Court Opinion

ID: 5120337
Source: CourtListenerOpinion
Date Created: 2021-10-22 14:06:33.488355+00
Date Added: 2024-06-11T08:22:17.279096
License: Public Domain

RENDERED: OCTOBER 15, 2021; 10:00 A.M.
                  NOT TO BE PUBLISHED

           Commonwealth of Kentucky
                  Court of Appeals

                    NO. 2020-CA-0992-MR

TIMOTHY LUNSFORD AND
DEBORAH J. LUNSFORD                                 APPELLANTS

             APPEAL FROM SCOTT CIRCUIT COURT
v.           HONORABLE BRIAN PRIVETT, JUDGE
                   ACTION NO. 18-CI-00766

CENTRAL BANK AND TRUST
COMPANY; CAROLYN
CARROWAY, SCOTT COUNTY
MASTER COMMISSIONER; LEE D.
BAYER; NATHAN D. WRIGHT;
VICKIE BAYER; WESBANCO
BANK, INC., SUCCESSOR BY
MERGER TO UNITED BANK &
CAPITAL TRUST COMPANY; AND
WINTHORPE ENTERPRISES, INC.                          APPELLEES

                        OPINION
                REVERSING AND REMANDING

                        ** ** ** ** **

BEFORE: ACREE, CALDWELL, AND LAMBERT, JUDGES.
CALDWELL, JUDGE: Timothy and Deborah Lunsford appeal from the Scott

Circuit Court’s denying them an evidentiary hearing on their exceptions and a

refund of their deposit. The Lunsfords had submitted the highest bid at a master

commissioner sale for property including a house. But they contended that the sale

should be set aside because someone–apparently, one of the owners who lost the

house in foreclosure–removed fixtures and other items including cabinetry, doors,

appliances, toilets, bathtubs, and the heating and air system shortly before the sale.

               The trial court ultimately ruled that the Lunsfords must forfeit their

deposit based on application of the caveat emptor doctrine.1 The Lunsfords argue

that the trial court erred in failing to recognize exceptions to the caveat emptor

doctrine in judicial sales and in denying them the opportunity to prove their

exceptions through an evidentiary hearing. They request that this Court reverse

and remand with instructions to enter an order for a refund of the Lunsfords’

deposit or, in the alternative, for an evidentiary hearing.

               After careful review of the record and of applicable law, we reverse

and remand with instructions to enter an order to refund the Lunsfords’ deposit.

1
 See Caveat Emptor, BLACK’S LAW DICTIONARY (11th ed. 2019): “[Latin “let the buyer
beware”] (16c) A doctrine holding that a purchaser buys at his or her own risk. • Modern statutes
and cases have greatly limited the importance of this doctrine.”

                                               -2-
                        FACTS AND PROCEDURAL HISTORY

                Appellee, Central Bank and Trust Company (“Central Bank”), filed a

complaint to foreclose on mortgages it held on property in Georgetown, Kentucky.

Wesbanco Bank, Inc., d/b/a United Bank and Trust Company (“Wesbanco”), held

the first mortgage on the property and was named as a defendant. Also named as

defendants were borrowers Nathan Wright and Lee and Vickie Bayer.

                In early May 2019, the trial court ordered the property to be sold by

the master commissioner upon Wesbanco’s motion and entered a Judgment and

Order of Sale (“JOS”). The JOS stated that Central Bank’s interest was junior and

inferior to that of Wesbanco and that, subject to an exception not relevant here,2

“[t]he real estate shall be sold on the terms of 10% cash at the time of the sale

. . . .” (Record (“R.”), p. 181.) Further terms stated that the risk of loss passed to

the purchaser on confirmation and that Wesbanco would not be deemed to have

warranted title. But there were no explicit terms regarding the sale being caveat

emptor or “as is.”3

2
 Special provisions would apply if Wesbanco were the highest bidder, including waiver of the
deposit.
3
    See As Is, BLACK’S LAW DICTIONARY (11th ed. 2019):

         In the existing condition without modification . • Under [Uniform Commercial Code] UCC § 2-316(3)(a), a seller can
         disclaim all implied warranties by stating that the goods are being sold “as is” or
         “with all faults.” Generally, a sale of property “as is” means that the property is

                                                 -3-
              Prior to the sale, two housekeepers submitted their appraisal of the

property which was filed in the record as called for in Kentucky Revised Statute

(“KRS”) 426.520. They appraised the property to be worth $410,000.

              The master commissioner sale occurred on May 28, 2019. The

Lunsfords offered the highest bid–for $324,000. They paid the required 10%

deposit ($32,400) to the master commissioner and signed a Sale Bond4 to pay the

balance of the sale price.

