CHAPTER 376 Statutory Liens

376.010. Mechanics’ and materialman’s liens — Filing of statement of amount claimed — Notice to owner or agent — Definitions of “labor” and “supplies.”

  1. Any person who performs labor or furnishes materials, for the erection, altering, or repairing of a house or other structure or for any fixture or machinery therein, for the excavation of cellars, cisterns, vaults, wells, or for the improvement in any manner of real property including the furnishing of agricultural lime, fertilizer, concrete pipe or drainage tile, crushed rock, gravel for roads or driveways, and materials used in the construction or maintenance of fences, by contract with, or by the written consent of, the owner, contractor, subcontractor, architect, or authorized agent, shall have a lien thereon, and upon the land upon which the improvements were made or on any interest the owner has therein, to secure the amount thereof with interest as provided in KRS 360.040 and costs. The lien on the land or improvements shall be superior to any mortgage or encumbrance created subsequent to the beginning of the labor or the furnishing of the materials, and the lien, if asserted as hereinafter provided, shall relate back and take effect from the time of the commencement of the labor or the furnishing of the materials. The lien shall not be for a greater amount in the aggregate than the contract price of the original contractor, and should the aggregate amount of the liens exceed the price agreed upon between the original contractor and the owner there shall be a pro rata distribution of the original contract price among the lienholders.
  2. The lien shall not take precedence over a mortgage or other contract lien or bona fide conveyance for value without notice, duly recorded or lodged for record according to law, unless the person claiming the prior lien shall, before the recording of the mortgage or other contract lien or conveyance, file in the office of the county clerk of the county wherein he has furnished or expects to furnish labor or materials, a statement showing that he has furnished or expects to furnish labor or materials, and the amount in full thereof. The lien shall not, as against the holder of a mortgage or other contract lien or conveyance, exceed the amount of the lien claimed or expected to be claimed as set forth in the statement. The statement shall, in other respects, be in the form prescribed by KRS 376.080 .
  3. No person who has not contracted directly with the owner or his agent shall acquire a lien under this section unless he notifies in writing the owner of the property to be held liable or his authorized agent, within seventy-five (75) days on claims amounting to less than $1,000 and one hundred twenty (120) days on claims in excess of $1,000 after the last item of material or labor is furnished, of his intention to hold the property liable and the amount for which he will claim a lien. It shall be sufficient to prove that the notice was mailed to the last known address of the owner of the property upon which the lien is claimed, or to his duly authorized agent within the county in which the property to be held liable is located.
  4. No person who has not contracted directly with the owner or his authorized agent shall acquire a lien under this section on an owner-occupied single or double family dwelling, the appurtenances or additions thereto, or upon other improvements for agricultural or personal use to the real property or real property contiguous thereto and held by the same owner, upon which the owner-occupant’s dwelling is located, unless he notifies in writing the owner of the property to be held liable or his authorized agent not more than seventy-five (75) days after the last item of material or labor is furnished, of the delivery of the material or performance of labor and of his intention to hold the property liable and the amount for which he will claim a lien. It shall be sufficient to prove that the notice was mailed to the last known address of the owner of the property upon which the lien is claimed, or to his duly authorized agent. This notice is in lieu of the notice provided for in subsection (3). Notwithstanding the foregoing provisions of this subsection, the lien provided for under this section shall not be applicable to the extent that an owner-occupant of a single or double family dwelling or owner of other property as described in this subsection has, prior to receipt of the notice provided for in this subsection, paid the contractor, subcontractor, architect, or authorized agent for work performed or materials furnished prior to such payment. The contractor or subcontractor cannot be the authorized agent under this subsection. This subsection shall apply to the construction of single or double family homes constructed pursuant to a construction contract with a property owner and intended for use as the property owner’s dwelling.
  5. For purposes of this section, “labor” includes but is not limited to all supplies and work done by teams, trucks, machinery, and mechanical equipment, whether the owner furnishes a driver or operator or not.
    1. “Supplies” includes small tools and equipment reasonably necessary in performing the work required to be done, including picks, shovels, sledge hammers, axes, pulleys, wire cables, ropes, and other similar items costing not more than fifty dollars ($50) per item, and tires and tubes furnished for use on vehicles engaged in the performance of the work. (6) (a) “Supplies” includes small tools and equipment reasonably necessary in performing the work required to be done, including picks, shovels, sledge hammers, axes, pulleys, wire cables, ropes, and other similar items costing not more than fifty dollars ($50) per item, and tires and tubes furnished for use on vehicles engaged in the performance of the work.
    2. “Supplies” also includes the cost of labor, materials, and repair parts supplied or furnished for keeping all machinery and equipment used in the performance of the work in good operating condition; and shall include the agreed or reasonable rental price of equipment and machinery used in performing the work to be done:
      1. The lien for rental equipment or machinery shall not be more than the aggregate sum of six (6) months’ rental, and the aggregate amount of such rental shall not exceed sixty percent (60%) of the agreed value of the machinery or equipment; and
      2. The liens for supplies as defined in this subsection are subordinate to the liens for labor, material, and supplies as defined in this section.

History. 2463: amend. Acts 1952, ch. 9; 1972, ch. 132, § 1; 1972, ch. 191, § 1; 1974, ch. 173, § 1; 1978, ch. 384, § 501, effective June 17, 1978; 1984, ch. 385, § 1, effective July 13, 1984; 1988, ch. 259, § 1, effective July 15, 1988; 1994, ch. 167, § 1, effective July 15, 1994; 2002, ch. 66, § 1, effective July 15, 2002.

NOTES TO DECISIONS

1.Constitutionality.

The mechanics’ lien statutes are constitutional. Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ). See Hightower v. Bailey, 108 Ky. 198 , 56 S.W. 147, 22 Ky. L. Rptr. 88 , 1900 Ky. LEXIS 31 ( Ky. 1900 ); Hodges v. Arvidson, 66 S.W. 601, 23 Ky. L. Rptr. 2078 , 1902 Ky. LEXIS 414 (Ky. Ct. App. 1902); Stewart v. Gardner-Warren Implement Co., 70 S.W. 1042, 24 Ky. L. Rptr. 1216 (1902); N. O. Nelson Mfg. Co. v. Mann, 71 S.W. 851, 24 Ky. L. Rptr. 1547 (1903).

2.Purpose.

The purpose of the mechanics’ lien laws is to protect and favor those who actually worked on, or contributed labor or material to, the construction, improvement, or repair of a building or other structure, thereby enhancing its value. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

This section is a beneficent statute enacted for the encouragement of building mechanics and materialmen. In re Heat 'n' Eat Brands, Inc., 174 F. Supp. 598, 1959 U.S. Dist. LEXIS 3075 (D. Ky. 1959 ), aff'd, 280 F.2d 426, 1960 U.S. App. LEXIS 4599 (6th Cir. Ky. 1960 ).

This section was designed to protect materialmen and contractors and these liens have been upheld consistently where subsequent claimants or mortgagees had knowledge of their existence, or that they were about to be asserted. Collier v. Dillon, 313 Ky. 244 , 230 S.W.2d 617, 1950 Ky. LEXIS 835 ( Ky. 1950 ).

It was the legislative will and intent by the enactment of subsection (4) of this section to provide protective measures to the owner of a single or double family dwelling from the inequities of liens that surface after the owner has paid his contractor in full. Kinser Sheet Metal, Inc. v. Morse, 566 S.W.2d 179, 1978 Ky. App. LEXIS 518 (Ky. Ct. App. 1978).

The primary function of the mechanic’s lien is to create a claim by law to secure priority of payment and must generally be based upon a contract or written consent. Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

The purpose of this section was to provide suppliers and laborers of building materials some financial security in collecting their contract price by allowing the real property to be encumbered for the amount of the debt. Bee Spring Lumber Co. v. Pucossi, 943 S.W.2d 622, 1997 Ky. LEXIS 44 ( Ky. 1997 ).

3.Construction.

Mechanics’ liens are the creatures of statute and did not exist at common law. Grainger & Co. v. Riley, 201 F. 901, 1913 U.S. App. LEXIS 1942 (6th Cir. Ky. 1913 ). See In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ); Doll v. Young, 149 Ky. 347 , 149 S.W. 854, 1912 Ky. LEXIS 638 ( Ky. 1912 ); Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ); Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ); Stidham v. Little's Adm'r, 251 Ky. 707 , 65 S.W.2d 1028, 1933 Ky. LEXIS 956 ( Ky. 1933 ).

