Mid South Capital Partners, Lp v. Bryan Adkins ( 2020 )

RENDERED: DECEMBER 18, 2020; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2019-CA-1764-MR
MID SOUTH CAPITAL PARTNERS,
LP APPELLANT
APPEAL FROM BOYD CIRCUIT COURT
v. HONORABLE JOHN F. VINCENT, JUDGE
ACTION NO. 17-CI-00162
BRYAN ADKINS; UNKNOWN
SPOUSE, IF ANY, OF BRYAN
ADKINS; CAPITAL ONE BANK;
AND COMMONWEALTH OF
KENTUCKY, COUNTY OF BOYD APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, DIXON, AND K. THOMPSON, JUDGES.
DIXON, JUDGE: Mid South Capital Partners, LP (“Mid South”) appeals from the
final judgment and order of sale entered on October 25, 2019, by the Boyd Circuit
Court. Following a careful review of the brief, record, and law, we affirm.
FACTS AND PROCEDURAL BACKGROUND
Mid South purchased two certificates of delinquency (“COD”)
encumbering the real property of Bryan Adkins for unpaid ad valorem taxes for the
2011 and 2012 tax years. The face value of the COD for the 2011 tax year was
$269.76; the face value of the COD for the 2012 tax year was $261.15. After
unsuccessful prelitigation debt collection efforts, Mid South filed the underlying
complaint. Its litigation efforts culminated in the final judgment and order of sale
awarding it certain fees and costs. Although the court granted judgment for the full
amounts of the CODs, it did not award all attorney’s fees and costs presented. Mid
South requested prelitigation attorney’s fees of $391.50, litigation attorney’s fees
of $2,804.12, and litigation costs of $704.79. Finding these amounts to be
unreasonable in relation to the amount of the CODs, the trial court only allowed
prelitigation attorney’s fees of $200.00, litigation attorney’s fees of $400.00, and
litigation costs of $415.97. This appeal followed.
STANDARD OF REVIEW
Unless otherwise directed by statute, the amount of an award of
attorney’s fees is within the trial court’s discretion. King v. Grecco, 111 S.W.3d
877, 883 (Ky. App. 2002), superseded by statute on other grounds as stated in
Meece v. Feldman Lumber Co., 290 S.W.3d 631 (Ky. 2009). “The test for abuse
of discretion is whether the trial judge’s decision was arbitrary, unreasonable,
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unfair, or unsupported by sound legal principles.” Goodyear Tire and Rubber Co.
v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000) (citation omitted). “When a trial
court is considering whether to award attorney fees and costs and/or how much to
award, the trial court’s decision should be guided by the purpose and the intent of
providing an award of attorney fees and costs[.]” Alexander v. S & M Motors, Inc.,
28 S.W.3d 303, 305 (Ky. 2000).
ATTORNEY’S FEES AND COSTS
On appeal, Mid South argues the trial court abused its discretion by
awarding reduced attorney’s fees and costs contrary to the legislative intent and
mandates of KRS1 134.452. This statute clearly distinguishes three types of
attorney’s fees which may be awarded for collection efforts on a COD. The first
type of attorney’s fee is a prelitigation fee related to a graduated percentage of the
tax bill. KRS 134.452(1)(c)2.a. The second type of attorney’s fee concerns
prelitigation fees for a third-party purchaser owning more than one COD relating
to a single taxpayer and is limited to one-and-a-half times the maximum permitted
by KRS 134.452(1)(c)2.a. KRS 134.452(1)(c)2.b. The third type is an award for
enforcement or protection of a COD through litigation. KRS 134.452(3). Unlike
prelitigation fees, however, the litigation fees are not expressly linked to the
amount of the underlying tax bill, and there is no precise formula for determining
1
Kentucky Revised Statutes.
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the amount. KRS 134.452(3) only states that the fees must be actual and
reasonable.2 All three types of attorney’s fees are at issue in the case herein.
As there is no dispute that Mid South is entitled to an award of
attorney’s fees, the question is whether the trial court erred when it did not award
the entire amount requested. Mid South directs us to KRS 134.452(5), which
provides:
The General Assembly recognizes that third-party
purchasers play an important role in the delinquent tax
collection system, allowing taxing districts to receive
needed funds on a timely basis. The General Assembly
has carefully considered the fees and charges authorized
by this section, and has determined that the amounts
established are reasonable based on the costs of
collection and fees and charges incurred in litigation.
2
KRS 134.452(3)(b) states:
For purposes of this subsection:
1. Actual attorneys’ litigation fees up to two thousand
dollars ($2,000) may be reasonable if the fees are based
upon documented work performed at a rate commensurate
with hourly rates customarily charged by private attorneys
in that jurisdiction for similar services. . . .