              According to the Lunsfords, they (along with others) had entered the

house on the property a few days before the sale as it had been left unlocked.5 The

house and rest of the property appeared to be in good condition at that time. But

       sold in its existing condition, and use of the phrase as is relieves the seller from
       liability for defects in that condition. – Also termed with all faults.
4
  The Sale Bond begins with a statement that the Lunsfords promise to pay to the master
commissioner the balance of the purchase price minus the deposit, with 4.625% interest until
paid. The Sale Bond states: “This bond is security for the payment for a tract of land” sold by
the master commissioner on May 28, 2019 as described in the trial court’s judgment. (R., p.
227.) The Sale Bond further recites: “This bond shall have the force and effect of a Judgment;
and to secure payment of this bond a lien is hereby retained in favor of said Master
Commissioner upon said property.” (R., p. 228.) The bond signed by the Lunsfords also states
that surety was “provided by written verification from lender approving loan to purchaser in an
amount in excess of balance of purchase price[.]” (R., p. 228.)
5
  Although Central Bank asserts the Lunsfords had trespassed, the parties have not pointed to
anything in the record showing definitively whether any owner or occupant had expressly
permitted entry by prospective purchasers prior to the sale. At a court hearing, Central Bank’s
attorney stated that generally a bank would lack the authority to lock up a house under
foreclosure so long as the house was occupied and that Central Bank representatives believed the
house was still occupied prior to the master commissioner sale. See also KRS 426.525.

                                                -4-
the house was locked up the last few days before the sale so they could not get in

anymore to inspect it.

             On the evening of May 28, (the date of the sale), the Lunsfords went

into the residence on the property and discovered that fixtures including toilets,

bathtubs, doors, appliances, the heating and air conditioning system, and cabinetry

had been removed. They filed a police report about the theft that night.

             The master commissioner’s report of the sale was filed on May 29.

The report stated that the Lunsfords submitted the highest bid–for $324,000–and

executed a sale bond pursuant to the terms and conditions of the trial court’s order

of sale. Apparently, the purchase price offered by the Lunsfords would have been

sufficient to pay off the mortgages held by both Wesbanco and Central Bank.

             In early June, the trial court granted Central Bank’s motion for

summary judgment against the Bayers and for an in rem default judgment against

Wright. Central Bank was awarded money judgments of nearly $75,000 against

Mr. Bayer and over $38,000 against Wright–plus interest, attorney fees, court

costs, and expenses. And the trial court adjudged Central Bank to have valid liens

superior to all others except Wesbanco.

             Also, in early June, the Lunsfords filed a statement of their exceptions

and/or objections to the master commissioner’s report. As grounds, they alleged

that unbeknownst to them, the property had been “substantially and materially

                                          -5-
altered and damaged by the removal of numerous fixtures and other integral parts

of the structure of the property just prior to the sale . . . .” (R., pp. 239-40.) They

alleged that the property’s value “was substantially and materially affected” due to

the removal of the fixtures and other items and that they had a reasonable

expectation that such fixtures were present in the property and would remain

present until after the sale. (R., p. 240.) And they asserted that removal of the

fixtures and other items cast doubt on the accuracy of the appraisal. The Lunsfords

later submitted into the record professionals’ estimates that the cost of repairing the

house and putting it back in its original condition would be about $96,000.

             Later that summer, the banks and the Bayers moved the trial court to

confirm the sale. The Lunsfords objected to the motions to confirm the sale. The

Lunsfords also moved the trial court to set aside the master commissioner sale and

to refund their deposit. The banks and the Bayers filed responses objecting to the

motion to set aside the sale. The Lunsfords moved for an evidentiary hearing on

their exceptions to the master commissioner’s report of sale.

             Following the filing of these motions over the summer, Central Bank

filed a motion in September 2019 requesting that the trial court have the master

commissioner re-sell the property if the Lunsfords would not complete their

purchase upon confirmation of the sale. After the failure of efforts to get insurance

                                           -6-
to pay for the losses and to work out a mutually satisfactory resolution,6 the

Lunsfords indicated that they would not be completing their purchase.

               The Lunsfords had submitted into the record, inter alia, the affidavit

of a neighbor who witnessed Wright removing and/or admitting to removing

fixtures from the house at issue a day or two before the sale. Wright had never

participated in the action and a default judgment had been entered against him.

Apparently, none of the other parties in this case–including his co-borrowers and

relatives, the Bayers–has disputed that Wright was involved in removing the

fixtures. In response to the trial court’s inquiry at one hearing, counsel noted that

no criminal complaint had been filed against Wright–or apparently anyone else–for

the damage and removal of fixtures.

               In October 2019, the trial court granted Central Bank’s motion for re-

sale by the master commissioner by written order. The trial court granted the

motion based on the Lunsfords’ indicating in court that they would not “complete

their purchase of the Property pursuant to the Master Commissioner sale held on

May 28, 2019 and subsequently confirmed herein.” (R., p. 437.)

               The trial court further ordered the master commissioner to hold the

Lunsfords’ deposit in escrow pending further orders and reserved other issues for

6
  For example, at a hearing, the Lunsfords indicated that they might be willing to pay $96,000
less than their bid to complete the sale or that they might pay the full $324,000 after the house
was repaired to its prior condition.

                                                -7-
further determination. The trial court orally stated at hearings in the fall of 2019

that he was holding off on certain rulings–apparently regarding what would happen

to the Lunsfords’ deposit–to see if insurance would cover the damage to the house

to avoid a harsh result to the Lunsfords.

             The property was then offered for sale again by the master

commissioner. According to a new appraisal by the same housekeepers as before,

the property was now worth $300,000. The Lunsfords submitted affidavits from

these same housekeepers indicating that their original appraisals would have been

very different if they had been apprised of the removal of the fixtures.

