Opinion
NO. 2013-CA-000103-MR
07-11-2014
AURORA LOAN SERVICES, LLC APPELLANT v. JOHN R. BARNETT; SHERRY L. BARNETT; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF REVENUE, DIVISION OF COLLECTIONS; CENTRAL KENTUCKY MANAGEMENT SERVICES, INC., A KENTUCKY CORP., ASSIGNEE OF THE UK MEDICAL CENTER; WILLIAM J. FOOKS, BOURBON COUNTY MASTER COMMISSIONER; AND MICHAEL NEWBY APPELLEES
BRIEF FOR APPELLANT: Gail C. Hersh, Jr. Cincinnati, Ohio BRIEF FOR APPELLEE, MASTER COMMISSIONER: Jack Conway Attorney General Aaron S. Ament Frankfort, Kentucky BRIEF FOR APPELLEE, MICHAEL NEWBY: James M. Lovell Paris, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BOURBON CIRCUIT COURT
HONORABLE ROBERT G. JOHNSON, JUDGE
ACTION NO. 10-CI-00332
OPINION
AFFIRMING
BEFORE: CLAYTON, JONES, AND TAYLOR, JUDGES. CLAYTON, JUDGE: Aurora Loan Services, LLC appeals from the Bourbon Circuit Court's order of December 20, 2012, which denied the motion to vacate an order confirming the Master Commissioner's sale of property. For the following reasons, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The issue in this case emanates from a foreclosure action on real property located at 1129 Plum Lick Road, Paris, Kentucky. On September 24, 2010, Aurora Loan Services, LLC (hereinafter "Aurora") filed a foreclosure action against John R. Barnett, Sherry L. Barnett, and other parties with liens against the real property. The borrowers had filed for bankruptcy and were only named parties in order to allow Aurora to obtain an in rem judgment. On December 6, 2011, Aurora was granted a judgment in which the property was ordered sold.
Commonwealth of Kentucky, Department of Revenue, Division of Collections; and Central Kentucky Management Services, Inc., a Kentucky corporation, which is an assignee of the University of Kentucky Medical Center and Kentucky Medical Services Foundation, Inc.
In effectuating the sale, several reports of canceled sales were filed by the Master Commissioner including reports filed on February 1, 2012, March 27, 2012, and May 2, 2012. On July 5, 2012, at the request of Aurora, another order, the fourth one, was entered to reschedule a Master Commissioner Sale. On August 9, 2012, the property was sold to Michael Newby and his wife, Kimberly Ann Newby; however, no representative of Aurora attended the sale.
Nevertheless, since then, the sale has not been confirmed and a Master Commissioner's deed has not been issued because Aurora is seeking relief from the sale. First, although the property was appraised for $125,000.00, it sold for $52,000.00. Aurora maintains that the low sale price is related to the Master Commissioner's office sending an e-mail that indicated the sale was canceled. Since Aurora believed that the sale was canceled, it did not send a representative to the sale where, according to its arguments, it would have bid at least the appraised amount for the property.
The alleged irregularity proffered by Aurora evolves from e-mail communications between its office and the Master Commissioner's office. During July 2012, Aurora sent three separate e-mails on three separate days asking about the scheduling of sales for three different cases, including this one. In particular, Aurora challenges the e-mail sent on July 26, 2012, which stated:
The Bourbon Citizen has informed me that they inadvertently left the Notice of Sale out of the paper. My only option is to cancel these sales for August and reschedule them all for September 13th sale date . . .Significantly, the subject line of the email was "12-CI-00134, McCarty, Donna - Sales Date."
Thus, the Master Commissioner says that its office never sent Aurora an e-mail that the Barnett sale was canceled. And it argues the e-mail itself was not confusing. Further, if there was confusion, the confusion was the result of a lack of diligence on the part of Aurora.
After Aurora learned about the sale, it filed Kentucky Rules of Civil Procedure (CR) 59.05 and CR 60.02 motions to vacate the sale. After oral arguments on November 8, 2012, the trial court took the issue under submission. On December 20, 2012, the trial court entered its order denying Aurora's motion to vacate the sale.
In its order, the trial court observed that Aurora relied solely on an e-mail indicating that the sale for another property was canceled. Prior to the August 9 date, Aurora did not check the Master Commissioner's website or the newspaper or the posting at the courthouse. Moreover, the trial court noted that Aurora received a mailed notice which informed it that the McCarty sale was canceled. Lastly, even though the sale price for the property is low, no proof of fraud was provided. The trial court concluded that the e-mail was not in error or an attempt to mislead, that any confusion was created by Aurora, and that Aurora had the ability to check other places for the scheduled sale. Aurora now appeals the order.
STANDARD OF REVIEW
The decision to grant or deny a motion under CR 59.05 or CR 60.02 rests within the trial judge's sound discretion. See Copas v. Copas, 359 S.W.3d 471, 475 (Ky. App. 2012). Thus, we review to ascertain whether the trial court abused its discretion when it denied Aurora's motion to vacate the sale. The test for abuse of discretion is "whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). With this standard in mind, we turn to the situation herein.
ANALYSIS
Aurora argues that the trial court abused its discretion in denying its motion to vacate the sale of the real property because irregularities occurred related to the sale, which prevented Aurora from attending the sale, and ultimately resulted in an inadequate price for the property. Further, Aurora maintains that the trial court abused its discretion when it relied on inapplicable law in its opinion.
