Opinion
NO. 2016-CA-000517-MR
03-10-2017
KENTUCKY TAX BILL SERVICING, INC. APPELLANT v. PATRICIA LYNN CRAVENS, A/K/A PATRICIA HULETTE; HENRY HULETTE; JENEL FAYTH CRAVENS; UNKNOWN SPOUSE OF JENEL FAYTH CRAVENS; COMMONWEALTH OF KENTUCKY FINANCE AND ADMINISTRATION CABINET; JAMOS FUND I, LP; TAX EASE LIEN INVESTMENTS 1, LLC; CENTRAL KENTUCKY TAX ACQUISITION, LLC; FRANKLIN COUNTY, KENTUCKY; AND CITY OF FRANKFORT, KENTUCKY APPELLEES
BRIEF FOR APPELLANT: Joshua M. Bilz Cold Spring, Kentucky BRIEF FOR APPELLEE: Preston Scott Cecil Frankfort, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 10-CI-01058 OPINION
AFFIRMING
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BEFORE: CLAYTON, DIXON, AND NICKELL, JUDGES. CLAYTON, JUDGE: This case arises from a foreclosure action and presents a narrow issue regarding whether a person with a right of redemption can exercise that right and then assign to another person or entity the right to be conveyed the property. We answer the question affirmatively and begin with a brief historical recitation.
Kentucky Tax Bill Servicing, Inc. (hereinafter "KTBS") purchased numerous delinquent tax bills for a piece of real property owned by Patricia Cravens (now Hulette). KTBS then moved for foreclosure of the property. A judgment was entered, and a judicial sale held. The property was appraised at $50,000, but it only sold for $5,000 to KTBS at the auction. Because the high bid was less than two-thirds of the appraised value, a right of redemption existed for Cravens to purchase the property within six months for the original purchase price plus ten percent interest per annum. Kentucky Revised Statutes ("KRS") 426.530.
Approximately a month later, Cravens exercised her right of redemption by paying $5,041.67 to the clerk of the court. The trial court then entered an order directing the Master Commissioner to convey the property to Cravens. See KRS 426.530(2). Before the Master Commissioner conveyed the deed to Cravens, Cravens filed a "Notice of Assignment of Right of Redemption" that assigned her right to be conveyed the real property to ESAD, LLC, a Kentucky Limited Liability Company formed after Cravens had exercised her right of redemption.
KTBS filed a motion to strike the assignment, arguing Cravens had already exercised her right of redemption and could not now assign it to another party. Cravens responded that she was not assigning her right to redeem the property; instead, she was assigning her right to be conveyed the property. Furthermore, she noted that her assignment was no different than an assignment of a bid by a successful purchaser to a third party, which occurs frequently at Kentucky's judicial sales. See, e.g., Ky. 3rd Judicial Circuit Local Rule 14.09 ("Any purchaser making an assignment of its bid to another entity shall file same with the Clerk, setting forth the nature of the assignment together with the name and address of the assignee."); Ky. 5th Judicial Circuit Local Rule 12.03(F) (similar); Ky. 9th Judicial Circuit Local Rule 9.06 (similar); Ky. 46th Judicial Circuit Local Rule 12.07 (similar). Cravens also argued that KTBS had no standing to move to strike the assignment, as its interest in the property merged into the judgment and order of sale, and the property was now free and clear of all liens.
In short form, the Franklin Circuit Court denied the motion to strike:
The Plaintff (KTBS) does not cite to any legal authority that would deny Ms. Cravens the right to assign this particular right (to be conveyed the property). Thus, the Court is constrained but to allow Ms. Cravens to assign the right to be conveyed the deed. In the absence of any countervailing authority, the Court finds that this is but one of the many rights which individuals may freely assign.
KTBS appeals and argues that when Cravens exercised her right of redemption, she extinguished the right, leaving nothing to be assigned to ESAD, LLC. KTBS claims that the Master Commissioner must now, pursuant to KRS 426.530(2), "convey the real property to the defendant [Cravens.]"
Under the specific facts presented here, we disagree. Neither party disputes that Cravens could have first transferred her right of redemption to ESAD, LLC, and ESAD, LLC could then have exercised the right of redemption and had the deed conveyed to it by the Master Commissioner. Such transfers have been approved by Kentucky courts for decades. Town Branch Storage, Inc. v. Commonwealth, 995 S.W.2d 398 (Ky. App. 1999). See also Gross v. Logan, 197 S.W.3d 571, 574 (Ky. App. 2006).
KTBS claims that because the opposite happened - Cravens first exercised the right to redemption, then attempted to assign to another party the deed's conveyance - the conveyance should not be allowed. KTBS points us to no law to support its assertion, arguing only generally that we should view the right of redemption as an option to purchase that, when exercised, is extinguished.
We are constrained from such a narrow reading of the statute due to two overarching principles. First, "the law favors the former owners' redemption right and resolves any ambiguities in the law so as to uphold redemption." Gross, 197 S.W.3d at 574 (citing Crittenden v. Rogers, 278 Ky. 481, 128 S.W.2d 942, 945 (1939), overruled on other grounds by Lockhard v. Brown, 536 S.W.2d 318 (Ky. 1976)). Second, a right of redemption includes an equitable interest in the right to be conveyed the property. Just as "[a] purchaser at a judicial sale has an equity which constitutes property and which may be assigned[,]" Johnson v. Baker, 246 Ky. 604, 55 S.W.2d 404, 406 (1932) (citations omitted), a right to redemption may also be assigned, Town Branch, supra, and, accordingly, part of the equitable value of the right of redemption is the right to be conveyed the property, KRS 426.530(2).
Thus, because there is an equitable interest in the right to be conveyed the property, and because we must resolve any ambiguities so as to uphold the right of redemption (including the equitable interest in the conveyance right), we necessarily hold that Cravens may redeem the property then assign the conveyance right before the Master Commissioner has conveyed the property. Any other result would create a legal absurdity where Cravens could only assign the right of redemption but not the equity interest in the resulting conveyance right.
Finally, KTBS argues that because the Master Commissioner was under court order to convey the property to Cravens, then the conveyance to a third party violated public policy and is void. This argument is unavailing, as the trial court's order was interlocutory and subject to alteration. Nothing about the court's "Order of Redemption" directing the Master Commissioner to convey the property to Cravens stated the order was final and appealable. Kentucky Rules of Civil Procedure (CR) 54.02. Likewise, it did not adjudicate all the rights of all parties, and, accordingly, was not a final and appealable order. See Tax Ease Lien Invs. 1, LLC v. Brown, 340 S.W.3d 99 (Ky. App. 2011). Thus, the trial court acted within its jurisdiction by ruling on Craven's motion to assign the conveyance to ESAD, LLC, and altering its redemption order.
Having found no error with the trial court's order, we affirm and do not address Craven's alternative argument that KTBS lacked standing.
ALL CONCUR. BRIEF FOR APPELLANT: Joshua M. Bilz
Cold Spring, Kentucky BRIEF FOR APPELLEE: Preston Scott Cecil
Frankfort, Kentucky