Opinion
NO. 2019-CA-001556-MR
05-29-2020
HAMILTON HOLDINGS, LTD. AND NALLY & HAMILTON ENTERPRISES, INC. APPELLANTS v. APPALACHIAN ROYALTY TRUST, LLC APPELLEE
BRIEFS FOR APPELLANTS: Joseph H. Mattingly III Lebanon, Kentucky S. Thomas Hamilton Bardstown, Kentucky BRIEF FOR APPELLEE: Scott M. Webster London, Kentucky
NOT TO BE PUBLISHED APPEAL FROM BELL CIRCUIT COURT
HONORABLE ROBERT V. COSTANZO, JUDGE
ACTION NO. 19-CI-00159 OPINION
AFFIRMING
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BEFORE: COMBS AND JONES, JUDGES; BUCKINGHAM, SPECIAL JUDGE. BUCKINGHAM, SPECIAL JUDGE: Hamilton Holdings, LTD. (Hamilton) and Nally & Hamilton Enterprises, Inc. (N&H) appeal from a summary judgment of the Bell Circuit Court in favor of Appalachian Royalty Trust, LLC (ART) in a case involving the right of redemption under KRS 426.530. We affirm.
Retired Judge David C. Buckingham sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution.
Kentucky Revised Statutes.
FACTS
The litigation began in the Laurel Circuit Court when Whitaker Bank filed a mortgage foreclosure action on ART property located in Laurel County and Bell County. N&H held the coal and mining rights to the property under a lease agreement with ART. The ART property in Bell County was appraised prior to judicial sale pursuant to KRS 426.520 at $4,050,000 and was sold at public auction on January 4, 2019, to Hamilton for a purchase price of $670,950. Hamilton deposited $63,000 with the master commissioner of Laurel County on the date of sale.
Because Hamilton's highest and best bid at the sale was less than two-thirds of the appraised value, Hamilton's title to the property was subject to ART's right to redeem it pursuant to KRS 426.530(1). On January 23, 2019, ART's attorney emailed an attorney for Hamilton and N&H, stating its intent to redeem the property and pay the purchase price plus interest to the court. The email also stated that if any reasonable costs were incurred by KRS 426.530(1), those amounts should be made known by January 23, and if there was a dispute, the matter could be presented to the court on February 8 for a hearing.
On February 7, 2019, ART filed its affidavit of redemption and deposited the amount of the purchase price, $670,950, with the court. On the same day, ART's attorney emailed the master commissioner and an attorney for Hamilton and N&H, forwarding a copy of the affidavit of redemption and stating, "I'm still awaiting word from Hamilton Holdings, LTD, through their attorney Allen Lewis, as to any claimed interest and costs. I hope and believe we can work out an agreement in that regard." On the same day, the attorney for Hamilton and N&H responded by email that he could not answer the costs question at that time, but that he should be able to answer it the following day. He further stated that he believed the interest would be about $5,600 per month. As Hamilton had paid the purchase price in full, on February 8, 2019, a deed conveying the property to Hamilton was executed and approved by the court.
On February 12, 2019, ART's attorney emailed an attorney for Hamilton and N&H, asking that the dates payments had been made to the court be provided so that interest could be calculated. The email stated that "[m]y client is statutorily entitled to a deed to this property upon payment of those amounts." The email further stated that if there was not an agreed resolution as to interest and costs by February 27, then a motion would be filed with the court to resolve the matter.
On February 25, 2019, ART filed a motion for order as to costs and interest and for master commissioner deed. ART disputed $6,386.63 in engineering analysis expenses as not being recoverable for the maintenance or repair of the property as well as Hamilton's claim for interest in the amount of $8,823.36. The motion noted that Hamilton had paid $63,000 to the court on the date of sale, January 4, 2019, and $607,950 on February 2, 2019. ART argued that the court must not allow interest calculated on money that had not been paid. The motion was originally scheduled to be heard on March 8, 2019, but it was postponed for a month.
The parties disagree as to whether the postponement of the hearing was at the request of Hamilton's attorney or was by agreement.
After hearing arguments on the motion, the court emailed counsel for the parties and asked what date the parties had agreed that interest on the purchase would stop. It was confirmed that interest would stop on March 7.
On April 23, 2019, the court entered an order awarding Hamilton $6,844.25 in interest and $671 for transfer tax but denying the engineering expenses. The court further denied Hamilton's claim for rents, profits, or royalties on the ground that rent and royalties are not costs for the maintenance or repair of the property. The court further noted that ART had paid the full amount of the price for which the property had sold "even before Hamilton had acquired a deed to the property." The court further stated, "the Court finds that it would thwart the purpose and spirit of KRS 426.530 to allow such profit, and further that these factors make this case distinguishable from Karam v. Greentree Corporation, 783 S.W.2d 78 [(Ky. App. 1990)]." On May 3, 2019, ART paid the amounts to the court, and the master commissioner delivered a deed to ART on May 10, 2019. The court also entered an order directing distribution of the funds to Hamilton.
Karam v. Greentree was overruled on other grounds by Capital Holding Corp. v. Bailey, 873 S.W.2d 187 (Ky. 1994).
