Jp Morgan Mortgage Acquisition Corp. v. Bryan C. Hix, Administrator of the Estate of John R. Ferguson, Jr.

• Court: Court of Appeals of Kentucky
• Decided: February 23, 2023
• Docket: 2022 CA 000578
• Status: Unknown

Opinion

RENDERED: FEBRUARY 24, 2023; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals

NO. 2022-CA-0578-MR

JP MORGAN MORTGAGE ACQUISITION CORP. APPELLANT

APPEAL FROM FRANKLIN CIRCUIT COURT v. HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 20-CI-00241

BRYAN C. HIX, ADMINISTRATOR OF THE ESTATE OF JOHN R. FERGUSON, JR.; CHRISTOPHER R. EDEN; CITY OF FRANKFORT; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF REVENUE, INHERITANCE TAX DIVISION; LUCY EDEN; MISTY FERGUSON; PATRICIA LEIGH FERGUSON, AKA PATRICIA TINKER FERGUSON; STEWART C. BURCH, SPECIAL MASTER COMMISSIONER; UNKNOWN HEIRS, DEVISEES, OR LEGATEES, AND THEIR SPOUSES, IF ANY, OF JOHN R. FERGUSON, JR.; UNKNOWN OCCUPANT, IF ANY OF 115 FARMERS LANE, FRANKFORT, KENTUCKY 40601; UNKNOWN SPOUSE, IF ANY OF PATRICIA LEIGH FERGUSON AKA PATRICIA TINKER FERGUSON; UNKNOWN SPOUSE, IF ANY, OF JOHN R. FERGUSON, JR.; AND UNKNOWN SPOUSE, IF ANY, OF MISTY FERGUSON APPELLEES

AND

NO. 2022-CA-0650-MR

APPEAL FROM FRANKLIN CIRCUIT COURT v. HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 20-CI-00241

BRYAN C. HIX, ADMINISTRATOR OF THE ESTATE OF JOHN R. FERGUSON, JR.; CHRISTOPHER R. EDEN; CITY OF FRANKFORT; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF REVENUE, INHERITANCE TAX DIVISION; LUCY EDEN; MISTY FERGUSON; PATRICIA LEIGH FERGUSON, AKA PATRICIA TINKER FERGUSON; STEWART C. BURCH, SPECIAL MASTER COMMISSIONER; UNKNOWN HEIRS, DEVISEES, OR LEGATEES, AND THEIR SPOUSES, IF ANY, OF JOHN R. FERGUSON, JR.; UNKNOWN OCCUPANT, IF ANY OF 115 FARMERS LANE, FRANKFORT, KENTUCKY 40601; UNKNOWN SPOUSE, IF ANY OF

-2- PATRICIA LEIGH FERGUSON AKA PATRICIA TINKER FERGUSON; UNKNOWN SPOUSE, IF ANY, OF JOHN R. FERGUSON, JR.; AND UNKNOWN SPOUSE, IF ANY, OF MISTY FERGUSON APPELLEES

OPINION AFFIRMING

** ** ** ** **

BEFORE: CETRULO, DIXON, AND EASTON, JUDGES.

CETRULO, JUDGE: This is a consolidated appeal resulting from a Franklin

Circuit Court foreclosure action. After a judgment and order of sale, the trial court

subsequently entered an order allocating administrator attorney fees and burial

expenses out of the residue of the sale. Finding no error, we affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

Appellant J.P. Morgan Mortgage Acquisition Corporation (“JP

Morgan”) commenced this action to foreclose upon its mortgage encumbering real

property located at 115 Farmers Lane in Frankfort (the “property”). The

mortgagor, John Ferguson, predeceased the filing of the complaint. Appellee,

Bryan Hix, (“Administrator”) was appointed as the public administrator of the

estate in order for the action to proceed. The Administrator’s answer to the

complaint demanded estate costs, including burial expenses, and sought payment

-3- of the Administrator’s fees, but otherwise generally agreed that the property should

be sold. Other potential heirs of the estate were joined by an amended complaint,

and in January 2022, JP Morgan filed a motion for summary judgment and order of

sale. Neither the Administrator nor any of the named appellees responded or

objected. Indeed, all parties to this appeal agreed that the property was the only

real asset of the estate and needed to be sold.

