Timothy Lee Fifield v. Donald Fritz Dba Lp Liquor

RENDERED: AUGUST 18, 2023; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0581-MR
TIMOTHY LEE FIFIELD; DAWN
FIFIELD; AND RED BRICK
STATION, LLC APPELLANTS
APPEAL FROM MADISON CIRCUIT COURT
v. HONORABLE COLE ADAMS MAIER, JUDGE
ACTION NO. 21-CI-00366
DONALD FRITZ DBA LP LIQUOR APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CETRULO, ECKERLE, AND GOODWINE, JUDGES.
CETRULO, JUDGE: Appellants Timothy Lee Fifield, Dawn Fifield, and Red
Brick Station, LLC (together, “Buyer”) appeal the Madison Circuit Court order
granting the motion for partial summary judgment of Appellee Donald Fritz, d/b/a
LP Liquor (“Lessee”).
FACTS AND PROCEDURAL HISTORY
On May 27, 2021, Buyer purchased real property located at 703 East
Irvine Street, Richmond, Kentucky (the “Property”) from M&J Liquors, Inc.
(“Seller”). Before the purchase, Buyer became aware of an unrecorded lease on
the Property, entered June 26, 2019, between Seller and Lessee (“2019 Lease”).
The 2019 Lease ran from July 2019 through July 2024 and provided the option for
Lessee to renew the lease for an additional five-year term starting in July 2024.
Additionally, the agreement provided Lessee the right of first refusal and option to
purchase the Property at the same price as any other party purchasing the Property.
Despite all parties knowing about the 2019 Lease, Seller signed a general warranty
deed to Buyer, as well as an “Owner’s/Sellers’ Affidavit, Correction and
Indemnity” agreement stating that there were no unrecorded leases on the Property.
Following the sale, on July 15, 2021, Buyer served all occupants of
the Property, including Lessee, with a 30-day vacate notice. The next month,
Lessee filed a complaint in Madison Circuit Court against Buyer, stating claims for
a declaration of rights, slander of title, trespass, and intentional interference with
use and enjoyment of property. Buyer filed a motion to dismiss the action,
claiming Lessee did not have standing to bring the claim because the controlling
lease on the property was one entered between Seller and Lessee in October 2017 –
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ending October 2022.1 Although that lease was also between Seller and LP
Liquor, it was signed by Brittany Brandenburg, not Donald Fritz (“2017 Lease”).
In response, Lessee noted that Buyer had submitted the 2019 Lease as the
applicable lease in the forcible detainer actions.
The circuit court denied Buyer’s motion to dismiss. The Buyer then
filed an answer to Lessee’s complaint, alleging that the 2019 Lease violated the
terms of the 2017 Lease. Buyer admitted that Seller had told Buyer that the 2019
Lease was a valid lease, and Seller had not disclosed the 2017 Lease to him.
Lessee filed a motion for partial summary judgment, seeking to enforce his right of
first refusal and option to purchase contained in the 2019 Lease. Lessee explained
that there were no issues of material fact regarding the existence of the contractual
rights, the price Buyer had paid for the Property, nor that Buyer had actual notice
of the 2019 Lease and the contractual rights contained therein prior to the
purchase.
The next month, Buyer filed a response to Lessee’s motion for partial
summary judgment and filed his own motion for partial summary judgment, citing
the same arguments he espoused in his answer to the complaint. Lessee’s reply
1
During that time, Buyer also filed a forcible detainer action against Lessee in Madison District
Court, claiming that Lessee violated provisions of the 2019 Lease. At that trial, the jury returned
a verdict of not guilty, finding that Lessee had complied with his duties under the 2019 Lease.
Buyer then filed another forcible detainer action against Lessee, alleging again that Lessee had
violated multiple requirements of the 2019 Lease. The Madison District Court dismissed that
action in February 2022.
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stated that Brittany Brandenburg had testified at the forcible detainer trial that she
made no further claims to the leasehold on the Property and Buyer had dismissed
her from the first detainer action. Further, Buyer did not name Brittany
Brandenburg in the second detainer action. Lessee also noted that the jury in the
first detainer action found Lessee had not violated the 2019 Lease, and in order to
make such determination, the jury had to determine the 2019 Lease was valid.
The circuit court heard the matter in April 2022. At the hearing,
Lessee briefly explained the motion for partial summary judgment, and Buyer
responded. The circuit court granted the motion. The order stated that the court
reviewed the facts in a light most favorable to Buyer and found that Buyer had
purchased the Property subject to the 2019 Lease. The circuit court noted that
Buyer had admitted to actual knowledge of the 2019 Lease containing Lessee’s
right of first refusal and purchase option. The court explained that in Mortgage
Electronic Registration Systems, Inc. v. Roberts, 366 S.W.3d 405, 408 (Ky. 2012),
the Kentucky Supreme Court held that “prior interest in real property takes priority
over a subsequent interest that was taken with notice, actual or constructive, of the
prior interest.” (Emphasis added.)
