Court Opinion

ID: 4680475
Source: CourtListenerOpinion
Date Created: 2021-04-23 14:06:49.961264+00
Date Added: 2024-06-11T08:03:55.469145
License: Public Domain

RENDERED: APRIL 16, 2021; 10:00 A.M.
                         TO BE PUBLISHED

               Commonwealth of Kentucky
                         Court of Appeals

                            NO. 2019-CA-1007-MR

JOEL D. HOUSE AND MONICA                                        APPELLANTS
HOUSE

               APPEAL FROM JEFFERSON CIRCUIT COURT
v.              HONORABLE ANN BAILEY SMITH, JUDGE
                       ACTION NO. 14-CI-400031

DEUTSCHE BANK NATIONAL                                             APPELLEE
TRUST, AS TRUSTEE FOR WAMU
SERIES 2007-HE1 TRUST

                                  OPINION
                                 AFFIRMING

                                ** ** ** ** **

BEFORE: CLAYTON, CHIEF JUDGE; TAYLOR AND L. THOMPSON,
JUDGES.

TAYLOR, JUDGE: Joel D. House and Monica House (the Houses) bring this

appeal from a June 19, 2019, Amended Judgment and Order of Sale granting

summary judgment in favor of Deutsche Bank National Trust, as Trustee for

Wamu Series 2007-HE1 Trust, (Deutsche Bank). We affirm.
              This is a residential foreclosure action. The primary dispute in this

appeal centers upon whether Deutsche Bank can enforce a promissory note where

the original note has been lost. The underlying facts of this case are somewhat

complex, and we will only recite those facts necessary to resolution of this appeal.

                                     BACKGROUND

               On December 8, 2006, Joel House (Joel) executed a promissory note

in the principal amount of $303,000 and made payable to the lender, Washington

Mutual Bank (Washington Mutual).1 The promissory note was secured by a

mortgage upon real property located in Louisville, Kentucky (mortgage), owned by

the Houses. The mortgage was executed by the Houses on December 8, 2006, in

favor of Washington Mutual.2

              According to Deutsche Bank, the promissory note was thereafter

transferred to it by Washington Mutual on December 1, 2007. Upon transfer,

Washington Mutual became the loan servicer for Deutsche Bank and retained

possession, as agent for Deutsche Bank, of the promissory note. Later, Deutsche

Bank obtained the mortgage by an assignment dated May 22, 2008, from

Washington Mutual. Under the assignment, Washington Mutual “transfer[red]”

1
  We will refer to the December 8, 2006, promissory note as either the promissory note or the
lost promissory note throughout this Opinion.
2
 Both Joel David House and his wife, Monica House (the Houses), executed the December 8,
2006, mortgage as collateral for the loan; however, Joel solely executed the December 8, 2006,
promissory note.

                                              -2-
and “assign[ed]” a “mortgage dated 12/13/2006 executed and delivered by [the

Houses] . . . together with the promissory note.”3 This assignment was recorded

with the Jefferson County Clerk on May 30, 2008.

              Subsequently, on July 1, 2008, Deutsche Bank and the Houses entered

into a Loan Modification Agreement. The Loan Modification Agreement adjusted

the principal balance, monthly payment, and interest paid by the Houses.

Additionally, the Loan Modification Agreement specifically listed Deutsche Bank

as “note holder and mortgagee.”

              In October 2008, JP Morgan Chase Bank (Chase Bank) acquired all

loans and loan commitments from Washington Mutual. It is at this time that the

Houses believe Chase Bank was transferred the promissory note from Washington

Mutual. Conversely, Deutsche Bank claims that Chase Bank merely became the

loan servicer for the promissory note at this time.

              Joel apparently was unable to make the monthly payments as required

by the promissory note. As a consequence, the Houses executed a Home

Affordable Modification Trial Period Plan on September 1, 2009. In the Home

3
 The mortgage was actually signed and dated December 8, 2006, and recorded in the Jefferson
County Clerk’s office on December 13, 2006. The mortgage was assigned to Deutsche Bank
National Trust, as Trustee for Wamu Series 2007-HE1 Trust, (Deutsche Bank) by assignment
dated May 22, 2008.