The mechanics’ lien statutes must be substantially complied with. Grainger & Co. v. Riley, 201 F. 901, 1913 U.S. App. LEXIS 1942 (6th Cir. Ky. 1913 ). See Voss v. Home Loan & Bldg. Ass'n, 167 Ky. 231 , 180 S.W. 368, 1915 Ky. LEXIS 835 ( Ky. 1915 ).

Although in derogation of common law, the mechanics’ lien statute should be liberally construed. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ). See Grainger & Co. v. Johnson, 286 F. 833, 1923 U.S. App. LEXIS 2765 (6th Cir. Ky.), cert. denied, 262 U.S. 749, 43 S. Ct. 524, 67 L. Ed. 1213, 1923 U.S. LEXIS 3070 (U.S. 1923); Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ); B. F. Avery & Sons v. Woodruff & Cahill, 144 Ky. 227 , 137 S.W. 1088, 1911 Ky. LEXIS 599 ( Ky. 1911 ); Mid-Continent Petroleum Corp. v. Southern Surety Co., 225 Ky. 501 , 9 S.W.2d 229, 1928 Ky. LEXIS 810 ( Ky. 1928 ); Union Indem. Co. v. Pennsylvania Boiler Works, 246 Ky. 473 , 55 S.W.2d 367, 1932 Ky. LEXIS 791 ( Ky. 1932 ).

Mechanics’ liens are the creatures of statute and did not exist at common law except as to personalty. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ).

The owner may be liable even though the contractor purchased the material in his own name and not as the owner’s agent. Browinski v. Pickett, 113 Ky. 420 , 68 S.W. 408, 24 Ky. L. Rptr. 305 , 1902 Ky. LEXIS 62 ( Ky. 1902 ).

The owner is presumed to have contracted with each mechanic and materialman. Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ).

Although in derogation of common law, the mechanics’ lien statute should be liberally construed but its provisions cannot be entirely ignored. Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ).

Compliance with the recordation and notice provisions of this section and KRS 376.080 will preserve and perfect the lien, but to protect it against a bona fide purchaser for value without notice this section expressly requires that the claimant get to the courthouse first. Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

The provision of a lease requiring a building to be erected free and clear of liens is not, solely as a contract between lessor and lessee, effectual to relieve the lessor of the liability this section imposes. Campbell & Summerhays, Inc. v. Greene, 381 S.W.2d 531, 1964 Ky. LEXIS 320 ( Ky. 1964 ).

The statutory provisions for perfecting a lien must be strictly followed; unless the lien has been properly perfected, there is nothing to enforce by a suit, and there is no basis for a lien claim in a complaint. Laferty v. Wickes Lumber Co., 708 S.W.2d 107, 1986 Ky. App. LEXIS 1047 (Ky. Ct. App. 1986).

This section should be liberally construed to protect those who furnish labor and materials. Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

The mechanics’ and materialman’s liens statutes are to be construed according to their common and approved language and the courts take a liberal view toward promoting the legislative intent and they are to be interpreted liberally to protect those who furnish labor and materials. Bee Spring Lumber Co. v. Pucossi, 943 S.W.2d 622, 1997 Ky. LEXIS 44 ( Ky. 1997 ).

4.Application.

The statute does not give a lien to a materialman who furnishes materials to another materialman. The materials must be furnished to an owner, contractor, subcontractor, architect or authorized agent. Hightower v. Bailey, 108 Ky. 198 , 56 S.W. 147, 22 Ky. L. Rptr. 88 , 1900 Ky. LEXIS 31 ( Ky. 1900 ).

The statute confers a lien on the contractor, subcontractor, mechanics and materialmen. Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ).

A mechanics’ lien operates only in rem. Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ).

Where partnership contractor contracted with corporation owner to build a hotel this section had no application. Whitaker v. Howell & Goins, 283 Ky. 738 , 143 S.W.2d 179, 1940 Ky. LEXIS 404 ( Ky. 1940 ).

Mechanic’s lien provisions had no applicability to dispute concerning nonpayment of fees and assessments relative to condominium. Bank of the Bluegrass & Trust Co. v. Richmond Square Office Townhouse Condos. Council Co-Owners, 965 S.W.2d 827, 1997 Ky. App. LEXIS 145 (Ky. Ct. App. 1997).

It was error to grant a bank’s motion for summary judgment in a suit to enforce a mechanic’s lien because there was a genuine issue of material fact as to the application of the doctrine of marshaling of assets. M. A. Walker Co. v. PBK Bank, 95 S.W.3d 70, 2002 Ky. App. LEXIS 2342 (Ky. Ct. App. 2002).

5.Material Defined.

“Material” is “matter which is intended to be used in the creation of a mechanical structure” and is a word of general significance, especially in lien laws and building contracts and when thus used it is understood to be something that becomes a part of the finished structure; something that goes into and forms a part of the finished structure and does not include tools, machinery or appliances used for the purpose of facilitating the work. Century Indem. Co. v. Shunk Mfg. Co., 253 Ky. 50 , 68 S.W.2d 772, 1934 Ky. LEXIS 604 ( Ky. 1934 ).

6.Owner.

Incorporators contracting for construction which is to be the property of the corporation to be organized are personally liable as owners to the extent of their subscription. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ).

One who has contracted to purchase land, which contract was later consummated is an owner within the meaning of this subsection. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ). See Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ).

“Owner” implies either an owner in fee or by executory contract. T. W. Spinks Co. v. Pachoud Bros., 263 Ky. 119 , 92 S.W.2d 50, 1936 Ky. LEXIS 154 ( Ky. 1936 ).

The owner in requiring the lessee to construct a building that will increase the value of the land upon reversion to the owner, is in effect contracting for the improvement for his own benefit. Campbell & Summerhays, Inc. v. Greene, 381 S.W.2d 531, 1964 Ky. LEXIS 320 ( Ky. 1964 ).

The mechanics’ liens statutes are not predicated on any concept of credit reliance, and labor or materialmen can enforce a lien against the owner of land even though, at the time he performed the service or furnished the material, he did not know who was the owner. Kinser Sheet Metal, Inc. v. Morse, 566 S.W.2d 179, 1978 Ky. App. LEXIS 518 (Ky. Ct. App. 1978).

7.— Written Consent.

Verbal consent of the owner is insufficient. Luigart v. Lexington Turf Club, 130 Ky. 473 , 113 S.W. 814, 1908 Ky. LEXIS 300 ( Ky. 1908 ). See Cincinnati Stucco Co. v. North Kentucky Fair, Inc., 218 Ky. 493 , 291 S.W. 715, 1927 Ky. LEXIS 174 ( Ky. 1927 ).

The execution of a lease requiring the lessee to construct a building constitutes “written consent” of the owner within the meaning of the mechanics’ lien statutes. Campbell & Summerhays, Inc. v. Greene, 381 S.W.2d 531, 1964 Ky. LEXIS 320 ( Ky. 1964 ).

8.Agents.

A trustee having no specific authority to create liens is not an authorized agent of the beneficiary under this section. Hall & Son v. Bullock's Trustee, 97 S.W. 351, 29 Ky. L. Rptr. 1254 (1906). See Maynard v. Columbus, 150 Ky. 817 , 150 S.W. 1019, 1912 Ky. LEXIS 990 ( Ky. 1912 ); Hines v. Hollingsworth-Young Hardware Co., 178 Ky. 233 , 198 S.W. 716, 1917 Ky. LEXIS 698 ( Ky. 1917 ).

A former agent, who ostensibly continues as such, may bind his former principal to improvements for which the contractors have relief under this section. Ohio Oil Co. v. Smith-Haggard Lumber Co., 288 Ky. 278 , 156 S.W.2d 111, 1941 Ky. LEXIS 92 ( Ky. 1941 ).

Where materialman contracted with husband who managed motel owned by wife, husband was acting as wife’s agent and materialman had lien on motel. Sowards v. Ashland Lumber Co., 341 S.W.2d 268, 1960 Ky. LEXIS 80 ( Ky. 1960 ).

9.Contractor.

One who not only is obligated to furnish materials, but also to perform onsite work with respect to them is a contractor within the meaning of the mechanics’ lien statute. Woodson Bend, Inc. v. Masters' Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

10.Materialman.

One who is merely obligated to furnish materials to an owner or contractor is a materialman. Woodson Bend, Inc. v. Masters' Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

11.Applicable Law.

The law applicable is that which was in effect when the contract was made and the work done. Vass v. Otting, 58 S.W. 433, 22 Ky. L. Rptr. 551 , 1900 Ky. LEXIS 308 (Ky. Ct. App. 1900). See Kinsy v. Eilerman, 110 Ky. 948 , 62 S.W. 1009, 23 Ky. L. Rptr. 913 , 1901 Ky. LEXIS 145 ( Ky. 1901 ). See Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ); Fox v. Somerset Odd Fellows Hall & Auditorium Co., 54 S.W. 835, 21 Ky. L. Rptr. 1272 , 1900 Ky. LEXIS 332 (Ky. Ct. App. 1900); Harris' Assignee v. Gardner, 68 S.W. 8, 24 Ky. L. Rptr. 103 , 1902 Ky. LEXIS 394 (Ky. Ct. App. 1902).

