Christine Castillo v. The Baxter Apartments, Llc-Sarah Apartments

• Court: Court of Appeals of Kentucky
• Decided: June 27, 2024
• Docket: 2023 CA 000747
• Status: Unknown

Opinion

RENDERED: JUNE 28, 2024; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals NO. 2023-CA-0747-DG

CHRISTINE CASTILLO APPELLANT

ON DISCRETIONARY REVIEW FROM FRANKLIN CIRCUIT v. COURT HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 23-XX-00003

THE BAXTER APARTMENTS, LLC- SARAH APARTMENTS APPELLEE

OPINION REVERSING AND REMANDING

** ** ** ** **

BEFORE: CALDWELL, CETRULO, AND ECKERLE, JUDGES.

CETRULO, JUDGE: Appellant Christine Castillo (“Castillo”) seeks discretionary

review of a Franklin Circuit Court order denying her motion to set aside a previous

circuit court order that affirmed a judgment of the Franklin District Court finding

her guilty of forcible detainer. After review, we reverse and remand. BACKGROUND

In July 2019, Castillo, a recent immigrant and non-English speaker,

entered into a lease with Appellee The Baxter Apartments, LLC – Sarah

Apartments (“Sarah Apartments”). According to the lease, the rental unit was

subject to a seven-day notice of failure to pay rent and intention to terminate the

lease; Sarah Apartments could increase rent (not to exceed 10%); rent payments

were due by the first of each month; Sarah Apartments could impose a late fee of

$30 if Castillo did not pay in full by the fifth of each month; and the lease required

money orders or a cashier’s check for late rent payments.

Initially, the lease set the rent amount at $575 per month. However,

Sarah Apartments incrementally increased Castillo’s rent amount, and as of

January 1, 2023, Castillo’s rent was $7521 per month. There were no allegations of

unpaid rent until January 2023.2 On January 6, 2023, Castillo3 tendered a $500

1 Despite the lease limiting rent increases to 10% or less, $752 represents a 15.34% increase from December 2022 ($100 addition). These numbers are based on Castillo’s appellant brief and Sarah Apartments does not challenge the numbers. However, Castillo presented this argument for the first time on appeal. This is a court of review, and we may only review those findings made below and may not address arguments made for the first time on appeal. Norton Healthcare, Inc. v. Deng, 487 S.W.3d 846, 852 (Ky. 2016) (internal quotation marks, footnotes, and citations omitted) (“An appellate court is without authority to review issues not raised in or decided by the trial court. The proper role for an appellate court is to review for error – and there can be no error when the issue has not been presented to the trial court for decision.”). 2 Castillo admitted in her appellant brief that she had $0.83 outstanding as of January 1, 2023. 3 It is unclear if Castillo or her husband tendered this money order.

-2- money order to Sarah Apartments. Sarah Apartments took the $500 money order,

did not return the payment, and did not inform Castillo that it was rejecting or not

“accepting” the money order as late rent. On January 10, Sarah Apartments placed

a notice on Castillo’s door demanding she pay the full amount owed ($782.83) or

vacate within seven days. On January 20, Castillo’s husband delivered another

money order for $250 to Sarah Apartments.4 Again, Sarah Apartments took the

$250 money order, did not return the payment, and did not inform Castillo that it

was rejecting or not “accepting” the money order.

On January 25, Sarah Apartments filed a forcible detainer action

against Castillo for non-payment of rent. On the forcible detainer complaint form,

Sarah Apartments stated that Castillo’s current rent was $575, and that she was in

default in the amount of $782.83.5 On February 5, Castillo filed a motion to

dismiss. She argued a forcible detainer judgment would be improper because

4 Here, the parties disagree: Castillo argues the money order was delivered on January 20, but Sarah Apartments argues it was January 26. The property manager for Sarah Apartments implied, through later testimony, that although she found it on her desk on January 26, her “boss” might have accepted it the week prior while she was out for a medical procedure. Castillo argues the money order was dated and tendered by her husband on January 20. The district court did not make an explicit factual finding as to date of delivery. We make note of this discrepancy, but the six-day difference is not outcome determinative under these circumstances. 5 It is unclear why Sarah Apartments reported Castillo’s current rent as $575, and not the $752 they had raised it to at the beginning of 2023. Additionally, Sarah Apartments presumably listed the default amount as $782.82 because they were not “accepting” the tendered money orders. However, there is merit to Castillo’s argument that the amount in default at that time was only $32.83 ($0.83 toward 2022 rent + $2 toward January 2023 rent + $30 late fee).