                                            -3-
Affordable Modification Trial Period Plan, the lender was identified as “JP

Morgan Chase Bank, NA, Successor to Washington Mutual Bank.”

             More than two years later, on June 29, 2012, the Houses and Chase

Bank entered into another agreement – the Home Affordable Modification

Agreement. Relevant herein, under the Home Affordable Modification

Agreement, Chase Bank is identified as the lender or servicer. The agreement was

effective July 1, 2012.

             On January 9, 2014, Deutsche Bank filed a complaint for foreclosure

against the Houses in Jefferson Circuit Court. Therein, Deutsche Bank asserted:

                           FIRST CLAIM FOR RELIEF

             3. [Deutsche Bank] is entitled to enforce the Note
             executed by Defendant Joel David House, AKA Joel D.
             House (hereinafter referred to as “Maker”). . . .

             4. The original obligations of the Note have been
             modified by the parties by a [sic] written agreements
             (herein after referred to as “Agreements”). . . .

             5. Maker has defaulted under the obligations of the
             Note and Agreements by, among other things, failing to
             pay the required monthly payments of principal and
             interest.

             6. [Deutsche Bank] has satisfied all conditions
             precedent and declared the entire debt referenced above
             due and payable. The current principal amount due is
             $268,724.07, plus interest on the outstanding principal
             balance at the variable rate as set forth by the step rate
             loan modification from July 1, 2013[,] until paid, and the
             deferred principal amount of $103,348.00, plus late fees,

                                        -4-
             costs, attorney’s fees, and other advances made pursuant
             to the terms of the Note and Agreements.

                         SECOND CLAIM FOR RELIEF

             7. [Deutsche Bank] incorporates the allegations of the
             First Claim for Relief as if fully set forth herein.

             8. The Mortgage executed by Defendant Joel David
             House, AKA Joel D. House and Defendant Monica Lynn
             House, AKA Monica L. House (hereinafter referred to as
             “Mortgagors”) was given to secure payment of the
             above-described Note. . . .

             9. The Mortgage was recorded December 13, 2006[,]
             [at] Mortgage Book 10448, Page 0577, Jefferson County,
             Kentucky records. Except for real property estate taxes
             and assessments, the Mortgage constitutes a valid first
             lien against the real property commonly known as 9415
             Rockycreek Lane, Louisville, KY 40299 . . . .

             10. The terms and conditions of the Mortgage have been
             broken and become absolute, and [Deutsche Bank] has
             declared the entire balance due and payable. All
             conditions precedent to [Deutsche Bank’s] ability to
             enforce the mortgage have been satisfied, and [Deutsche
             Bank] is entitled to have the property sold.

Complaint at 1-3. In its complaint, Deutsche Bank sought to enforce the terms of

the promissory note and claimed that Joel had defaulted thereunder by failing to

make the required monthly payments since August 1, 2013. Deutsche Bank also

alleged that the terms of the mortgage had been breached and sought judicial sale

of the real property.

                                        -5-
             The Houses filed an answer. In the answer, the Houses maintained

that Deutsche Bank was not entitled to enforce the promissory note. The Houses

claimed that Deutsche Bank failed to produce the original note and, thus, failed to

demonstrate that the promissory note had been endorsed to enable Deutsche Bank

to seek enforcement thereof. Rather, the Houses believed Chase Bank to be the

holder of the promissory note and solely entitled to enforce it.

             Deutsche Bank filed a motion for summary judgment and an order of

sale. Therein, Deutsche Bank admitted that the original promissory note was not in

its possession and was lost. Deutsche Bank claimed it was entitled to enforce the

lost promissory note under Kentucky Revised Statutes (KRS) 355.3-309. The

Houses responded and argued that Deutsche Bank failed to demonstrate the

statutory prerequisites to enforce a lost note pursuant to KRS 355.3-309.

