Opinion
NO. 2015-CA-000523-MR
12-22-2016
ELIZABETH L. LEWIS APPELLANT v. SINKING VALLEY LAND COMPANY, LLC APPELLEE
BRIEFS FOR APPELLANT: Elizabeth A. Thornsbury M. Austin Mehr Lexington, Kentucky BRIEF FOR APPELLEE: Ryan D. Morrow Somerset, Kentucky
NOT TO BE PUBLISHED APPEAL FROM PULASKI CIRCUIT COURT
HONORABLE JEFFREY T. BURDETTE, JUDGE
ACTION NO. 09-CI-01617 OPINION
AFFIRMING
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BEFORE: ACREE, J. LAMBERT AND THOMPSON, JUDGES. THOMPSON, JUDGE: Elizabeth L. Lewis appeals from an order of the Pulaski Circuit Court denying her request to redeem property sold at a judicial sale. The issue presented is whether a rental agreement entered into between Lewis and the purchaser of the property waived Lewis's right of redemption arising under Kentucky Revised Statutes (KRS) 426.530. We hold that under the express terms of the rental agreement, Lewis waived her right of redemption and affirm.
Lewis was the owner of property located at 808 Nixon Street, Ferguson, Kentucky. On March 9, 2012, the property was appraised for $50,000. On September 26, 2013, the property was sold pursuant to a foreclosure sale to Sinking Valley Land Company, LLC, for $20,000. On the same day, Sinking Valley paid 10% of the purchase price and tendered a sale bond for the remaining purchase price with interest at 12% per annum.
Because the sale price of the property was less than two-thirds of the appraised value, pursuant to KRS 426.530(1), Lewis had the right to redeem the property within one year 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[.]"
The statute was amended and now provides that the time-period for the right to redeem property is six months. --------
The day following the sale, Lewis and Sinking Valley entered into a rental agreement for a period beginning October 1, 2013 and ending on October 31, 2014. The agreement provides: Security Deposit: "In lieu of first month's rent, tenant agrees to waive the right of redemption." The page that includes the waiver of the right of redemption is initialed by Lewis and the third and final page, is signed by Lewis as tenant and a Sinking Valley representative as landlord.
The order confirming the sale and order directing approving deed were entered on November 25, 2013. Lewis is shown on the certificate of service for both orders. The deed was recorded in the Pulaski County Clerk's office on December 8, 2013.
The Commissioner's deed did not include a lien in favor of Lewis reflecting any right to redeem the property as provided for by KRS 426.530(3), which states: "[W]hen 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." Although the deed reflected that any right to redeem was waived or released, Lewis did not object to or protest the terms of the master commissioner's deed.
On August 8, 2014, Sinking Valley filed a forcible detainer complaint against Lewis for breach of the rental agreement alleging unpaid rent for the months of June, July and August of 2014. On September 18, 2014, Lewis attempted to exercise her right of redemption by presenting $22,000 to the Pulaski County Circuit Clerk's office. The master commissioner filed a motion requesting instruction from the circuit court.
The circuit court concluded that immediately after the sale on September 26, 2013, Sinking Valley, as the equitable title owner, had the right to enter into binding contracts regarding the real property, including rental agreements. It concluded that Lewis waived her right of redemption under the terms of the rental agreement. The request to redeem the property was denied. Lewis appealed.
Lewis argues Sinking Valley did not possess legal or equitable title at the time the agreement was executed and, therefore, did not possess an interest in the property giving it the right to enter into the rental agreement. According to Lewis's interpretation of Kentucky law, legal or equitable title did not pass until the sale was confirmed by the master commissioner on November 25, 2013.
The parties are in agreement that the issues presented are matters of law and subject to de novo review. Cinelli v Ward, 997 S.W.2d 474, 476 (Ky.App. 1998). The question of when legal or equitable title passes to a purchaser at a judicial sale is purely a legal issue and, therefore, we afford no deference to the trial court's interpretation of the law. Id.
Sinking Valley concedes that it did not receive legal title to the property until execution of the deed by the master commissioner, as approved by the Pulaski Circuit Court, on November 25, 2013. Goodin v. Wilson, 114 Ky. 716, 71 S.W. 866 (1903). It asserts that regardless of when legal title vested, equitable title passed upon the judicial sale and acceptance of the purchase money bond on September 26, 2013.
Lewis properly notes that "[w]hen the owner's property is sold under judgment of the court to pay his debts, the title does not pass to the purchaser until the year allowed for redemption expires, if the property does not sell for two-thirds of its appraised value." Messer v. Am. Eagle Fire Ins. Co., 227 Ky. 3, 12 S.W.2d 358, 360 (1928). However, that is not the issue. The question is whether the waiver of Lewis's right to redemption is enforceable.
The fact that Sinking Valley did not have legal title to the property when the rental agreement was executed is not determinative. Kentucky law in this area is well settled. "Absent a valid ground to prevent confirmation of the sale, the equitable title of property passes with a judicial sale and acceptance of the purchase-money bond or bonds." Kentucky Farm Bureau Mut. Ins. Co. v. Conley, 498 S.W.2d 122, 125-26 (Ky. 1973). "[T]he controlling element is not the confirmation, but the purchaser's compliance with the terms of the sale." Smith v. Nat'l Union Fire Ins. Co., 239 Ky. 106, 39 S.W.2d 189, 190 (1931).
In Conley, the purchaser executed a bond for the purchase price on the date of sale, but did not procure insurance. Before entry of the order confirming the sale and execution of the master commissioner's deed, the house was destroyed by fire. The Court held that the purchaser bore the risk of loss and had an insurable interest. Conley, 498 S.W.2d at 126. Thus, while legal title is lacking until confirmation of a judicial sale, the purchaser's equitable interest in the property is one subject to contract.
On the date of the sale, Sinking Valley paid 10% down and posted a bond for the unpaid purchase price as required by the notice of sale and became the equitable owner of the property. At that point, Lewis's interest in the property was no longer a legal or equitable one, but was a statutory right to redeem.
"[T]he law favors the former owners' redemption right and resolves any ambiguities in the law so as to uphold redemption." Gross v. Logan, 197 S.W.3d 571, 574 (Ky.App. 2006). Nevertheless, that right can be transferred to another. Id. We conclude that although agreements to waive the right of redemption are subject to judicial scrutiny, nevertheless, the right may be waived by a valid and enforceable agreement.
We can discern no reason why the waiver of the right of redemption contained in the rental agreement should not be enforced. The waiver was clearly and expressly stated in the fourth paragraph of the three-page agreement. Additionally, the agreement was supported by adequate consideration. As noted in Justice v. Justice, 237 S.W.2d 866, 867 (Ky. 1951), "adequate legal consideration need not be an exact monetary quid pro quo." The waiver of the right of redemption was supported by adequate consideration.
Based on the foregoing, the order of the Pulaski Circuit Court is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT: Elizabeth A. Thornsbury
M. Austin Mehr
Lexington, Kentucky BRIEF FOR APPELLEE: Ryan D. Morrow
Somerset, Kentucky