Request By:
Hon. R. Wayne McGee
123 South Main Street
Post Office Box 112
Cynthiana, Kentucky 41031
Opinion
Opinion By: David L. Armstrong, Attorney General; Greg Holmes, Assistant Attorney General
This is in response to your letter to the Attorney General in which you ask six questions relating to judicial sales of real estate in Kentucky. We will address your questions seriatim:
1. Is the buyer of the real estate at a judicial sale required to execute bond when the buyer is also the first mortgagee?
KRS 426.705 provides in pertinent part:
426.705 Bond required of purchaser
(1) The purchaser of property sold under an order of court shall give bond for the price, with good surety, approved by the officer making the sale . . .
Since the statute does not except from this requirement first mortgagees or, for that matter, any other entity, the buyer of real estate at a judicial sale is required to execute bond even if that buyer is also the first mortgagee.
2. Under what circumstances must a master commissioner advertise real estate to be sold by judicial sale.
KRS 426.560 provides:
426.560 Newspaper advertisement required in execution and judicial sales
In addition to the notices now required by statute to be posted, all public sales of any kind of property sold under execution, judgment or decree, shall, unless otherwise agreed upon by the parties, be advertised by publication pursuant to KRS Chapter 424. The advertisement shall state the time, place and terms of sale and describe the property to be sold. The newspaper advertisement shall not be necessary where the appraised value of the property than one hundred to be sold is less than one hundred dollars.
Enacted in 1966, KRS 426.560 supersedes some previous case law which, in the absence of a statutory requirement, held that judicial sales need not be advertised unless ordered by the court.
3. To what extent if real estate sold by judicial sale divisible at the sale?
You state that it is the procedure in your County to require the master commissioner to announce to the buyers at the sale "Will anyone take less than the whole of the property for the debts and costs?" This procedure appears to be in accord with KRS 426.200(1):
426.200 Sale of land: place of; advertisement; appraisement
(1) Land shall be sold under execution to the highest bidder at the courthouse door of the county in which it lies. Only lso much land shall be sold as will satisfy the execution under which the sale is made.
Since KRS 426.200(1) requires only so much of the land to be sold as will satisfy the execution under which the sale is made, the land being sold is divisible to the extent of satisfying the execution.
4. At what point is the purchaser of real estate at a judicial sale entitled to the possession of that property?
The procedure for obtaining possession of land purchased at a judicial sale is codified in KRS 426.260(1) which provides:
426.260 Motion for possession by purchaser; notice; judgment
(1) The purchaser of land sold under execution and not redeemed, after obtaining a conveyance therefor may, upon ten days' notice in writing to the defendant in the execution, whose lands have been sold, enter a motion on the docket in the circuit court of the county where the land is situated for a judgment for the possession of the land. If, upon the hearing of the motion, the court is of the opinion that the purchaser render a judgment accordingly and award possession, with costs. The proceedings on the motion shall be as provided in KRS 418.005 to 418.015, and Rule 6.03 of the Rules of Civil Procedure.
Subsection (2) of the statute provides a form by which notice is to be given by the purchaser to the defendant who remains in possession of the real estate. You may wish to refer to KRS 426.220 through 426.290 which address specific questions concerning the right of possession including the issue of redemption, encumbered title, as well as the procedure to be followed when a defendant does not have title to the property.
5. When a piece of real estate is sold by an execution lien creditor and the property is subject to other mortgages, what should the proper announcement be by the master commissioner at the sale as to what the property is taken subject to, and what is the proper procedure to take in a case where the property does not bring enough to satisfy the mortgages?
KRS 426.290(1) provides:
426.290 Sale of encumbered property under execution; rights of purchaser, creditor; redemption; bond of purchaser of personalty; control of courts
(1) If the defendant in an execution owns the legal title to any real or personal property on which a bona fide encumbrance created prior to the execution lien exists, the interest of the defendant in the property may be levied on and sold, subject to the encumbrance.
Pursuant to KRS 426.290(1) the master commissioner should announce at the sale that the real property being sold is subject "to the following prior encumbrances. " The master commissioner should then identify the prior encumbrances and state that such liens must be satisfied before the purchaser at the judical sale can obtain any value from the land sold. Under Kentucky law, the purchaser at a judicial sale does not acquire title but only acquires a lien on the purchased property. See
Tabers v. Jackson Purchase Production Credit Association, Ky. App., 649 S.W.2d 202 (1983).
6. Is the master commissioner required to put the legal description of the property to be sold in the newspaper advertisement?
KRS 426.200(2) provides:
426.200 Sale of land; place of; advertisement; appraisement . . .
. . . (2) The officer making the sale shall first advertise the time and place of sale by written notice describing the land to be sold . . .
There is no statutory requirement that the actual legal description of the real estate be in the advertisement. In Frazer v. Merrell, 8 Ky. Opin 33 (1874), the court held that sale of land under an execution is void only if the execution and sale do not describe the land so that is can be identified.