             The matter was referred to the master commissioner. In a September

28, 2017, report, the master commissioner recommended that the motion and order

of sale be denied. The master commissioner believed that the promissory note was

lost and that Deutsche Bank failed to satisfy KRS 355.3-309 in order to enforce the

lost promissory note. The master commissioner reasoned:

                  The [Houses] claim that [Deutsche Bank] has not
             established that it has standing to enforce the promissory
             note and mortgage. [Deutsche Bank] has not produced
             the original note signed by Mr. House, but has filed the
             affidavit of Curtis Pulsipher, Senior Vice President of
             Select Portfolio Servicing, Inc., servicer for [Deutsche

                                         -6-
Bank], attesting that the note has been “lost, misfiled,
misplaced or destroyed.” The affidavit further attests that
“upon information and belief, the Noteholder [Deutsche
Bank] was the owner of the Note when the loss of
possession occurred and was entitled to enforce the Note
at that time.” Attached to the affidavit is a copy of the
note signed by Mr. House, payable to Washington
Mutual Bank and bearing no indorsement or allonge.

     The [Houses] contend that in order to enforce the
note, [Deutsche Bank] must satisfy the requirements of
KRS 355.3-301 by establishing that it is “A person not in
possession of the instrument who is entitled to enforce
the instrument pursuant to KRS 355.3-309 or KRS 355.3-
418(4).” . . .

     ....

     The [Houses] claim that [Deutsche Bank’s] affidavit
does not comply with the statute. Specifically, as the
attached note is not endorsed to [Deutsche Bank], the
affidavit fails to prove that the note was negotiated to
[Deutsche Bank] or otherwise explain how [Deutsche
Bank] may have became a holder of the note. Therefore,
[Deutsche Bank] has not established that it was entitled
to enforce the note when loss of possession occurred.

     Additionally, the [Houses] allege that [Deutsche
Bank] failed to establish that its loss of possession of the
note was not the result of a transfer. [Deutsche Bank]
has submitted a loan modification agreement between the
[Houses] and [Deutsche Bank] dated July 1, 2008, and a
home affordable modification trial period plan, dated
September 1, 2009, between the [Houses] and JPMorgan
Chase Bank, NA, successor to Washington Mutual Bank
as “Lender.” The record also contains the affidavit of
Mr. House attesting that he made payments on the note to
JPMorgan Chase Bank. All of this suggests that the note
may have been transferred from [Deutsche Bank] to
JPMorgan Chase Bank.

                            -7-
                  A motion for summary judgment shifts the burden to
             the opposing party to submit supportive information
             establishing that there are material factual issues to be
             tried by the Court; more is required than relying upon the
             assertion of the pleadings. Lawrence v. Risen, 598
             S.W.2d 474 (Ky. App. 1980).

September 28, 2017, Report at 1-3 (footnotes omitted). The circuit court

ultimately denied Deutsche Bank’s exceptions to the master commissioner’s

report.

             Deutsche Bank subsequently filed another motion for summary

judgment and order of sale on January 30, 2019. Deutsche Bank again argued that

it was entitled to enforce the lost promissory note under KRS 355.3-309. It

pointed to affidavits as evidence that it fulfilled the requirements of KRS 355.3-

309. In response, the Houses maintained that Deutsche Bank again failed to meet

the requirements of KRS 355.3-309 and was, thus, not entitled to enforce the

promissory note.

             By an April 12, 2019, report, the master commissioner recommended

denying the motion for judgment and order of sale. In relevant part, the master

commissioner concluded:

             [Deutsche Bank] alleges that the original note cannot be
             located. Because of this, [Deutsche Bank] submitted a
             Lost Note Affidavit. However, KRS 355.3-309(2)
             provides that “[t]he court may not enter judgment in
             favor of the person seeking enforcement unless it finds
             that the person required to pay the instrument is

                                         -8-
             adequately protected against loss that might occur by
             reason of a claim by another person to enforce the
             instrument. Adequate protection may be provided by
             reasonable means.” Thus, [Deutsche Bank] must provide
             reasonable adequate protection for Defendant Joel David
             House against a claim by another person to enforce the
             instrument. [Deutsche Bank] may do this by filing a
             motion for the Court to set a bond and tendering a motion
             therewith.