Where landowners contracted for erection of a house and the contractor engaged subcontractor to furnish materials and labor and contractor subsequently became insolvent, the subcontractor’s mechanics’ lien was governed by subsection (1) of this section, not by subsection (4) of this section. Kinser Sheet Metal, Inc. v. Morse, 566 S.W.2d 179, 1978 Ky. App. LEXIS 518 (Ky. Ct. App. 1978).

12.For Value.

An attachment was not a “lien —for value,” a present value or consideration being required. In re Graves, 27 F. Supp. 717, 1939 U.S. Dist. LEXIS 2672 (D. Ky. 1939 ).

The words “for value,” in subsection (2) of this section, qualify “mortgage” and “contract lien,” as well as “bona fide conveyance,” and the words mean present value or consideration. In re Graves, 27 F. Supp. 717, 1939 U.S. Dist. LEXIS 2672 (D. Ky. 1939 ).

Where a part of the mortgage was not for value and a materialman’s lien was created when labor was performed and materials were furnished pursuant to contract, the mortgage did not have priority over the two materialman’s liens. Metal Sales Mfg. Corp. v. Newton, 12 S.W.3d 691, 1999 Ky. App. LEXIS 37 (Ky. Ct. App. 1999).

13.Lien.

Where subcontractor who was not paid by contractor filed mechanic’s lien on the improved property, owner of such property became directly obligated to pay subcontractor out of funds which were due from owner to contractor. Citizens Fidelity Bank & Trust Co. v. Fenton Rigging Co., 522 S.W.2d 862, 1975 Ky. LEXIS 145 ( Ky. 1975 ).

It was error to grant a bank’s motion for summary judgment in a suit to enforce a mechanic’s lien because there was a genuine issue of material fact as to whether, when the bank refinanced certain of the property owner’s debt, this was a novation which made the bank’s lien on the property junior to that of the mechanics’ lienholder. M. A. Walker Co. v. PBK Bank, 95 S.W.3d 70, 2002 Ky. App. LEXIS 2342 (Ky. Ct. App. 2002).

14.— Second or Vacation Home.

Subsection (4) of this section is not applicable to second homes or vacation homes, and the dollar-for-dollar credit provided by subsection (4) does not apply to such properties. Bee Spring Lumber Co. v. Pucossi, 943 S.W.2d 622, 1997 Ky. LEXIS 44 ( Ky. 1997 ).

15.— Requirements.

The lien is contingent on the existence of two conditions; first, the labor or materials must be necessary; and second, as regards the materials, they must in fact be used or consumed in the making of the improvements. Haynie v. Benton, 258 S.W.2d 488, 1953 Ky. LEXIS 844 ( Ky. 1953 ).

16.— Persons Entitled.

Subcontractors, mechanics and materialmen have a lien even when the contractor has lost his by having received full payment from the owner, notwithstanding the owner had no notice of the liens. Hightower v. Bailey, 108 Ky. 198 , 56 S.W. 147, 22 Ky. L. Rptr. 88 , 1900 Ky. LEXIS 31 ( Ky. 1900 ). See Kinsy v. Eilerman, 110 Ky. 948 , 62 S.W. 1009, 23 Ky. L. Rptr. 913 , 1901 Ky. LEXIS 145 ( Ky. 1901 ); Browinski v. Pickett, 113 Ky. 420 , 68 S.W. 408, 24 Ky. L. Rptr. 305 , 1902 Ky. LEXIS 62 ( Ky. 1902 ); N. O. Nelson Mfg. Co. v. Mann, 71 S.W. 851, 24 Ky. L. Rptr. 1547 (1903); Southern Planing Mill & Lumber Co. v. Doerhoefer's Ex'r, 78 S.W. 882, 25 Ky. L. Rptr. 1834 (1904); Allen County v. United States Fidelity & Guaranty Co., 122 Ky. 825 , 93 S.W. 44, 29 Ky. L. Rptr. 356 , 1906 Ky. LEXIS 105 ( Ky. 1906 ); Thacker v. Bullock Lumber Co., 140 Ky. 463 , 131 S.W. 271, 1910 Ky. LEXIS 298 ( Ky. 1910 ); Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ); Monyahan v. Lancaster, 168 Ky. 677 , 182 S.W. 862, 1916 Ky. LEXIS 610 ( Ky. 1916 ).

A materialman is not entitled to the proceeds of a fire insurance policy carried by the owner after acceptance of the building by him. Henry Vogt. Mach. Co. v. Lingenfelser, 99 S.W. 358, 30 Ky. L. Rptr. 654 (1907). See also Goodin & Barney Coal Co. v. Southern Elkhorn Coal Co., 219 Ky. 827 , 294 S.W. 792, 1927 Ky. LEXIS 456 ( Ky. 1927 ).

A materialman is not entitled to a lien if the material furnished by him to the contractor is by agreement between them to be repaid by the contractor in other materials. Ed Blanton & Co. v. Brandenburg, 143 Ky. 651 , 137 S.W. 212, 1911 Ky. LEXIS 476 ( Ky. 1911 ).

Unpaid subcontractors, mechanics and materialmen have a lien whenever the contractor has one. B. F. Avery & Sons v. Woodruff & Cahill, 144 Ky. 227 , 137 S.W. 1088, 1911 Ky. LEXIS 599 ( Ky. 1911 ).

When the building is destroyed before acceptance, the mechanics have no lien, since the contractor has no right of recovery. Doll v. Young, 149 Ky. 347 , 149 S.W. 854, 1912 Ky. LEXIS 638 ( Ky. 1912 ).

The protection afforded by the Kentucky mechanics’ lien law extends to the materialman who furnishes material to a remote subcontractor, away from the job site, so long as the material is ultimately used to improve the property involved. Woodson Bend, Inc. v. Masters' Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

The status of contractor, insofar as the materialmen’s lien rights are concerned, must be determined by the terms of the July 5, 1972 agreement between plaintiff and contractor under which contractor agreed to act as a contractor to build module units for it, since it was under this agreement that the materialmen furnished the supplies which are the basis of the liens which they now seek to enforce. Woodson Bend, Inc. v. Masters' Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

This section would allow issuance of a lien to a subcontractor for improvements to property if the subcontractor was not paid by the contractor, even though there exists no written contract as between the subcontractor and the owner of the improved property. Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

17.— Property Subject.

The materialman must furnish the materials for a particular house and not on general order. Charles H. Conner & Co. v. Mason, 143 Ky. 635 , 137 S.W. 235, 1911 Ky. LEXIS 491 ( Ky. 1911 ). See Caden v. Allen, Clark, Peters Hardware Co., 147 Ky. 430 , 144 S.W. 66, 1912 Ky. LEXIS 253 ( Ky. 1912 ); Menne v. American Radiator Co., 150 Ky. 151 , 150 S.W. 24, 1912 Ky. LEXIS 851 ( Ky. 1912 ).

A mechanics’ lien is a claim created by law for the purpose of securing priority of payment of the price or value of work performed and material furnished in erecting or repairing a building or other structure, and as such attaches to the land as well as buildings and improvements erected thereon. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

Materialman cannot assert lien on one tract of land or its improvements for material furnished to erect or repair improvements on noncontiguous tract, where owner of both tracts had made separate contracts to improve each tract. Will B. Miller Co. v. Peerless Lumber Co., 284 Ky. 93 , 143 S.W.2d 735, 1940 Ky. LEXIS 430 ( Ky. 1940 ).

Where materials or labor are supplied under one contract and for one owner in constructing two or more buildings on distinct but contiguous lots, one lien may be asserted against all the buildings. Will B. Miller Co. v. Peerless Lumber Co., 284 Ky. 93 , 143 S.W.2d 735, 1940 Ky. LEXIS 430 ( Ky. 1940 ).

Subsection (4) of this section was intended to afford protection to an owner who resided upon the premises as to additions or improvements effectuated by the labor or the materialmen and, therefore, does not apply to a new dwelling under construction or before the owner-occupant has undertaken residency therein. Kinser Sheet Metal, Inc. v. Morse, 566 S.W.2d 179, 1978 Ky. App. LEXIS 518 (Ky. Ct. App. 1978) (decision prior to 1988 amendment of KRS 376.010(4)).

