STUMP (CHARLES ROBERT), ET AL. VS. PIKEVILLE INDEPENDENT SCHOOL DISTRICT
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RENDERED: DECEMBER 30, 2009; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2008-CA-001456-MR
CHARLES ROBERT STUMP AND
PAULINE STUMP
v.
APPELLANTS
APPEAL FROM PIKE CIRCUIT COURT
HONORABLE EDDY COLEMAN, JUDGE
ACTION NO. 05-CI-01397
PIKEVILLE INDEPENDENT SCHOOL
DISTRICT
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, CAPERTON, AND THOMPSON, JUDGES.
CAPERTON, JUDGE: The Appellants, Charles Robert Stump and Pauline Stump,
appeal the July 11, 2008, Judgment of the Pike Circuit Court, adjudicating a lien on
real property purchased by Stump at a judicial auction. After a thorough review of
the record, the arguments of the parties, and the applicable law, we affirm.
The Pikeville Independent School District taxes property within its
district and subsequently purchases any tax bills which are not paid by the
landowner or purchased at the tax sale by a third party. A list of taxes which are
delinquent and purchased by the School District are maintained in the Pike County
Clerk’s Office, on a printout which is provided to the County Clerk on a monthly
basis.
The printout is maintained on a shelf in the County Clerk’s Office,
which is denoted, “City Taxes/School Taxes”. Those lists indicate the name of the
property owner, the address of the property, the amount due, any accrued penalties,
and the amount due the following month. The Pikeville Independent School
District pays a fee to the County Clerk each month for each delinquent tax
collected.
The dispute in the matter sub judice arose when the Stumps paid
delinquent property tax bills to the School District on behalf of the previous owner
of the property. The Stumps purchased the property at a Master Commissioner’s
foreclosure sale in 1999. Although the School District’s lien was maintained on
record at the Pike County Clerk’s Office, the law firm handling the foreclosure
action did not list the School District as a party.1
Subsequent to the time that they placed their bid, but prior to the
finalization of the sale, the Stumps had the opportunity to conduct a title search,
but did not do so. During the course of the bench trial below, Pauline Stump
1
The law firm handling the foreclosure action was a party to this action for legal malpractice as a
result of this failure.
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testified that she hired an attorney to do a title search on the property sometime
after the Master Commissioner’s sale was finalized.
That attorney located the School District’s liens recorded at the Pike
County Clerk’s Office. Accordingly, the attorney placed the taxes on his title
opinion and advised the Stumps that the taxes were owed. The Stumps paid the
taxes, and subsequently initiated a lawsuit against the School District and the
aforementioned law firm which handled the foreclosure action.
On appeal to this Court, the Stumps argue first, that the lien of the
School District was not validly recorded and, that as such, it should be defeated by
bona fide purchasers. While acknowledging that KRS 135.420 permits taxing
districts to have liens for delinquent tax bills, they nevertheless argue that in this
case, the manner in which the county clerk recorded the liens provided neither
actual nor constructive notice to bona fide purchasers. Thus, in reliance upon
Midland-Guardian Co. v. McElroy, 563 S.W.2d 752 (Ky.App. 1978), they assert
that the general principle of “first in time, first in right” should apply.2
Our standard of review in this matter is two-fold. First, the trial
court's “findings of fact shall not be set aside unless clearly erroneous, and due
regard shall be given to the opportunity of the trial court to judge the credibility of
the witnesses.” CR 52.01. Secondly, any “interpretation of a statute is a matter of
law”, Commonwealth v. Gaitherwright, 70 S.W.3d 411, 413 (Ky. 2002). Thus, the
2
Kentucky Supreme Court held that while the validity of an instrument or lien does not normally
depend upon its proper recordation, recordation becomes a factor where the rights of innocent
purchasers or creditors have an interest within the meaning of KRS 382.270.
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construction and application of statutes are interpreted “de novo, without deference
to the interpretations adopted by lower courts.” Wheeler & Clevenger Oil Co. v.
Washburn, 127 S.W.3d 609, 612 (Ky. 2004). We review this matter with these
standards in mind.
First, we note that there is no question that the School District has the
statutory right to tax real property within its district boundaries pursuant to KRS
134.420(1)(a). Unquestionably, in this instance, the school district had a lien on
the property at issue. Thus, pursuant to KRS 426.690, it should have been named
as a party to the original foreclosure action. Unfortunately, it was not, through no
fault of the School District itself.
It was the responsibility of the School District to see that its liens were
properly recorded. In the matter sub judice, we believe the School District fulfilled
that duty. Although the Stumps argue that the School District did not deliver
anything to the County Clerk’s office in recordable form as required by KRS
382.335, our review of the record convinces us otherwise.3 Having reviewed both
KRS 134.420, and KRS 382.335, we are of the opinion that the liens were properly
recorded in this instance.4
3
See Plaintiff’s Ex. No. 1.