Further, the court noted that the highest court in Kentucky had, on
multiple occasions, held that actual knowledge of unrecorded instruments at the
time of acceptance of a deed will defeat the priority of the subsequent purchaser.
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See Cornett v. Maddin, 126 S.W.2d 871 (Ky. 1939); Perry v. Trimble, 76 S.W. 343(Ky. 1903); and Cox v. Guaranty Bank & Tr. Co., 250 S.W. 804 (Ky. 1923).
The court found that Buyer failed to take any action to notify Lessee
of the pending purchase or confirm that Lessee did not wish to exercise his rights
under the 2019 Lease. While Buyer testified that he did not believe he was
required to make such inquiry, Kentucky precedent clearly required it. The court
cited Gates v. Shannon, 255 S.W. 79, 80 (Ky. 1923), which held that “it was the
duty of appellant, [purchaser], upon learning of appellee’s lease, to have inquired
of him as to its terms and extent. This would have disclosed the option; such
information was sufficient to constitute constructive notice.” The circuit court
concluded that Buyer had actual notice of Lessee’s right of first refusal and option
to purchase the Property and, as a matter of law, there were no genuine issues of
material fact.
The court directed the master commissioner to issue a deed for the
Property to Lessee upon payment of the purchase price. Upon receipt of the
purchase price, the funds were to be distributed to Buyer. Buyer filed a Kentucky
Rule of Civil Procedure (“CR”) 59.05 motion to alter, amend, or vacate the partial
summary judgment. The court denied Buyer’s motion. Buyer appealed, repeating
his earlier arguments that the circuit court failed to determine whether the Lessee
had a valid lease; that the purported lease was not recorded under Kentucky
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Revised Statute (“KRS”) 382.110; that Buyer did not have privity of contract with
Lessee; and that Seller conveyed the Property to Buyer by a general warranty deed
and had signed an affidavit, correction, and indemnity agreement.
STANDARD OF REVIEW
First, there is no appeal from a denial of a CR 59.05 motion. Ford v.
Ford, 578 S.W.3d 356, 366 (Ky. App. 2019). The denial of such motion does not
alter the judgment; therefore, the appeal is actually from the underlying judgment.
Id. Our review is limited to the circuit court’s finding that there were no issues of
material fact as to Lessee’s right of first refusal and option to purchase.2 See id.This Court reviews a trial judge’s decision to grant a motion for
summary judgment to determine “whether the record, when examined in its
entirety, shows there is ‘no genuine issue as to any material fact and the moving
party is entitled to a judgment as a matter of law.’” Hammons v. Hammons, 327
S.W.3d 444, 448 (Ky. 2010) (quoting CR 56.03). In so determining, “[t]he trial
judge must view the evidence in a light most favorable to the nonmoving party,
resolving all doubts in its favor.” Id. (citing Spencer v. Est. of Spencer, 313
S.W.3d 534, 537 (Ky. 2010)). This Court generally reviews grants of summary
2
Although the order was a partial summary judgment, a motion panel of this Court determined it
was final and appealable pursuant to Security Federal Savings & Loan Association of Mayfield v.
Nesler, 697 S.W.2d 136, 138 (Ky. 1985) (citing Newsom v. Johnson, 255 S.W.2d 33 (Ky. 1953))
(“An order of sale which directs a disbursement of the proceeds after payment of costs definitely
is a final and appealable order.”).
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judgment without deference to the trial court’s “assessment of the record or its
legal conclusions” because summary judgment does not require findings of fact
and requires “only an examination of the record to determine whether material
issues of fact exist[.]” Id. (citations omitted).
ANALYSIS
First, this Court deems it necessary to remind Buyer’s counsel that the
Rules of Appellate Procedure (“RAP”) mandate that the appellant’s brief contain
“[a]n argument conforming to the statement of points and authorities, with ample
references to the specific location in the record and citations of authority pertinent
to each issue of law and which shall contain at the beginning of the argument a
statement with reference to the record showing whether the issue was properly
preserved for review and, if so, in what manner.” RAP 32(A)(4) (emphasis
added).
While Buyer’s brief contains a section titled “Argument and Law of
the Case[,]” this Court is hard-pressed to find either in the paragraphs that follow.
Each “argument” simply contains statements referring to things that Buyer
perceives the circuit court did or did not do. There are no actual arguments
supporting such statements nor any recitations that clearly pertain to the circuit
court’s determinations. Additionally, the subsections do not each contain
statements of authority, nor are there any references to where, or whether, Buyer
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properly preserved the “arguments” for review. While we will not exercise our
discretion to strike Buyer’s brief for failure to substantially comply with the RAP
requirements – RAP 31(H)(1) – we do urge Buyer to take greater care in the future.
