GARNISHMENT – IRS Discharge: Lifestyles of Jasper, Inc. v. Gremore (COA 11/6/2009)

Lifestyles of Jasper, Inc. v. Gremore
2008-CA-001396 11/06/09 2009 WL 3672881

Opinion by Judge VanMeter; Judges Keller and Stumbo concurred.

On discretionary review, the Court reversed and remanded an order of the circuit court affirming a district court order upholding a garnishment challenge, ordering appellant to return amounts collected, and holding that a default judgment had been discharged when appellant filed a Form 1099-C, Cancellation of Debt, with the I.R.S. The Court held that Commonwealth ex rel. Bates v. Hall, 251 Ky. 280, 64 S.W.2d 585 (1933) was sufficiently broad to cover the instant situation in which the judgment creditor filed the form to comply with I.R.S. regulations and not in satisfaction of the debt. Therefore, the district court abused its discretion in holding that the judgment was discharged.

GARNISHMENT: Brooks v. Lexington-Fayette Urban County Housing Authority (COA 11/13/2009)

Brooks v. Lexington-Fayette Urban County Housing Authority
2008-CA-001677 11/13/09 2009 WL 3786367

Opinion by Judge Nickell; Judges Keller and Moore concurred.

The Court affirmed orders of the circuit court granting appellee’s costs and expenses incurred in the successful bid to quash enforcement of a non-wage garnishment and denying appellant’s request for attorney fees.

The Court first held that the trial court did not err in granting legal fees to appellee for amounts incurred in challenging the enforcement of the non-wage garnishment. Appellant’s reliance on the law of the case doctrine was misplaced. The record and the earlier published opinions rendered in the matter did not hold that the Housing Authority was not a state agency and in light of precedent, the Housing Authority, created under KRS Chapter 80, enjoyed the status of a state agency. Therefore, the trial court correctly found that it was not subject to levy or execution by garnishment.

The Court then held that the trial court did not abuse its discretion in awarding the Housing Authority its reasonable attorney fees pursuant to CR 54.04 and KRS 411.080.
The Court finally held that the trial court did not err in denying appellant’s request for additional attorney fees for her attempt to enforce the judgment through non-wage garnishment as CR 54.04 and KRS 344.450 only allowed for awarding attorney fees to the prevailing party.

PROPERTY – Equitable subrogation, liens: Roberts v. Mortgage Electronic Registration Systems, Inc. (COA 10/30/2009)

Roberts v. Mortgage Electronic Registration Systems, Inc.
2008-CA-000262 10/30/09 2009 WL 3486594
Opinion by Judge Thompson; Chief Judge Combs concurred; Senior Judge Buckingham dissented by separate opinion.

The Court reversed and remanded an order of the circuit court granting a motion for default and summary judgment. The circuit court applied the doctrine of equitable subrogation and found that appellee’s lien had priority over appellant’s lien in a foreclosure action. The Court held that the trial court erred in applying the doctrine of equitable subrogation in reordering lien priorities to appellant’s detriment and that the liens should have been prioritized in accordance with KRS 382.280. The Court distinguished the narrow holding in Louisville Joint Stock Land Bank v. Bank of Pembroke, 225 Ky. 375, 9 S.W.2d 113 (1928), and held that the facts did not justify the relief sought when appellee lacked diligence in discovering appellant’s lien and appellant’s interest could be entirely or partially defeated if the property was sold for an amount insufficient to repay both appellant and appellee.

CONSUMERS – Garnishment exemptions limited to bankruptcy: MPM Finacial Group, Inc. v. Michael P. Morton (SC 6/25/2009)

MPM Finacial Group, Inc. v. Michael P. Morton
2007-SC-000652-DG June 25, 2009
Opinion by Justice Venters. All sitting; all concur.

MPM sued Morton for theft and embezzlement and obtained a $14,000 judgment in its favor. MPM then sought to garnish the benefits Morton received from a disability insurance policy. Morton argued that the benefits were exempt under KRS 427.170 and the trial court ruled in his favor. The Court of Appeals affirmed.

The Supreme Court reversed, holding that the exemptions listed in KRS 427.170 were not available to all debtors domiciled in Kentucky— only to those involved in bankruptcy proceedings.