             In November 2019, the property sold for $250,000 at the second

master commissioner sale. The trial court confirmed the second sale and directed

distribution of the proceeds in early 2020. The $250,000 purchase price was

sufficient to satisfy the Wesbanco mortgage. But it paid only a portion of the

second mortgage and none of the third mortgage held by Central Bank.

             Central Bank then filed a motion seeking disbursement of the

Lunsfords’ $32,400 deposit to it in January 2020. It pointed out that the re-sale

brought $74,000 less in proceeds than the price the Lunsfords agreed to pay. It

also noted it was still owed over $50,000 on the June 2019 judgments awarded to it

against the Bayers and Wright.

                                            -8-
              Central Bank argued the Lunsfords’ deposit should be paid to it

because of harm caused by their refusal to complete the first sale. Specifically,

Central Bank pointed out that the mortgages would have been paid in full if the

Lunsfords had completed their purchase. And Central Bank also asserted that

delay caused by the Lunsfords’ refusal to complete the sale resulted in additional

expenses including increased taxes, interest, and attorneys’ fees. So, Central Bank

requested that the court order the master commissioner to pay the Lunsfords’

deposit to Central Bank “to be applied to the judgments awarded to it [Central

Bank] . . . .” (R., p. 489.)7

              After the filing of the Lunsfords’ response and a hearing, the trial

court granted the motion to disburse the Lunsfords’ deposit to Central Bank in June

2020. The Lunsfords then filed a motion to alter, amend, or vacate. The trial court

denied this motion after a hearing and the Lunsfords then filed a timely appeal.

                                STANDARDS OF REVIEW

              As the parties acknowledge in their briefs, the trial court’s resolution

of pure questions of law–such as interpretation of contracts or statutes or other

legal authority–is subject to non-deferential de novo review on appeal. See, e.g.,

7
 In its written motion, Central Bank requested that the deposit be applied “to the judgments
awarded to it herein.” (R., p. 489.) The motion referred to the judgments awarded to Central
Bank against the Bayers and Wright in June 2019. Central Bank’s motion cited no legal
authority addressing why the Lunsfords’ deposit should be used to pay off judgments against
other parties–the Bayers and Wright.

                                              -9-
Seeger v. Lanham, 542 S.W.3d 286, 290 (Ky. 2018) (questions of law including

statutory construction are subject to de novo review on appeal); EQT Production

Company v. Big Sandy Company, L.P., 590 S.W.3d 275, 285 (Ky. App. 2019)

(questions of construction of contracts, deeds, and trusts reviewed de novo).8

               We review a trial court’s decision to confirm or set aside a judicial

sale9 for abuse of discretion. Lerner v. Mortgage Electronic Systems, Inc., 423

S.W.3d 772, 773 (Ky. App. 2014). Similarly, we review rulings on evidentiary

issues–such as whether to admit or exclude evidence–for abuse of discretion.

Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 577 (Ky. 2000).

With these applicable standards of review in mind, we address the issues presented

by the Lunsfords and Central Bank in their briefs.

8
  Any findings of fact by the trial court should be disturbed only if clearly erroneous. Kentucky
Rules of Civil Procedure (“CR”) 52.01. But from our review of the record, the trial court did not
formally issue factual findings and the parties have not argued any error in factual findings in
their appellate briefs.
9
  At times, the documents in the record seem conflicting as to whether the trial court had actually
confirmed the first commissioner sale of May 2019. In an October 2019 order, the trial court
states it had overruled the Lunsfords’ exceptions and confirmed the commissioner sale of May
2019. Then later, after a second master commissioner sale was conducted and confirmed,
Central Bank filed a motion to disburse the deposit paid by the Lunsfords in the “unconfirmed”
first master commissioner sale of May 2019. (R., p. 487.) The trial court granted this motion.
But despite the confusing state of the record, the parties both discuss the May 2019 sale as never
having been confirmed in their briefs.

                                               -10-
      Any Reversible Error in Trial Court’s Application of Caveat Emptor

               Whether and how caveat emptor (“buyer beware”) applies to the facts

here is a legal determination subject to de novo (non-deferential) review on appeal.

Manning v. Lewis, 400 S.W.3d 737, 741 (Ky. 2013).

               The trial court repeatedly orally stated in hearings that master

commissioner sales are caveat emptor sales. The Lunsfords argued that while

generally this may be true, such caveat emptor rules are nonetheless subject to

certain exceptions such as for mutual mistake or for fraud by someone connected

with the sale. While the trial court orally indicated it was aware that there may be

certain exceptions to the caveat emptor rule, it seemingly did not believe any such

exception could possibly apply to this case and that all master commissioner sales

were at the buyer’s risk and/or as is. And it stated that although the rule was harsh,

it believed that “the statute” would have to be changed for the Lunsfords to escape

the application of caveat emptor to bar refund of the deposit.10 (Video Record

(“V.R.”) 9/12/2019 2:07:40-2:08:18.)

10
   Despite the trial court’s reference to a statute which apparently meant that the Lunsfords were
obligated to go through with their purchase or at least forfeit their deposit regardless of the
property’s condition, there appears to be no Kentucky statute which expressly states that all
master commissioner or judicial sales are “as is” or totally without warranty and at the buyer’s
risk. However, some statutes indicate that newspaper advertisements of judicial sales should
state the terms of sale and that the court can require the payment of a deposit to cover expenses if
a resale becomes necessary. See KRS 426.560 (newspaper advertisements for judicial sales must
“state the time, place and terms of sale and describe the property to be sold”); KRS 451.170
(stating that judicial sales can be for cash or credit and that court may require the payment of a
deposit sufficient to cover the expense of a resale).

