UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
DEBTOR CASE NO. 90-00101
CHRISTINE ASHER PLAINTIFF
VS. ADV. NO. 90-0126
RED BIRD HOSPITAL DEFENDANT
OPINION AND ORDER
This matter is before the Court on cross Motions for Summary Judgment by the plaintiff and the defendant. This proceeding originated with the plaintiff's filing of a Complaint on May 23, 1990. The defendant filed its Answer on June 22, 1990. The defendant filed its Motion for Summary Judgment on July 30, 1990. The plaintiff filed an Objection to Defendant's Motion for Summary Judgment and her own Motion for Summary Judgment on August 2, 1990. The parties have memorialized a Joint Stipulation which sets out the pertinent facts in this proceeding.
The debtor/plaintiff herein is Christine Asher. According to the Joint Stipulation, her husband, Foister Asher, died testate on July 9, 1985, leaving all his property, including the subject real estate which he had acquired by deed, to her. There is no mortgage against the subject real estate, nor has there been any mortgage against it at any relevant time hereto. The will, which was probated on July 19, 1985, provided that all his just debts be paid. The defendant, Red Bird Hospital ("the Hospital"), a creditor of Foister Asher, filed a Demand of Payment for a debt in the amount of $14,223.20 in the probate case within the time period set out by KRS Chapter 396. Christine did not make a final settlement of the estate or make any payment to defendant, although she had signed a so-called Agreement to Pay Claim in January 1986.
The Hospital filed an action in Clay Circuit Court (86-CI-184) on June 17, 1986, for judgment against Christine individually and as the sole devisee and legatee of Foister and as executrix of his estate. Summary Judgment was entered therein on June 9, 1987, an Order of Execution on October 5, 1987, the Sheriff's return on January 17, 1988, and Order of Sale on February 4, 1988. Christine attempted to convey the subject real estate to her daughter on November 7, 1986. The Hospital filed another suit in Clay Circuit Court (88-CI-038) to set aside the fraudulent conveyance. The Hospital was awarded Summary Judgment in this action as well. The Hospital executed on the subject real estate pursuant to the judgment in 86-CI-184 and a Sheriff's Sale was held on December 7, 1989. The property, which had been appraised at $10,000.00, sold for $500.00. Christine filed her Chapter 7 petition on February 20, 1990. Schedule A-3 of the petition lists a debt to the Hospital in the amount of $18,000.00. Schedule B-4 lists personal property exemptions, but does not list an exemption under KRS 427.060.
The Complaint asks for an Order setting aside the judicial sale of the subject real estate on December 7, 1989; that the property be brought into and made a part of this proceeding; and that the Hospital be ordered to proceed with any claim against Christine pursuant to the rules of the Bankruptcy Court. This request for relief is based on the fact that the sale of the real estate took place within 180 days of the filing of her bankruptcy petition and "thus is subject to the laws and rulings of this Court." (See Complaint). No Code section is cited. In addition, a $5,000.00 homestead exemption is alleged pursuant to KRS 427.060.
The Hospital's Answer states in part that Christine had failed to join an indispensable party, i.e., the purchaser of the property, and that she did not have standing to bring this action as any claim to the subject property is now an asset of the bankruptcy estate, such claim to be brought by the trustee. Both parties filed motions to amend their pleadings, but neither an Amended Complaint nor an Amended Answer was ever filed.
The Hospital's Motion for Summary Judgment reversed its position on the ownership of the property and states that Christine has no standing to seek to set aside the Sheriff's Sale, as the property is owned by the estate of her husband. The Motion asks for dismissal of the Complaint. Christine's Motion for Summary Judgment argues that upon the death of Foister, Christine became the individual owner of the property; that the Sheriff's Sale violated KRS 427.090; and that Christine was entitled to the homestead exemption provided for in KRS 427.060 to "protect her from the sale of her home". (See plaintiff's Motion for Summary Judgment). She asks that the sale of the real estate be set aside.
The Hospital obtained a lien against the subject property when the Order of Execution was entered in 86-CI-184 on October 5, 1987, not when the property was sold in December 1989. Thus the lien attached well outside the 90 day preference period provided for in 11 U.S.C.'547(b)(4), as well as the 180 day period provided for by KRS 378.060. Christine did not assert her homestead exemption at the time the Clay Circuit Court ordered execution on the property, and she has thus waived the opportunity to assert that exemption in her bankruptcy case. In any event, the Hospital's lien was for an amount greater than the appraised value of the property.
In addition, under Kentucky law, a devisee takes property subject to the debts of the devisor. In McLean v. Trabue, 135 S.W. 309 (1911), the testator, McLean, left all his property to his children by will. Trabue had an unpaid judgment against the testator, and brought suit against the children to sell the land for payment of the debt. The Kentucky Court of Appeals held that the circuit court had properly subjected the property to the payment of the debts of the testator. In addition, KRS 394.510 provides that "[w]hen any property is devised subject to or upon the payment by the devisee to another of a sum of money or his doing some other thing, the latter shall have a lien on the legacy for the sum to be paid, or for the value of the thing to be done." See Drake v. Ellman, 80 Ky 434, 4 KLR 269 (1882), in which a testator devised property to his children, subject to the payment of his debts, providing that the debts should be paid out of his estate. The devise was charged with their payment and the lien of the creditor was not lost by accepting from the devisees a mortgage to secure the debt made in contemplation of insolvency. This Court must therefore conclude that the property which Foister Asher devised to his wife Christine was subject to his debts, including his debt to the Hospital, that the Hospital had a lien on that property, and that it timely presented its claim for same pursuant to KRS 396.010 and 396.015.
In consideration of all of the foregoing, it is the opinion of this Court that defendant Red Bird Hospital has carried forward its burden of demonstrating that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. It is therefore further the opinion of this Court that the defendant's Motion for Summary Judgment should be SUSTAINED and that the Complaint be, and it hereby is, dismissed with prejudice and the Motion for Summary Judgment of the plaintiff Christine Asher should be OVERRULED.
This is a final and appealable Order.
By the Court -
Marcia A. Smith, Esq.
Michael Bowling, Esq.