceeds from State Farm are exempt from execution under Kentucky Revised Statutes (KRS) 427.110(1). Because the trial court expressly reserved ruling on that issue, the panel of this Court declined to address the claim on appeal. The panel cautioned, "Choate must bring an appeal from the court's final order or judgment adjudicating that issue." Slip Op. at 6.

The Kentucky Supreme Court denied discretionary review on March 9, 2016. What has occurred in Trigg Circuit Court Civil Action No. 02-CI-00189 since this Court's opinion in 2013-CA-001849-MR is not before this Court, as a separate civil action - the declaratory judgment action - is the subject of the instant appeal.

II. Trigg Circuit Court Action No. 2013-CI-00152: the Declaratory Judgment.

On September 24, 2013, two days before the deficiency judgment was entered, Cadiz Bank filed in Trigg Circuit Court a Petition for Declaratory Judgment under civil case action number 2013-CI-00152. The result of that proceeding comprises the appeal currently before this Court. In that action, Cadiz Bank asked the trial court to determine each party's rights (now including Ella Choate, who apparently became Jeff Choate's wife sometime after the 2002 foreclosure proceeding commenced) to the funds then being held by State Farm Fire and Casualty Company. While the Declaratory Judgment action was pending, the parties entered an agreed order in the Deficiency Judgment action, to wit StateFarm Fire and Casualty Company would settle the funds it owed on the fire insurance claim: (1) Cadiz Bank received $28,763.52 in full satisfaction of the outstanding mortgage and promissory note balance for the insured residence; (2) Jeff and Ella Choate received $44,671.55; and (3) $337,194.52 was deposited into an interest bearing account in Trigg Circuit Court to be held for resolution of the garnishment order in the 02-CI-00189 Deficiency Judgment action.

After entry of the agreed order, the parties conducted extensive discovery and filed in the record over 600 pages of answers to interrogatories and responses to requests for production of documents. Then, on December 1, 2014, some fifteen months after initiating the Declaratory Judgment action, the Bank filed a lengthy motion for summary judgment.

On January 8, 2015, the Choates, collectively, filed a two-page response. They first argued more time was necessary to complete discovery because a deposition of Cadiz Bank's officer who compiled the discovery requests was needed to resolve whether Cadiz Bank had forgiven the indebtedness owed in the Deficiency Judgment action. They next argued the motion was premature as the Deficiency Judgment action was still being appealed. (Indeed, a motion for discretionary review by the Kentucky Supreme Court was not ruled upon until March 9, 2016.) On February 11, 2015, Cadiz Bank filed a reply, responding to the Choate's two claims.

On February 20, 2015, the trial court granted summary judgment and declaratory judgment in favor of Cadiz Bank. The trial court found ample time -some fifteen months - had passed between the action's initiation and the summary judgment motion, which was sufficient time for the parties to take depositions. It found that though there had been a "write-off" of the debt on the bank's books and such write-off was simply an internal bookkeeping matter and not debt forgiveness, as Cadiz Bank received no valid consideration for an actual release of the debt. It further found the exemption in KRS 427.110 is inapplicable to the instant case because State Farm Fire and Casualty Insurance Co. is a stock insurer, not an assessment or cooperative life or casualty insurance company. The trial court also found Ella Choate's separate entitlement to the garnished proceeds was resolved in the October 24, 2013 agreed order. Finally, the trial court found Jeff Choate was the property's sole title holder, thus destroying any entitlement Ella Choate would have to the insurance proceeds based upon dower or contribution.

The Choates timely appealed. The case now stands submitted for resolution by this Court.

ISSUES

The Choates present a number of issues for our resolution. After careful review of the briefs, the record, and the applicable case law, we affirm the trial court's order granting summary judgment and declaratory judgment.

I. The trial court gave the parties sufficient time to conduct discovery.

Initially, we address whether the trial court permitted the parties sufficient time to conduct discovery. Approximately fifteen months passedbetween the action's initiation and the summary judgment grant. During that time, the parties engaged in significant discovery, including the propounding of interrogatories and requests for production of documents. The instant record includes...