Court Opinion

ID: 9362930
Source: CourtListenerOpinion
Date Created: 2023-01-13 15:09:10.62716+00
Date Added: 2024-06-11T17:15:26.451887
License: Public Domain

RENDERED: JANUARY 6, 2023; 10:00 A.M.
                         NOT TO BE PUBLISHED

                  Commonwealth of Kentucky
                             Court of Appeals

                                 NO. 2021-CA-0883-MR

ELIZABETH NAPIER AND BRUCE
NAPIER                                                                     APPELLANTS

                     APPEAL FROM PERRY CIRCUIT COURT
v.                   HONORABLE ALISON C. WELLS, JUDGE
                           ACTION NO. 20-CI-00175

TED NACE                                                                       APPELLEE

                                        OPINION
                                       AFFIRMING

                                      ** ** ** ** **

BEFORE: CLAYTON, CHIEF JUDGE; CALDWELL AND K. THOMPSON,
JUDGES.1

THOMPSON, K., JUDGE: Bruce and Elizabeth Napier appeal from the judgment

of the Perry Circuit Court which awarded Ted Nace damages for breach of an

1
 Judge Kelly Thompson authored this Opinion before his tenure with the Kentucky Court of
Appeals expired on December 31, 2022. Judge Denise G. Clayton concurred in this Opinion
prior to her retirement from the Court of Appeals. Release of this Opinion was delayed by
administrative handling.
installment land contract. We affirm because this was an appropriate remedy and

the judgment is supported by substantial evidence.

              On September 6, 2018, the Napiers and Nace entered a written

installment land contract which was titled Bond for Deed. Pursuant to this

agreement, Nace was to pay the Napiers a total of $50,000.00 for a house and

parcel of land located in Perry County, Kentucky. In accord with the agreement,

Nace paid $10,000.00 down and was to continue to pay $500.00 per month

towards the balance while having the right to possession of the property during the

payment term.

              The agreement stated that “any money received prior to the full

$50,000.00 being paid is considered to be rental and does not create any equity

interest in [Nace].” Once Nace had paid the full amount per the agreement, the

Napiers would transfer title of the property to Nace “with full covenants of general

warranty . . . .”

              During Nace’s occupancy, Julie Parks, sister of Elizabeth Napier, put

up a “No Parking” sign on the parking area next to the home on the property

causing doubt as to what the boundaries of the property actually were contrary to

representations made by the sellers to buyer. Nace would later testify he was also

threatened by Parks and her brother who was also a sibling of Elizabeth. The

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Napiers did nothing to confirm the legal boundary of the land they were ostensibly

going to transfer to Nace or anything to cause Parks to stop harassing Nace.

             Nace retained counsel and did not make a payment in April 2020.

However, from October 2018, through February 2020, Nace had paid $700.00 per

month, and paid $500.00 in March 2020, which resulted in a $3,400.00 credit.

Despite this, by letter dated April 14, 2020, the Napiers threatened Nace with

eviction if he did not pay them $1,000.00 by May 6, 2020. The Napiers also sent

Nace a number of harassing text messages.

             On May 20, 2020, Nace filed a complaint in Perry County alleging

that the Napiers had breached the agreement by harassing him and forcing him to

abandon the property. Nace did not seek recoupment of the $500.00 monthly

payments he had made, only his down payment and the excess $3,400.00 he had

paid over the course of the preceding two years.

             A bench trial was conducted on May 21, 2021 and the parties

submitted post-trial briefs to the court. The Perry Circuit Court entered its findings

of fact, conclusions of law, and judgment on June 29, 2021. Amongst its findings,

the circuit court determined Julie Parks had “clearly set up a cla[i]m to a portion of

the property Mr. Nace was told he was purchasing[,]” and the Napiers “by their

inaction have evidenced their intent to breach the terms of the agreement” as to the

property they told Mr. Nace he was purchasing against the claims of Julie Parks,

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and “[t]heir actions in sending an eviction notice and their texts demanding [Nace]

vacate the property were a breach of the contract because Mr. Nace was entitled to

possession of the property[.]”

             Finding the Napiers in breach of the agreement, the circuit court

awarded Nace at total of $13,400.00 which represented his down payment of

$10,000.00 and the $3,400.00 he had paid in excess of the agreement’s $500.00

monthly installments.