Where a tract of land was conveyed in February, 1974, in exchange for a mortgage, a contract was entered into for the construction of a warehouse on the land in July, 1974, and in August, 1975, the mortgage was declared in default and a materialman’s lien filed, the fact that the bank-mortgagee may have had knowledge of the construction liens was negated by the fact that the contractor released his liens, pro tanto, as he was paid, and the contractor could not assert a lien against the sums retained to guarantee completion. Merchants Nat'l Bank & Trust Co. v. Professional Constructors, Inc., 579 S.W.2d 100, 1979 Ky. LEXIS 232 ( Ky. 1979 ).

Kitchen equipment installed in a warehouse to accommodate a lessee involved in a food preparation contract did not constitute fixtures since it was for the use of a business using the building and was not employed in the actual operation of the building itself; accordingly, the mechanics lien placed on the warehouse did not attach to the kitchen equipment under this section. In re Royal International Corp., 13 B.R. 290, 1981 Bankr. LEXIS 3167 (Bankr. W.D. Ky. 1981 ).

A public improvement lien created under KRS 376.210 attaches to funds due and owing to the contractor while a private improvement lien created under this section attaches to the improved property itself or the owner’s interest therein. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

18.— Occupancy.

It was the legislative intent to use the word “owner-occupied” to mean actual occupancy, and not constructive occupancy; meaning- fully, it denotes premises which are used and occupied as a dwelling house, though not necessarily on an absolutely continuous and uninterrupted basis. Kinser Sheet Metal, Inc. v. Morse, 566 S.W.2d 179, 1978 Ky. App. LEXIS 518 (Ky. Ct. App. 1978).

Actual physical occupancy at the time of the work is necessary to invoke the protection of subsection (4) of this section. Smith v. Magruder, 566 S.W.2d 430, 1978 Ky. App. LEXIS 522 (Ky. Ct. App. 1978).

A clear and simple meaning of the word occupant is one who occupies or has the actual use or possession of a thing, as distinguished from constructive possession thereof. Smith v. Magruder, 566 S.W.2d 430, 1978 Ky. App. LEXIS 522 (Ky. Ct. App. 1978).

An owner of an uninhabitable parcel, such as a house destroyed by a natural disaster, of real property is not considered to be an owner-occupant of a single or double family dwelling, pursuant to subsection (4) of this section, and, accordingly, it is not mandatory on a subcontractor who has not contracted directly with the owner, but who has furnished labor and materials during the period of uninhabitableness, to notify the owner of the said real property, within ten (10) days of furnishing the first material or labor, of his intention to claim a lien against said real estate. Smith v. Magruder, 566 S.W.2d 430, 1978 Ky. App. LEXIS 522 (Ky. Ct. App. 1978).

19.— Interest Subject.

Except when the interest is such that the owner has no power to create liens only the interest of an employing owner or an owner consenting in writing may be sold and the burden is on the claimant to prove that the property is such that a lien may be imposed upon it and that the owner of the interest sought to be subjected was authorized to create such a lien upon it. Hines v. Hollingsworth-Young Hardware Co., 178 Ky. 233 , 198 S.W. 716, 1917 Ky. LEXIS 698 ( Ky. 1917 ).

Only the interest of an employing owner or an owner consenting in writing may be sold. Staton Springs Park Co. v. Keesee, 217 Ky. 329 , 289 S.W. 292, 1926 Ky. LEXIS 83 ( Ky. 1926 ). See Cincinnati Stucco Co. v. North Kentucky Fair, Inc., 218 Ky. 493 , 291 S.W. 715, 1927 Ky. LEXIS 174 ( Ky. 1927 ); Weir v. Jarecki Mfg. Co., 254 Ky. 738 , 72 S.W.2d 450, 1933 Ky. LEXIS 5 ( Ky. 1933 ).

20.— Failure of Performance.

After such a failure of performance by the contractor that the owner gets nothing, the subcontractors, mechanics and materialmen have no lien, since the contractor has none, whether or not they were in any way at fault. Watts v. Metcalf, 66 S.W. 824, 23 Ky. L. Rptr. 2189 , 1902 Ky. LEXIS 524 (Ky. Ct. App. 1902). See Terrell v. McHenry, 121 Ky. 452 , 89 S.W. 306, 28 Ky. L. Rptr. 402 , 1905 Ky. LEXIS 227 ( Ky. 1905 ); Doll v. Young, 149 Ky. 347 , 149 S.W. 854, 1912 Ky. LEXIS 638 ( Ky. 1912 ); Monyahan v. Lancaster, 168 Ky. 677 , 182 S.W. 862, 1916 Ky. LEXIS 610 ( Ky. 1916 ).

When the failure of the contractor to perform is only partial, the subcontractors, mechanics and materialmen have a lien to the extent of the reasonable value of the improvement to the owner, and as against them the owner cannot set off his claim for damage against the original contractor. Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ). See Monyahan v. Lancaster, 168 Ky. 677 , 182 S.W. 862, 1916 Ky. LEXIS 610 ( Ky. 1916 ).

When failure of performance is due to a defect in the work or material furnished by the claimant himself, the owner is entitled to an abatement to the extent of his damages. Monyahan v. Lancaster, 168 Ky. 677 , 182 S.W. 862, 1916 Ky. LEXIS 610 ( Ky. 1916 ).

The claimant may be adjudged a lien when his failure to complete performance was due to owner’s preventing him from so doing. Reusch v. Hemmer, 236 Ky. 546 , 33 S.W.2d 618, 1930 Ky. LEXIS 796 ( Ky. 1930 ).

21.— Improvements Only.

Materialmen adjudged not to have a lien on the entire property, because the trustee with whom they dealt had only authority to make improvements out of income, nevertheless have a lien on the material, and should be allowed to withdraw it or to enforce its payment out of rents. Hall & Son v. Bullock's Trustee, 97 S.W. 351, 29 Ky. L. Rptr. 1254 (1906).

When the trustee had no authority to make improvements or create liens, the improvements may be sold apart from the land for the benefit of the materialmen. Maynard v. Columbus, 150 Ky. 817 , 150 S.W. 1019, 1912 Ky. LEXIS 990 ( Ky. 1912 ).

When it is not practicable to remove the improvements, a sale of the improved property is proper. Miller v. Johnson, 213 Ky. 473 , 281 S.W. 467, 1926 Ky. LEXIS 543 ( Ky. 1926 ).

22.— Time of Attachment.

The lien attaches at the beginning of the work or the furnishing of the material. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ). See Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ); Harris' Assignee v. Gardner, 68 S.W. 8, 24 Ky. L. Rptr. 103 , 1902 Ky. LEXIS 394 (Ky. Ct. App. 1902); Dersch v. Miller, 137 Ky. 89 , 122 S.W. 177, 1909 Ky. LEXIS 479 ( Ky. 1909 ); Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ); Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

As against another encumbrancer, a mechanics’ lien attaches upon the filing of the lien in the clerk’s office. Gordon v. House, 201 Ky. 45 , 255 S.W. 846, 1923 Ky. LEXIS 211 ( Ky. 1923 ). See Ideal Supplies Co. v. Underhill, 213 Ky. 741 , 281 S.W. 988, 1926 Ky. LEXIS 611 ( Ky. 1926 ).

If the lien takes effect at the time the material is furnished, and its validity is to be determined under the law in effect at that time, the status of the parties involved as owner, contractor and materialman must also be proven as of the time the material is furnished and governed by the contract or contracts in effect at that time. Woodson Bend, Inc. v. Masters' Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

23.— Extent.

The only limitation upon the liens of persons who furnish labor and material in the erection of a building is that they shall in no case be for a greater amount than the contract price of the original structure. Browinski v. Pickett, 113 Ky. 420 , 68 S.W. 408, 24 Ky. L. Rptr. 305 , 1902 Ky. LEXIS 62 ( Ky. 1902 ). See Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ); Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ); Monyahan v. Lancaster, 168 Ky. 677 , 182 S.W. 862, 1916 Ky. LEXIS 610 ( Ky. 1916 ); McClain v. Coleman, 208 Ky. 163 , 270 S.W. 736, 1925 Ky. LEXIS 240 ( Ky. 1925 ).

An order given by a contractor on the owner in favor of a materialman and which is accepted to the extent of the contract price is without consideration as to the unpaid balance. Canady, Gillum & Key v. Webb, 80 S.W. 172, 25 Ky. L. Rptr. 2107 , 1904 Ky. LEXIS 277 (Ky. Ct. App. 1904).