On February 16, 2022, the trial court granted JP Morgan’s motion and

entered the In Rem Final Judgment and Order of Sale (“February Order of Sale”).

That February Order of Sale was tendered by JP Morgan and recited that the total

owed to JP Morgan, with attorney fees, assessments, taxes, and insurance was

$92,978.92. An in rem judgment was entered in favor of JP Morgan for that

amount. Additionally, the February Order of Sale contained the following

provisions:

The proceeds of the sale shall be applied and distributed in the following order:

1. To the costs of this action; 2. All real estate taxes due and owing at the time of the sale shall be paid from the proceeds, including any attorney fees owed on delinquent real estate taxes; 3. To the full satisfaction of the lien in favor of Plaintiff, including reimbursement for its costs and attorney’s fees as set forth herein; and 4. The Master Commissioner shall hold any remaining proceeds of said sale until further order of this Court.

...

-4- This action is retained to confirm the [Master] Commissioner’s Sale, distribute the proceeds, and for such further proceedings as may be necessary.

The right is reserved to [JP Morgan] to make later claim for amounts advanced for taxes, insurance, assessments, or sums expected pursuant to [Kentucky Revised Statute] KRS 426.525, and other levies and costs and fees paid by [JP Morgan], including attorney’s fees and the issue of said [JP Morgan’s] recovery herein of such sums in this action is reserved for later adjudication.

J.P. Morgan Mortg. Acquisition Corp. v. Hix, Franklin Circuit Court Case No. 20-

CI-00241, In Rem Final Judgment and Order of Sale (filed Feb. 16, 2022)

(emphasis added).

A few weeks later, the Administrator filed a motion seeking an order

taxing as costs the unpaid legal and administration fees and the burial expenses. JP

Morgan objected to this motion but after a hearing, the trial court entered an order

taxing those expenses as costs of the action (“April Costs Order”).1 Specifically,

the April Costs Order stated:

[T]he services of the Franklin County Public Administrator, appointed by the courts to fulfill the fiduciary obligations of the estate’s administration, were necessary and proper to this proceeding and equivalent to the services that would have been necessary from a warning order attorney, As such, the Public Administrator’s services . . . should be compensated with a reasonable fee . . . . Further, the funeral and burial

1 The ruling indicates that this followed a hearing and the motion was noticed for a motion docket but the record does not contain any video recordings.

-5- expenses paid . . . entitles her to preferred creditor status. The real property at issue is the only asset of the estate.

The fees and costs incurred by the Estate in the handling of the estate and of this litigation in the amount of $5,730.50 and the preferred claim . . . in the amount of $5,995.00 for funeral and burial expenses shall be taxed as costs and paid by the special Master Commissioner from the proceeds of the sale of the real property at issue.

J.P. Morgan Mortg. Acquisition Corp. v. Hix, Franklin Circuit Court Case No. 20-

CI-00241, Order Taxing Claims As Costs (filed Apr. 20, 2022) (emphasis added).

The April Costs Order resulted in the first notice of appeal to this

Court. Of course, the property still remained to be sold and it was sold on

April 25, 2022 for $115,000.00, resulting in more funds than were owed to JP

Morgan under the court’s February Order of Sale. The master commissioner then

filed a motion to confirm the sale of the property and proposed an order of

distribution approving payment of the master commissioner’s fees and expenses of

the sale, the Administrator’s fee, and the funeral expenses. The total remaining

was $98,563.33, which was to be paid to JP Morgan, per the master

commissioner’s report. This represented $5,584.41 more than JP Morgan was to

have received pursuant to the February Order of Sale in its favor.

Still, JP Morgan objected, again claiming that the estate fees and costs

and burial expenses were not to be paid under the February Order of Sale and that

-6- the court had lost jurisdiction to amend that final judgment and award those costs.

The trial court disagreed and confirmed the Order of Distribution and Sale in May

2022 (the “May Distribution Order”), resulting in the second notice of appeal to

this Court. These two appeals were consolidated by this Court.