                                               -11-
               Although we are unaware of any express provision in current statutes

and court rules that judicial sales (including master commissioner sales) are always

of the property “as is” at the time of sale, Kentucky case law has long generally

applied the doctrine of caveat emptor to judicial sales/master commissioner sales.

See, e.g., Trigg v. Jones’ Adm’r, 19 Ky. L. Rptr. 1009, 102 Ky. 44, 42 S.W. 848,

849-50 (1897) (“There can be no question that the rule of caveat emptor applies to

judicial sales of real property, and, in the absence of misconception and fraud, the

buyer must look out for himself. He buys at his own risk, both as to title and

quantity.”).

        Similarly, court rules generally require that the terms of a master commissioner or
judicial sale are to be stated in the judgment ordering the sale and in the notice of sale to the
public–but do not expressly provide that judicial sales are always “as is” with no warranties. See
CR 53.02(1) (“Judicial sales under order or judgment of the circuit court may be executed and
accounts of estates may be settled by a master commissioner under such terms and conditions as
are specified by the circuit court either in its order or judgment or by rule.”); KENTUCKY
ADMINISTRATIVE PROCEDURES OF THE COURT OF JUSTICE IV, Sec. 5, General Provisions of
Judicial Sales (requiring inter alia that advertisement for judicial sale state time, place, and terms
of sale); RULES OF PRACTICE AND PROCEDURE OF THE 14TH JUDICIAL CIRCUIT, BOURBON, SCOTT,
AND WOODFORD COUNTIES, Rule XXXVIII) (local trial court rule requiring in Paragraphs E and F
that judicial judgment and order of sale contain legal description of property and name of party
whose interest will be sold, source of title, and “[t]erms specifying that said property shall be
sold on a date and time to be fixed by the Master Commissioner . . .” and that the master
commissioner’s advertisement of sale state “time, terms, place of sale and description of the
property to be sold.”). See also Sterling Grace Mun. Corp. v. Central Bank & Trust Co., 926
S.W.2d 670, 673 (Ky. App. 1995) (“the terms of a judicial sale are ultimately determined by the
circuit court”).

        Although not discussed by the parties in their appellate briefs, we found nothing in the
trial court’s order and judgment of sale nor in the master commissioner’s notice of sale which
expressly provided that the property was being sold as is. Nor does the local court rule expressly
provide that all master commissioner sales are as is or that buyers buy at their own risk.

                                                -12-
               Still, Kentucky case law has also long recognized that in certain

instances, exceptions to caveat emptor apply–even to property sold by a master

commissioner in a judicial sale–such that a judicial sale may be set aside. For

example, in acknowledging that the caveat emptor rule applies to judicial sales of

real property “in the absence of misconception or fraud,” the Trigg decision

suggests that there are potential exceptions to caveat emptor.

               Judicial sales should not be easily disapproved,11 especially for a

party’s mere dissatisfaction with the price at which the property sold. But

sometimes judicial sales should be set aside for extraordinary circumstances

including fraud, unfair or irregular proceedings, mistake, or the price itself simply

shocking the conscience of the court. Courtyards, 594 S.W.3d at 209-10. For

example, this Court noted the deferential abuse of discretion standard of review

and upheld a trial court’s setting aside a judicial sale based largely on the sale price

11
   As Central Bank’s brief indicates, both more recent and longer-standing precedent reflects
perhaps a general preference for upholding judicial sales. See, e.g., U.S. Bank N.A. v.
Courtyards University of Kentucky, LLC, 594 S.W.3d 205, 209 (Ky. App. 2019) (indicating that
judicial sales should generally be upheld if proceedings were conducted in a fair and regular
manner in the absence of “substantial reasons” not to confirm a sale); Jones v. Deposit &
People’s Bank, 180 Ky. 395, 202 S.W. 907, 910 (1918) (“the policy of the law [is] to sustain
judicial sales and to encourage bidding by all persons, in order that the property not be
sacrificed” so setting aside a sale for insignificant reasons is discouraged). Nonetheless,
promoting public confidence in judicial sales is a valid goal which may not be served by
confirming judicial sales under certain circumstances. Thus, as discussed in the body of this
Opinion, there have certainly been other cases in which Kentucky appellate courts have seen fit
to reverse a trial court’s confirmation of a judicial sale despite the general preference to uphold
judicial sales absent extraordinary circumstances.

                                               -13-
being only about ten percent of the property’s appraised value–which the trial court

had found so low as to shock its conscience–in Lerner, 423 S.W.3d at 773-74.

             Even when the price alone is not sufficient to shock the conscience of

the court, confirmation of a judicial sale may not be appropriate if the party

challenging confirmation can establish fraud by someone connected with the sale,

irregularity in the proceedings, or mistake or other reason casting doubt on the

sale’s fairness:

             A sale price which is not low enough to shock the
             conscience may still be grounds for vacating a judicial
             sale if other circumstances are present which cast doubt
             on the fairness of the process. “[T]here must be either
             fraud or misconduct in some one connected with the sale,
             unfairness of the officer who conducts the sale, some
             surprise or misapprehension on the part of those
             interested, or some irregularity in the proceedings, or
             other circumstances attending, conducing to show
             unfairness.”