When the cost exceeds the contract price, a perfected mechanic’s lien is entitled to satisfaction not of the property or unpaid balance in the ratio that the contract price bears to the total of all mechanics’ liens, perfected and unperfected. Canady, Gillum & Key v. Webb, 80 S.W. 172, 25 Ky. L. Rptr. 2107 , 1904 Ky. LEXIS 277 (Ky. Ct. App. 1904). See Higgins Lumber Co. v. Cunningham, 216 Ky. 298 , 288 S.W. 334, 1926 Ky. LEXIS 978 ( Ky. 1926 ).

The contractor’s surety is liable to the owner for the amount of mechanics’ liens paid in excess of the contract price. Allen County v. United States Fidelity & Guaranty Co., 122 Ky. 825 , 93 S.W. 44, 29 Ky. L. Rptr. 356 , 1906 Ky. LEXIS 105 ( Ky. 1906 ).

The subcontractors and materialmen have a lien to the extent of the amount for which the contractor was entitled to a lien. Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ).

When the contractor has applied to the payment of liens all moneys paid him, then the liability of the owner will not exceed the contract price. McClain v. Coleman, 208 Ky. 163 , 270 S.W. 736, 1925 Ky. LEXIS 240 ( Ky. 1925 ).

In such case, portion of judgment awarding lien on waterworks but not providing for sale to enforce lien was improper, but would be treated as mere surplusage. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where, at time notice of lien was given by materialman who furnished materials to contractor for construction of improvement to city waterworks plant, the money appropriated by the city for the work had all been paid to the contractor, the materialman was entitled to judgment ordering the city to provide the necessary funds to pay his claim. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Homeowner’s contract with a cabinet company accepting personal responsibility for the payment of the cabinetry bill in a new home was enforceable even though both parties expected the general contractor to pay; nevertheless, under KRS 376.010(4), if payment from the homeowner to the contractor was identifiable as payment for the cabinetry, the homeowner was entitled to a dollar-for-dollar credit for such sums and the company would have a lien only to the extent that the homeowner failed to pay the contractor for the cabinetry. Barber Cabinet Co. v. Sparks, 2009 Ky. App. LEXIS 244 (Ky. Ct. App. Dec. 4, 2009, sub. op., 2009 Ky. App. Unpub. LEXIS 1100 (Ky. Ct. App. Dec. 4, 2009).

24.— Equitable.

Plaintiff abandoned statutory mechanic’s lien by pleadings and motions making claim for equitable lien. Haas v. Fidelity & Columbia Trust Co., 281 Ky. 671 , 136 S.W.2d 1088, 1940 Ky. LEXIS 92 ( Ky. 1940 ).

Where purchaser of land under land contract filed mechanics’ lien for improvements made on property during period he was in possession prior to cancellation of contract for nonperformance, failure to give vendor statutory notice of lien would bar right to enforce statutory lien, but would not prevent enforcement of equitable lien. Haas v. Fidelity & Columbia Trust Co., 281 Ky. 671 , 136 S.W.2d 1088, 1940 Ky. LEXIS 92 ( Ky. 1940 ).

25.— Priority.

The lien of mechanics and materialmen is superior to that of the contractor or his assignee. Roe v. Scanlan, 98 Ky. 24 , 32 S.W. 216, 17 Ky. L. Rptr. 595 , 1895 Ky. LEXIS 10 ( Ky. 1895 ). See Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ).

A materialman’s lien is superior to that of an attaching creditor of the owner. Norton's Assignee v. Hope Milling, Mining & Lumber Co., 101 Ky. 223 , 40 S.W. 688, 19 Ky. L. Rptr. 382 , 1897 Ky. LEXIS 181 ( Ky. 1897 ). See In re Graves, 27 F. Supp. 717, 1939 U.S. Dist. LEXIS 2672 (D. Ky. 1939 ); Continental Supply Co. v. Sandy River Oil Co., 218 Ky. 248 , 291 S.W. 49, 1927 Ky. LEXIS 137 ( Ky. 1927 ).

A materialman’s lien is superior to that of an attaching creditor of the contractor. Fenck & Schmidt Lumber Co. v. Mehler, 102 Ky. 111 , 43 S.W. 403, 19 Ky. L. Rptr. 1146 , 1897 Ky. LEXIS 97 ( Ky. 1897 ).

Even though the mechanic does not first file his statement he has priority over all encumbrancers, except those for value without notice regularly lodged for record. Dersch v. Miller, 137 Ky. 89 , 122 S.W. 177, 1909 Ky. LEXIS 479 ( Ky. 1909 ).

Mechanics and materialmen contracting directly with the owner have liens of equal dignity. Those contracting with a sole contractor have liens of equal dignity as between themselves. Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ).

In the absence of waiver in the manner prescribed by KRS 427.100 a homestead has priority over a mechanics’ lien for labor or materials furnished for repairs or additions. Graham v. Humm, 191 Ky. 28 , 229 S.W. 80, 1921 Ky. LEXIS 265 ( Ky. 1921 ). See In re Lyon, 35 F.2d 251, 1929 U.S. Dist. LEXIS 1578 (D. Ky. 1929 ).

A materialman acquiring a lien under KRS 378.030 had a lien prior to any claim of the fraudulent vendee. Taylor v. Rapp Lumber Co., 248 Ky. 560 , 59 S.W.2d 5, 1933 Ky. LEXIS 272 ( Ky. 1933 ).

Generally a statutory lien does not take precedence over a prior contractual lien; but the legislature has power to give a statutory lien priority over all other liens, and if the statute clearly shows such an intention, the courts must give effect to it. Adkins v. Carol Mining Co., 281 Ky. 328 , 136 S.W.2d 32, 1940 Ky. LEXIS 40 ( Ky. 1940 ).

Bank was subrogated to the rights of state road contractor where it loaned contractor money to pay laborers and materialmen and had priority in fund deposited in court by state highway commission as balance due contractor on contract over claim of surety on contractor’s bond under an assignment of the contractor’s rights in the contract. Southern Exchange Bank v. American Surety Co., 284 Ky. 251 , 144 S.W.2d 203, 1940 Ky. LEXIS 460 ( Ky. 1940 ), limited, York v. Cline Constr. Co., 336 S.W.2d 34, 1960 Ky. LEXIS 311 ( Ky. 1960 ), overruled, National Surety Corp. v. State Nat'l Bank, 454 S.W.2d 354, 1970 Ky. LEXIS 277 ( Ky. 1970 ).

It was the intention of the legislature to make mechanics’ and materialmen’s liens superior to all other claimants except those enumerated. Egyptian Supply Co. v. Boyd, 117 F.2d 608, 1941 U.S. App. LEXIS 4289 (6th Cir. Ky. 1941 ). See Hodges v. Quire, 295 Ky. 78 , 174 S.W.2d 9, 1943 Ky. LEXIS 209 ( Ky. 1943 ).

This section has reference to a “contract lien” and a statutory lien created by the levy of an execution is secondary to a mechanics’ and materialmen’s lien. Hodges v. Quire, 295 Ky. 78 , 174 S.W.2d 9, 1943 Ky. LEXIS 209 ( Ky. 1943 ).

Where appellant bought completed home from contractor first by contract with down payment and then by deed which was recorded upon payment in full and appellee had been contracted with by contractor to do plumbing on the home and appellant home owner had no notice that contractor had not paid appellee contractor until within 75 days after subcontractor did some correctional work on the plumbing when subcontractor notified appellant and recorded his lien, appellant’s investment was superior to subcontractor’s lien. Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

Where appellant obtained title in two stages first by contract with a down payment and then by deed upon payment in full and on each occasion they parted with money on good faith and without notice that appellee subcontractor had not been paid, the interest or quantum of title obtained by them in each instance, whether it be styled legal or equitable, was equally subject to the coverage of this subsection (2) of this section upon recordation. Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

Where subcontractor who was not paid by contractor filed mechanic’s lien on the improved property, subcontractor’s lien on sums due the contractor was superior to secured creditor’s lien arising from security interest agreement which granted a lien on contractor’s accounts receivable. Citizens Fidelity Bank & Trust Co. v. Fenton Rigging Co., 522 S.W.2d 862, 1975 Ky. LEXIS 145 ( Ky. 1975 ).

The phrase “shall relate back and take effect from the time of the commencement of the labor or the furnishing of the materials” has reference to the priority that materialmen and laborers will have in relation to creditors not in the class of materialmen and laborers. Charles White Co. v. Percy Galbreath & Sons, Inc., 563 S.W.2d 478, 1978 Ky. App. LEXIS 480 (Ky. Ct. App. 1978).

26.— — Existing Liens.

