Hadley v. Citizen Deposit Bank, No. 2004-CA-000670-MR.

• Decision Date: 08 July 2005
• Docket Number: No. 2004-CA-000670-MR.
• Citation: 186 S.W.3d 754
• Parties: Adrian HADLEY, Appellant, v. CITIZEN DEPOSIT BANK, Appellee.
• Court: Kentucky Court of Appeals

186 S.W.3d 754

Adrian HADLEY, Appellant, v. CITIZEN DEPOSIT BANK, Appellee.

No. 2004-CA-000670-MR.

Court of Appeals of Kentucky.

July 8, 2005.

Willard Paxton, Princeton, Alan C. Stout, Marion, KY, for appellant.

James B. Brien, Jr., Mayfield, Robert Spragens, Jr., Lebanon, KY, for appellee.

Before HENRY and VANMETER, Judges; MILLER, Senior Judge.¹

OPINION

HENRY, Judge.

Adrian Hadley appeals from the Adair Circuit Court's entry of summary judgment in favor of Citizen Deposit Bank on a counterclaim and an amended counterclaim filed by Hadley against the bank. We affirm.

Wallace and Adrian Hadley married in 1959 and, for over twenty-five years, lived in Louisville and worked for Standard Oil/Chevron. In 1985, the Hadleys retired from Chevron, drew out their retirement benefits, relocated to Graves County, Kentucky, and purchased what was then the Heath Oil Company. The Hadleys operated that business as the Hadley Oil Company until selling it in 1998. They then relocated to the Adair County property that is part of the subject matter of this litigation. The Hadleys maintained a joint bank account at Citizen Deposit Bank that was used by various businesses in which the couple became involved both before and after their oil company was sold.

In April 1998, in order to secure a line of credit in the amount of $300,010.00 with Citizen Deposit Bank, Wallace delivered to the bank a real estate mortgage covering the Hadleys' Adair County farm and residence property. The mortgage purported to contain the notarized signatures of both Wallace and Adrian. The bank subsequently obtained from attorney Marshall Loy an opinion letter affirming the bank's status as a superior lienholder.

In the fall of 1998, Adrian learned about the mortgage purporting to contain her signature and called the bank. She denied ever having signed the mortgage or even knowing anything about it, and asked what could be done to remove her name from the mortgage. This issue was never resolved to the satisfaction of both parties. When Adrian confronted Wallace about what had happened, he admitted that he borrowed the money in order to finance drug deals. Wallace would later deed his one-half interest in the real property in question to Adrian in February 1999. Adrian would then transfer the interest to her limited partnership by deed on December 14, 2000.

Also in February 1999, Adrian was notified by Ernest Lee Williams, the president of Citizen Deposit Bank, that Wallace had written two checks (totaling approximately $125,000.00) on the Hadleys' joint bank account, the balance of which was insufficient to cover the checks. The bank took the position that Wallace and Adrian, as joint owners and depositors on the account, were both responsible to the extent that these potential overdrafts were honored. On April 5, 1999, Adrian executed a promissory note that effectively covered the overdrafts on the joint account. Wallace was not asked to sign the note. The note became due in March 2000 and was paid by Adrian.

On August 28, 2001, Citizen Deposit Bank brought suit on the mortgage, and various other promissory notes executed by Wallace, to recover debts owed. The bank included Adrian as a party-defendant because: (1) her purported signature, properly notarized, appeared on the mortgage; (2) she was the spouse of Wallace Hadley; (3) she owned an interest in the property as of the date of the mortgage; and (4) she, and later her limited partnership, had, subsequent to the making of the mortgage, become succeeding owners of the property in question. Citizen Deposit Bank now acknowledges in its brief that Wallace had apparently arranged for Adrian's signature to be forged on the mortgage and had procured an unlawful notary certificate attesting to this fraudulent signature.²

On October 2, 2001, Adrian filed an answer and counterclaim, and a cross-claim to the action filed by Citizen Deposit Bank. In her answer and counterclaim, Adrian again denied executing the mortgage, and asserted that the mortgage was procured by fraud. She also stated that she had obtained record title to the real property in question from Wallace Hadley by deed dated February 26, 1999. She further alleged that the bank was attempting to enforce a void and fraudulent mortgage.

