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Humphress v. U.S. Bank

Commonwealth of Kentucky Court of Appeals
May 29, 2015
NO. 2013-CA-001708-MR (Ky. Ct. App. May. 29, 2015)

Opinion

NO. 2013-CA-001708-MR

05-29-2015

JOHN HUMPHRESS APPELLANT v. US BANK AS CUSTODIAN FOR SASS MUNI V DTR ASSUMED NAME FOR SASS MUNI V DTR, LLC; PATRICIA HUMPHRESS; TAX EASE LIEN INVESTMENTS I, LLC; DEPT. OF THE TREASURY, INTERNAL REVENUE SERVICE, US ATTORNEY GENERAL; HON. DAVID J. HALE, UNITED STATES ATTORNEY FOR THE WESTERN DISTRICT OF KENTUCKY; CITY OF CAMPBELLSVILLE, KENTUCKY, HON. TONY YOUNG, MAYOR; FORCHT BANK, NATIONAL ASSOCIATION, N/K/A CAMPBELLSVILLE NATIONAL BANK HIGHEST RANKING AGENT OR OFFICER; UNKNOWN SPOUSE OF JOHN HUMPHRESS A/K/A JOHNNY HUMPHRESS AND UNKNOWN SPOUSE OF PATRICA HUMPHRESS; HON. JOHN BERTRAM, TAYLOR COUNTY ATTORNEY; MARK CARNEY, TAYLOR COUNTY CLERK; ALLEN NEWTON, TAYLOR COUNTY SHERIFF; COMMONWEALTH OF KENTUCKY, EX REL DIVISION OF UNEMPLOYMENT INSURANCE, EDUCATION AND WORKFORCE DEVELOPMENT CABINET, OFFICE OF LEGAL AND LEGISLATIVE SERVICES; COMMONWEALTH OF KENTUCKY, DIVISION OF COLLECTIONS, FINANCE AND ADMINISTRATION CABINET F/K/A REVENUE CABINET; OFFICE OF THE ATTORNEY GENERAL; COMMONWEALTH OF KENTUCKY, COUNTY OF TAYLOR, BY AND ON RELATION OF LORI HUDSON FLANERY, SECRETARY OF FINANCE AND ADMINISTRATION CABINET APPELLEES

BRIEF FOR APPELLANT: Robert C. Bishop Elizabethtown, Kentucky BRIEF FOR APPELLEE, TAX EASE LIEN INVESTMENTS 1, LLC: Marcy E. Spratt Heather D. Claycomb Lexington, Kentucky


NOT TO BE PUBLISHED APPEAL FROM TAYLOR CIRCUIT COURT
HONORABLE DAN KELLY, JUDGE
ACTION NO. 13-CI-00168
OPINION
REVERSING IN PART, DISMISSING IN PART, AND REMANDING
BEFORE: CLAYTON, KRAMER, AND NICKELL, JUDGES. KRAMER, JUDGE: John Humphress owns property located at 116 Kensington Avenue in Campbellsville, Kentucky. On May 1, 2013, US Bank filed a foreclosure action in Taylor Circuit Court against Humphress based upon a certificate of delinquency it had purchased with respect to Humphress' nonpayment of 2005 property taxes. As part of its action, US Bank also joined appellee Tax Ease, which held (and likewise asserted claims to enforce) two other certificates of delinquency that had been issued after Humphress failed to pay property taxes in 2006 and 2008. On August 26, 2013, following a period of motion practice, the circuit court entered summary judgment in favor of US Bank; adjudicated the full amount of its lien; and directed the sale of Humphress' property to satisfy it.

