SPENCER (RITA), ET AL. VS. KENTUCKY TAX BILL SERVICING, INC., ET AL.
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RENDERED: JUNE 18, 2010; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-000792-MR
RITA SPENCER; DONALD
SPENCER; AND FRANK STULL
v.
APPELLANTS
APPEAL FROM PENDLETON CIRCUIT COURT
HONORABLE ROBERT W. MCGINNIS, JUDGE
ACTION NO. 08-CI-00336
KENTUCKY TAX BILL SERVICING,
INC.; AND KENTUCKY FORECLOSURE
MANAGEMENT, INC.
APPELLEES
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: LAMBERT AND STUMBO, JUDGES; WHITE,1 SENIOR JUDGE.
WHITE, SENIOR JUDGE: This is an appeal from an order of the Pendleton
Circuit Court which granted a motion for judgment on the pleadings brought by
1
Senior Judge Edwin M. White sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes
(KRS) 21.580.
Kentucky Tax Bill Servicing, Inc. (“KTBS”) and Kentucky Foreclosure
Management, Inc. (“KFM”) against the appellants, Rita and Donald Spencer and
Frank Stull.2 The appellants, who are Pendleton County landowners, filed a
complaint alleging that KTBS and KFM had charged illegal and unauthorized fees
in connection with delinquent property tax bills.
KTBS purchases delinquent county real estate tax bills and KFM
assists in the collection process. KRS 134.452 entitles private purchasers of
certificates of delinquency to collect interest, administrative and attorneys’ fees up
to certain monetary limits, in addition to the amount actually paid to purchase the
certificate. It provides in pertinent part as follows:
(1) Notwithstanding any other provisions of this chapter,
a private purchaser of a certificate of delinquency shall
be entitled to collect only the following:
(a) The amount actually paid to purchase the
certificate of delinquency;
(b) Interest accrued subsequent to the date the
certificate of delinquency was purchased as
provided in KRS 134.500;
(c) Attorneys’ fees as provided in this paragraph.
1. Attorneys’ fees incurred for collection
efforts prior to litigation as follows:
a. If the amount paid for a certificate
of delinquency is between five dollars
($5) and three hundred fifty dollars
($350), actual reasonable fees
incurred up to one hundred percent
2
Mike and Greta Kidwell, who were named as appellants in the notice of appeal, were dismissed
as appellants on their own motion on November 19, 2009.
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(100%) of the amount of the
certificate of delinquency, not to
exceed three hundred fifty dollars
($350);
b. If the amount paid for a certificate
of delinquency is between three
hundred fifty-one dollars ($351) and
seven hundred dollars ($700), actual
reasonable fees incurred up to eighty
percent (80%) of the amount of the
certificate of delinquency, not to
exceed five hundred sixty dollars
($560); and
c. If the amount paid for a certificate
of delinquency is above seven
hundred one dollars ($701), actual
reasonable fees incurred up to seventy
percent (70%) of the amount of the
certificate of delinquency, not to
exceed seven hundred dollars ($700).
...
(d) Administrative fees incurred for preparing,
recording, and releasing an assignment of the
certificate of delinquency in the county clerk’s
office, not to exceed one hundred dollars ($100).
KTBS acquired delinquent tax bills for the Spencer and Stull
properties, and demanded payment of $2,319.81 from the Spencers and $1,202.40
from Frank Stull. These amounts included attorney and administrative fees which
the appellants contend were illegal, unauthorized, and neither actual nor
reasonable, although they were not in excess of the statutory limits. Stull has paid
his bill; the Spencers have not.
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Stull and the Spencers filed suit in the Pendleton Circuit Court
seeking class status, and declaratory, injunctive and monetary relief against KTBS
and KFM. They alleged that the KTSB and KFM had violated KRS 134.452, et
seq.; the federal Fair Debt Collections Practices Act, 15 U.S.C. § 1692(e); the
Kentucky Consumer Protection Act, KRS 367.170; and the Civil Rights Act, 42
U.S.C. § 1983. They also made common law claims of conversion and fraud and
requested a declaratory judgment concerning the assessment and collection of the
fees and expenses. Their prayer for relief asked for compensatory and punitive
damages and sought temporary and permanent injunctive relief to restrain KTBS
and KFM from further violations.
The appellants served interrogatories and requests for production of
documents on the appellees, who eventually sought an extension of time to provide
the discovery. In the intervening period, the appellees also filed a motion with
accompanying memorandum for judgment on the pleadings. The circuit court
granted the motion and dismissed the complaint. This appeal followed.