On April 4, 2002, the trial court entered an order, on motion of Citizen Deposit Bank, granting partial summary judgment to the bank as to its claims against Wallace Hadley. The court specifically found that the bank was entitled to recover on promissory notes totaling over $417,000.00, and it adjudged that the bank had a first and superior lien upon the real property that was the subject of the April 1998 mortgage. The court noted, however, that this lien did not affect Adrian Hadley's one-half interest in the property, but only covered Wallace's one-half interest. The trial court further held that its order only pertained to the claims against Wallace, and that all remaining claims were reserved for future adjudication.

Adrian attempted to appeal from this order, but this court declined to entertain the appeal because the partial summary judgment was deemed to be interlocutory. Adrian also sought a writ of prohibition from this court, pursuant to CR³ 76.36, that would prohibit the trial court from ordering the sale of her property; however, this court ruled that Adrian was not entitled to extraordinary relief, and that her remedy was to instead file a notice of appeal within thirty (30) days of the trial court's entry of an order of sale. On May 6, 2002, the trial court entered an order of sale as to Wallace Hadley's one-half interest in the real property in question and this interest was ultimately sold. The sale was confirmed in a September 24, 2002 order. Neither Adrian nor Wallace attempted to appeal from either of these orders.

On October 16, 2002, Adrian filed an amended counterclaim again alleging that Citizen Deposit Bank was attempting to enforce a void and fraudulent mortgage and also alleging for the first time that the bank fraudulently induced her to execute the promissory note to cover the $125,000.00 overdraft on the Hadleys' joint checking account.

On March 4, 2004, the trial court entered an order granting summary judgment to Citizen Deposit Bank as to the counterclaim and amended counterclaim filed by Adrian and her limited partnership. The court generally found that there was no genuine issue of material fact as to these claims and that the bank was entitled to summary judgment as a matter of law, but it gave no other specific justification. No legal precedent or authority was cited in the judgment. Adrian's post-judgment motions were denied. This appeal followed.

The standard of review on appeal when a trial court grants a motion for summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996); Palmer v. International Ass'n of Machinists & Aerospace Workers, 882 S.W.2d 117, 120 (Ky.1994); CR 56.03. "The trial court must view the evidence in the light most favorable to the nonmoving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor." Lewis v. B & R Corporation, 56 S.W.3d 432, 436 (Ky.App.2001), citing Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480-82 (Ky.1991); Leslie v. Cincinnati Sub-Zero Products, Inc., 961 S.W.2d 799, 804 (Ky.App.1998). "The moving party bears the initial burden of showing that no genuine issue of material fact exists, and then the burden shifts to the party opposing summary judgment to present `at least some affirmative evidence showing that there is a genuine issue of material fact for trial.'" Lewis, 56 S.W.3d at 436, citing Steelvest, 807 S.W.2d at 482; Hubble v. Johnson, 841 S.W.2d 169, 171 (Ky.1992); Hibbitts v. Cumberland Valley Nat'l Bank & Trust Co., 977 S.W.2d 252, 253 (Ky.App.1998). The trial court "must examine the evidence, not to decide any issue of fact, but to discover if a real issue exists." Steelvest, 807 S.W.2d at 480. The Kentucky Supreme Court has held that the word "impossible," as set forth in the standard for summary judgment, is meant to be "used in a practical sense, not in an absolute sense." Lewis, 56 S.W.3d at 436, citing Perkins v. Hausladen, 828 S.W.2d 652, 654 (Ky.1992); Welch v. American Publishing Co. of Kentucky, 3 S.W.3d 724 (Ky.1999). "Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo." Id., citing Scifres, 916 S.W.2d at 781; Estate of Wheeler v. Veal Realtors and Auctioneers, Inc., 997 S.W.2d 497, 498 (Ky.App. 1999); Morton v. Bank of the Bluegrass and Trust Co., 18 S.W.3d 353, 358 (Ky.App. 1999).

While Adrian's arguments on appeal are somewhat difficult to sort out it appears that she has two primary points of contention: (1) summary judgment was inappropriate because there was evidence that Citizen Deposit Bank knew that Adrian's signature was forged; accordingly, the bank should be liable for trying to enforce a mortgage that it knew to be void; and (2) summary judgment was inappropriate because Citizen Deposit Bank made the fraudulent representation to her that Adrian was jointly liable for any overdrafts made by Wallace from the couple's joint account.

As an initial matter, we are compelled to address the fact that Adrian's notice of appeal and introduction to her brief address two separate summary judgment orders entered by the trial court: (1) the April 4, 2002 partial summary judgment order adjudging that Citizen Deposit Bank had a first and superior lien upon the real estate that was the subject of the April 1998...