4
In so finding, we briefly address the arguments of the parties concerning, KRS 134.420(1)(f),
and the trial court’s conclusion that only tax liens of cities in the third, fourth, fifth, and sixth
class must record notice in the same manner as notices of lis pendens. Having reviewed the
record and the statute at issue, we are in agreement with the trial court’s statutory interpretation.
Clearly, if the statute intended that all classes file their notices in the same manner as required
for a lis pendens, it would have so stated. Certainly, it would not have specified certain classes,
while leaving others out, if it intended all classes to be included. Accordingly, we need not
address this issue further herein.
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Notwithstanding the foregoing analysis, we reiterate that we are a
court of review. In addressing this issue below, the circuit court made a finding of
fact that the manner in which the School District files its delinquent tax list in the
County Clerk’s office provides sufficient notice. The School District argues, and
we are compelled to agree, that this finding of fact was supported by substantial
evidence.
Certainly, CR 52.01 provides that findings of fact shall not be set
aside unless clearly erroneous. Further, our case law is clear that findings of fact
will not be found to be erroneous if they are supported by substantial evidence,
which is evidence of substance and relevant consequence having the fitness to
induce conviction in the minds of reasonable men.” Kentucky State Racing
Commission v. Fuller, 481 S.W.2d 298, 308 (Ky. 1972).
Having reviewed the record, we are in agreement with the School
District that the question of whether or not the notice was sufficient in this
particular instance was a finding of fact to be made by the trial court. In this
instance, on the basis of the evidence before it, the trial court made a finding that
the notice was in fact sufficient. Upon our review of the record, we cannot find
that the trial court’s decision was unsupported by the evidence. Accordingly, we
affirm the court’s finding that the notice in this matter was sufficient.
In so finding, we note that the Stumps are correct in arguing that,
pursuant to KRS 134.420(1), a sale to a bona fide purchaser will defeat a lien.
Indeed, as our Court previously held in Liberty National Bank & Trust v.
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Vanderkraats, 899 S.W.2d 511 (Ky.App. 1995), unless notice of a lien is filed, a
bona fide purchaser is given priority. However, our law is equally clear that in the
absence of actual or constructive knowledge, the proper recording of a lien
statement constitutes perfection of the lien, and establishes its priority over
subsequently recorded liens or statements. See Fay S. Sams Money Purchase
Pension Plan v. Jansen, 3 S.W.3d 753 (Ky.App. 1999).
The Stumps argue first, that they are bona fide purchasers, and
secondly, that they had neither actual nor constructive notice of the School
District’s lien in this instance. Upon review, we can agree with neither of those
assertions, in particular, the assertion with respect to the issue of constructive
notice, which we believe to be determinative of this matter. Having found that the
School District properly recorded and provided sufficient notice of its lien, we
conclude that at the very least, it can be found that the Stumps had constructive
notice of its existence.
We are persuaded by the School District’s argument, which we
believe to be in accordance with the law of this Commonwealth, that in order to be
a bona fide purchaser, one must make a reasonable attempt to determine whether
or not any liens were present. In the matter sub judice, the Stumps certainly had
the opportunity, post-bid but pre-sale, to conduct a title search to determine
whether or not any liens were present. They chose not to do so. Without making
any attempts to conduct a search, the Stumps were certain not to discover the lien,
regardless of whether or not it was properly recorded. As we have previously
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stated, “Equity aids the vigilant, not those who slumber on their rights.” See
Fightmaster v. Leffler, 556 S.W.2d 180, 183 (Ky.App. 1977).
Subsequent to the finalization of sale, the Stumps retained their own
personal attorney to conduct a title search. That attorney was able to locate the
liens of the School District via the Pike County Clerks’ Office, and indeed, placed
the taxes on his title opinion. Had the Stumps chosen to conduct a title search prior
to the finalization of the sale, they would presumably have discovered the
existence of the lien at that time. While it is unfortunate that they did not do so,
that is not a matter which can effectively be remedied by this Court on review.
Wherefore, for the foregoing reasons, we hereby affirm the July 15,
2008, Findings of Fact, Conclusions of Law, and Judgment of the Pike Circuit
Court, the Honorable Eddy Coleman, presiding.
ACREE, JUDGE, CONCURS.
THOMPSON, JUDGE, CONCURS IN RESULT ONLY.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEE:
Lawrence R. Webster
Pikeville, Kentucky
Max K. Thompson
Pikeville, Kentucky
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