Opinion
NO. 2015-CA-000083-MR
02-05-2016
DONALD T. PRATHER, TRUSTEE; AND S&T INVESTMENTS, LLC APPELLANTS v. TAX EASE LIEN INVESTMENTS 1, LLC; AND TAX EASE LIEN SERVICING, LLC APPELLEES
BRIEF FOR APPELLANTS: Donald T. Prather Shelbyville, Kentucky BRIEF FOR APPELLEES: R. Eric Craig Rachel M. Dickey Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM HENRY CIRCUIT COURT
HONORABLE KAREN A. CONRAD, JUDGE
ACTION NO. 08-CI-00289 OPINION
AFFIRMING BEFORE: CLAYTON, THOMPSON, AND VANMETER, JUDGES. CLAYTON, JUDGE: This is an appeal from a decision of the Henry Circuit Court from a tax lien foreclosure case. Based upon the following, we affirm the decision of the trial court.
BACKGROUND SUMMARY
On September 5, 2008, there was a tax lien foreclosure case filed which resulted in a Judgment and Order of Sale ("JOS") on June 15, 2012, which directed that the property located at 4747 Port Royal Road in Henry County be sold by the Master Commissioner. On November 9, 2012, an Amended JOS ("AJOS") was entered. Pursuant to both the JOS and the AJOS, Paragraph 7 required that, in order to "satisfy Plaintiff's lien awarded herein, the Master Commissioner of this Court is hereby directed to sell 4747 Port Royal Road, Henry County, Kentucky, as a whole and otherwise free and clear of all other claims, liens and encumbrances of the parties hereto...and according to the terms set forth in Paragraph 5 (A-D), for which the purchaser shall not have a credit against the purchase price..." Both Orders also set forth that the purchaser would assume any and all of the unpaid taxes levied against the property. The Master Commissioner was ordered to apply the proceeds of the sale of the property to the costs of the action and then to the full 2000 unpaid ad valorem taxes and any other unpaid taxes of equal dignity, whether delinquent or due and owing at the time of the sale.
The Master Commissioner held the sale of the property on November 12, 2012, where Appellee, Tax Ease Lien Servicing, LLC, purchased the property for $4,700. It had been appraised for $20,000.
On April 10, 2014, S&T Investments, LLC and Donald T. Prather, Trustee, filed a Motion to Compel with the Henry Circuit Court to have the court require Tax Ease to comply with the JOS and AJOS and pay the unpaid taxes against the property not paid by the Master Commissioner's pro-rata distribution. The trial court overruled the Motion to Compel and this appeal followed.
STANDARD OF REVIEW
Since this case deals only with legal questions, we need not defer to the trial court's decision and must review the issue de novo. Lewis v. B&R Corp., 56 S.W.3d 432, 436 (Ky. App. 2001).
DISCUSSION
The Appellants first argue that a judicial sale must be made in compliance with the terms of the JOS and AJOS. They assert that Paragraph 5B of both the JOS and the AJOS unequivocally requires the purchaser to assume and pay all unpaid taxes. Local Rule 6.03 also requires purchaser to pay all unpaid taxes levied against the property.
The trial court found that "the Local Rule is in conflict with the statutory scheme and case law interpreting [Kentucky Revised Statutes] KRS 426.690, KRS 134.128 and KRS 134.420." It further recognized that it was "bound by the precedent set forth in U.S. Bank Nat. Ass'n v. Tax Ease Lien Investments I, LLC." Thus, it denied the Appellants' Motion to Compel the Appellee to comply with Paragraphs 5B and 7 of the JOS and AJOS.
In Abernathy v. Nicholson, 899 S.W.2d 85, 87 (Ky. 1995), the Supreme Court of Kentucky held that "[t]he authorization to enact local rules pursuant to SCR 1.040(3)(a) is subject to [the condition] that no local rule shall contradict any substantive rule of law..." This was an intention by the Kentucky Supreme Court "to standardize practice and procedure in the Court of Justice to the greatest extent possible and permit local rules only to the extent necessary to satisfy a peculiar circumstance of the locality." Id.
KLAS Properties, LLC v. Tax Ease Lien Investments 1, LLC, 407 S.W.3d 564 (Ky. App. 2013) provides that:
The Legislature has explicitly stated that all tax liens are equal in priority and, while the third-party purchaser who initiates the foreclosure action is entitled to costs, such are included within the lien itself. In the event that the proceeds are insufficient to pay all tax liens, as occurred herein, that purchaser is only entitled to a pro rata share of its lien, including the costs associated therewith. We believe that such procedure not only gives effect to the intent of the Legislature but is also sound public policy. To hold that the first third-party purchaser to file the action is somehow entitled to "super priority" over the other lien holders would create an untenable situation and lead to a race to the courthouse steps. Rather than working with homeowners to resolve the delinquent tax liens without litigation, such a precedent would result in increased and unnecessary foreclosure filings.Id. at 568.
KRS 426.690 provides that "when it appears from the petition or otherwise, that several debts are secured by one (1) lien, or by liens of equal rank, and they are all due at the commencement of the action, or become so before judgment, the court shall order the sale for the pro rata satisfaction of all of them[.]" However, if "the proceeds are insufficient to pay all of the liens in full, each third-party purchaser is entitled only to its pro rata share." KLAS Properties, LLC, 407 S.W.3d at 567.
The trial court followed the law of this Commonwealth when it determined that Kentucky Statutes have priority over Local Rules. The Master Commissioner sale must also abide by the laws of this Commonwealth. Appellants, however, argue that U.S. Bank, supra, does not apply in this case because there was a purchaser and that the terms of a judgment and order of sale for a master commissioner's sale should be considered the same as the terms of a standard real estate purchase and sales contract, with the parties bound to it.
Basically, the Appellants argue that the Appellees should have tendered a Motion to Alter, Amend, or Vacate, otherwise it is stuck with the JOS and AJOS. The Appellees, however, were following the case and statutory law of this Commonwealth. Thus, they did not need to file a Motion to Alter, Amend, or Vacate.
Appellants also assert that the rule of caveat emptor applies to the purchaser at a judicial sale. However, as set forth above, the Appellees were following the law of this Commonwealth, thus, we affirm the decision of the trial court.
ALL CONCUR. BRIEF FOR APPELLANTS: Donald T. Prather
Shelbyville, Kentucky BRIEF FOR APPELLEES: R. Eric Craig
Rachel M. Dickey
Louisville, Kentucky