Central Bank of Jefferson Cty v. Dept. of RevenueAnnotate this Case
In the underlying cases, the respective property owners failed to satisfy their debt obligations to professional lending institutions, which precipitated foreclosure proceedings. The Commonwealth intervened, seeking to block the foreclosures pending resolution of the tax liens. In both cases, the lenders brought suit to assert that their respective mortgages were superior to the general tax liens filed pursuant to the state recording statutes. Kentucky is a "race-notice" state in that a mortgage, deed or deed of trust takes effect at the time it is recorded. In both cases, the tax liens superseded the lenders' liens; but the lenders argued that state law provided super priority for ad valorem taxes, not general tax liens, therefore their purchase money mortgages superseded the Commonwealth's liens. Disagreeing with the lenders' characterization of the tax liens, the Supreme Court held that the tax liens took priority over the lenders' liens, and should be afforded no special priority.