Courtyards, 594 S.W.3d at 209-10 (quoting Smith v. Holowell, 201 Ky. 271, 256

S.W. 408, 409 (1923)).

                                      Mistake

             The Lunsfords argue that the 2019 master commissioner sale should

have been set aside and their deposit refunded on the basis of either mutual or

unilateral mistake about the condition of the property. They assert that mutual

mistake is applicable as all parties (except perhaps Wright) and the appraisers

                                         -14-
mistakenly believed that the property was “habitable” and “had toilets, water

heaters, cabinets, HVAC units, doors, etc.” (Appellants’ brief, p. 12.)

              They also contend that even if their mistake was unilateral, equity

calls for setting aside their contractual obligations regarding the sale, citing Kane v.

Hopkins, 309 Ky. 488, 218 S.W.2d 37 (1949), which states:

              Equitable relief from a mutual mistake is frequently
              given by a reformation of the contract. But a contract
              will not be reformed for an unilateral mistake. Equitable
              relief may, however, be given from an [sic] unilateral
              mistake by a rescission of the contract. Essential
              conditions to such relief are: (1) The mistake must be of
              so grave a consequence that to enforce the contract as
              actually made would be unconscionable. (2) The matter
              as to which the mistake was made must relate to a
              material feature of the contract. (3) Generally the
              mistake must have occurred notwithstanding the exercise
              of ordinary diligence by the party making the mistake.
              (4) It must be possible to give relief by way of rescission
              without serious prejudice to the other party except the
              loss of his bargain. In other words, it must be possible to
              put him in statu [sic] quo.

Id. at 39-40 (quoting Fields v. Cornett, 254 Ky. 35, 70 S.W.2d 954, 957 (1934)).

              The Lunsfords note that it would cost $96,000 to put the house back in

the condition which “generated” their bid and assert the house’s condition was a

material feature of the contract. They also argue they exercised ordinary diligence

by going into the house when given the opportunity12 and that “Central Bank and

12
   Again, Central Bank perceives the Lunsfords’ entering the unlocked house before the sale as
trespassing and suggests the Lunsfords should not, therefore, be permitted to rely on their

                                             -15-
the others will not suffer serious prejudice since the house was resold in the same

condition as the day of the first sale.” (Appellants’ brief, p. 13.)

              The trial court rejected the Lunsfords’ mistake argument, orally

stating that the appraisal was accurate when issued–in mid-May 2019–prior to the

partial destruction of the property a day or two before the sale. The trial court

orally indicated there was no mistake in the appraisal–instead, there was an

intervening criminal act which occurred between the appraisal and the sale.

              Despite the Lunsfords’ noting provisions in the order and notice of

sale that risk of loss passed to the purchasers only upon confirmation, the trial

court believed that the Lunsfords’ obligation to perform was not excused due to the

destruction of the property or any misunderstanding about the property’s condition.

              While slight misunderstandings about a property’s qualities by a

purchaser or appraisal may not generally justify setting aside a judicial sale, there

is precedent for setting aside a sale where an appraisal is based on significant

mistake of facts about the fundamental qualities of a property. See Elswick v.

Justice, 287 Ky. 632, 154 S.W.2d 714 (1941). For example, where appraisers

observations. Whether the Lunsfords had actually trespassed is unclear–given an apparent lack
of evidence of whether an owner or occupant permitted the entry. Neither the Lunsfords nor the
appraisers explicitly stated whether they reviewed any information via public Property Valuation
Administrator (“PVA”) records which might have shed light on existing basic structures such as
plumbing or heating and air systems. Even disregarding the Lunsfords’ actual observations,
however, one would not reasonably expect that most essential fixtures in a house would have
been removed just before a sale–even a foreclosure sale.

                                             -16-
admitted they had mistakenly understood the property for sale to consist of 70 to

80 acres when in fact the property covered about 176 acres and the property sold

for about two-thirds the appraised value, the Kentucky high Court reversed the trial

court’s refusal to set aside the sale. Id. at 714-15.13

               The Kentucky Court held that under these circumstances, the trial

court should have sustained exceptions and set aside the sale due to the

significance of the appraisers’ mistake of fact rather than of judgment:14

               In the case before us the inadequate appraisement
               resulted from the mistake of the appraisers in valuing
               only part of the land to be sold, clearly a mistake of fact,
               which not only tended to affect the price received at the
               sale but also deprived appellants of their right of
               redemption. Under the circumstances, we think the court
               should have sustained the exceptions to the master
               commissioner’s report of sale and set aside the sale.

Id. at 715.

13
  The property had sold for about twenty-five percent of its actual value but for two-thirds of its
appraised value so that the owners’ right of redemption was defeated. The Kentucky Court took
note that the appraisers “did not appraise the land as an entirety, regardless of the acreage, but
agreed on the value per acre and multiplied this by the number of acres they believed to be in the
two tracts.” Id. at 715.
14
   Central Bank cites Mastin v. Zweigart, 24 Ky. L. Rptr. 1920, 72 S.W. 750 (1903) (not
officially reported) which states: “A mere mistaken opinion of the appraisers as to the value of
the land does not affect sale.” Id. at 750. The Kentucky Court there explicitly noted the lack of
allegations of fraud concerning the appraisal and did not explicitly discuss any mistake of fact by
the appraisers. The land sold for $18.25 an acre, despite the appraisal for court valuing it at $20
an acre and the appellant’s affidavits of other appraisals valuing the property at $25 an acre. Id.
at 750-51. The Kentucky Court characterized any mistake by the court appraisers as a mistake of
judgment: “The evidence that the land was worth $25 per acre could not do more than to
conduce to show that the appraisers erred in their judgment as to the value of the land.” Id. at
750. So, there was no showing of a mistake of fact, rather than of judgment, as in Elswick.

