Kinsley State Bank v. Waters

854 P.2d 311, 18 Kan. App. 2d 413, 23 U.C.C. Rep. Serv. 2d (West) 561, 1993 Kan. App. LEXIS 64
CourtCourt of Appeals of Kansas
DecidedJune 11, 1993
DocketNo. 68,354
StatusPublished
Cited by1 cases

This text of 854 P.2d 311 (Kinsley State Bank v. Waters) is published on Counsel Stack Legal Research, covering Court of Appeals of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kinsley State Bank v. Waters, 854 P.2d 311, 18 Kan. App. 2d 413, 23 U.C.C. Rep. Serv. 2d (West) 561, 1993 Kan. App. LEXIS 64 (kanctapp 1993).

Opinion

Anderson, J.:

This appeal involves a priority dispute between two creditors, the Iuka Cooperative Exchange (appellant) and The Peoples Bank of Pratt (appellee), concerning the surplus proceeds from a foreclosure sale of real estate. The facts are not in dispute.

The case began as a foreclosure action brought by the plaintiff, The Kinsley State Bank, against the defendant, Richard D. Waters, and others, in Stafford County District Court. Appellant was made a party to the foreclosure action by virtue of its notice of lis pendens filed in Stafford County on October 5, 1989. Appellant’s notice of lis pendens was based upon a previously filed suit against Waters in Pratt County District Court.

Appellee was never formally made a party to this action, although it had also filed a separate foreclosure action against Wa[414]*414ters in Stafford County District Court on June 22, 1990. In appellee’s action against Waters, it sought the foreclosure of certain' real estate mortgages and security interests it held on other property of Waters. Appellee did not, however, have a mortgage on the real estate covered- by' the foreclosure action which is the subject- of this case-. -Appellant was likewise made a party to appellee’s foreclosure action because of appellant’s notice of lis péndens, ‘ and appellant filed an answer therein acknowledging that its interest was subordinate to the mortgages and security interests of appellee in the property being foreclosed against in that action. ' ’ - •

-" ’Meanwhile, in this'-action, -The Kinsley State Bank obtained judgment against Waters- and proceeded to sheriff s sale. An order of sale was issued, and the real estate was sold on April 30, 1991.

Following the- sále' of the real estate and the' payment of the debt to The Kinsley State Bank, there remained over $27,000 in surplus funds which were held by the Clerk of the District Court. Of this amount, $6,201.15 was paid to another defendant to satisfy its judgment lien, which payment is not being contested by either party to this áppeál. '

On May 30, 1991, appellant' obtained judgment against Waters in' the sum of $45,000 in Pratt County District Court. A transcript of this judgment was filed in-Stafford County on the same date.The sheriffs sale'in Stafford County'in'this case was confirmed by the court on May 31’ 1991..

Appellant ■ filed á motion in Stafford County to establish its priority to the remainder-of the funds being held by the clerk. Appellant’s claim of priority was based on its judgment lien and prior notice of lis pendens out of Pratt County. Appellee, although not a party to this action, filed an objection to appellant’s motion and. set forth its own claim of priority.

On May 14, 1992, the trial court rendered its memorandum opinion, finding that appellant’s notice of lis pendens never resulted in a perfected lien against the real estate in question or the proceeds from its sale and was extinguished when such real estate was sold. The trial court then ruled that the proceeds remaining after the,.sale. of the real estate and the payment of tire uncontested claims constituted accounts receivable to Waters. Further, the court ruled that appellee was entitled to such pro[415]*415ceeds since it had a security interest in Waters’ accounts receivable. Appellant appeals that ruling.

Appellant first argues that, under K.S.A. 60-2203a, it had a valid judgment lien against Waters’ real estate at the time of the sheriffs sale, and, therefore, had a right to seek satisfaction of its claim from the surplus proceeds remaining after the sale. Appellant maintains that its judgment lien arose as a result of its notice of lis pendens in Stafford County on October 5, 1989, and its subsequent filing on May 30, 1991, of a transcript of the judgment it had obtained against Waters in Pratt County earlier on that same date. It is appellant’s position that the trial court erred in x'uling that any rights appellant had under its notice of lis pendens were extinguished when the real estate was sold. We agree.

K.S.A. 60-2203a is controlling on this issue. It reads in relevant part:

“(a) After the commencement of any action in any district court of this state, . , . any party to said action may give notice in any other county of the state of the pendency of the action by filing for record with the clerk of the district court of such other county a verified statement setting forth the parties to the action, the nature of the action, the court in which it is pending, and the relief sought, which shall impart notice of the pendency of the action and shall result in the same lien rights as if the action were pending in that county. The lien shall be effective from the time the statement is filed, but not to exceed four (4) months prior to the entry of judgment except as provided in subsection (c). ” (Emphasis added.)

Judge Gard, in his comments on K.S.A. 60-2203, the predecessor statute to K.S.A. 60-2203a, states:

“The above section was originally added as a new section by the 1965 Legislature. The purpose was to make judgment liens apply to property of the judgment debtor in counties other than that in which the action was brought where the specified lis pendens notice was filed in such other county or counties. After judgment is rendered, the lien relates back to the time of filing the ‘verified statement’ required, but not farther than 4 months prior to the entry of the judgment.
“The section was repealed in 1976, which was apparently inadvertent. At any rate the 1977 Kansas legislature reenacted the section in its present form which is the same as at the time of repeal except for the addition of subsection (lx) which is a saving clause to protect liens resulting from filing after the effective date of the repeal . . . but before the effective date of the reenactment .... Upon reenactment the section was designated by [416]*416the Revisor of Statutes as K.S.A. 60-2203a instead of 60-2203, which was the number of the repealed section.” 2 Gard’s Kansas C. Civ. Proc. 2d Annot. § 60-2203a, Comments (1979).

Under the language of the statute, appellant obtained a valid judgment lien against the real estate of Waters when it filed its Pratt County judgment in Stafford County on May 30, 1991. Further, under the statute, such lien related back and attached to the real estate four months prior thereto, i.e., January 30, 1991, well before the real estate was sold.

The trial court ruled that K.S.A. 1992 Supp. 60-2410 controls the sale of real property under execution and that such a sale cuts off liens on the property unless saved pursuant to K.S.A. 60-2406 and K.S.A.

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Bluebook (online)
854 P.2d 311, 18 Kan. App. 2d 413, 23 U.C.C. Rep. Serv. 2d (West) 561, 1993 Kan. App. LEXIS 64, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kinsley-state-bank-v-waters-kanctapp-1993.