RENDERED: MARCH 13, 2015; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO. 2014-CA-000056-MR RAMONA SPINKS, EXECUTRIX OF THE WILL OF BENJAMIN SPINKS, DECEASED APPELLANT APPEAL FROM HENDERSON CIRCUIT COURT v. HONORABLE KAREN LYNN WILSON, JUDGE ACTION NO. 10-CI-00547 U.S. BANK NATIONAL ASSOCIATION AND MONUMENTAL LIFE INSURANCE CORP. APPELLEES OPINION AFFIRMING ** ** ** ** ** BEFORE: DIXON, J. LAMBERT, AND TAYLOR, JUDGES. LAMBERT, J., JUDGE: Ramona Spinks appeals from the Henderson Circuit Court s December 10, 2013, order entering summary judgment. After careful review, we affirm the order of the Henderson Circuit Court.
In January 1998, Benjamin Spinks visited Great Financial Bank, FSB (predecessor to Star Bank, NA), to refinance an existing first mortgage debt with Fleet Mortgage encumbering his real estate located in Henderson, Kentucky. The existing Fleet Mortgage account did not have any mortgage or credit life insurance associated with it. For the new loan, Mr. Spinks completed a standard form mortgage loan application with the retail branch manager, Tim Crowson, and such was delivered by courier to the Great Financial Bank Home Mortgage Division located in Owensboro, Kentucky. Subsequent thereto, Mr. Crowson had no further involvement or participation in the first mortgage application or consummation thereof. On January 9, 1998, Dee Dee Eldridge, a mortgage loan processor for Great Financial Bank at the Owensboro home mortgage division, received, and, on the same date, processed Mr. Spinks first mortgage loan application, and, by cover letter, returned the necessary documents for signatures to the applicant. Included within the documents Ms. Eldridge sent was a standard form Request for Insurance Information. That form stated: Great Financial Services is not an insurance company and does not issue insurance policies. ANY INSURANCE POLICY YOU PURCHASE WILL BE THE OBLIGATION SOLELY OF THE ISSUING INSURANCE COMPANY AND IS NOT A PRODUCT OF, NOR GUARANTEED BY, GREAT FINANCIAL BANK OR ANY OF ITS AFFILIATED COMPANIES.By signing, I acknowledge that I have received, read, and understand the provisions above. -2-
The portion of the form where the signor indicates that he wants mortgage life insurance was left blank, and the form was otherwise signed by Benjamin Spinks. Accordingly, it appears from the form that Mr. Spinks was indicating that he did not want mortgage life insurance information. Ms. Eldridge indicated that she was the sole mortgage loan officer and processor of the subject first mortgage loan application, and, therefore, directly involved in consummation of the $79,000.00 first mortgage closed by Attorney Charles Clem on February 24, 1998. Upon approval of the loan application, closing documents were forwarded to Attorney Clem for closing in his office on February 24, 1998. On that date, Benjamin Spinks executed a Mortgage Note payable to Star Bank, N.A., for the amount of $79,000.00. To secure payment of the mortgage note, Mr. Spinks, and his spouse, Ramona Spinks, executed and delivered to Star Bank a mortgage against their residential real estate. The foregoing real property mortgage was recorded in the Office of the Henderson County Clerk on March 3, 1998. Through mergers and succession, Star Bank is now U.S. Bank National Association (U.S. Bank), the appellee herein. Also on that date, Attorney Clem, a real estate and mortgage closing attorney, conducted the subject $79,000.00 first mortgage closing between the Spinkses and Star Bank in his office on South Main Street in Henderson, Kentucky. Mr. Clem testified that the only persons attending the first mortgage closing in his office consisted of himself, Benjamin Spinks, and Ramona Spinks. Mr. Clem further testified that there were no Star Bank employees or agents -3-
attending or participating in any manner at the subject mortgage closing. Finally, Mr. Clem testified that insurance was never mentioned or discussed at the first mortgage closing conducted in his office on February 24, 1998. On that same date, Mr. Spinks also entered into a $20,000.00 equity line agreement with Star Bank, secured by the same real property. Mr. Spinks purchased a credit life insurance policy on that equity loan, which would pay the debt if he died. The documents signed that day only show that Mr. and Mrs. Spinks were buying a credit life insurance policy to cover the $20,000.00 equity line; Southern Financial issued a policy for that amount. On or about November 5, 1998, approximately eight months subsequent to the $79,000.00 first mortgage closing, Mr. Spinks obtained a first mortgage life insurance policy from Monumental Life Insurance Company. The policy was issued solely as a result of a telemarketing solicitation (cold-call) program of Monumental; however, at the request of Mr. Spinks, the $4.74 monthly premium was collected with the monthly first mortgage payment by Star Bank and forwarded to the insurer. Documents filed in this action reveal that the policy was in fact an accidental death life insurance policy insuring the life of Benjamin Spinks. Star Bank is listed as the payee on the policy, but there is no evidence that Star Bank was involved in the negotiation or consummation of the first mortgage life insurance policy between Mr. Spinks and Monumental. Mr. Spinks died of natural causes on October 8, 2008, and Ms. Spinks notified the Appellee on October 27, 2008. On November 3, 2008, U.S. Bank -4-
