Tuesday, February 22, 2011

Pro Se Kentucky Homeowner Scores Appeals Court Reversal Of Rubber-Stamped Foreclosure Judgment As Trial Judge Proves Unable To Apply Basic State Law

In a seemingly simple case that a lower court inexplicably screwed up, the Kentucky Court of Appeals found it necessary to vacate and remand Henry County Circuit Court Judge Karen Conrad's ruling allowing for the entry of a judgment in a foreclosure action, despite the obvious fact that the foreclosing plaintiff, by failing to acquire an interest in the loan (by assignment) until after the action was filed, did not have standing to bring the action under Kentucky law. Along with the remand, Judge Conrad has been given instructions to remove this case from her docket.

The fact that the appeals court's legal analysis of the case before it was only three paragraphs long(1) and was issued by the 3-judge panel as an unpublished ruling only highlights the fact that there is apparently nothing particularly precedent-setting in this ruling. However, the ruling does merit attention in that it shines some light on another trial judge getting snagged screwing over a pro se homeowner battling to save his home from foreclosure, apparently without regard by the judge to the existing case law and procedural rules in the state.

For the ruling, see Augenstein v. Deutsche National Trust Co., No. 2009-CA-000058-MR (Ky. App. February 18, 2011) (unpublished).

Thanks to Glenn Augenstein for the heads-up on his successful appeal.

(1) The court's 'short & sweet' analysis follows (bold text is my emphasis, not in the original text):

  • Glenn argues that the court erred by exercising particular case jurisdiction over this claim because Deutsche Bank did not have standing. He contends that the assignment of mortgage was not executed in favor of Deutsche Bank until after the complaint was filed. Thus, Glenn argues, that Deutsche Bank failed to show that it was the real party in interest at the time the action was commenced.

    CR 17.01 provides that “every action shall be prosecuted in the name of the real party in interest, but…an assignee for the benefit of creditors… may bring an action…” It follows that, where a cause of action has been assigned, the assignee becomes the real party in interest. See CR 17.01. However, “[i]n no event may an assignee maintain an action for any part of a claim which has not been assigned to him.” Works v. Winkle, 234 S.W.2d 312, 315 (Ky. App. 1950). A mere expectancy is not enough to establish standing, a party must prove apresent or substantial interest.” Plaza B.V. v. Stephens, 913 S.W.2d 319, 322 (Ky. 1996) (quoting Ashland v. Ashland F.O.P. No.3, Inc., 888 S.W.2d 667 (Ky. 1994)).

    In this case, the complaint was filed on December 17, 2007, but the assignment of mortgage was not executed until January 3, 2008. Thus, Deutsche Bank had no present interest when it filed its complaint and failed to take any steps to correct this. Allowing Deutsche Bank to commence this action at a time when it lacked standing impermissibly allowed litigation to commence based upon mere expectancy of an interest. See Plaza B.V., 913 S.W.2d at 322. Accordingly, the trial court erred when it did so; thus, it should not have entered summary judgment for Deutsche Bank. This issue being dispositive of the appeal, we decline to review the remainder of Glenn’s arguments.

    In light of our analysis, we vacate the entry of summary judgment because Deutsche Bank did not have standing to commence this action when it did. This matter is therefore remanded to the circuit court for the purpose of entering an order consistent with this opinion removing this case from its docket.

    ALL CONCUR.

Editor's Note: While it may be acceptable for the foreclosing entity to obtain the assignment after the case commences in some states, this apparently is not the case in Kentucky, based on this ruling.

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