April 12, 2019, Report at 1-2. Deutsche Bank filed exceptions to the master

commissioner’s report. Relevant to this appeal, Deutsche Bank alleged that Joel

was adequately protected against a third-party seeking to enforce the lost note and

cited to language in a Lost Note Affidavit of Curtis Pulsipher that had been filed in

the circuit court record in October of 2015.

             By report dated May 31, 2019, and filed on June 3, 2019, the master

commissioner recommended that Deutsche Bank’s motion for summary judgment

and order of sale be granted. The master commissioner agreed with Deutsche

Bank “that the indemnification language in the Lost Note Affidavit provides

reasonable and adequate protection” to the Houses as required by KRS 355.3-

309(2). Consequently, the master commissioner concluded that Deutsche Bank

was entitled to enforce the lost promissory note under KRS 355.3-309.

             The Houses filed exceptions to the June 3, 2019, report, but same

were denied by the circuit court by order entered June 19, 2019. In a June 19,

2019, Amended Judgment and Order of Sale, the circuit court granted summary

                                         -9-
judgment determining that $438,841.65 was owed upon the promissory note and

ordered the Houses’ real property subject to the mortgage to be sold by the master

commissioner. This appeal follows.

                            STANDARD OF REVIEW

             To begin, summary judgment is proper where there exists no material

issue of fact and movant is entitled to judgment as a matter of law. Steelvest, Inc.

v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991). All facts and

inferences therefrom are to be viewed in a light most favorable to the nonmoving

party. Id. If there are no factual issues, a summary judgment looks only to

questions of law, whereupon we review a trial court’s decision to grant summary

judgment de novo. Blackstone Mining Co. v. Travelers Ins. Co., 351 S.W.3d 193,

198 (Ky. 2011). Our review shall proceed accordingly.

                                    ANALYSIS

             The Houses argue that the circuit court erroneously rendered summary

judgment concluding that Deutsche Bank was entitled to enforce the lost

promissory note under KRS 355.3-301 and KRS 355.3-309. For the following

reasons, we disagree and conclude that summary judgment was proper.

I. KRS 355.3-301

             Under the Kentucky Uniform Commercial Code, KRS 355.3-301 sets

forth who is regarded as a “[p]erson entitled to enforce” an instrument, as follows:

                                        -10-
             (1) The holder of the instrument;
             (2) A nonholder in possession of the instrument who has
             the rights of a holder; or

             (3) A person not in possession of the instrument who is
             entitled to enforce the instrument pursuant to KRS 355.3-
             309 or KRS 355.3-418(4). A person may be a person
             entitled to enforce the instrument even though the person
             is not the owner of the instrument or is in wrongful
             possession of the instrument.

As Deutsche Bank admittedly is not in possession of the promissory note, the

circuit court concluded that it could enforce the lost promissory note under

subsection (3) of KRS 355.3-301. Thereunder, a person not in possession of the

instrument may, nonetheless, enforce it if such person meets requirements of KRS

355.3-309 or KRS 355.3-418(4).

II. KRS 355.3-309

             At issue in this case is KRS 355.3-309 – the lost instrument statute.

KRS 355.3-309 provides:

             (1) A person not in possession of an instrument is entitled
             to enforce the instrument if:

                (a) The person seeking to enforce the instrument:

                   1. Was entitled to enforce the instrument when loss
                      of possession occurred; or

                   2. Has directly or indirectly acquired ownership of
                      the instrument from a person who was entitled
                      to enforce the instrument when loss of
                      possession occurred;

                                        -11-
                (b) The loss of possession was not the result of a
                   transfer by the person or a lawful seizure; and

                (c) The person cannot reasonably obtain possession of
                    the instrument because the instrument was
                    destroyed, its whereabouts cannot be determined,
                    or it is in the wrongful possession of an unknown
                    person or a person that cannot be found or is not
                    amenable to service of process.

