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

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NOT TO BE PUBLISHED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
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
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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
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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.
...
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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.
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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
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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.
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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
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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.
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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.
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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.
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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.
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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
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