advised Ms. Spinks that it had no knowledge of insurance but provided her with the name and telephone number of the possible life insurance company and recommended direct contact with the insurer for information concerning the claim. Ms. Spinks claim to Monumental was denied, as Mr. Spinks death was not accidental. In her original pleadings, Ms. Spinks alleged that Mr. Spinks requested a credit life insurance policy for the $79,000.00 first mortgage indebtedness. To the contrary, neither the mortgage application nor the good faith estimate of settlement charges listed any life insurance premiums or requests for coverage. Furthermore, Mr. Spinks failed to check the box requesting information for credit life insurance when applying for the first mortgage loan. According to Ms. Spinks first amended complaint, Monumental allegedly failed or refused to pay on the alleged policy of insurance that it sold to Mr. Spinks. Subsequent to the filing of the first amended complaint, Ms. Spinks and Monumental settled the life insurance claim. As a result, Ms. Spinks filed a second amended complaint and initiated this cause of action against the appellee, U.S. Bank. On July 9, 2012, by judicial admission, Ms. Spinks counsel advised the trial court that this is not a suit on insurance contract because there is none; this is a suit on a contract to issue a policy of insurance. By order dated January 13, 2013, upon a motion for summary judgment by the appellee, the trial court concluded that any contract claim was barred by the Statute of Frauds. Thereafter, Ms. Spinks changed her claim, alleging that the appellee negligently failed to -5-
provide mortgage life insurance to Mr. Spinks insuring the subject $79,000.00 first mortgage. After the appellee completed two depositions of Ms. Spinks, plus extensive discovery, it petitioned the trial court for summary judgment dismissing her complaint for failure to produce any evidence or basis that it had any equitable, contractual, or statutory duty to provide mortgage credit life insurance to the mortgagor/debtor, Benjamin Spinks. By order entered December 10, 2013, the trial court dismissed Ms. Spinks second amended complaint and granted summary judgment to U.S. Bank. Ms. Spinks filed a notice of appeal on January 8, 2014, and this appeal now follows. The Supreme Court of Kentucky has concluded that the proper function for a summary judgment in a case is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor and against the movant. Paintsville Hospital Co. v. Rose, 683 S.W.2d 255, 256 (Ky. 1985) (internal citation omitted). Furthermore a party opposing a properly supported summary judgment motion cannot defeat that motion without presenting at least some affirmative evidence demonstrating that there is a genuine issue of material fact requiring trial. 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)). 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 -6-
genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law. Lewis v. B & R Corp., 56 S.W.3d 432, 436 (Ky. App. 2001). 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. Id. At the trial level, the moving party bears the initial burden of showing that no genuine issue of material fact exists and he is entitled to judgment as a matter of law; thereafter 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. Steelvest, supra, at 482. On appeal, Ms. Spinks argues that the bank had a duty to procure credit life insurance and that its breach of this duty constitutes negligence. In support of this argument, Ms. Spinks contends that the bank, once it represented that it would obtain credit life insurance, had a duty to do so. Ms. Spinks argues that this issue was specifically addressed in Hancock Bank v. Integon Life Ins. Corp., 660 F.Supp. 459 (S.D. Miss. 1986), a case applying Missisippi law. That case held that when a bank represents itself as capable of securing credit life insurance, and the customer accepts the offer, the bank then has a duty to secure that insurance. Ms. Spinks points to other cases from other jurisdictions with the same holding. Ms. Spinks argues that the trial court based its decision solely on the belief that Kentucky law does not impose a duty on a lender to secure credit life insurance. -7-