             (2) A person seeking enforcement of an instrument under
             subsection (1) of this section must prove the terms of the
             instrument and the person’s right to enforce the
             instrument. If that proof is made, KRS 355.3-308 applies
             to the case as if the person seeking enforcement had
             produced the instrument. The court may not enter
             judgment in favor of the person seeking enforcement
             unless it finds that the person required to pay the
             instrument is adequately protected against loss that might
             occur by reason of a claim by another person to enforce
             the instrument. Adequate protection may be provided by
             any reasonable means.

To enforce a lost note under KRS 355.3-309, both Section (1) and Section (2) must

be satisfied by the person seeking enforcement thereunder. KRS 355.3-309(1)

permits “[a] person not in possession of an instrument” to, nevertheless, enforce

that instrument provided subsection (a), (b), and (c) are met. We shall analyze

each subsection of KRS 355.3-309(1) seriatim and then review Section (2) of KRS

355.3-309.

                             (i) KRS 355.3-309(1)(a)

             Under KRS 355.3-309(1)(a), a person is entitled to enforce an

instrument if such person either “1. Was entitled to enforce the instrument when

                                        -12-
loss of possession occurred” or “2. Has directly or indirectly acquired ownership of

the instrument from a person who was entitled to enforce the instrument when loss

of possession occurred[.]” And, to determine if a person was entitled to enforce

the instrument when loss occurred within the meaning of KRS 355.3-309(1)(a)1,

we must refer back to KRS 355.3-301. KRS 355.3-301 defines, in relevant part,

the term – person entitled to enforce – as either (1) “The holder of the instrument”

or (2) “A nonholder in possession of the instrument who has the rights of a

holder[.]” We shall initially decide who can be considered a holder of the lost

promissory note pursuant to KRS 355.3-301(1).

              Under the Kentucky Uniform Commercial Code, a holder is generally

“[t]he person in possession of a negotiable instrument that is payable either to

bearer or to an identified person that is the person in possession[.]” KRS 355.1-

201(2)(u)1; see also 4 ROBERT W. KEATS, KY. PRAC. Methods of Practice § 5.10

(2020). 4 In turn, for Deutsche Bank to be entitled to enforce the instrument under

KRS 355.3-309(1)(a)1, Deutsche Bank must demonstrate that it had obtained

possession of the promissory note that was appropriately indorsed by Washington

Mutual when loss of possession occurred. KRS 355.3-301(1).

4
 A holder in due course of an instrument is defined in Kentucky Revised Statutes (KRS) 355.3-
302.

                                            -13-
              Under the facts of this case, the promissory note was initially payable

to Washington Mutual. Deutsche Bank has not introduced a copy of the

promissory note either indorsed in blank or indorsed to Deutsche Bank. In 2018,

Deutsche Bank filed a second Lost Note Affidavit signed by Lorena Medina, a

document control officer for Select Portfolio Servicing, Inc. (Select Portfolio);5

Select Portfolio is purportedly the current loan servicer for Deutsche Bank. In the

Lost Note Affidavit, Medina stated:

                    5. The loan was transferred to Deutsche Bank
                        National Trust Company, as Trustee, in trust for
                        registered Holders of WaMu Asset-Backed
                        Certificates WaMu Series 2007-HEI Trust, on or
                        about December 1, 2007 (“Deutsche Bank”).
                        Washington Mutual Bank remained the servicer
                        when the loan was transferred to the Trust.

                    6. Washington Mutual Bank endorsed the Note to
                       Deutsche Bank National Trust Company, as
                       Trustee, in trust for registered Holders of WaMu
                       Asset-Backed Certificates WaMu Series 2007-
                       HEI Trust, but retained possession solely as
                       servicer for Deutsche Bank.

Lost Note Affidavit at 2-3. In the above affidavit, Deutsche Bank introduced proof

that the promissory note was indorsed specifically to it by Washington Mutual and

that it possessed the promissory note, through its agent Washington Mutual, before

loss occurred.

5
 A copy of the original promissory note executed by Joel D. House is attached to the Lost Note
Affidavit filed by Deutsche Bank in 2018.

