MEMORANDUM

This case is before the court on motion of the debtors, pursuant to 11 U.S.C. § 522(f)(1), to avoid the judicial liens of Shamrock Broadcasting Company, Inc., d/b/a WTVQ-TV ("Shamrock Broadcasting"), Georgetown Bank & Trust Company, Lazarus, Salem Carpet Mills, Burlington Industries, Inc. and Hobert W. Humphrey as liens that impair the homestead and wildcard exemptions of the debtors in their residence located at 336 East Main Street, Georgetown, Scott County, Kentucky. KRS 427.060, KRS 427.010.

On January 4, 1995 the court entered a memorandum opinion and order overruling a similar motion of the debtors. The record has since been supplemented.

FINDINGS OF FACT:

In the schedules to the debtors' joint petition for relief under chapter 7 of the Bankruptcy Code, the value of the debtors' residence is listed as $159,000. Counsel for the debtors notes there has been no objection to that stated value. See First Amended Motion to Avoid Judicial Liens, filed 2/2/95, unnumbered page 2.

According to proofs of claim in the record in this case, the consensual mortgage indebtedness to First National Bank of Georgetown ($96,820.62) and Central Bank & Trust Company ($26,991.37) aggregates $123,811.99. However, the second mortgage indebtedness to Central Bank & Trust Company is further secured by all the furniture, fixtures, equipment, inventory and accounts receivable of Remnant Rack, Inc., now known as Jack & Jan's, Inc., 1030 New Circle Road, Lexington, Kentucky. The debtors have reaffirmed in full the foregoing first and second mortgage indebtedness on their residence.

The claimed exemptions of $12,000 when added to the mortgage indebtedness of $123,811.99 increase the encumbrances on the property to $135,811.99, less perhaps the value of the pledged collateral of the corporate entity Jack & Jan's, Inc. There is equity in the property of about $24,000.

According to a title search performed at the direction of the court, the residence is subject to Scott County ad valorem taxes and to City of Georgetown taxes. Ad valorem taxes owing for 1990 to 1993, as of July 31, 1993, total $4,672.94. City taxes owing for 1988 through June of 1993, plus interest, total $1,218.84. See Debtors' Amended Motion, filed 2/2/95, unnumbered page 2 and Exhibits B & C, respectively.

On August 9, 1990 state tax lien #000242192 was recorded in Tax Book 2, page G of the Scott County Clerk's Office ("the 1990 state tax lien"). On August 17, 1992 state tax lien #929127 was recorded in Tax Book 2, page G of the Scott County Clerk's Office ("the 1992 state tax lien").

Counsel for the debtors has attached to her motion a copy of a FAX from Melvin Aldridge of the Revenue Cabinet, Frankfort, Kentucky, which states that taxes owing by the debtors to the Commonwealth as of the petition date of July 23, 1991 total $75,329.58. See Debtors' Amended Motion filed 2/2/95, unnumbered page 1 and Exhibit A.

A judgment lien of Shamrock Broadcasting arising out of civil action no. 91-CI-303 in the Fayette Circuit Court was filed on March 13, 1991 in Lis Pendens Book 6, page 109, in the Scott County Clerk's office. Shamrock Broadcasting has filed a proof of claim indicating it holds a lien for $8,101 plus interest at the rate of 12% from March 11, 1991 until paid.

A judgment lien of Georgetown Bank & Trust Company arising out of Scott Circuit Court civil action no. 91-CI-159 was filed on July 30, 1991 in Lis Pendens Book 6, page 220 in the Scott County Clerk's office. The only evidence in the record of the amount of this judicial lien is the fact that it is listed as $5,000 in the schedules to the debtors' joint petition.

A judgment lien of Lazarus arising out of Scott District Court civil action no. 91-C-181 was filed on August 21, 1991 in Lis Pendens Book 6, page 502 in the Scott County Clerk's office. A proof of claim filed by Lazarus indicates the amount of the lien is $2,246.19.

A judgment lien of Salem Carpet Mills, Inc. arising out of civil action no. 91-C-2026 in the Fayette District Court was filed on April 2, 1992 in Lis Pendens Book 6, page 502 in the Scott County Clerk's office. The only evidence in the record of the amount of this lien is the fact that it is listed as $2,294.22 in the schedules to the debtors' joint petition.

A judgment lien of Burlington Industries, Inc. arising out of civil action no. 91-CI-31514 in the Fayette Circuit Court was filed April 24, 1992 in Lis Pendens Book 6, page 529 in the Scott County Clerk's office. The only evidence in the record as to the amount of this lien is the fact that it is listed as $10,175.61 in the schedules to the debtors' joint petition.

A judgment lien of Hobert W. Humphrey arising out of Small Claims Division action no. 92-500088 in the Scott District Court was filed on September 15, 1992 in Lis Pendens Book 6, page 686 in the Scott County Clerk's office. An Amendment to Schedules filed February 2, 1995 lists the debt to Mr. Humphrey as a business debt in the amount of $400.

Thus, the 1990 state tax lien antedates five judicial liens totalling $27,817.02. The 1992 state tax lien antedates the $400 judicial lien of Humphrey. The record is unclear as to the amount of delinquent taxes secured by the tax liens at the time each of the judicial liens were filed.

There are three federal tax liens of record but they appear to have been filed after all of the foregoing liens and are therefore inferior to them and are not material to a determination of the right of the debtors to avoid the judicial liens of Shamrock Broadcasting Company, Georgetown Bank & Trust Company, Lazarus, Salem Carpet Mills, Burlington Industries, Inc., and Hobert W. Humphrey.

Counsel for the debtors asserts that pursuant to the language of KRS 134.420(4) the 1990 tax liens automatically increase or decrease depending on subsequent assessments and payments. Thus, according to debtors' counsel, in terms of priority, the 1992 tax lien relates back to the 1990 tax lien and takes precedence over the judicial liens in question.

Counsel for Shamrock Broadcasting, the only responding judicial lien creditor, counters that KRS 134.420 does not shield the Revenue Cabinet from liens recorded subsequent to its August 8, 1990 Notice of Tax Lien. Additionally, counsel argues that the 1990 tax lien was extinguished by novation or waiver, namely, by the debtors' entering into a payment plan with the Revenue Cabinet in 1992, about the time the second Notice was recorded.

Counsel for the debtor and counsel for Shamrock Broadcasting have agreed that the motion to avoid the lien of Shamrock Broadcasting should be overruled. This makes it unnecessary for the court to determine the scope and meaning of KRS 134.420.

Dated:

By the court -

_____________________________

JOE LEE, CHIEF JUDGE

Copies to:

Ginger C. Knight

Madeleine Taylor Baugh

Thomas L. Canary, Jr.

Morgan & Pottinger, PSC

Hobert W. Humphrey

Georgetown Bank

James Odell

Robert J. Brown