II. STANDARD OF REVIEW

JP Morgan contends that the trial court was without jurisdiction to

amend the February Order of Sale and that the standard of review in reviewing

jurisdiction is de novo. However, we do not agree that the subsequent orders of the

court below were amendments of the February Order of Sale. To the contrary,

these subsequent orders were simply actions to enforce the judgment and to

distribute the proceeds in keeping with the court’s obligations for a judicial sale. 2

The appeals herein are from the trial court’s orders awarding costs and

fees to a public administrator and representative of the estate. Under Kentucky

law, an award of attorney fees is reviewed by this Court using an abuse of

discretion standard. Allison v. Allison, 246 S.W.3d 898, 909 (Ky. App. 2008)

(citation omitted); see also Miller v. McGinty, 234 S.W.3d 371, 373 (Ky. App.

2007). Similarly, an award of costs is generally viewed as being within the

2 After the judicial sale of real property, an order confirming the sale is also considered a final and appealable order. Maynard v. Boggs, 735 S.W.2d 342 (Ky. 1987); Young v. U.S. Bank, Inc., 343 S.W.3d 618 (Ky. 2011); U.S. Nat’l Bank Ass’n v. Am. Gen. Home Equity, Inc., 387 S.W.3d 345 (Ky. App. 2012). It is reasoned that the appeal from an order of sale solely adjudicates the validity of the underlying claim precipitating the sale while a judgment from an order of confirmation adjudicates the validity of sale procedures and distribution of proceeds therefrom.

-7- discretion of the trial court. Lewis v. Charolais Corp., 19 S.W.3d 671 (Ky. App.

1999). “The test for abuse of discretion is whether the trial judge’s decision was

arbitrary, unreasonable, unfair, or unsupported by sound legal principles.”

Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999) (citations omitted).

III. ANALYSIS

We find no abuse of discretion by the Franklin Circuit Court; the trial

court specifically retained its rights to determine costs and fees incurred and to

make further orders upon the conclusion of the sale.

A final judgment and order of sale is a final and appealable order.

Sec. Fed. Sav. & Loan Ass’n of Mayfield v. Nesler, 697 S.W.2d 136, 139 (Ky.

1985). “[A]n order directing property to be sold in satisfaction of a judgment is a

final judgment. The order to sell the property was a direction to perform an

administrative act. The necessity to make a report of that action does not prevent

the judgment from being final and appealable.” As such, we agree with JP Morgan

that the February Order of Sale was a final and appealable judgment.

Also, “this Court has consistently recognized that a foreclosure action

is a multifaceted proceeding from which multiple final and appealable orders may

arise.” Kentucky Tax Bill Servicing, Inc. v. Fultz, 567 S.W.3d 148, 152 (Ky. App.

2018). Even though the February Order of Sale was a final and appealable order, it

is also true that subsequent orders confirming sales are similarly final and

-8- appealable. Young, 343 S.W.3d at 620-21. Further, the trial court in such actions

does generally retain the matter on the docket to marshal assets, conduct the sale,

and distribute the proceeds. Id. at 621. That is exactly what the wording of the

February Order of Sale did, preserving the right to make further orders after full

satisfaction of the lien of JP Morgan, and specifically directing the payment of the

costs of the action.3

As the trial court stated in its April Costs Order, the appointment of a

public administrator in this instance was necessary for the action to proceed. In the

answer to the complaint, the Administrator pled that his fees and costs should be

paid from the proceeds of any sale and that the property should be sold. It was

further asserted therein that burial expenses should be paid as preferred creditors of

the estate, and that the lien of JP Morgan should be satisfied. There was nothing

that the Administrator needed to appeal in the February Order of Sale as there was

no dispute about the lien amount claimed by JP Morgan nor with the order of sale.

We agree with the trial court that the payment of fees assessed by the

Administrator is the equivalent of a warning order or guardian ad litem fee that the

court can certainly assess as a reasonable cost of the action. The trial court’s

3 JP Morgan argues that the February Order of Sale inappropriately attempted to change the priority of the claims pursuant to Kentucky Rule of Civil Procedure 59.05. However, we do not agree. The April Costs Order and May Distribution Order did not change or affect the order of priorities; the subsequent orders merely completed the administrative necessities of a master commissioner sale.