                                             -14-
               On the other hand, the Houses filed the affidavit of Joel. In his

affidavit, Joel stated:

                    2. I was told by J.P. Morgan/Chase Bank that the
               note which is [the] subject of the foregoing action was
               negotiated and transferred to J.P. Morgan/Chase Bank
               and I was instructed to make, and did make, numerous
               payments to J.P. Morgan/Chase Bank for the debt, many
               of which payments, according to my attorney, have been
               credited in documents produced in this action.

                    3. The amounts claimed by Plaintiff in this action
               do not match the payments and charges in my
               calculations of the balance due to the holder of the note I
               executed.

Joel’s Affidavit at 1. Viewing the facts and inferences therefrom most favorable to

the Houses, Joel was informed by Chase Bank that the promissory note was

“negotiated and transferred” to Chase Bank. A permitted inference from Chase

Bank’s statement would be that the promissory note was indorsed to Chase Bank,

as it was negotiated.6 If so, Joel’s affidavit would be contrary to the Lost Note

Affidavit submitted by Medina as the promissory note could not have been both

indorsed by Washington Mutual to Deutsche Bank and also indorsed by

Washington Mutual to Chase Bank. The Houses believe that Joel’s affidavit

creates a material issue of fact.

6
 It is clear that “negotiation requires transfer of possession of the instrument and its indorsement
by the holder.” KRS 355.3-201(2).

                                               -15-
                In Kentucky, all affidavits are not entitled to equal consideration or

equal weight when considering a summary judgment. Particularly, Kentucky

Rules of Civil Procedure (CR) 56.05 provides that an affidavit in support of a

motion for summary judgment “shall set forth such facts as would be admissible in

evidence[.]” An affidavit containing inadmissible hearsay statements is

insufficient and cannot be considered on a motion for summary judgment. CR

56.05; Cadleway Props., Inc., v. Bayview Loan Serv., LLC, 338 S.W.3d 280, 289

(Ky. App. 2010).

                In his affidavit, Joel was relying upon statements made to him by

Chase Bank. In this respect, Joel’s affidavit is plainly based upon hearsay

statements and cannot be considered unless an exception to the hearsay rule is

applicable. Kentucky Rules of Evidence (KRE) 801. However, we were neither

cited to nor are we aware of an exception to the hearsay rule that would permit

admission of the above hearsay statements in Joel’s affidavit.7 On the other hand,

7
    Kentucky Rules of Evidence 801A(c)(2) provides:

                (c) Admission by privity:

                    ....

                    (2) Predecessors in interest. Even though the declarant is
                    available as a witness, when a right, title, or interest in any
                    property or claim asserted by a party to a civil action requires a
                    determination that a right, title, or interest existed in the
                    declarant, evidence of a statement made by the declarant during
                    the time the party now claims the declarant was the holder of
                    the right, title, or interest is not excluded by the hearsay rule

                                                -16-
the Lost Note Affidavit by Medina contains no hearsay but rather is based upon her

personal knowledge grounded upon a review of Select Portfolio’s records.

               As Joel’s affidavit cannot be considered as it was based upon

hearsay, the Lost Note Affidavit is uncontroverted as to the fact that Washington

Mutual had indorsed the promissory note to Deutsche Bank and that Deutsche

Bank had obtained possession of the promissory note, through its agent, before its

loss occurred. Viewing the facts most favorable to the Houses, we conclude that

Deutsche Bank constituted a holder of the instrument per KRS 355.3-301(1) and,

thus, was entitled to enforce the promissory note when loss of possession occurred

per KRS 355.3-309(1)(a)1.

                                 (ii) KRS 355.3-309(1)(b)

              As Deutsche Bank satisfied KRS 355.3-309(1)(a), our focus now

turns to Section (1)(b) of KRS 355.3-309. Under KRS 355.3-309(1)(b), a person

not in possession of an instrument may enforce it if “[t]he loss of possession was

not the result of a transfer by the person or a lawful seizure[.]” To satisfy this

requirement, Deutsche Bank again points to the Lost Note Affidavit of Medina.

                  when offered against the party if the evidence would be
                  admissible if offered against the declarant in an action
                  involving that right, title, or interest.