With that said, Humphress' arguments on appeal regarding why the circuit court's judgment should be reversed can be summarized as follows. First, he contends that US Bank's delinquency certificate was void because the sheriff, county clerk, and county attorney did not give him "notice required by KRS[] 134" before issuing it to US Bank in 2007. This is the extent of his argument. He also fails to identify what notice, if any, these officials were required by law to provide him with, or to cite any supporting proof. Accordingly, Humphress is not entitled to relief on this issue. "[I]t is not our function as an appellate court to research and construct a party's legal arguments, and we decline to do so here." Hadley v. Citizen Deposit Bank, 186 S.W.3d 754, 759 (Ky. App. 2005) (citations omitted); see also Kentucky Rule of Civil Procedure (CR) 76.12(4)(c)(v).

US Bank filed no appellee brief. Nevertheless, we have exercised our discretion not to impose any of the penalties authorized by CR 76.12(8)(c).

Kentucky Revised Statute.

In his pro se pleadings below, Humphress styled this contention as a "counterclaim." In his appellate brief, he also appears to argue the circuit court failed to adjudicate it. However, this contention was clearly a matter constituting an avoidance of liability and was, thus, an affirmative defense rather than a counterclaim. See CR 8.03. From the record and the judgment at issue in this matter, it also appears the circuit court treated this contention as an affirmative defense, as permitted by that rule, and rejected it.

Humphress' second argument is that because US Bank and Tax Ease shared representation from the same firm below, US Bank's attorneys had a conflict of interest which consequently rendered the judgment in favor of US Bank void. However, even if US Bank's attorneys had engaged in some form of unethical conduct—and nothing of record indicates that was remotely the case—Humphress again identifies no rule of law, and we have found none supporting that it could have rendered US Bank's judgment invalid. Thus, Humphress is entitled to no relief on this issue, either.

Third, Humphress argues US Bank either lacked standing to assert its delinquency certificate or the circuit court lacked jurisdiction to consider US Bank's foreclosure action relating to that certificate. As to why, he argues that US Bank failed to adduce evidence substantiating that it complied with the notice requirements of KRS 134.490.

Another argument that Humphress advances on appeal is that he was not given an adequate amount of time to conduct discovery before the circuit court entered summary judgment in favor of US Bank. As to what he wished to discover, Humphress argues in a somewhat opposite vein that he wanted to request evidence from US Bank establishing whether that entity complied with the notice requirements of KRS 134.490 prior to initiating foreclosure proceedings against him.
Even assuming Humphress was given inadequate time to request this evidence from US Bank, his inability to request it caused him no real prejudice and at best constituted harmless error. This is because (as discussed below), after he effectively raised US Bank's compliance with KRS 134.490 as an issue in his answer and response to US Bank's motion for summary judgment, it became US Bank's obligation to produce that evidence, irrespective of any discovery request from Humphress, to support its requisite prima facie case for summary judgment.

To begin, Humphress is incorrect that US Bank lacked standing to assert its delinquency certificate as the basis of its foreclosure proceedings. The certificate itself, which US Bank included of record, is prima facie evidence that Humphress' property was subject to the taxes levied thereon and was assessed as required by law; the tax claim of Taylor County was valid and correct in all respects; and that the requisite taxes were not paid any time before the establishment of the certificate of delinquency or personal property certificate of delinquency. KRS 134.122(2)(e)(1)-(3). After US Bank purchased the certificate from Taylor County, it essentially stood in Taylor County's shoes; that is, US Bank's payment was treated as an assignment of Taylor County's rights, and US Bank was therefore entitled to assert all of the remedies available to Taylor County for collecting amounts due under the certificate of delinquency or enforcing the lien. See KRS 134.126(5)(b); KRS 134.126(8)(a); KRS 134.420; KRS 134.546(2). Furthermore, even if US Bank had not complied with the notice requirements of KRS 134.490 prior to filing suit (discussed further below), failing to do so would merely provide a basis for reversal on appeal. It would not have otherwise deprived the circuit court of jurisdiction. See Lorton v. Ashbrook, 220 Ky. 830, 295 S.W. 1027 (1927).