The purpose of Kentucky Civil Rules of Procedure (CR) 12.03, which
provides that a party may file a motion for a “judgment on the pleadings,” is
to expedite the termination of a controversy where the
ultimate and controlling facts are not in dispute. It is
designed to provide a method of disposing of cases where
the allegations of the pleadings are admitted and only a
question of law is to be decided. . . . The judgment
should be granted if it appears beyond doubt that the
nonmoving party cannot prove any set of facts that would
entitle him/her to relief.
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City of Pioneer Village v. Bullitt County ex rel. Bullitt Fiscal Court, 104 S.W.3d
757, 759 (Ky. 2003). Whether the dismissal was proper is a question of law;
therefore, our review is de novo. Benningfield v. Pettit Envtl., Inc., 183 S.W.3d
567, 570 (Ky. App. 2005).
The trial court’s order dismissing the complaint states only that it
based its decision on the rationale contained in the appellees’ memorandum. The
primary argument advanced by the appellees in that memorandum was that the
circuit court lacked subject matter jurisdiction over the appellants’ claims. “The
Circuit Court is a court of general jurisdiction; it has original jurisdiction of all
justiciable causes not exclusively vested in some other court.” KRS 23A.010(1).
The district court has exclusive jurisdiction in “[c]ivil cases in which the amount in
controversy does not exceed four thousand dollars ($4,000), exclusive of interest
and costs, except matters affecting title to real estate and matters of equity[.]”
KRS 24A.120(1). Thus, the three potential bases of circuit court jurisdiction in
this case are: 1) if the amount in controversy exceeds $4,000; 2) if the claim
affects title to real estate; or 3) if the claim is equitable.
The appellants argue that their claims for injunctive and declaratory
relief invoked the circuit court’s exclusive jurisdiction over matters of equity.
They contend that they seek not only to recover the alleged overpayments they
have made, but to declare the actions of the appellees invalid, and to enjoin future
violations, for the benefit of future class members. They argue that the only
method by which the putative class can achieve this end is to invoke the equity
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jurisdiction of the circuit court pursuant to the Declaratory Judgment Act, KRS
418.040.
The fact that the appellants seek class certification is not sufficient to
invoke the equitable jurisdiction of the circuit court. There must be a separate,
independent source of equitable jurisdiction apart from any class claims. The
Pennsylvania Supreme Court has aptly delineated this distinction:
The class action . . . is a procedural device designed to
promote efficiency and fairness in the handling of large
numbers of similar claims; class status or the lack of it is
irrelevant to the question whether an action is to be heard
in equity or at law . . . . With no independent basis for
equity jurisdiction appellants cannot generate it simply
by alleging class status.
Lilian v. Commonwealth, 354 A.2d 250, 253-54 (Pa. 1976) (citations omitted).
The primary claim of the appellants is that the attorneys’ and
administrative fees, while admittedly within the statutory limits, were neither
“actual” nor “reasonable” as required under the statute. Under KRS 134.490, a
private person owning a certificate of delinquency may after the expiration of one
year institute an action to enforce the lien provided in KRS 134.420(1). KRS
134.420(1)(c) provides that such tax lien “shall have priority over any other
obligation or liability for which the property is liable[,]” and notice of such a lien is
to be recorded with the county clerk. KRS 134.420(1)(f). The appellants were
faced with the choice of paying the disputed fees in order to clear their title, or
refusing to pay and allowing the lien to encumber the property. Hence, we hold
that the circuit court does have jurisdiction pursuant to KRS 24A.120(1), which
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excludes matters affecting title to real property from the jurisdiction of the district
court.
The appellants and appellees have both raised numerous additional
arguments disputing the viability of the claims in the complaint. The circuit court
did not specify the grounds on which it granted judgment on the pleadings, stating
only that it adopted the rationale of the appellees’ memorandum. We must
therefore conclude that it agreed with the appellees that it did not have subject
matter jurisdiction. Operating under this assumption, it would not have been
necessary or appropriate for the circuit court further to consider the substantive
claims of the complaint. “It is a matter of fundamental law that the trial court
should be given an opportunity to consider an issue, so an appellate court will not
review an issue not previously raised in the trial court.” Marksberry v. Chandler,
126 S.W.3d 747, 753 (Ky. App. 2003). We therefore reverse the trial court’s order
and remand for further proceedings in accordance with this opinion.
ALL CONCUR.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEES:
Charles T. Lester, Jr.
Independence, Kentucky
Gary J. Sergent
Christopher J. Arlinghaus
Covington, Kentucky
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