U.S. Bank argues that it had no duty to provide credit life insurance to the Spinkses, as Mr. Spinks did not request information on credit life insurance on the insurance form. Furthermore, the form Mr. Spinks signed clearly and unequivocally stated that the bank was not an insurance company and did not issue insurance policies, and that any policy issued by such insurance company would not be a product of or guaranteed by the bank. U.S. Bank also contends that the entire transaction between its predecessors and the Spinkses was based in contract, and the only legal protection to which Ms. Spinks is entitled is found within the terms of the Note and Mortgage contracts. A review of the record, the trial court s order, and the applicable law indicates that the entire transaction between the Spinkses and U.S. Bank s predecessors was contractual in nature, and thus the bank did not owe a duty to the Spinkses to procure credit life insurance for the loan. Furthermore, Mr. Spinks ultimately obtained life insurance for the loan on his own accord, and he chose to purchase accidental insurance only. Thus, it is clear to this Court that U.S. Bank owed no duty to procure life insurance in addition to the life insurance Mr. Spinks obtained on the loan. Thus, we discern no error in the trial court s entry of summary judgment. Where the only relationship is contractual, the liability of one to the other in an action of tort for negligence must be based upon some positive duty which the law imposes because of the relationship, or because of the negligent manner in which some act which the contract provides for is done. Dice s Adm r v. -8-
Zweigart s Adm r, 171 SW.195, 197 (1914). In Kentucky, it appears the covenants of good faith and fair dealing do not give rise to a separate tort claim in cases where the parties are not in a special relationship. See Hulda Schoening Family Trust v. Powertel/Kentucky, Inc., 275 F.Supp.2d 793, 797 8 (W.D.Ky. 2004) (citation omitted). Under Kentucky law it is rare for banks to have special or fiduciary relationships with their borrowers. Kentucky courts have recognized such a relationship only twice, both times involving banks which profited from information provided by the borrower in confidence and at the borrower s expense. Steelvest at 485; Henkin, Inc. v. Berea Bank & Trust Co., 566 S.W.2d 420 (Ky. 1978). In the instant case, the relationship between the parties was that of a normal commercial setting, and the mortgage obtained by the Spinkses was a normal mortgage. There is no indication that the bank profited from information provided by the borrower in confidence or at the borrower s expense. While Mr. Spinks signed the form regarding credit life insurance, he failed to check the portion of the form actually requesting credit life insurance information. Ms. Spinks testimony has changed continuously throughout the underlying proceedings, and absent any other proof that the bank indicated it would obtain credit life insurance for the parties, we simply cannot see how Ms. Spinks would prevail at a trial on the merits. In his sworn affidavit, the closing attorney, Mr. Clem, states that pursuant to normal business practice, he received by mail and prepared all mortgage closing -9-
documents for consummation of the Spinkses first mortgage closing on February 24, 1998. He states that the closing was conducted at his law office located at 9 South Main Street, Henderson, Kentucky, and was attended by himself and the mortgagors, Benjamin Spinks and Ramona Spinks. Ms. Spinks testified at one point that there were two bank employees at the closing, and then she later testified that there was in fact only one bank employee there, but that one or both of the employees discussed credit life insurance. This directly contradicts Mr. Clem s assertion that no bank employees were present and that customary with normal business practice or procedure, there was no discussion of any matter concerning insurance of any kind or form between himself and/or the mortgagors; likewise, since there was no Star Bank representative at the closing, insurance was not discussed with the mortgagee either. Mr. Clem stated additionally that based upon [his] experience and normal business practice, [he] can state that credit life insurance was never referenced, offered, or consummated with Star Bank, or its predecessors/successors, [in the] first mortgage transaction closed by [him]. Given the different accounts given by Ms. Spinks, Mr. Clem s affidavit, the forms that clearly indicate that Mr. Spinks did not in fact request credit life insurance information from the bank, and the fact that he ultimately obtained accidental credit life insurance through Monumental, we simply cannot say that Ms. Spinks would have prevailed at trial. There is simply no indication that the bank owed any duty to obtain credit life insurance on behalf of the Spinkses. Furthermore, there is no indication that they were negligent in any way. -10-
Accordingly, we affirm the December 10, 2013, order of the Henderson Circuit Court entering summary judgment in this matter. ALL CONCUR. BRIEF FOR APPELLANT: Harry L. Mathison Henderson, Kentucky BRIEF FOR APPELLEE, U.S. BANK NATIONAL ASSOCIATION: Septtimous Taylor Owensboro, Kentucky -11-