-3- Sarah Apartments (1) only gave her a seven-day notice, not the 30 days required by

§ 4024(c)(1) of the Coronavirus Aid, Relief, and Economic Security (“CARES”)

Act, 15 United States Code § 9021; and, (2) waived the right to terminate the lease

when it accepted Castillo’s money orders with knowledge of a default, citing

Kentucky Revised Statute (“KRS”) 383.675. Castillo pointed out that she “paid

and [Sarah Apartments] accepted $750.00 toward the $782.83 of the rent due.”

Therefore, she argued, she was not forcibly detaining the property at the time Sarah

Apartments commenced the action.

The record does not contain a response by Sarah Apartments to

Castillo’s motion to dismiss, but on February 6, the district court held an eviction

hearing. At that hearing, a Sarah Apartments property manager testified that a man

tendered the money orders on Castillo’s behalf, but that the property manager did

not “cash” them. Castillo’s legal counsel asked the property manager about those

payments, and the following conversation ensued:

Property Manager: They [money orders] were placed on my desk, but I did not deposit them or cash them.

Castillo’s Legal Counsel: When you say they were placed on your desk, somebody in your office accepted them?

Property Manager: Yes, that would be my boss.

Legal Counsel for Sarah Apartments: No.

-4- [Inaudible conversation between Sarah Apartments’ legal counsel and Property Manager.]

Castillo: Did you return . . .

(interrupting) Property Manager: We did not accept it. Like, it was not placed into the ledger, but if you hand it to us, we can set it on our desk.

Ultimately, the district court denied Castillo’s motion to dismiss,

entered a forcible detainer judgment against her, and ordered her to relinquish

possession of the property no later than February 13. The record indicates that she

did vacate the premises on that date.

On February 13, Castillo also tendered a notice of appeal and a

motion to proceed in forma pauperis and stay the execution of the forcible detainer

judgment. The circuit court denied the in forma pauperis motion that same day,

giving her 30 days to pay the filing fee. The fee was timely paid, and the appeal

proceeded to circuit court. On April 11, Sarah Apartments filed a motion to

dismiss Castillo’s appeal, and one week later the circuit court granted Sarah

Apartments’ motion (“April 2023 Order”).

On April 28, Castillo filed a motion to set aside the April 2023 Order

pursuant to Kentucky Rule of Civil Procedure (“CR”) 60.02. After a hearing, the

court denied Castillo’s CR 60.02 motion finding the matter was moot, notice of

eviction was properly given, and the January 2023 payments were “not accepted”

-5- by Sarah Apartments (“May 2023 Order”). Thereafter, Castillo moved for

discretionary review, which we granted.

ANALYSIS

Here, Castillo argues the circuit court erred in denying her motion to

set aside the April 2023 Order because her appeal was not moot, and Sarah

Apartments waived Castillo’s default by accepting her money orders.6 We agree.

We review findings of fact for clear error. CR 52.01. Factual

findings are clearly erroneous if not supported by substantial evidence. Moore v.

Asente, 110 S.W.3d 336, 354 (Ky. 2003) (citation omitted). “If the trial judge’s

findings of fact in the underlying action are not clearly erroneous, i.e., are

supported by substantial evidence, then the appellate court’s role is confined to

determining whether those facts support the trial judge’s legal conclusion.”

Whitcher v. Hous. Auth. of Henderson, 672 S.W.3d 58, 60 (Ky. App. 2023)

(quoting Commonwealth v. Deloney, 20 S.W.3d 471, 473-74 (Ky. 2000)).

6 Castillo also argued that federal law required Sarah Apartments to give a 30-day notice, not a seven-day notice. However, this argument required fact-finding – whether Sarah Apartments was a “covered dwelling” under § 4024(c)(1) of the CARES Act. The district court did not make such a finding, and Castillo did not request additional findings pursuant to CR 52.04. As such, Castillo did not properly preserve this argument. See Vinson v. Sorrell, 136 S.W.3d 465, 470-71 (Ky. 2004) (finding an issue non-reviewable on appeal because the trier of fact did not make an essential finding and the party later relying on that absent fact did not request additional findings below). Additionally, we are not permitted to take judicial notice of such a finding. Mash v. Commonwealth, 376 S.W.3d 548, 552 (Ky. 2012) (internal quotation marks and citation omitted) (“Judicial notice should not be used as a device to correct on appeal a failure to present adequate evidence to the trial court.”).

-6- However, we review statutory interpretation and other matters of law de novo.

Shinkle v. Turner, 496 S.W.3d 418, 420 (Ky. 2016) (citing Pennyrile Allied Cmty.

Serv., Inc. v. Rogers, 459 S.W.3d 339, 342 (Ky. 2015)). Forcible detainer is a

special statutory proceeding which deals exclusively with the present right of

possession of real property and is governed by KRS 383.200-285. Shinkle, 496

S.W.3d at 421-22. Sarah Apartments argue that because a forcible detainer action

is about the current right of possession, the fact that Castillo vacated the premises

renders the matter moot. However, under these circumstances, we do not agree.