On May 21, 2019, Hamilton and N&H filed a declaratory judgment action in the Bell Circuit Court, the county where the property is located, that is the subject of this appeal. Therein, Hamilton and N&H sought a declaration of rights as to whether Hamilton or ART was entitled to the coal mining royalties payable by N&H. Hamilton claimed that it was the purchaser, possessor, and title-holder of the property from January 4, 2019, through May 3, 2019, when the master commissioner delivered a deed to ART, and that it was entitled to the coal mining royalties which accrued during that period of time.
On August 1, 2019, the court awarded summary judgment and held that ART, not Hamilton, was entitled to the royalties during the entire period following the date the property was sold. The court held:
As the Laurel Circuit Court found, Karam is inapposite. Defendant paid the bid amount into the Court before the confirmation and deed to Plaintiffs, without waiting on an Order as to disputed amounts, unlike Greentree in the Karam case. Defendant is not seeking credit on the
redemption and Karam stands only for the proposition that Defendant would not be entitled any such credit from any rentals or royalties collected by Hamilton Holdings.This appeal by Hamilton and N&H followed.
Even with Defendant's deposit of the bid amount, Hamilton Holdings still took a deed from the Master Commissioner the next day. Hamilton Holdings was entitled to be reimbursed those bid funds immediately upon payment of them to the Court but did not seek that until later; it was entitled to legitimate costs and interest but delayed in providing calculations of those and, when it did, claimed excessive amounts. To allow a purchaser taking subject to a right of redemption to delay by failing to provide statutorily justifiable calculations of costs and interest and then take advantage of the delay caused thereby would be unjust and not in any way authorized by the subject statute, especially when the amount subject to precise calculation, i.e., the bid amount, has been deposited.
As found by the Laurel Circuit Court, because Defendant "acted with haste to assert its statutory rights . . . it would thwart the purpose and spirit of KRS 426.530 to allow such profit," in the form of the recovery sought by Plaintiff in this action.
STANDARD OF REVIEW
The arguments raised by Hamilton and N&H are legal ones. Therefore, "[t]he trial court's conclusions of law . . . are subject to independent de novo appellate determination." Gosney v. Glenn, 163 S.W.3d 894, 898 (Ky. App. 2005).
STATUTE
KRS 426.530 provides as follows:
(1) If real property sold in pursuance of a judgment or order of a court, other than an execution, does not bring two-thirds (2/3) of its appraised value, the defendant and his or her representatives may redeem it within six (6) months from the day of sale, by paying the original purchase money and ten percent (10%) per annum interest thereon, and any reasonable costs incurred by the purchaser after the sale for maintenance or repair of the property, including but not limited to utility expenses, insurance, association fees, taxes and the costs to conform the property to the minimum standards of local nuisance code provisions and other local ordinances as authorized in KRS 65.8801 to 65.8839.
(2) The defendant shall pay the redemption money to the clerk of the court in which the judgment was rendered or the order of sale was made. Upon payment by the defendant, the master commissioner shall convey the real property to the defendant.
(3) When the right of redemption exists, the purchaser shall receive an immediate writ of possession and a deed containing a lien in favor of the defendant, reflecting the defendant's right to redeem during the statutory period.
ANALYSIS
Hamilton and N&H argue that Hamilton is entitled to the coal mining royalties because, pursuant to KRS 426.530(3) as amended in 1982, it held the right to immediate possession of the property as of the judicial sale, despite the existence of redemption rights. Further, because it was in possession of the property as of the date of the sale, Hamilton claims it was entitled to the profits from the property purchased until such time as there was a valid redemption. In support of its argument, Hamilton cites Karam, a redemption of property case wherein this Court held that "the buyer is entitled to the rents and profits derived during the period he or she is in possession." 783 S.W.2d at 81.
In Karam property was sold to the purchaser for less than two-thirds of the appraised value, giving the owner the right of redemption. Id. at 79. Over six months after the sale, the owner moved the court for an order establishing the amount for redeeming the property. Approximately two years later, the court set the amount to be paid by the owner to the purchaser. Thereafter, in a CR 60.02 motion, the owner argued he should have been given credit on the amount the court had determined he was to pay the purchaser. This Court held in Karam that the owner was not entitled to credits for the rents collected by the purchaser during the time he had owned the property. Id. at 81.
Kentucky Rules of Civil Procedure.
Citing KRS 426.530(1), Hamilton argues that although ART paid the purchase price into the court on February 7, which was slightly over a month following the sale, it (Hamilton) was nonetheless entitled to the royalties until such time as ART also paid the interest and any reasonable costs incurred after the sale for maintenance or repair. Hamilton asserts that this Court should adopt a "bright-line rule for how rents and profits generated from property subject to redemption rights under KRS 426.530 should be allocated after a purchaser's bid is accepted." Hamilton contends that, because the purchase price and interest are subject to easy calculation, the rule "should be that the purchaser is entitled to rents and profits from the purchased property until such time as the defendant has deposited the purchase price and interest. . . . By paying the purchase price and interest, the defendant can cut-off the purchaser's claim to further rents and profits while the 'reasonableness' of the purchaser's claims for costs is litigated."