                                               -17-
             Unlike Elswick, the right of redemption by an owner in foreclosure is

not at stake here. And here a purchaser–rather than an original owner–challenges

the appraisal as being much too high rather than much too low. But despite these

distinctions, Elswick should be read to call for setting aside the May 2019

commissioner sale and/or rescinding the contract arising from this sale.

             Even if the appraisal here was correct as of the date of its filing, the

property as offered by sale on May 28, 2019 fundamentally differed from the

appraisers’ understanding of fundamental facts about the property. The appraisers

admitted in affidavits that their mid-May 2019 appraisal was based on assumptions

that the property had certain key fixtures–such as air conditioning, cabinetry,

toilets and bathtubs, and sinks–and would have been significantly different if they

knew such key fixtures had been ripped out.

             Furthermore, their appraisal for the second master commissioner sale

came in $110,000 lower–for $300,000 instead of $410,000. And the property sold

at the second sale for a price ($250,000) much closer to their second appraisal than

their first appraisal. As in Elswick, it is appropriate to accept that the appraisers

essentially were laboring under a significant mistake of fact–not just judgment–in

appraising the property as worth $410,000 at the date and time of the first sale.

             And although Elswick involved the rights of owners to challenge a

sale based on a too-low appraisal which defeated the right of redemption, our

                                          -18-
precedent does not limit our consideration of significant inequities to only those

affecting the original owners of property. Instead, precedent calls for considering

justice and equity to all parties involved. See, e.g., Gross v. Gross, 350 S.W.2d

470, 471 (Ky. 1961) (emphasis added) (citing Kentucky Joint Land Bank of

Lexington v. Fitzpatrick, 237 Ky. 624, 36 S.W.2d 25, 26 (1931) (“the trial court

and this court must have due regard for the rights of all the parties involved as

measured by legal and equitable standards” so when a questionable sale price “is

accompanied by circumstances, though only slight and insufficient in themselves,

which tend to cause it, or where it is attended by apparent unfairness or

impropriety or oppression on the part of those connected with the sale, the sale

ought to be and will be set aside.”)). It would be grossly unfair to require the

Lunsfords to lose their deposit under these facts, given that they, like the

appraisers, had no way to know of the theft of key fixtures just prior to the sale and

that they promptly filed exceptions to the sale after discovering the theft.

                                           Fraud

              The Lunsfords contend that the sale should be set aside based on fraud

or misconduct by a person connected with the sale–namely, Nathan Wright (who

did not directly participate in the proceedings below).15 They note he was clearly

15
  The Lunsfords do not assert in their appellate briefs that the Bayers–who, like Wright, had
money judgments to Central Bank awarded against them–might also have engaged in any fraud
or misconduct.

                                             -19-
connected with the sale as an owner of the property and party to the lawsuit. And

they argue:

              Secretly taking all the fixtures out of the house just
              before the sale was both fraudulent and misconduct. He,
              in essence, stole or destroyed what the Court ordered to
              be sold. He concealed what he did by locking the doors.
              Neither the Lunsfords, the master commissioner, the
              attorneys nor the banks were aware of Mr. Wright’s
              misconduct.

(Appellants’ brief, p. 7.)

              Central Bank argues in its brief that only fraud or misconduct on the

part of the master commissioner or other agent of the court would excuse a party

from performance. But statements in authority it cites seem more relevant to

allegations of irregularity or unfairness in proceedings by the master

commissioner or other court agents–which is not alleged here–rather than fraud or

misconduct by a person connected to the sale. See Appellee’s brief, p. 8 (quoting

Courtyards, 594 S.W.3d at 210) (“errors in notice and other irregularities can be

grounds for setting aside a sale if the fault lies with the Master Commissioner

rather than one of the parties.”). See also Trigg, 42 S.W. at 850 (cited by

Appellees to allow equitable relief for purchasers “deceived by the action of the

court or the misrepresentations of its agents . . . .”) (indicating that relief may be

available to persons so deceived by a court or court’s agents about the quantity of

land sold in case in which property was not actually as large as advertised for

                                          -20-
judicial sale, but not expressly limiting relief for fraud to cases involving fraud by

the court or its agents).16

               Despite the perceptions or expectations of some people that foreclosed

property will likely be damaged in some manner, we have not come across any

reported Kentucky case addressing whether a judicial sale can or must be set aside

due to intentional property destruction or removal of fixtures by a foreclosed-upon

owner. But under the unique facts here, we believe the trial court erred in failing

to recognize that such intentional misconduct or fraud could constitute

extraordinary circumstances warranting an exception against applying the caveat

emptor doctrine to bar relief for these purchasers.