Castillo argues that a forcible detainer judgment – i.e., “the stain of an

eviction” – often results in severe, long-lasting collateral consequences for a tenant

such as the destabilization of families; the inability to rent in the area; negative

impact on a tenant’s credit rating (which in turn has financial consequences); and

detriment to current and future employment and upward mobility. Thus, she

argues, there is still an ongoing legal controversy beyond current right of

possession, thereby escaping a determination of mootness. We agree that these

“collateral consequences” of a forcible detainer judgment have merit. See Young v.

House, 648 S.W.3d 706, 709 (Ky. App. 2022). But here, we hold that the public

policy interest exception to mootness applies.

To meet the public interest exception, a litigant must clearly show that: “(1) the question presented is of a public nature; (2) there is a need for an authoritative determination for the future guidance of public officers;

-7- and (3) there is a likelihood of future recurrence of the question.” [Morgan v. Getter, 441 S.W.3d 94, 102 (Ky. 2014)] (citation omitted).

Young, 648 S.W.3d at 709.

“The Supreme Court of Kentucky has previously concluded that ‘the

proper and efficient application of the law pertaining to the special statutory

proceeding for forcible entry and detainer is a matter of public interest[,]’

satisfying the first criteria.” Id. (quoting Shinkle, 496 S.W.3d at 420).

Additionally, as there is no appellate guidance concerning money order acceptance

within the context of KRS 383.675, and given the import of acceptance as it

applies to waiver of a landlord’s right to terminate a lease, we conclude that the

remaining criteria have been established. Accordingly, we shall review the merits

of Castillo’s arguments.

“In Kentucky, a tenant is guilty of a forcible detainer when he refuses

to vacate the premises after his right of possession has ended.” Young, 648 S.W.3d

at 421; KRS 383.200(3)(a). “A forcible detainer action focuses upon and

determines which party is entitled to present possession of the property at the

commencement of the action, not at some later date.” Shinkle, 496 S.W.3d at 422

(citing Bledsoe v. Leonhart, 205 S.W.2d 483, 484 (Ky. 1947)). Implicit in that

statement is an understanding that a landlord cannot pursue a forcible detainer

complaint – i.e., commence the action in district court asserting the claim – until

-8- the tenant has lost her right of current possession. See id. Further, if a landlord

accepts rent with knowledge of a default by the tenant, the landlord waives his

right to terminate a rental agreement for that breach and, thus, forfeits his right to

pursue a forcible detainer judgment against the tenant for that default. See KRS

383.675; see also Shinkle, 496 S.W.3d at 421.

Here, Castillo argues that when Sarah Apartments accepted the money

orders – with knowledge of her default and without indicating to her that the

payments were being rejected or returned – Sarah Apartments waived its right to

terminate the lease for that breach, citing KRS 383.675. We agree. To the

contrary, Sarah Apartments argues they did not “accept” rent because they did not

“add it to their ledger,” but such an argument, under these circumstances, is rather

disingenuous.

On January 6, 2023, Castillo tendered a $500 money order to Sarah

Apartments. Sarah Apartments received the money order, did not inform Castillo

it was not being accepted, and did not return the money order. On January 20,

2023, Castillo’s husband delivered a $250 money order to the “boss” at Sarah

Apartments; that boss took possession of the money order; placed it on the

property manager’s desk; neither the boss or property manager informed Castillo

or Castillo’s husband they were not “accepting” the payment as late rent; and Sarah

-9- Apartments did not return the money orders. We take judicial notice7 that unlike a

personal check (where funds are not removed until it is “cashed”), money orders

are purchased, i.e., prepaid, and the funds are attached to the money order itself.8

It is unclear how, under these circumstances, the district court determined Sarah

Apartments did not “accept” the money. Thus, the factual finding that Sarah

Apartments did not “accept” the money order rent payments was clearly erroneous

because it was not supported by substantial evidence. See CR 52.01; see also

Whitcher, 672 S.W.3d at 60 (citations omitted).

Sarah Apartments did accept the money orders, thereby waiving

default of the late rent payment. See KRS 383.675. Because Sarah Apartments

waived its right to terminate the lease, they did not yet have the right of possession

of the premises and no statutory right at that time to commence the forcible

detainer action. See Shinkle, 496 S.W.3d at 423. (Finding the landlord cannot

claim a right of immediate possession until the statutory elements of a forcible

7 Kentucky Rule of Evidence 201(b)(2) allows judicial notice of adjudicative facts that are “[c]apable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” 8 See Casey Bond, How do Money Orders Work?, U.S. NEWS & WORLD REPORT (May 17, 2023), https://www.usnews.com/banking/articles/how-do-money-orders-work (“A money order is a prepaid, guaranteed form of payment that is backed by a financial institution. . . . When you purchase a money order, you pay the face value, plus any associated fees.”); see also Emily Guy Birken, What is A Money Order and How Does it Work?, FORBES (May 5, 2023), https://www.forbes.com/advisor/banking/what-is-a-money-order (“Much like a check, a money order is a paper payment. Unlike a check, money orders can’t bounce. You purchase a money order with cash or another guaranteed form of payment[.]”)