Buyer first states that the circuit court failed to determine which of the
two leases was controlling. Buyer simply asserts that both leases could not have
been valid at the same time. Buyer cites no authority nor explains the significance
of such statements. Nevertheless, the circuit court’s order granting partial
summary judgment determined that Buyer had purchased the Property subject to
the 2019 Lease. The record contained ample evidence that the 2019 Lease was
valid and that Buyer had actual notice of it.
Buyer had presented the 2019 Lease in the district court detainer
actions, and the jury had determined that Lessee had properly met his obligations
under that lease. Further, all parties agreed that the signer of the 2017 Lease
denied any claim to the Property or any remaining obligations under the 2017
Lease. In fact, Buyer had dismissed the signer of the 2017 Lease from the first
forcible detainer action and did not list her as a party in the second detainer action.
Additionally, Buyer brought the detainer actions against Lessee under the 2019
Lease. In those actions, Buyer testified that he had actual notice of the 2019 Lease
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and that he knew it contained a right of first refusal and option to purchase.3 The
circuit court clearly determined the 2019 Lease was valid.
Next, Buyer attempts to claim that Seller had not recorded the 2019
Lease under KRS 382.110; therefore, it could not have been an incumbrance that
ran with the land, even if Buyer had actual notice of the lease. Lessee argues,
however, that Buyer’s argument fails to consider the plain language of the statute.
We agree. KRS 382.110(1) states that “[a]ll deeds, mortgages and other
instruments required by law to be recorded to be effectual against purchasers
without notice, or creditors, shall be recorded in the county clerk’s office of the
county in which the property conveyed, or the greater part thereof, is located.” The
provision in no way provides that the leases require recordation in order to run
with the land. The statute simply provides that instruments should be recorded in
the appropriate county clerk’s office.
As discussed, the record clearly details Buyer’s actual knowledge of
the 2019 Lease. As the circuit court explained, our precedent provides that even
where an instrument was not recorded, if the buyer had actual notice of the
instrument, that would defeat the priority of the subsequent purchaser. Mortg.
3
In the district court action, counsel asked Buyer, “[s]o to be clear so the jury and I understand
this, before you took the deed to the [P]roperty to your and your wife’s name, [the Seller] open
and obviously gave you [Lessee’s] lease to the property and you were aware of it before you
took the deed?” The Buyer answered, “Correct.”
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Elec. Registration Sys., 366 S.W.3d at 407-08. KRS 382.110 provides no further
guidance on that issue, and the record indicates that there is no genuine issue of
material fact as to whether Buyer had actual notice of the 2019 Lease.
Third, Buyer argues that it did not have privity of contract with Lessee
and could not have had same until after the Buyer purchased the Property.
Therefore, Buyer argues, he would have to honor the terms of the 2019 Lease and
give Lessee a right of first refusal only if Buyer decided to sell the Property in the
future. These statements are confounding. Lessee is not arguing – and has never
argued – that the right of first refusal was a contractual obligation between Buyer
and Lessee. That obligation is clearly between the Seller and Lessee.
Additionally, as Lessee correctly explains, Buyer’s reference to
Presnell Construction Managers, Inc. v. EH Construction, LLC, 134 S.W.3d 575(Ky. 2004), equally misses the mark. In Presnell, the Kentucky Supreme Court
held “[a]lthough privity is no longer required to maintain a tort action, ‘one who is
not a party to the contract or in privity thereto may not maintain an action for
negligence which consists merely in the breach of the contract.’” Id. at 579
(footnotes and citations omitted). This is not a negligence action arising from
breach of contract claims – Lessee’s claims pertain to the 2019 Lease with Seller.
Therefore, the holding in Presnell is not persuasive in this Court’s analysis of the
issues.
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Finally, Buyer states that Seller used a general warranty deed, along
with an affidavit, correction, and indemnity agreement, to convey the Property.
Buyer argues that the agreement stated “there has been no . . . nor are there any
unrecorded contracts, leases, easements or other type [of] agreements creating any
interest in the property executed by me/us.” Again, Buyer fails to explain the
significance of such facts in this dispute or cite to applicable authority.
Lessee was not a party to Seller’s affidavit, correction, and indemnity
agreement. The existence of the affidavit does nothing more than show that both
Seller and Buyer ignored a lease that they knew existed. Buyer fails to point this
Court to any precedent that suggests an affidavit of this nature – between parties
other than the one claiming the rights – would somehow impair a lease with a right
of first refusal or relieve Buyer of the duty to inquire of the 2019 Lease’s terms
with Lessee. See Gates, 255 S.W. at 80. Buyer provides nothing for this Court to
review.
CONCLUSION
Buyer failed to raise any argument that there exists a genuine issue of
material fact. As such, we AFFIRM the order of the Madison Circuit Court
granting Lessee’s motion for partial summary judgment.
ALL CONCUR.
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BRIEF FOR APPELLANTS: BRIEF FOR APPELLEE:
Jimmy Dale Williams Rodney G. Davis
Randy Martin O’Neal Richmond, Kentucky
Richmond, Kentucky
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