                                      General Inequity

               Although a questionable sales price standing alone might not warrant

setting aside a judicial sale, setting aside a judicial sale may be warranted where

the questionable sale price is accompanied by even slight indications of unfairness

or impropriety by those connected with the sale. Gross, 350 S.W.2d at 471.

Although ultimately the trial court’s decision to set aside a sale was reversed in

Gross due to lack of indications of impropriety and other factors, id. at 471-72,

16
   The purchaser in Trigg sought to obtain a reduction in the purchase price due to the acreage
being less than advertised. 42 S.W. at 849. Trigg indicates that the purchaser could not get the
requested relief–sales price reduction–in part due to his delay in filing exceptions until after
confirmation and also indicates that he might have been entitled to rescission instead but refused
this option. Id. at 850.

                                               -21-
Gross did not involve issues of whether the sale should be set aside due to any sort

of damage or destruction to property.

               Central Bank argues that precedent establishes that partial destruction

of the property prior to confirmation–even prior to the sale itself–does not excuse a

purchaser in a judicial sale from performing their obligations given the general

applicability of caveat emptor principles. As authority, it cites Walters v. Blevins’

Executor, 3 Ky. L. Rptr., 11 Ky. Op. 309, 1881 WL 8036 (Ky. Oct. 29, 1881);

Vance’s Administrator v. Foster, 72 Ky (9 Bush) 389, 1873 WL 6643 (1872); and

Cook’s Administrator v. Franklin Fire Insurance Company, 224 Ky. 360, 6 S.W.2d

477 (1928). Walters concerned the removal of rails from property subject to a

judicial sale. 11 Ky. Op. at 310.17

               In Vance’s Administrator, the Court noted that machinery had been

accidentally partially destroyed by fire after its judicial sale but before the sale

could be confirmed. 72 Ky. at 391. The Kentucky high Court reversed the trial

17
  The Court stated that although no defect in title was alleged, “the proof conduces to show that
the rails were taken from the land before the sale. If taken after the sale the appellant would be
compelled to take the property and look to the trespasser for reparation.” 11 Ky.Op. at 309-10.
The Court held that this indication of property destruction was insufficient to warrant setting
aside the sale which was only of land within certain boundaries and not necessarily of a
particular building which was the subject of an exception unless that building was within those
boundaries. And it determined that the purchaser could have ascertained what was being sold by
looking at the judgment and obtained proper title to land within the boundaries set forth in the
judgment. So, the Kentucky Court upheld the trial court’s confirmation of the sale. Id. at 310.
The discussion of the facts indicates only that “rails were taken” and does not provide much
background into other circumstances–such as who may have taken the rails and whether there
were indications of intentional misconduct. See id. at 310.

                                              -22-
court’s refusal to confirm the sale, noting that neither party had been at fault for the

accidental loss of property. Id. at 393.

             In the Cook’s Administrator case, the Kentucky Court did not

explicitly indicate the destruction of property by fire occurred accidentally, but it

also did not note any allegations of arson in its description of the facts. 6 S.W.2d

at 478. Given its quotation of the discussion of accidental fire loss in Vance’s

Administrator, perhaps one could presume that the loss by fire in Cook’s

Administrator was also accidental.

             Although these cases indicate destruction of property before

confirmation did not merit setting aside the judicial sale, Vance’s Administrator

expressly notes that the partial property destruction occurred accidentally without

fault by either party. And there is no explicit indication in any of these cases that

they involved intentional destruction of property by a party connected with the

sale–unlike the present case in which intentional destruction of property by a party

connected with the sale has been not only alleged but also supported by evidence

of record.

             Also, the property destruction here apparently occurred prior to the

sale as well as prior to the confirmation. Thus, we do not believe the holding of

Vance’s Administrator (which was quoted in Cook’s Administrator) is apt.

                                           -23-
             Vance’s Administrator states that equitable title passes with the sale–

even prior to confirmation–and that a purchaser who is entitled to benefit by

purchasing the property at the agreed-upon price should also be bound by his

promise to pay that price where there is no valid ground to set aside the sale at the

time of the sale:

                    If it be true, as contended for the appellees, that
             their bids for the several parcels of machinery and their
             acceptance by the commissioner were not effectual for
             any purpose until approved by the court, and could have
             only operated to transfer the title, then, as from the time
             of confirmation, we readily concede that the loss
             sustained in this case should fall on the estate of Vance
             and not on the appellees. But in our opinion both the
             rights which the appellees acquired, and the
             responsibilities they incurred by becoming the accepted
             bidders for the property, greatly exceeded those resulting
             from mere proposals or offers to purchase subject to the
             approbation of the court. The principle can not [sic], we
             think, be questioned that where at the time a sale is made
             no valid ground for setting it aside exists the accepted
             bidder is entitled to his purchase, however much the
             property may appreciate in value between the sale and
             time for confirming it. This being so, why should he not
             be held bound by his purchase, although from accidental
             causes the property in the mean time [sic] may become
             impaired or depreciate in value?

Id. at 391-92. Here, in contrast, there was a valid reason to set aside the sale at the

time of the sale–intentional damage which would cost almost $100,000 to fix and

which resulted in the property’s declining in value by around twenty-five percent–

based on the difference between the two appraisals and two sale prices.