A mechanics’ lien is inferior to liens existing when the first work or material was furnished. Kentucky Bldg. & Loan Ass'n v. Kister, 101 Ky. 321 , 41 S.W. 293, 19 Ky. L. Rptr. 494 , 1897 Ky. LEXIS 208 ( Ky. 1897 ). See Cooley v. Black, 105 Ky. 267 , 48 S.W. 1075, 20 Ky. L. Rptr. 1181 , 1899 Ky. LEXIS 198 ( Ky. 1899 ); Sandy Land & Development Co. v. Brown, 175 Ky. 219 , 194 S.W. 90, 1917 Ky. LEXIS 294 ( Ky. 1917 ); Hyde Park Supply Co. v. Peck-Williamson Heating & Ventilating Co., 176 Ky. 513 , 195 S.W. 1115, 1917 Ky. LEXIS 85 (Ky.), modified, 176 Ky. 656 , 197 S.W. 391, 1917 Ky. LEXIS 100 ( Ky. 1917 ); Staton Springs Park Co. v. Keesee, 217 Ky. 329 , 289 S.W. 292, 1926 Ky. LEXIS 83 ( Ky. 1926 ); Goodin & Barney Coal Co. v. Southern Elkhorn Coal Co., 219 Ky. 827 , 294 S.W. 792, 1927 Ky. LEXIS 456 ( Ky. 1927 ).

A mechanics’ lien is inferior to liens existing when the first work or material was furnished even though the sale was equitable and unenforceable, provided it was in good faith and had not been rescinded. Miller v. Johnson, 213 Ky. 473 , 281 S.W. 467, 1926 Ky. LEXIS 543 ( Ky. 1926 ).

Mechanics’ liens are superior only to encumbrances created subsequent to the beginning of labor or furnishing of materials. Staton Springs Park Co. v. Keesee, 217 Ky. 329 , 289 S.W. 292, 1926 Ky. LEXIS 83 ( Ky. 1926 ).

A mechanics’ lien is inferior to liens existing when the first work or material was furnished unless the prior lienor consented in writing to the improvement or construction or in writing required the owner to make same. Penney v. Kentucky Utilities Co., 238 Ky. 167 , 37 S.W.2d 5, 1931 Ky. LEXIS 199 ( Ky. 1931 ). See T. W. Spinks Co. v. Pachoud Bros., 263 Ky. 119 , 92 S.W.2d 50, 1936 Ky. LEXIS 154 ( Ky. 1936 ).

A mechanics’ lien is inferior to liens existing when the first work or material was furnished unless the prior lienor consented in writing to the improvement or construction or in writing required the owner to make same but the prior lienor may withdraw his consent before any labor or material is furnished. T. W. Spinks Co. v. Pachoud Bros., 263 Ky. 119 , 92 S.W.2d 50, 1936 Ky. LEXIS 154 ( Ky. 1936 ).

Mechanics’ and materialmen’s liens are inferior to mortgages or other contract liens or bona fide conveyances for value created prior to notice of the mechanics’ and materialmen’s liens duly recorded or lodged for record according to law. Egyptian Supply Co. v. Boyd, 117 F.2d 608, 1941 U.S. App. LEXIS 4289 (6th Cir. Ky. 1941 ).

27.— — Abandonment.

A claimant may not secure priority as against other claimants by abandoning his mechanics’ lien and proceeding by attachment. Hyde Park Supply Co. v. Peck-Williamson Heating & Ventilating Co., 176 Ky. 513 , 195 S.W. 1115, 1917 Ky. LEXIS 85 (Ky.), modified, 176 Ky. 656 , 197 S.W. 391, 1917 Ky. LEXIS 100 ( Ky. 1917 ).

A claimant who abandons his mechanics’ lien and procures judgment and execution does not have any superior right over other execution creditors or over the homestead rights of the defendant. Graham v. Humm, 191 Ky. 28 , 229 S.W. 80, 1921 Ky. LEXIS 265 ( Ky. 1921 ).

28.— — Mortgages.

A mortgage given to finance the construction of a building and executed before work is begun is superior to a mechanics’ lien. Kentucky Bldg. & Loan Ass'n v. Kister, 101 Ky. 321 , 41 S.W. 293, 19 Ky. L. Rptr. 494 , 1897 Ky. LEXIS 208 ( Ky. 1897 ).

Mechanics’ liens are inferior to subsequent mortgages for value without notice unless the statement is filed prior to the recording of the mortgage. Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ). See Harris' Assignee v. Gardner, 68 S.W. 8, 24 Ky. L. Rptr. 103 , 1902 Ky. LEXIS 394 (Ky. Ct. App. 1902); Trust Co. of America v. Casey, 131 Ky. 771 , 115 S.W. 780, 1909 Ky. LEXIS 56 ( Ky. 1909 ); Ichenhauser Co. v. Landrum's Assignee, 153 Ky. 316 , 155 S.W. 738, 1913 Ky. LEXIS 837 ( Ky. 1913 ); Voss v. Home Loan & Bldg. Ass'n, 167 Ky. 231 , 180 S.W. 368, 1915 Ky. LEXIS 835 ( Ky. 1915 ); Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ); Gordon v. House, 201 Ky. 45 , 255 S.W. 846, 1923 Ky. LEXIS 211 ( Ky. 1923 ); Ideal Supplies Co. v. Underhill, 213 Ky. 741 , 281 S.W. 988, 1926 Ky. LEXIS 61 1 ( Ky. 1926 ); Higgins Lumber Co. v. Cunningham, 216 Ky. 298 , 288 S.W. 334, 1926 Ky. LEXIS 978 ( Ky. 1926 ); Indiana Truck Corp. v. Hurry Up Broadway Co., 222 Ky. 521 , 1 S.W.2d 990, 1928 Ky. LEXIS 202 ( Ky. 1928 ); Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

A mechanics’ lien is superior to a mortgage executed after work is begun where the mortgagee has actual notice though the statement was not filed. Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

A subsequent mortgagee with notice who retained control of payments is subrogated to the lien of the vendor, as against a mechanics’ lien, to the extent that the proceeds of the mortgage were applied to retirement of the vendor’s lien. Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

When the proceeds of a mortgage are to be paid in instalments, it is for value only to the extent of actual advancements. Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

Although mortgage was recorded before the preliminary statement of mechanics’ lien, the actual notice of the mortgagee of the mechanic’s claim prevents the mortgage from having priority. Coral Ridge Clay Products Co. v. Louisville Trust Co., 223 Ky. 694 , 4 S.W.2d 737, 1928 Ky. LEXIS 439 ( Ky. 1928 ).

A mortgage executed after work is begun is superior if the mechanic’s statement was not filed and the mortgagee had no actual notice of the mechanics’ lien. Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

Though purchasers knew, when they contracted to purchase completed house and took and recorded a second mortgage on the lot to protect down payment, that contractor was erecting house on lot for vendor and was to be paid monthly for materials and labor furnished, in absence of showing that purchasers knew the payments were not being made, they were not chargeable with such notice as to entitle subsequently-filed mechanics’ lien to priority over mortgage. Collier v. Dillon, 313 Ky. 244 , 230 S.W.2d 617, 1950 Ky. LEXIS 835 ( Ky. 1950 ).

Where materials were furnished for building but notice of lien was not filed until some time after the execution of a mortgage, the mortgage would be superior to the lien notwithstanding the fact that the mortgagee knew the work was being done on the property. Johnson Lumber Co. v. Stovall, 394 S.W.2d 930, 1965 Ky. LEXIS 231 ( Ky. 1965 ).

Mortgage recorded before a materialman’s lien was filed was not prior to the lien because the mortgage was to secure pre-existing debts for materials, some for other projects and some for buildings on the land covered by the mortgage. Cardinal Kitchens, Inc. v. Home Supply Co., 467 S.W.2d 775, 1971 Ky. LEXIS 404 ( Ky. 1971 ).

29.— Estoppel.

Mere knowledge by the mechanic that the owner intends to execute a mortgage for the purpose of paying for the improvements does not estop contractors from asserting their mechanics’ liens. Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ).

Mere fact that the contractor gave the owner a receipt in full reciting payment of all claims does not estop the assertion of a lien by a mechanic or materialman. Mivelaz v. Genovely, 121 Ky. 235 , 89 S.W. 109, 28 Ky. L. Rptr. 203 , 1905 Ky. LEXIS 186 ( Ky. 1905 ).

Mere knowledge by subcontractor that the contractor intended to collect the balance due him from the owner does not estop him from asserting his lien. Mivelaz v. Genovely, 121 Ky. 235 , 89 S.W. 109, 28 Ky. L. Rptr. 203 , 1905 Ky. LEXIS 186 ( Ky. 1905 ).

30.— Enforcement.