-10- detainer are met; doing so prematurely is fatal to the complaint.) Sarah

Apartments had no cause of action when it initiated the forcible detainer complaint.

Thus, the district court erred in not granting Castillo’s February 5, 2023, motion to

dismiss. It appears the circuit court did not fully consider the waiver issue, having

concluded that the matter was moot due to Castillo’s vacating of the premises.

CONCLUSION

As stated in KRS 383.675, a landlord waives his right to terminate a

lease if he accepts rent with knowledge of a default by the tenant. Sarah

Apartments accepted Castillo’s money orders – by taking possession of the money

orders, not informing Castillo the money orders were not being accepted, and not

returning the money orders to Castillo – and thereby waived its right to terminate

Castillo’s lease for that default. Thus, Sarah Apartments had no current right of

possession at the time it initiated the forcible detainer action. Accordingly, we

REVERSE the April 2023 Order and the May 2023 Order of the Franklin Circuit

Court and REMAND to the Franklin District Court for entry of an order vacating

the forcible detainer judgment and dismissing the underlying action.

CALDWELL, JUDGE, CONCURS.

ECKERLE, JUDGE, DISSENTS AND FILES SEPARATE OPINION.

ECKERLE, JUDGE, DISSENTING: Respectfully, I must dissent

from the majority’s decision to reverse and remand because I agree with the Circuit

-11- Court’s assessment that this matter is now moot. “Ordinarily, this Court dismisses

an action when no relief can be given to the parties below.” Commonwealth v.

Stevens, 489 S.W.3d 755, 760 (Ky. App. 2016). “A forcible detainer action

focuses upon and determines which party is entitled to present possession of the

property at the commencement of the action, not at some later date.” Shinkle v.

Turner, 496 S.W.3d 418, 422 (Ky. 2016) (emphasis in original) (citing Bledsoe v.

Leonhart, 305 Ky. 707, 205 S.W.2d 483, 484 (1947)). A forcible detainer court

only has the authority to order restitution of the premises and payment of costs

expended by the prevailing party. KRS 383.240. In this case, Castillo admits that

she no longer has possession of the leased premises, and she is not seeking

recovery of any costs. Thus, this Court cannot grant any meaningful relief to

Castillo.

Nevertheless, the majority concludes we may review the matter under

the public interest exception set out by the Kentucky Supreme Court in Morgan v.

Getter, 441 S.W.3d 94, 103 (Ky. 2014). In Young v. House, 648 S.W.3d 706 (Ky.

App. 2022), a panel of this Court implied that the collateral consequences of a

forcible detainer judgment may warrant review. Id. at 709. The majority suggests

that these collateral consequences may give rise to an existing controversy despite

the tenant’s lack of possession. However, the panel in Young did not make such a

-12- broad ruling. Rather, the panel in Young and the majority in this case focus on the

application of the public interest exception to the mootness rule.

I am not convinced that all three elements of the public interest

exception are met in this case. The question in Young concerned whether the

landlord complied with the notice prerequisite to filing the forcible detainer

complaint. Id. See also Phillips v. M & M Corbin Properties, LLC, 593 S.W.3d

525, 528 (Ky. App. 2020), and Shinkle, supra at 422-23 (landlord failed to comply

with statutory notice prior to filing forcible detainer complaint). Similarly, in

Meinshausen v. Friendship House of Louisville, Inc., 607 S.W.3d 199 (Ky. App.

2020), the question concerned whether the District Court acquired jurisdiction

when the complaint was not filed by a party with an immediate right to possession

of the property. Id. at 204. In each of these cases, the issue was whether there was

strict compliance necessary to invoke the jurisdiction of the District Court in a

special statutory proceeding.

But in this case, the question is whether the landlord waived its right

to terminate a rental agreement for the tenant’s breach. This is a factual matter

relating to a statutory defense to forcible detainer. See KRS 383.675. Unlike in

the cases cited above, this issue presents a distinctly factual question that is not of a

public nature requiring authoritative guidance and on which there is little

likelihood of further recurrence on these particular facts. Morgan, 441 S.W.3d at

-13- 102. Therefore, I would affirm the order of the Franklin Circuit Court dismissing

this matter as moot.

BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:

Juliana N. Madaki Jaron P. Blandford Louisville, Kentucky Chris Eller Lexington, Kentucky

-14-