In re Nagel, CASE NO. 19-20055

CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Kentucky
Writing for the CourtTracey N. Wise Bankruptcy Judge
Decision Date05 December 2019
Docket NumberCASE NO. 19-20055


CASE NO. 19-20055


December 5, 2019



Debtor objects to Proof of Claim #5 (the "Claim") filed by Kentucky Tax Bill Servicing, Inc. ("KTBS"), contending that any claim KTBS held was satisfied by a 2012 in rem judgment and subsequent conveyance of real property to KTBS. The Court agrees. The doctrine of claim preclusion prevents KTBS from further relief against Debtor. The Claim will be DISALLOWED.


Debtor previously owned real property located at 291 Rogers Road, Demossville, Kentucky (the "Rogers Property"). Debtor failed to pay property taxes assessed on the Rogers Property for tax years 2003, 2004, 2006 and 2007 resulting in Pendleton County's lien on the Rogers Property. The Pendleton County Clerk issued certificates of delinquency for the unpaid taxes (the "Certificates"), and KTBS purchased them.

The 2010 Case

In 2010, KTBS filed an action in Kentucky state court against Debtor and his spouse seeking to collect the Certificates (the "2010 Case"). KTBS's complaint requested a personal judgment against Debtor, foreclosure of the Certificates, and a public sale of the Rogers Property. Debtor failed to respond, and the state court entered an "In Rem Judgment and Order of Sale" on April 10, 2012 (the "2012 Judgment"). [POC 5-1 at 5-10.]

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The 2012 Judgment, which KTBS prepared, stated that KTBS shall recover "against the [Rogers Property] the sum of Eight Thousand Forty Dollars and Ninety-Eight Cents ($8,040.98) together with interest at the statutory rate of 12% from March 1, 2012 until paid plus any continuing costs or attorney's fees and shall have a lien against the [Rogers Property] to secure said Judgment." [Id. at 7-8 ¶ 1.] The 2012 Judgment ordered the Master Commissioner to sell the Rogers Property and to pay the proceeds, in part, to cover "the full satisfaction of the liens for delinquent ad valorem taxes assessed against [the Rogers Property] including those of any third party purchaser of a tax lien against [the Rogers Property.]" [Id. at 8 ¶ 3.b.] The 2012 Judgment also stated: "It is adjudged that this is a final and appealable judgment and order of sale, and there is no reason for delay in its entry." [Id. at 10 ¶ 10.] Notwithstanding the complaint's request for a personal judgment against Debtor, the 2012 Judgment is silent as to Debtor's in personam liability. Nothing in the record suggests any party appealed from the 2012 Judgment.

The Master Commissioner offered the Rogers Property for sale on July 19, 2012, but received no bids. The Master Commissioner thus conveyed the Rogers Property to KTBS in accordance with Kentucky law.1

The 2015 Case

In 2015, KTBS filed a second state court complaint for a personal judgment against Debtor and foreclosure of Debtor's current home at 9710 Kentucky Highway 467, Williamstown, Kentucky (the "Williamstown Property"). In 2016, Debtor was found to be in default, and the state court entered an in personam judgment against Debtor and ordered the sale of the Williamstown Property. Debtor "filed a motion to set aside the judgment and order of

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sale based upon his contention that the April 10, 2012 order was an in rem judgment against [the Rogers Property], not a judgment against him personally." Ky. Tax Bill Servicing, Inc. v. Nagel, No. 2017-CA-000432-MR, 2018 Ky. App. Unpub. LEXIS 773, at *3-4 (Ky. Ct. App. Nov. 2, 2018). The trial court granted the motion. Id.

In granting Debtor's motion, the trial court observed:

The entirety of this case is premised on a judgment lien filed by [KTBS] on or about August 3, 2015. That judgment lien was filed pursuant to a judgment obtained in [the 2010 Case]. [KTBS] has represented to the [c]ourt that the judgment obtained in [the 2010 Case] was a personal judgment against [Debtor]...when in fact, the judgment was in rem only.

[ECF No. 43-2 at 53-56.]2 The trial court reasoned that

[t]he [c]ourt does not believe that the legislature intended to alter long standing distinctions between in rem and in personam judgments by enacting K.R.S. 134.546(4). If [KTBS's] arguments were accepted by the [c]ourt, there would be no difference between an in rem and in personam judgment, as the in rem judgment would leave [KTBS] in the exact same position as one in personam.

[Id. at 55.] Although KTBS appealed this ruling to the Kentucky Court of Appeals, the appeal was dismissed because the order was not final and appealable. KTBS v. Nagel, 2018 Ky. App. Unpub. LEXIS 773, at *6.

Debtor's 2019 Bankruptcy Case and KTBS's Proof of Claim

Debtor filed his Chapter 13 case on January 19, 2019. KTBS filed the Claim, initially asserting a $25,890.92 claim secured by a judgment lien. As evidence of the claim, KTBS cited the Certificates and attached the 2012 Judgment. [POC 5-1.] Debtor objected to the Claim and filed a Memorandum in Support [ECF Nos. 30, 56]. Debtor contends that the 2012 Judgment in

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KTBS's favor only granted in rem relief against the Rogers Property, which subsequently was conveyed to KTBS, and that the 2012 Judgment cannot support any further claim against Debtor or property of the estate. Further, Debtor argues that he has no outstanding personal liability to KTBS.

KTBS filed a Response and a Reply [ECF Nos. 47, 57]. KTBS also amended its Claim to assert that Debtor is liable under K.R.S. § 134.015 for an "unsecured obligation arising from deficiency of tax" rather than a judgment lien. [POC 5-2.] That statute provides: "[a]ll [property] taxes due under this section and all fees, penalties and interest thereon are a personal debt of the taxpayer on the assessment date, from the time the tax becomes due until paid." KY. STAT. REV. § 134.015. Based on the statute, KTBS argues that from the "moment KTBS purchased these delinquent property tax bills, the debtor was personally liable to KTBS for the 2003, 2004, 2006, and 2007 delinquent tax bills plus any and all fees, penalties and accrued interest." [ECF No. 57 at 3.] Thus, the question...

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