-9- February Order of Sale permitted the court to award those very costs and to make

those costs the first priority of the proceeds of the sale. The Administrator then

properly submitted his motion for the specific amount of those costs and burial

expenses and the court granted that motion, treating that as a motion for costs, and

acting therefore within its discretion and in keeping with its prior order. Similarly,

we note that the court below could have simply awarded JP Morgan the total

amount of the in rem judgment of $92,978.92, and the remaining proceeds received

from the sale could have been considered in “further orders of the Court” as

previously stated.

In Fultz, this Court recognized that foreclosure actions are multi-

faceted and multiple final and appealable orders may arise. Fultz, 567 S.W.3d

at 152. Indeed, Appellant filed two separate appeals in this case. In Fultz, the

Court specifically held that the trial court could properly consider such issues as

post-judgment interest when it later considered the distribution of the sale

proceeds.

IV. CONCLUSION

We conclude that the trial court herein properly considered these costs

of the action and did not abuse its discretion in later upholding the master

commissioner’s order of distribution which was also in keeping with its earlier

judgment. Accordingly, we AFFIRM.

-10- DIXON, JUDGE, CONCURS.

EASTON, JUDGE, CONCURS AND FILES SEPARATE OPINION.

EASTON, JUDGE, CONCURRING: I agree with the result reached

by the majority Opinion. The second appealed order did not alter the first but

rather enforced it by determining what the “costs” were for purposes of

distribution. I write separately to state the merits of the appeals were rendered

moot in the circumstances of this case. Louisville Transit Co. v. Dep’t of Motor

Transp., 286 S.W.2d 536 (Ky. 1956).

It was understandable for JP Morgan to file the first appeal to

preserve its position that any claims arising from the estate should not be given

priority over its secured claim. The sale may not have brought a high enough bid.

But when the subsequent sale brought sufficient proceeds to satisfy all claims, the

first appeal should have been dismissed and the second one not filed.

The circuit court’s ruling of placing both the public administrator’s

costs and fees and the burial expenses within the priority “costs” category of its

judgment and order of sale presents challenges on the merits. Administrative costs

and expenses as well as burial expenses have a statutory priority when the assets of

the estate are administered in probate. Kentucky Revised Statute (“KRS”)

396.095. Even so, KRS 396.011(2)(a) clearly protects a secured claim fully to the

extent of the value of the property secured.

-11- This action is not to settle an estate, although the public administrator

could have proceeded by an action under KRS 395.515 to sell this sole asset. It is

instead a mortgage foreclosure proceeding. Ancient precedent might have

authorized the circuit court to allocate the administration costs and fees as a cost

with priority over the mortgage lien in the circumstances of this case involving a

single estate asset. See Sumrall v. Vanarsdall’s Adm’r, 111 S.W.310 (Ky. 1908).

With respect to burial expenses, they may not be given such a priority. Graham v.

Graham’s Adm’x, 306 S.W.2d 831 (Ky. 1957).

The problem is these questions were rendered academic when the sale

produced enough proceeds to pay JP Morgan in full what was owed to it. What

happened to the remaining funds is no longer its concern. JP Morgan’s priority

debt having been satisfied, the excess funds go to the estate and would have been

used to satisfy the administrative costs and fees as well as the burial expense. If

any funds remain after all these payments, the funds belong to the estate for

distribution to either other creditors or heirs. JP Morgan may only receive its

payment in full, nothing more. JP Morgan got all it was entitled to in the

distribution order from which it appealed. This appeal is moot and should be

dismissed.

-12- BRIEF FOR APPELLANT: BRIEF FOR APPELLEE BRYAN C. HIX, ADMINISTRATOR Brian E. Chapman OF THE ESTATE OF JOHN R. John R. Tarter FERGUSON, JR.: Cincinnati, Ohio Bryan C. Hix Frankfort, Kentucky

-13-