             The Napiers do not take issue with the circuit court’s factual findings,

the other conclusions it drew from those findings, or the amount of damages

awarded. Their only argument on appeal is that Nace waived his only lawful

remedy for breach, which they assert was a judicial sale of the property.

Therefore, this appeal is limited only to that issue.

             The question of what damages or relief may be afforded by a court is

an issue of law. “When the outcome of a case turns on an issue of law . . .

appellate review is de novo.” Western Kentucky Coca-Cola Bottling Co., Inc. v.

Revenue Cabinet, 80 S.W.3d 787, 790 (Ky.App. 2001).

             The Napiers argue that the Kentucky Supreme Court’s opinion in

Sebastian v. Floyd, 585 S.W.2d 381 (Ky. 1979), and the Court of Appeal’s later

decision in Slone v. Calhoun, 386 S.W.3d 745 (Ky.App. 2012), stand for the

proposition that the only remedy available to Nace to resolve an alleged breach of

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the land contract was the judicial sale of the property. The Napiers argue a judicial

sale “would result in a judgment that would quiet title and determine the parties[’]

respective rights to the proceeds therefrom.”

             Importantly, in both Sebastian and Slone, the Courts were considering

the proper remedy for the seller upon the buyer’s default. In Sebastian, the issue

before our Supreme Court was whether a clause in an installment land sale contract

providing for forfeiture of the buyer’s payments upon the buyer’s default could be

enforced by the seller. The Court ruled that when an installment land contract is

used as a means of financing the purchase of property, the seller’s interest, being

bare legal title, is to be treated as a lien on the property to secure payment,

requiring a seller to seek a judicial sale of the property upon the purchaser’s

default; thus, the forfeiture clause in the installment land contract would not be

enforced. The Court in Sebastian ruled that “[t]he seller’s remedy for breach of

the contract is to obtain a judicial sale of the property.” Sebastian, 585 S.W.2d at

384 (emphasis added). The Court did not hold that such a sale would be a buyer’s

only remedy for a breach on the part of the sellers.

             The Court stated:

                    There is no practical distinction between the land
             sale contract and a purchase money mortgage, in which
             the seller conveys legal title to the buyer but retains a lien
             on the property to secure payment. The significant
             feature of each device is the seller’s financing the buyer’s

                                          -5-
              purchase of the property, using the property as collateral
              for the loan.

              ...

              . . . We are of the opinion that a rule treating the seller’s
              interest as a lien will best protect the interests of both
              buyer and seller. Ordinarily, the seller will receive the
              balance due on the contract, plus expenses, thus fulfilling
              the expectations he had when he agreed to sell his land.
              In addition, the buyer’s equity in the property will be
              protected.
Id. at 383.
              In Slone, the Court of Appeals simply followed the precedent

established in Sebastian but added, “[n]ot only does [the defaulting buyer] have an

equitable ownership interest in the property to the extent of the monthly payments

that were made thereon over a period of approximately four years, [the defaulting

buyer] also has redemption rights in the property under applicable Kentucky law.

Kentucky Revised Statutes 426.530.” Slone, 386 S.W.3d at 748.

              Sebastian and Slone establish that under a seller-financed land

contract, sellers are to be treated as mortgagors when a buyer subsequently

defaults. They do not limit buyers to the remedy of a judicial sale when it is the

sellers who default. In this present matter it was the buyer, who was determined by

the circuit court to not be in default, that prosecuted a breach of contract action

against the sellers; not the sellers who, upon a default by the buyer, were seeking to

quiet the redemption rights and equitable ownership interests accrued by the buyer.

                                           -6-
             It would be fundamentally unfair to limit Nace’s damages to the

proceeds of a judicial sale. The Napiers received value for Nace’s “rental” of the

property and are not entitled to retain Nace’s additional down payment and excess

payments.

             Having determined that Nace was not prohibited as a matter of law

from seeking and being awarded monetary contract damages for the Napiers’

breaches of the land sale contract, we need not address their second argument that

Nace allegedly waived his right to cause a judicial sale of the property.

             Accordingly, the judgment of the Perry Circuit Court is affirmed.

             ALL CONCUR.

BRIEF FOR APPELLANTS:                      BRIEF FOR APPELLEE:

Jeremy R. Morgan                           Frank C. Medaris, Jr.
Hazard, Kentucky                           Hazard, Kentucky

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