407 S.W.3d 564
Ky. Ct. App.2013Background
- KLAS and Tax Ease are third-party purchasers of delinquency certificates for Logan County real estate; Tax Ease holds 2005, 2006, 2008 liens, KLAS holds 2007 lien; 2009 and 2010 liens remained with county.
- Foreclosure action filed by Tax Ease under KRS 134.420; KLAS named as defendant due to its 2007 lien.
- March 11, 2011 sale of the property for $5,500; total delinquent taxes amounted to $7,625.30; proceeds insufficient to satisfy all liens.
- April 27, 2011 order disbursed $728.97 to Master Commissioner for sale costs; remaining funds held.
- August 17, 2011 order directed that Tax Ease receive $501.04 for court costs; remaining funds to be distributed pro rata; KLAS opposed prioritizing costs over pro rata shares; court ultimately denied KLAS’s motion in 2011; this appeal follows.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Tax Ease’s costs may be paid before pro rata distribution | KLAS: costs must be included in lien and distributed pro rata | Tax Ease: costs are authorized by KRS 134.452(5) and CR 54.04 and may be paid upfront | No; costs must be included in lien and distributed pro rata; no super priority for costs. |
| Which statute governs priority of tax lien costs when proceeds are insufficient | Chapter 134 controls and grants equal priority among liens | Chapter 91 (Mass Foreclosure Act) governs costs priority after sale | Chapter 134 governs third-party purchaser liens; costs are part of the lien and pro rata sharing applies. |
| Whether costs should be added to the lien amount or treated separately in distribution | Costs should be added to the unpaid taxes and distributed pro rata | Costs are recoverable but should not create super priority | Costs are included in the lien and pro rata distribution applies when funds are insufficient. |
Key Cases Cited
- U.S. Bank National Association v. Tax Ease Lien Investments 1, LLC, 356 S.W.3d 770 (Ky.App.2011) (affects priority and treatment of costs within liens)
- Bowling Green v. Board of Education of Bowling Green Independent School District, 443 S.W.2d 243 (Ky.1969) (statutory construction rules; harmonization of acts; specific over general)
- City of Bowling Green v. Board of Education of Bowling Green Ind. School Dist., 443 S.W.2d 243 (Ky.1969) (quoted to discuss statutory construction principles)
- Bailey v. Reeves, 662 S.W.2d 832 (Ky.1984) (interpretation of statutes and ordinary meaning of terms)
- Bowling v. Kentucky Department of Corrections, 301 S.W.3d 478 (Ky.2009) (court reads statutory text to ascertain legislative intent)
- Morton v. Auburndale Realty Co., 340 S.W.2d 445 (Ky.1960) (precedent on statutory interpretation and special vs general acts)