Lorton involved an analogous issue, namely, the alleged failure of an individual asserting a mechanic's lien to have provided statutorily-mandated notice prior to filing suit. In relevant part, the former Court of Appeals explained at 295 S.W. at 1027-28:

It was the duty of defendants if they desired to take advantage of this oversight to do so either by demurrer or motion, and if in such manner the court's attention had been directed to the oversight, it might then have been readily and promptly remedied.
Judgments are generally speaking void only for three reasons: (1) want of jurisdiction of the subject-matter; (2) want of jurisdiction over the persons of the litigants or some of them; and (3) want of power in the tribunal to grant the relief attempted to be granted in the judgment.
In this case the court had jurisdiction of the subject-matter; it acquired jurisdiction over the persons of the property owners by process, and it obviously had the power to grant the relief sought, and it was granted. There mere failure by oversight to allege the taking of one step required before asserting a statutory lien does not so vitally effect the sufficiency of the pleading as to make it insufficient to support a valid judgment, and particularly when an exhibit filed with it discloses that such fact might truthfully have been alleged.
The court having jurisdiction of the subject-matter, of the parties, and the power to enter the judgment it did, the latter was not void but merely erroneous, and could therefore be taken advantage of only by appeal after the raising of the question in the lower court. . . .

Nevertheless, an issue warranting further discussion and a point of error that Humphress effectively preserved on appeal is US Bank's compliance with the notice requirements specified in KRS 134.490.

Generally speaking, after a third party purchases a certificate of delinquency, there are various points at which the purchaser is required to send notices to the delinquent taxpayer. See KRS 134.490(1) and (2). These notices must be sent by first-class mail with proof of mailing to the most recent address of the owner of the property subject to the certificate of delinquency, as provided by the property valuation administrator. KRS 134.490(3)(a). They must provide: (1) a statement describing the nature and amount of the certificate of delinquency; (2) a statement that the certificate of delinquency will be subject to collection if unpaid; (3) a statement that the taxpayer may be eligible for a payment plan; (4) information regarding the interest and fees which a purchaser is entitled to collect; and (5) contact information for the purchaser. KRS 134.490(3)(d)-(e). The purchaser is required to send the first of these notices within fifty days of receiving the certificate of delinquency from the county clerk; this first notice is mainly intended to inform the delinquent taxpayer that the certificate of delinquency has been purchased by a third party. KRS 134.490(1)(a). Thereafter, the purchaser is required to send such notices annually, unless an action to collect the amount due under the certificate of delinquency or to enforce the lien is instituted. KRS 134.490(1)(b).

Importantly, a failure to send the original fifty-day notice (or a correction notice in the event that a third-party purchaser's name or contact information changes) operates to suspend the accrual of all interest and any fees incurred by the third-party purchaser after that date until proper notice is given. KRS 134.490(e). Moreover, to institute any action to collect amounts due under the certificate of delinquency or to enforce the lien, the third-party purchaser must send an additional notice to the delinquent taxpayer at least forty-five days beforehand informing the taxpayer that enforcement action will be taken; this other notice must likewise include the information required by KRS 134.490(3). KRS 134.490(2).

By statute, US Bank was required to "maintain complete and accurate records of all notices sent pursuant to [KRS 134.490]." KRS 134.490(3)(c). Therefore, because Humphress effectively raised it as an issue below, US Bank was required to provide evidence of its compliance with KRS 134.490 as part of its prima facie case for summary judgment. See Porter v. Johnson County Judge/Executive, 357 S.W.3d 500, 504 (Ky. App. 2010) (for the purpose of summary judgment, "Unless and until the moving party has properly shouldered the initial burden of establishing the apparent non-existence of any issue of material fact, the non-movant is not required to offer evidence of the existence of a genuine issue of material fact." (Citations and quotations omitted)).