Thereunder, “a predecessor in interest[‘s] [hearsay statements may] be used against that
predecessor-in-interest’s successor.” Melton v. Cross, 580 S.W.3d 510, 518 (Ky. 2019). Under
the facts as set forth by the Houses, JP Morgan Chase Bank would not constitute a predecessor-
in-interest to Deutsche Bank because the promissory note is not an interest in property.

                                             -17-
Therein, Medina averred that after obtaining the promissory note from Washington

Mutual, Washington Mutual served as the loan servicer. Subsequently, according

to Medina, Chase Bank became the loan servicer from October 2, 2008, to May 1,

2014; thereafter, Select Portfolio became the loan servicer. Medina stated that

“[d]uring the course of the servicing transfer, the original Note was lost and could

not be found.” Additionally, Medina pointed out that “[t]he loss of the Note was

not the result of transfer by Deutsche Bank . . . or a lawful seizure.” The Houses

have not put forth any contradictory evidence upon this point. Therefore, viewing

the facts most favorable to the Houses, Deutsche Bank has demonstrated that the

loss of possession of the promissory note was not the result of transfer or lawful

seizure under KRS 355.3-309(1)(b).

                             (iii) KRS 355.3-309(1)(c)

             Because Deutsche Bank has satisfied KRS 355.3-309(1)(a) and (b),

we now focus on Section (1)(c) of KRS 355.3-309. Under KRS 355.3-309(1)(c), a

person seeking enforcement of a lost instrument must prove that he “cannot

reasonably obtain possession of the instrument because” it “was destroyed, its

whereabouts cannot be determined, or it is in the wrongful possession of an

unknown person or a person that cannot be found or is not amenable to service of

process.” Turning to the Lost Note Affidavit, Medina stated that Deutsche Bank

“cannot reasonably obtain possession of the Note because its whereabouts cannot

                                        -18-
be determined, it was destroyed, or it is in the wrongful possession of an unknown

person” or a person that cannot be found or is not amenable to service of process.

Medina Lost Note Affidavit at 3. The Houses failed to set forth contradictory

facts, beyond mere conjecture. See Henninger v. Brewster, 357 S.W.3d 920, 929

(Ky. App. 2012). As such, Deutsche Bank has set forth uncontradicted facts

demonstrating that it could not have reasonably obtained possession of the

promissory note pursuant to KRS 355.3-309(1)(c).

            As set out above, Deutsche Bank has satisfied the statutory

requirements of KRS 355.3-309(1); nonetheless, to enforce a lost instrument under

KRS 355.3-309, Deutsche Bank must also meet the mandates of Section (2) of

KRS 355.3-309.

                              (iv) KRS 355.3-309(2)

            KRS 355.3-309(2) reads:

            A person seeking enforcement of an instrument under
            subsection (1) of this section must prove the terms of the
            instrument and the person’s right to enforce the
            instrument. If that proof is made, KRS 355.3-308 applies
            to the case as if the person seeking enforcement had
            produced the instrument. The court may not enter
            judgment in favor of the person seeking enforcement
            unless it finds that the person required to pay the
            instrument is adequately protected against loss that might
            occur by reason of a claim by another person to enforce
            the instrument. Adequate protection may be provided by
            any reasonable means.

                                        -19-
Under KRS 355.3-309(2), the terms of the lost promissory note must be

sufficiently demonstrated by the person seeking to enforce the lost note. If such is

demonstrated, the court must then find that the promisor/obligor required to pay

upon the lost instrument is “adequately protected” for a loss resulting from a

possible future claim asserted by a third-party. 4 WILLIAM A. HAWKLAND,

FREDERICK H. MILLER AND ALVIN C. HARRELL, UCC Series – Adequate Protection

§ 3-309:6 (2020). KRS 355.3-309(2) is clear that “[a]dequate protection may be

provided by any reasonable means.”