                                         -24-
             Another key distinction is that the trial court’s judgment and order of

sale here explicitly states that the risk of loss does not shift to the purchaser until

confirmation. Central Bank argues in its brief that this does not mean the

Lunsfords are entitled to their deposit. Instead, it contends that the order’s risk of

loss provision “merely retained all the rights of the owners and mortgage holders

against third parties until such time as the sale was confirmed and final” to avoid

the owners and mortgage holders being left without insurance coverage.

(Appellee’s brief, p. 13.)

             Central Bank further argues: “Because the First Sale [the May 2019

master commissioner sale] was never confirmed, the risk of loss for the Property

never shifted to Appellants [the Lunsfords] alone.” (Appellee’s brief, p. 14.) And

so, the Lunsfords, in Central Bank’s view, should only have to forfeit their deposit

rather than being held liable for the $74,000 difference between the first and

second sale prices. Central Bank does not cite any authority, however, for holding

a purchaser’s deposit forfeited where the sale is never confirmed.

             Here, the trial court’s judgment and order of sale plainly stated that

the risk of loss shifted to the purchasers only upon confirmation. And the property

was partially destroyed–apparently intentionally by a party connected with the

sale–after the appraisal was prepared but before the sale actually occurred.

Precedent indicating that purchasers at a judicial sale were bound despite

                                          -25-
accidental partial destruction of property between the sale and confirmation is

materially distinguishable from the case at hand.

              Evidentiary Hearing Not Necessarily Required Here

             The Lunsfords argue that the trial court erred in denying their motion

for an evidentiary hearing on their exceptions. They contend they must be given

the chance to present evidence to prove their exceptions, citing Burchett v. Bank

Josephine, 474 S.W.2d 66 (Ky. 1971). The Kentucky Court in Burchett held that

the trial court erred in confirming the judicial sale before conducting an evidentiary

hearing to provide the homeowners an opportunity to prove their exceptions and to

protect their right of redemption:

             We are of the opinion that the trial court erred in
             confirming the report of sale after the exceptions had
             been filed without first having an evidentiary hearing on
             the factual issue of the value of the property. KRS
             426.530 provides an owner the right of redemption in the
             event the property sold by judicial decree does not bring
             two-thirds of its appraised value. An insufficient
             appraisal could defeat the right of redemption by the
             owner. We are not saying that the appraisal of $40,000 is
             legally insufficient; we are saying that the trial court
             should have held an evidentiary hearing concerning the
             sufficiency of the appraisal.

Id. at 68. The Burchetts asserted the property was worth $160,000.

             But unlike Burchett, the present case does not involve an owner’s

right of redemption so perhaps Burchett may not necessarily require an evidentiary

hearing here. See also Eagle Cliff Resort, LLC v. KHBBJB, LLC, 295 S.W.3d 850,

                                        -26-
852-53 (Ky. App. 2009) (indicating that Burchett calls for an evidentiary hearing

“[w]hen a party whose redemption rights are at stake believes the appraisal of his

property is inadequate in any way[.]”). Furthermore, we need not reach whether an

evidentiary hearing is always required on exceptions which do not relate to the

exercise of a right of redemption here–since this case could have and should have

been resolved on the evidence in the written record here.

             Under the facts here, an evidentiary hearing would have been futile as

the trial court seemingly believed the Lunsfords were not entitled to a refund of

their deposit even assuming that all their factual allegations were true. And we are

unaware of any expressly stated dispute of the allegations that Wright destroyed

property and removed fixtures–even about the extent of the destruction–in the

record. Given this lack of significant factual dispute and evidence in the record

supporting the Lunsfords’ position, no evidentiary hearing is necessary but we

direct the trial court to order return of the Lunsfords’ deposit on remand.

             As previously discussed, under the facts here, we conclude that the

trial court abused its discretion in not totally setting aside the first sale and ordering

the Lunsfords’ deposit refunded. It is fundamentally unfair under the unique facts

of this case to require the Lunsfords to essentially have to pay almost half of the

difference between the first and second sale prices–particularly as they did not

delay in filing exceptions and seeking to set aside the sale. See Massey v. Fischer,

                                          -27-
245 S.W.2d 594, 595-96 (Ky. 1952) (trial court erred in confirming master

commissioner sale where purchaser promptly filed exceptions upon discovering

restrictions on property not noted in the master commissioner advertisement so she

was entitled to rescission of the sales contract; caveat emptor does not bar setting

aside a sale where valid objections concerning title problems are raised before

confirmation since a sale contract is only executory when submitting the highest

bid). See also Trigg, 42 S.W. at 850 (holding purchaser could not obtain requested

relief of reduction in judicial sale price for misstated acreage due in part to his not

objecting until after confirmation and indicating that rescission of the sale would

have been available if purchaser had not refused this option).

             While Central Bank understandably seeks payment of amounts owed

to it by Wright and the Bayers, the Lunsfords should not have to forfeit their

deposit under the facts here to satisfy Central Bank’s judgments against Wright

and the Bayers.

                                   CONCLUSION

             For the foregoing reasons, we reverse and remand with instructions to

enter an order returning the Lunsfords’ deposit to them.

             ALL CONCUR.

                                          -28-
BRIEFS FOR APPELLANTS:     BRIEF FOR APPELLEE CENTRAL
                           BANK AND TRUST COMPANY:
Richard M. Rawdon, Jr.
Georgetown, Kentucky       Tyler Powell
                           Lexington, Kentucky

                         -29-