A claimant hereunder is not entitled to a personal judgment against the successor of a lessee for the amount of the lessee’s indebtedness. Gordon v. Hurt & Petty, 201 Ky. 42 , 255 S.W. 857, 1923 Ky. LEXIS 217 ( Ky. 1923 ).

Only the reasonable market value of material furnished outside the contract is recoverable. Hazard Lumber & Supply Co. v. Demumbrum, 220 Ky. 422 , 295 S.W. 414, 1927 Ky. LEXIS 544 ( Ky. 1927 ).

Dates appearing on statement of account filed as an exhibit are not conclusive. Theatre Realty Co. v. P. H. Meyer Co., 243 Ky. 346 , 48 S.W.2d 1, 1932 Ky. LEXIS 84 ( Ky. 1932 ).

The filing of mechanics’ lien claim as a secured claim in bankruptcy proceedings had the effect of an action under Kentucky statutes to enforce the lien. American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

Where a mechanics’ lien claim properly perfected under this section and KRS 376.080 was filed in bankruptcy court, the lien was not later invalidated under KRS 376.090 by failure of claimant to enforce lien through an action in equity pursuant to KRS 376.110 . American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

A petition to enforce a materialman’s lien containing no allegation that the person furnishing the material had contracted directly with the owner of the property or his agent or that the materialman had given written notice to the property owner or his agent within the time period specified by the statute is fatally deficient. Minter Homes Corp. v. Forsythe, 297 Ky. 11 , 178 S.W.2d 829, 1944 Ky. LEXIS 645 ( Ky. 1944 ).

It is incumbent on a lien claimant to allege and prove a specific contract between himself and the purchaser of the goods. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

Where the petition stated that the equipment or materials were furnished at the request of the company’s officers and agents, and the evidence established that the equipment and material supplied by each of the plaintiffs were used in the construction and operation of the mine, there was a valid contract. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

Where lien was asserted under this section and owner of building offered to confess judgment for $19,650 but denied liability for the balance of $4,000 on ground parties had agreed on the sum as damages on account of delay in performance by contractor, findings that contractor had agreed to a penalty of $4,000 as settlement in full for the breach was supported by credible, competent evidence. Hornung v. Greathouse Co., 333 S.W.2d 760, 1960 Ky. LEXIS 204 ( Ky. 1960 ).

Where original judgment did not direct a sale of leaseholds to satisfy claim filed by contractor under this section but directed purchaser to take the property subject to his lien, contractor was not entitled to insist upon a sale of the property to satisfy his lien and since he was not entitled to sale he was not entitled to relief against principal or surety of supersedeas bond executed upon appeal from the judgment and staying enforcement. Wenk v. Ruby, 379 S.W.2d 55, 1964 Ky. LEXIS 218 ( Ky. 1964 ).

31.— Payment.

As against the contractor’s guarantor, the owner is entitled to pay lien claimants without suit. United States Fidelity & Guaranty Co. v. Probst, 97 S.W. 405, 30 Ky. L. Rptr. 63 (1906). See Allen County v. United States Fidelity & Guaranty Co., 122 Ky. 825 , 93 S.W. 44, 29 Ky. L. Rptr. 356 , 1906 Ky. LEXIS 105 ( Ky. 1906 ); National Surety Co. v. Grant County Board of Education, 212 Ky. 475 , 279 S.W. 662, 1926 Ky. LEXIS 177 ( Ky. 1926 ); YMCA's Assignee v. Indemnity Ins. Co., 244 Ky. 473 , 51 S.W.2d 463, 1932 Ky. LEXIS 458 ( Ky. 1932 ).

The owner need not pay any part of the contract price until protected by the releases of the subcontractors, mechanics and materialmen. Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ).

When the contractor pays money received from an owner to a materialman without specifying what account is to be credited, and the materialman has no knowledge of the source of payment, the materialman’s lien against the paying owner is not affected. Thacker v. Bullock Lumber Co., 140 Ky. 463 , 131 S.W. 271, 1910 Ky. LEXIS 298 ( Ky. 1910 ).

A note executed to a subcontractor by the contractor and discounted at a bank should not be credited on the subcontractor’s account when the contractor has become insolvent, even though the subcontractor has not yet taken up the note. National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ).

When the owner pays a materialman without specifying which of his accounts is to be credited, the latter may appropriate it to any account of the owner. Vogt v. Cannon Electric Co., 245 Ky. 766 , 54 S.W.2d 338, 1932 Ky. LEXIS 684 ( Ky. 1932 ).

When the owner of property subject to various liens sells part of it and the vendee assumes payment of certain liens, then in a suit brought by the encumbrancers the various debts should be satisfied first out of the proceeds of the unsold property and the amounts assumed by the vendee, then by resort to the property sold. Ward v. Butcher, 263 Ky. 585 , 92 S.W.2d 741, 1936 Ky. LEXIS 188 ( Ky. 1936 ).

32.— Release.

Materialman whose lien had been fully satisfied and released before he intervened in an action to enforce materialman’s lien had no interest in the property affected and was in no position to complain of the judgment giving another a lien and the fact he did not intend to release his entire lien was immaterial where he had received a sum which was more than his pro rata part of the contract price of the house. Young v. Porter-Leach Hardware Co., 285 Ky. 625 , 148 S.W.2d 718, 1941 Ky. LEXIS 431 ( Ky. 1941 ).

33.— Disclaimer of Liability.

It is not a basis for denying the mechanics’ lien that the laborer or materialman was put on notice that the landlord was disclaiming liability. Campbell & Summerhays, Inc. v. Greene, 381 S.W.2d 531, 1964 Ky. LEXIS 320 ( Ky. 1964 ).

34.— Assignments.

The assignment of a perfected lien carries with it all securities for its payment theretofore legally acquired. Steele & Lebby v. Flynn-Sullivan Co., 245 Ky. 772 , 54 S.W.2d 325, 1932 Ky. LEXIS 676 ( Ky. 1932 ).

Assignment by contractor of mechanics’ lien as security does not deprive contractor of right to enforce it. Wagner v. Swoope, 246 Ky. 19 , 54 S.W.2d 395, 1932 Ky. LEXIS 701 ( Ky. 19 32).

An assignment of a chose in action secured by a mechanics’ lien carries the lien with it. Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

35.Claims.
36.— Lienable.

One who hauls building materials to the building site has a mechanics’ lien. Fowler & Guy v. Pompelly, 76 S.W. 173, 25 Ky. L. Rptr. 615 (1903).

It is not necessary that the labor and material actually become a part of the improvement. It is sufficient that their use was necessary to the improvement, and that they were so used or consumed. B. F. Avery & Sons v. Woodruff & Cahill, 144 Ky. 227 , 137 S.W. 1088, 1911 Ky. LEXIS 599 ( Ky. 1911 ); Mid-Continent Petroleum Corp. v. Southern Surety Co., 225 Ky. 501 , 9 S.W.2d 229, 1928 Ky. LEXIS 810 ( Ky. 1928 ).

One furnishing lumber for forms, molds or scaffolding in the erection of a building is entitled to a lien hereunder if the lumber is used up in such process and is not to be carried away by the contractor and used in the erection of other buildings. B. F. Avery & Sons v. Woodruff & Cahill, 144 Ky. 227 , 137 S.W. 1088, 1911 Ky. LEXIS 599 ( Ky. 1911 ).

Furnishing and installing a boiler in a residence is within the law. Menne v. American Radiator Co., 150 Ky. 151 , 150 S.W. 24, 1912 Ky. LEXIS 851 ( Ky. 1912 ).

Although generally the materials should be delivered to the owner’s premises, when the owner became bankrupt before delivery and the materials were especially made up for the particular construction and were worthless for other purposes, the materialman is entitled to a lien. Grainger & Co. v. Johnson, 286 F. 833, 1923 U.S. App. LEXIS 2765 (6th Cir. Ky.), cert. denied, 262 U.S. 749, 43 S. Ct. 524, 67 L. Ed. 1213, 1923 U.S. LEXIS 3070 (U.S. 1923).

One furnishing oil and gas for machinery used in the construction of a building is entitled to a mechanics’ lien. Mid-Continent Petroleum Corp. v. Southern Surety Co., 225 Ky. 501 , 9 S.W.2d 229, 1928 Ky. LEXIS 810 ( Ky. 1928 ).

Materials which have gone into the finished structure and become a part of it, or which have been consumed, wasted, or destroyed, almost or altogether in the work, are lienable. Marion Steam Shovel Co. v. Union Indem. Co., 255 Ky. 817 , 75 S.W.2d 541, 1934 Ky. LEXIS 340 ( Ky. 1934 ).

