UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
JOHN C. TAYLOR
CAROLYN SUE TAYLOR
DEBTORS CASE NO. 92-60256
This matter is before the Court on the debtors' Motion to Avoid Lien on Exempt Property, filed herein on August 4, 1992. Creditor Tri-County National Bank ("Tri-County") filed its Response to the Motion on August 13, 1992. The parties entered into Stipulations of Fact which they filed herein on September 8 1992. A Supplemental Stipulation of Fact was filed on January 4, 1993. This Court has jurisdiction of this matter pursuant to 28 U.S.C.'1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(K).
The lien the debtors seek to avoid is a judicial lien on real property asserted by Tri-County. Tri-County maintains that it has a mortgage lien on this piece of property. The debtors maintain that it was not included in either of two mortgages executed by them in favor of Tri-County. This matter was previously adjudicated in the Knox Circuit Court, where Tri-County obtained a default judgment. This of course raises the issue of whether the Knox Circuit Court judgment has a preclusive effect in the instant proceeding.
This issue was before the court in Kelleran v. Andrijevic, 825 F.2d 692 (2nd Cir. 1987). Therein the court, citing Allen v. McCurry, 449 U.S. 90, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980), pointed out that "'Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so....'" Bankruptcy courts are included in this mandate; therefore the bankruptcy court in Kelleran was "bound to give preclusive effect to the default judgment obtained in the state court ... to the same extent as would a New York court." At 694.
This Court is similarly bound. Kentucky courts give preclusive effect to default judgments. In Davis v. Tuggle's Adminstrator, 178 S.W.2d 979, the court held that the fact that no defense was offered in a prior suit did not affect the conclusiveness of a judgment in subsequent litigation between the same parties over the same subject matter, since the rule as to conclusiveness of judgments applies to a judgment by default. The Davis court cited Kimbrough v. Harbett, 60 S.W. 836, wherein the court held that a judgment by default for the sale of land to satisfy an execution precluded the defendant from thereafter setting up a homestead exemption in the land, the matter being res judicata.
The debtors having defaulted in the state court action, they may not contest the judgment's preclusive effect as to Tri-County's lien on the property identified in the subject mortgage as "Tract II". The description of Tract II was no more detailed in the state court action than it is in this proceeding. However, the debtors did not contest the scope of the mortgage in the state court action. In fact, they admitted that Tri-County had obtained a judicial lien on the disputed property in the state court action when they moved this Court to avoid it. They cannot be heard now to claim that the mortgage does not include the subject property.
In consideration of the foregoing it is therefore the opinion of this Court that the debtors' Motion to Avoid Lien
on Exempt Property should be overruled. An order in conformity with this opinion will be entered separately.
By the Court -
Jeffery R. Tipton, Esq.
R. Gregory Lathram, Esq.