             Here, it is clear that Deutsche Bank has proved the terms of the lost

promissory note. And, to meet the requirement that the Houses “are adequately

protected,” Deutsche Bank filed in 2015 a Lost Note Affidavit of Curtis Pulsipher,

Senior Vice-President of Select Portfolio. In the Lost Note Affidavit, Pulsipher

averred:

             2. Upon information and belief, on 12/08/2008, JOEL
             DAVID HOUSE (the “Borrower”), executed and
             delivered a promissory note (the “Note”) in the principal
             amount of $303,000.00 which Note is secured by a
             mortgage or deed of trust (the “Mortgage”) on the real
             property and improvements located at 10323 BACK
             RUN ROAD, LOUISVILLE, KY 40299 and which was
             duly recorded on 12/13/2006 in Book/Reel/Liber: 10448
             Page/Fotio: 0577 as Instrument No.: DN2006198866 in
             Jefferson County, a copy of which is attached hereto.

             3. The Company services the Mortgage and Note for
             DEUTSCHE BANK NATIONAL TRUST COMPANY,
             AS TRUSTEE, IN TRUST FOR REGISTERED

                                        -20-
HOLDERS OF WAMU ASSET-BACKED
CERTIFICATES WAMU SERIES 2007-HE1 TRUST
(the “Noteholder”) with Select Portfolio Servicing, Inc.[,]
as attorney in fact the successor in interest to the original
holder of the Note, the current owner of the Note.

4. Though it has conducted a diligent search of the
records and files maintained in connection with the
Mortgage, the Company has been unable to locate the
Note and believes that the Note has been lost, misfiled,
misplaced, or destroyed.

5. Upon information and belief, the Noteholder was the
owner of the Note when the loss of possession occurred
and was entitled to enforce the Note at that time.

6. The records of the Company do not show that the
Note was ever released, paid off, satisfied, assigned,
transferred, pledged, hypothecated or that the Note was
otherwise disposed of by the Company.

7. The Company is aware that the successors in interest,
assigns and/or transferees of the original holder of the
Note (collectively, the “Owner”) may rely upon the
statements made in this Affidavit as to the Note having
been lost, mislaid, misfiled or destroyed and never
having been released, paid off, satisfied, assigned,
transferred, pledged, hypothecated or otherwise disposed
of by the Company.

8. If the Company should ever locate the Note, the
Company agrees to provide the Note to the owner of
record of the Property at that time.

9. The Company hereby agrees to indemnify and hold
the Borrower harmless from and against any and all
losses, damages, penalties, fines, forfeitures, reasonable
and necessary legal fees and related costs, judgments,
and other costs and expenses resulting from any claim,
demand, defense or assertion based upon, or resulting

                            -21-
             from the Company’s breach of any covenant,
             representation or warranty contained in this Affidavit.

Pulsipher Lost Note Affidavit at 2-3.

             Pursuant to Paragraph 9 of the Lost Note Affidavit, Select Portfolio

agreed to “indemnify” the Houses against “all losses, [and] damages” arising from

any representations set forth in such affidavit. Pulsipher stated that Deutsche Bank

was the holder of the promissory note and entitled to enforce the promissory note

when it was lost. Moreover, Pulsipher averred that the promissory note was not

transferred, assigned, or satisfied. The circuit court viewed Paragraph 9 of the Lost

Note Affidavit as setting forth adequate protection to the Houses, and we cannot

conclude that the circuit court erred by so doing. Consequently, Deutsche Bank

has fulfilled the requirements of KRS 355.3-309(2).

                                  CONCLUSION

             Accordingly, we are of the opinion that the circuit court properly

rendered summary judgment determining that Deutsche Bank was entitled to

enforce the lost promissory note under KRS 355.3-301 and KRS 355.3-309.

             For the foregoing reasons, the Amended Judgment and Order of Sale

of the Jefferson Circuit Court is affirmed.

             ALL CONCUR.

                                         -22-
BRIEFS FOR APPELLANTS:     BRIEF FOR APPELLEE:

Vincent F. Heuser, Jr.     Brad S. Keeton
Louisville, Kentucky       Kathryn S. Beck
                           Louisville, Kentucky

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