As stated previously herein, the trial court rejected this argument by Hamilton and N&H and awarded summary judgment to ART. The court held that to allow Hamilton to take advantage of the delay it had caused "would be unjust and not in any way authorized by the subject statute[.]" The court also quoted approvingly the language of the Laurel Circuit Court in its order that "ART acted with haste to assert its statutory rights. As such, the Court finds that it would thwart the purpose and spirit of KRS 426.530 to allow such profit[.]"
While ART agrees with the decision of the trial court, its main argument in this appeal is that the claim of Hamilton and N&H for coal mining royalties in the Bell Circuit Court is barred as a matter of law by the doctrine of res judicata by the previous order of the Laurel Circuit Court. ART asserts that "[t]he Laurel Circuit Court adjudicated and finally determined the dispute between Appellants Hamilton Holdings and Nally & Hamilton and ART regarding the issue of royalties." ART also relies on the doctrine of collateral estoppel in support of its argument. Hamilton and N&H contend, on the other hand, that the subject matter of the Laurel Circuit Court suit was the scope of "reasonable costs" required to be paid by ART and that the subject matter of coal royalties in the Bell Circuit Court was unrelated to ART's right of redemption in the first suit.
Our Supreme Court in Yeoman v. Commonwealth, Health Policy Board, 983 S.W.2d 459 (Ky. 1998), described the doctrine of res judicata as "an affirmative defense which operates to bar repetitious suits involving the same cause of action." Id. at 464. Further, in discussing the two subparts of res judicata (claim preclusion and issue preclusion), the Court stated:
The issues in the former and latter actions must be identical. The key inquiry in deciding whether the lawsuits concern the same controversy is whether they both arise from the same transactional nucleus of facts. If the two suits concern the same controversy, then the previous suit is deemed to have adjudicated every matter which was or could have been brought in support of the cause of action.Id. at 465.
Two things are immediately apparent from our examination of this issue. First, the Laurel Circuit Court stated in its order that it rejected Hamilton's "claim for rents, profits, or royalties" because they "are not costs for 'maintenance or repair of the property.'" Second, although the Bell Circuit Court sided with ART and awarded it summary judgment, it did not address ART's argument that the claim of Hamilton and N&H for coal mining royalties was barred by res judicata or collateral estoppel.
We conclude that the claim of Hamilton and N&H in the Bell Circuit Court is barred by the doctrine of res judicata. As it relates to these parties, the subject matter of the Laurel Circuit Court action was the right of redemption by ART and the amount it had to pay to properly exercise that right. While Hamilton and N&H claimed various amounts, the court in that case did not allow royalties as they were not recoverable under the statute as "maintenance or repair of the property." KRS 426.530(1).
This Court may affirm the trial court for any reason supported by the record. Mark D. Dean, P.S.C. v. Commonwealth Bank & Trust Co., 434 S.W.3d 489, 495-96 (Ky. 2014).
The parties (Hamilton and N&H and ART) were identical, and the common issue was how much ART owed to Hamilton for its redemption of the property. Following the direction given by our Supreme Court in Yeoman, we conclude that the two suits arose from "the same transactional nucleus of facts." 983 S.W.2d at 465. Further, as the two suits concern the same controversy, res judicata applies because "the previous suit is deemed to have adjudicated every matter which was or could have been brought in support of the cause of action." Id. The matter of coal mining royalties was apparently brought before the Laurel Circuit Court, because the court therein specifically rejected the recovery of such in its order. Even if the matter of coal mining royalties was not before the court, it could have been brought in that action as the parties were before the court and the issue was the amount of money owed by ART to Hamilton due to Hamilton's possession of the property for a time.
Hamilton was not a party to the Laurel Circuit Court litigation, but it was before the court as the purchaser at judicial sale and was represented by counsel in the dispute with ART.
Regardless of whether res judicata bars recovery, we agree with the Bell Circuit Court that Hamilton may not use the delay it caused to unjustly lengthen its period of possessing the property and thereby not promptly allowing ART to complete the redemption process and thereafter claim entitlement to the coal mining royalties. ART paid the full purchase price into the court before the sale had been confirmed and the deed to Hamilton issued. The same day and in the days following, ART attempted to resolve the additional amounts owed and pay those amounts into the court.
Ultimately, ART filed a motion so that the court could resolve the dispute. While Hamilton contends that all ART had to do was pay the easily calculable interest into the court, the result of the hearing was that Hamilton had requested considerably more interest than the court held it to be entitled to. Hamilton also demanded additional amounts that the court determined were not appropriate under the statute. Under these circumstances, we conclude that the court did not err in refusing to award Hamilton the coal mining royalties.
CONCLUSION
The summary judgment awarded to ART by the Bell Circuit Court is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANTS: Joseph H. Mattingly III
Lebanon, Kentucky S. Thomas Hamilton
Bardstown, Kentucky BRIEF FOR APPELLEE: Scott M. Webster
London, Kentucky