Both the Master Commissioner and the buyer of the property, Newby, responded. Newby contends that the trial court did not abuse its discretion in denying the motion to vacate the sale and that the trial court correctly relied on applicable case law. The Commissioner explains that he complied with the legal requirements for notice of the sale and, therefore, Aurora cannot now complain about the notice. In addition, the Commissioner suggests that if any confusion existed it was caused by Aurora. Finally, the price for the property does not support vacating the sale.
First, we note that inadequacy of price alone is not sufficient to set aside a judicial sale unless the inadequacy is so great to raise a presumption of fraud or to shock the conscience of the court. Jones v. Deposit & People's Bank, 180 Ky. 395, 202 S.W. 907, 908 -909 (Ky. App. 1918). Nonetheless, if the price is inadequate and there are other circumstances, which tend to cause such inadequacy, or any apparent unfairness or impropriety, the sale may be set aside even if the additional circumstances are slight, and, if unaccompanied by inadequacy of price would not furnish grounds for vacating the sale. Id.
So, the question is: given the price for the property, whether the circumstances were irregular to the extent that the trial court's failure to vacate the sale was an abuse of discretion. Judicial sales are governed by CR 53.02, wherein it is noted that "[t]he master commissioner shall serve notice of the date, time and place of the judicial sale . . . ." CR 53.02(1).
In addition, the Bourbon, Scott and Woodford Circuit Court Rules require that "[b]efore conducting a sale, the Master Commissioner shall place an advertisement in a newspaper meeting the requirements of KRS [Kentucky Revised Statutes] 424.120 and setting forth the time, terms, place of sale and description of the property to be sold. The advertisement shall appear once a week for at least three (3) consecutive weeks next preceding the date of sale." Local Circuit Court Rule XXXVIII, Bourbon, Scott and Woodford Counties. As previously observed, the advertisement for the sale of this property met the requirements of the court rules.
Next, we address the questioned e-mail itself since Aurora contends that its existence created the irregularity. The main problem seems to relate to the language used in the e-mail that referred to "these sales" and "reschedule them all" and "these cancellations." Because there were several e-mails about sales involving Aurora, it maintains that it reasonably relied on this language and concluded that all the sales were canceled and rescheduled for September.
Aurora does not address the following pertinent facts: the subject line of the e-mail itself referenced another property; that the sale of the Barnett property was advertised in the Bourbon County Citizen on July 25, August 1, and August 8, 2012; that information about the sale was on the Master Commissioner's website; and, that notice for the Barnett sale was posted on the wall outside the Circuit Clerk's Office.
Even more telling, Aurora does not discuss that on July 18, 2012, Aurora's counsel received a notice of the McCarty canceled sale by mail. While Aurora mentions that it received this notice, it complains that no notice about Barnett was received. Clearly, no notice was received because the sale was not canceled.
Any confusion in this case results from the failure of diligence by Aurora. As provided in Aurora Loan Services v. Ramey, 144 S.W.3d 295, 299 (Ky. App. 2004), the party that causes the confusion as related to a master commissioner's sale cannot complain about the inequity. This is the situation here.
After the sale, the Master Commissioner filed his report to the court, and it included his statement that the sale was conducted after proper advertisement, which Aurora does not dispute. In sum, despite the use of plural language in the e-mail, the e-mail does not reference the Barnett sale. Therefore, we conclude that the trial court did not abuse its discretion by failing to vacate the sale. The advertising of the sale was proper. And Aurora missed several avenues for verification of the sale, which is its responsibility.
Next, we consider the argument by Aurora that the price for the property was inadequate. Three requisites are necessary for the inadequacy of the price to be sufficient to vacate a sale - it shocks the conscience, fraud, or inadequate price plus irregularity during the sale. Jones, 202 S.W. at 908 -909. It has already been decided that no irregularity occurred, which leaves to our consideration the issue of whether the price shocks our conscience or the sale was fraudulent. Indisputably, all the legal notice requirements under Kentucky law regarding foreclosure actions were followed. In foreclosure actions, property can and does bring in less than the appraised value. The sale was open to the public and that is the price the property brought. Further, Aurora has not alleged and certainly not established that the price was shocking or that fraud occurred. Merely stating that the price was less than the appraised value does not establish either element.
"If a judicial sale is to be set aside upon slight grounds and a resale ordered upon a promise of an increase in the purchase price, judicial sales would become so unstable as practically to put a premium upon the bad faith of bidders, and take from the purchaser his right under the law of having a reasonably speedy determination of his case." Jones, 202 S.W. at 910.
Finally, we believe that Aurora's complaint that the trial court incorrectly applied case law is unpersuasive. We have already noted our agreement with the trial court's observation that Aurora stands for the proposition that the party that creates the confusion is responsible for its impact. Aurora, 144 S.W.3d at 295. In Kissell Co. v. Chadwick, 737 S.W.2d 710 (Ky. App. 1987), the party complained that it did not receive notice of the judicial sale. Our Court in that case decided that advertising the sale in accordance with applicable law was sufficient and did not set aside the sale. Here, the sale was properly advertised and the court did not set it aside.
CONCLUSION
The Bourbon Circuit Court determined that the Master Commissioner's Office committed no irregularity in providing notice of a sale of the foreclosed property discussed herein. The trial court did not abuse its discretion. Accordingly, the judgment of the Bourbon Circuit Court denying the motion to vacate the judicial sale is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Gail C. Hersh, Jr.
Cincinnati, Ohio
BRIEF FOR APPELLEE, MASTER
COMMISSIONER:
Jack Conway
Attorney General
Aaron S. Ament
Frankfort, Kentucky
BRIEF FOR APPELLEE, MICHAEL
NEWBY:
James M. Lovell
Paris, Kentucky