2. Any attorneys’ litigation fee in excess of two thousand
dollars ($2,000) shall be allowed if authorized by the court
upon a finding that the third-party purchaser incurred actual
attorneys’ litigation fees in excess of two thousand dollars
($2,000) and that those attorneys’ litigation fees were
warranted based upon the complexity of the issues
presented in the litigation.
(Emphasis added.) This language indicates an award of attorney’s fees is permitted if the
amount is reasonable and warranted. Contrary to Mid South’s assertions, this language does not
create a presumption of reasonableness of charges for attorney’s fees up to two thousand dollars.
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(Emphasis added.) Mid South argues this provision creates a presumption of
entitlement to attorney’s fees presented in connection with collection efforts under
this statute. We disagree with Mid South’s contention that the trial court was
mandated by this subsection and/or statute to approve the full amount of the
attorney’s fees and costs presented so long as they do not exceed the maximum
amounts contained in this statute. Rather, it appears from the text of this
subsection that its purpose is to declare that the legislature found its own calculated
amounts detailed in this statute to be reasonable ceilings for recovery.
There is a dearth of published case law interpreting the effect of KRS
134.452 upon the determination of appropriate awards of attorney’s fees and costs
in association with collection efforts on a COD. Nevertheless, we hold that the
proper method for determining actual and reasonable attorney’s fees pursuant to
KRS 134.452 is set forth in Meyers v. Chapman Printing Co., Inc., 840 S.W.2d
814 (Ky. 1992). Although Meyers involved claims under the Kentucky Civil
Rights Act, it is instructive because it dealt with appellate review of the
appropriateness of an award of attorney’s fees authorized by statute. An
“attorney’s fee awarded should consist of the product of counsel’s reasonable
hours, multiplied by a reasonable hourly rate, which provides a ‘lodestar’ figure,
which may then be adjusted to account for various special factors in the litigation.”
Id. at 826. Using the lodestar method, a court may consider the complexity or
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simplicity of a proceeding to collect or protect the COD, the skill required, and the
fee customarily charged in the locality for similar proceedings.
Special factors that may be considered in awarding attorney’s fees are
set forth in Axton v. Vance, 207 Ky. 580, 269 S.W. 534 (1925). These factors
include:
(a) Amount and character of services rendered.
(b) Labor, time, and trouble involved.
(c) Nature and importance of the litigation or business in
which the services were rendered.
(d) Responsibility imposed.
(e) The amount of money or the value of property
affected by the controversy, or involved in the
employment.
(f) Skill and experience called for in the performance of
the services.
(g) The professional character and standing of the
attorneys.
(h) The results secured.
Id., 269 S.W. at 536-37. What can be gleaned from these factors in considering the
reasonableness of attorney’s fees is that a determination should be made based
upon the trial court’s knowledge, experience, and common sense. As the Court
cautioned in In re Citizens Fidelity Bank & Trust Co., 550 S.W.2d 569, 570 (Ky.
App. 1977): “(It) should be done with a view to common sense realism, that is to
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say, it should pose an amount that public standards will approve for the work done,
time consumed and the skill required.” (Citation omitted.) It is the trial court’s
role to follow the statutory language to provide a third-party purchaser of a COD
with the means to recover and protect its tax lien, as well as to safeguard the public
against possible abuses of the judicial process by not allowing excessive attorney’s
fees and costs to be imposed upon economically burdened citizens.
Here, Mid South argues this case was “complex” because it concerned
more than one COD and Mid South had issues with achieving service upon Adkins
and eventually had to hire a warning order attorney. However, we note that the
record is straightforward, and ultimately the final judgment and order of sale was
entered on Mid South’s dispositive motions with no answer, response, or objection
ever having been filed by Adkins. Mid South further asserts the trial court
acknowledged the reasonableness of its hourly rate. However, the trial court also
expressed its hesitancy to award the full amount of the claimed attorney’s fees and
costs when they so greatly exceeded the face value of the CODs at issue as
unreasonable and uncustomary for an award of attorney’s fees in its jurisdiction. It
was also noted that at least a portion of the attorney’s fees was for travel, and that
amount would have been lower had this case been handled by local counsel. Thus,
applying the lodestar method and a common-sense analysis to the case herein, we
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cannot say that the trial court abused its discretion in awarding reduced attorney’s
fees and costs.
CONCLUSION
Therefore, and for the foregoing reasons, the order entered by the
Boyd Circuit Court is AFFIRMED.
ALL CONCUR.
BRIEF FOR APPELLANT: NO BRIEF FILED FOR APPELLEES
M. Scott Mattmiller
Della C. Cummings
Lexington, Kentucky
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