In that respect, the only indication from the record that US Bank may have sent any notices to Humphress appears in an affidavit from US Bank's pre-litigation attorney requesting fees for a "50-day notice letter" sent on August 14, 2007, and a total of six "demand letters" sent between the dates of August 2, 2008, and April 19, 2012. But, this cannot be considered proof of US Bank's compliance with KRS 134.490; aside from being added to the record by US Bank post-judgment, this affidavit is unaccompanied by any sworn or certified copies of the purported notices it references. See CR 56.05. Therefore, we reverse and remand for the purpose of requiring US Bank to produce its records establishing that it sent Humphress the requisite notices mandated by KRS 134.490. Also, we decline to review Humphress' additional contention that US Bank's attorney's fees and additional charges constituting much of its judgment and lien were neither actual nor reasonable. See generally KRS 134.452. If US Bank failed to provide requisite notice to Humphress, it would moot the issue and any opinion we offered in that regard would be advisory.

Humphress also alleges US Bank failed to send requisite notice to the co-owner of the property at issue in this matter (i.e., his ex-wife, Patricia Humphress). This is not an issue properly before us, however, because Humphress has never been authorized to represent Patricia's interests in this litigation; Patricia never asserted lack of notice as a defense; and Patricia never appealed or otherwise contested the propriety of the default judgment that was ultimately entered against her below regarding US Bank's certificate of delinquency.
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Next, Humphress reasserts each of his above arguments against appellee Tax Ease, but with respect to a subsequent summary judgment the circuit court entered in favor of Tax Ease on November 14, 2013, regarding Tax Ease's claims to enforce its aforementioned 2006 and 2008 tax delinquency certificates.

The circuit court's judgment in favor of US Bank not only specified the priority of US Bank's lien, but also specified the full amount of US Bank's judgment, including all applicable fees, and it recited the appellate language of CR 54.02 (i.e., that it was final and that there was "no just reason for delay"). By contrast, the circuit court's November 14, 2013 judgment in favor of Tax Ease merely states in relevant part: "IT IS HEREBY ORDERED AND ADJUDGED that Tax Ease is granted a Summary Judgment against all parties hereto and be [sic] paid from the proceeds of any sale of the subject property herein." Stated differently, the circuit court's judgment in favor of Tax Ease verified that Tax Ease had a valid lien and was entitled to judgment. But, it did not specify the amount of Tax Ease's lien, let alone calculate the applicable fees and costs Tax Ease claimed in its complaint pursuant to KRS 134.452, which were required to be included as part of its lien amount. See KRS 134.420(3).

Where a statute authorizing a particular cause of action requires a judgment to include an award of attorney's fees and a claim for attorney's fees is properly pled by the plaintiff, the judgment remains interlocutory until the trial court enters its order setting the amount of the attorney fee. Thus, even a recital of the appellate language of CR 54.02—which incidentally is also absent from the circuit court's November 14, 2013 order—would not have operated to make Tax Ease's judgment final and appealable. See Francis v. Crounse Corp., 98 S.W.3d 62, 67-68 (Ky. App. 2002). Accordingly, to the extent that Humphress has attempted to appeal the circuit court's judgment in favor of Tax Ease, we dismiss it as interlocutory.

For these reasons, we REVERSE IN PART, DISMISS IN PART, and REMAND for further proceedings not inconsistent with this opinion.

ALL CONCUR. BRIEF FOR APPELLANT: Robert C. Bishop
Elizabethtown, Kentucky
BRIEF FOR APPELLEE, TAX EASE
LIEN INVESTMENTS 1, LLC:
Marcy E. Spratt
Heather D. Claycomb
Lexington, Kentucky


Summaries of

Humphress v. U.S. Bank

Commonwealth of Kentucky Court of Appeals
May 29, 2015
NO. 2013-CA-001708-MR (Ky. Ct. App. May. 29, 2015)
Case details for

Humphress v. U.S. Bank

Case Details

Full title:JOHN HUMPHRESS APPELLANT v. US BANK AS CUSTODIAN FOR SASS MUNI V DTR…

Court:Commonwealth of Kentucky Court of Appeals

Date published: May 29, 2015

Citations

NO. 2013-CA-001708-MR (Ky. Ct. App. May. 29, 2015)