When machinery or equipment is permanently incorporated with the use to which the building is to be used and is to be associated with its use, it becomes a part of the realty and is lienable. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

Contractor’s claim for ten per cent of cost of materials and labor, under a cost-plus contract, is a lienable claim. Bond v. W. T. Congleton Co., 278 Ky. 829 , 129 S.W.2d 570, 1939 Ky. LEXIS 501 ( Ky. 1939 ).

Doctrine of marshaling of assets could be raised in a suit to enforce a mechanic’s lien even though the bank against which the doctrine was raised had already released the property owner’s property which it could be found, under this doctrine, to have been obligated to execute on before executing on property which was also subject to the mechanic’s lien. M. A. Walker Co. v. PBK Bank, 95 S.W.3d 70, 2002 Ky. App. LEXIS 2342 (Ky. Ct. App. 2002).

37.— Nonlienable.

Claims for purchases made by the contractor which constitute his tools, equipment, appliances or plant, which are things of a permanent nature not consumed in constructing the improvement, but are usable on many contracts, are not secured by mechanics’ liens. Fowler & Guy v. Pompelly, 76 S.W. 173, 25 Ky. L. Rptr. 615 (1903). See Henry Bickel Co. v. National Surety Co., 156 Ky. 695 , 161 S.W. 1113, 1914 Ky. LEXIS 179 ( Ky. 1914 ); Union Indem. Co. v. Pennsylvania Boiler Works, 246 Ky. 473 , 55 S.W.2d 367, 1932 Ky. LEXIS 791 ( Ky. 1932 ); Century Indem. Co. v. Shunk Mfg. Co., 253 Ky. 50 , 68 S.W.2d 772, 1934 Ky. LEXIS 604 ( Ky. 1934 ); Marion Steam Shovel Co. v. Union Indem. Co., 255 Ky. 817 , 75 S.W.2d 541, 1934 Ky. LEXIS 340 ( Ky. 1934 ).

One renting machinery for use in constructing a building is not entitled to a mechanics’ lien. Henry Bickel Co. v. National Surety Co., 156 Ky. 695 , 161 S.W. 1113, 1914 Ky. LEXIS 179 ( Ky. 1914 ). See Steele & Lebby v. Flynn-Sullivan Co., 245 Ky. 772 , 54 S.W.2d 325, 1932 Ky. LEXIS 676 ( Ky. 1932 ); Century Indem. Co. v. Shunk Mfg. Co., 253 Ky. 50 , 68 S.W.2d 772, 1934 Ky. LEXIS 604 ( Ky. 1934 ).

One selling machinery for use in constructing a building is not entitled to a mechanics’ lien to secure the purchase price. Union Indem. Co. v. Pennsylvania Boiler Works, 246 Ky. 473 , 55 S.W.2d 367, 1932 Ky. LEXIS 791 ( Ky. 1932 ).

Claims for damage to machinery during use, freight thereon, and the loss or replacement of equipment are not lienable. Century Indem. Co. v. Shunk Mfg. Co., 253 Ky. 50 , 68 S.W.2d 772, 1934 Ky. LEXIS 604 ( Ky. 1934 ).

A repossessing vendor’s claim for depreciation is not secured by a mechanics’ lien. Marion Steam Shovel Co. v. Union Indem. Co., 255 Ky. 817 , 75 S.W.2d 541, 1934 Ky. LEXIS 340 ( Ky. 1934 ).

A printing press furnished by a materialman although attached to the floor does not confer a mechanics’ lien. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

Person who installed printing press for lessee in leased building did not have a lien under this section and could not remove the printing press under KRS 376.040 . In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

The statute was not intended to apply to personalty in no way attached to or used in connection with the building or structure. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

The phrase “permanently incorporated with the use to which the building is to be put” has reference to fixtures employed in the actual operation of the building itself and not to machinery or equipment for use in a particular business that might be conducted within the building. In re Heat 'n' Eat Brands, Inc., 174 F. Supp. 598, 1959 U.S. Dist. LEXIS 3075 (D. Ky. 1959 ), aff'd, 280 F.2d 426, 1960 U.S. App. LEXIS 4599 (6th Cir. Ky. 1960 ).

Evidence sustained finding that boiler was not permanent part of leased building but a trade fixture and contractor installing it was not entitled to a mechanics’ lien under this section so he was an unsecured creditor in bankruptcy proceedings. In re Heat 'n' Eat Brands, Inc., 278 F.2d 488, 1960 U.S. App. LEXIS 4600 (6th Cir. Ky. 1960 ).

38.— Interest.

The owner is not liable to subcontractors, mechanics and materialmen for interest except as provided in the original contract and not until the amount of the claim is ascertainable. Schnute Holtman Co. v. Sweeney, 136 Ky. 773 , 125 S.W. 180, 1910 Ky. LEXIS 541 ( Ky. 1910 ). See Mays v. Stegeman, 213 Ky. 60 , 280 S.W. 464, 1926 Ky. LEXIS 449 ( Ky. 1926 ).

Where contract for construction of improvement to city waterworks plant provided that money was due when contract was completed, materialman whose claim was not paid was entitled to interest on the amount of his claim from the date of filing notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

39.Notice.

This section provides for a preliminary notice providing for a priority of a mechanics’ lien, whereas KRS 376.080 provides for a final notice which preserves the lien for a given time. Scheas v. Boston & Paris, 125 Ky. 535 , 101 S.W. 942, 31 Ky. L. Rptr. 157 , 1907 Ky. LEXIS 312 ( Ky. 1907 ). See Trust Co. of America v. Casey, 131 Ky. 771 , 115 S.W. 780, 1909 Ky. LEXIS 56 ( Ky. 1909 ).

Filing of this preliminary statement is not essential to the creation of the lien if the subsequent statement required by KRS 376.080 is filed. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ), rehearing denied, Grigsby v. Lexington & E. R. Co., 152 Ky. 164 , 153 S.W. 232, 1913 Ky. LEXIS 633 ( Ky. 1913 ). See Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

The preliminary statement provided for herein does not create the lien but merely confers priority over other lienholders. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ).

When the contract is not made with the owner and this notice is not given, there is no mechanics’ lien on either the property or the unpaid balance. Ichenhauser Co. v. Landrum's Assignee, 153 Ky. 316 , 155 S.W. 738, 1913 Ky. LEXIS 837 ( Ky. 1913 ). See Blatz Co. v. Stivers, 200 Ky. 801 , 255 S.W. 699, 1923 Ky. LEXIS 190 ( Ky. 1923 ); Whitfield v. Kentucky Sales Corp., 211 Ky. 809 , 278 S.W. 105, 1925 Ky. LEXIS 973 ( Ky. 1925 ); Hazard Lumber & Supply Co. v. South, 224 Ky. 737 , 7 S.W.2d 206, 1928 Ky. LEXIS 671 ( Ky. 1928 ); Andrews v. Wilson, 253 Ky. 237 , 69 S.W.2d 343, 1934 Ky. LEXIS 639 ( Ky. 1934 ).

The necessity of notice is not waived by promise of the owner to pay. Kentucky Lumber & Millwork Co. v. Montz, 158 Ky. 328 , 164 S.W. 935, 1914 Ky. LEXIS 601 ( Ky. 1914 ). See Jackson v. Rechtin, 207 Ky. 539 , 269 S.W. 714, 1925 Ky. LEXIS 133 ( Ky. 1925 ).

“Without notice” refers to either constructive or actual notice. Ideal Supplies Co. v. Underhill, 213 Ky. 741 , 281 S.W. 988, 1926 Ky. LEXIS 611 ( Ky. 1926 ).

Whether the owner has knowledge of the labor or material is immaterial since the perfected lien of the mechanic or materialman depends on whether the requirements of the statute as to notice and as to the filing of statement have been complied with. Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ).

Employes claiming lien under KRS 379.150 are relieved of filing the notices required in any other section, including this section. Leslie's Adm'x v. Branham, 289 Ky. 409 , 158 S.W.2d 949, 1942 Ky. LEXIS 558 ( Ky. 1942 ).

The provision in this section for notice to the property owner of intent to hold the property liable applies only to persons who do not contract directly with the owner or his agent. Siler v. Corbin Bldg. & Supply Co., 296 Ky. 122 , 176 S.W.2d 250, 1943 Ky. LEXIS 111 ( Ky. 1943 ).

The description in the lien statement must itself furnish needed information to identify property to the exclusion of other property. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

Where the contract entered into by a contractor and owners of property contained no express provision for sharing of profits, and no such agreement could be implied from the contract, there was no joint adventure relationship created as would obviate the necessity of notice to owners as a prerequisite to the validity of materialmen’s lien. Drummy v. Stern, 269 S.W.2d 198, 1954 Ky. LEXIS 958 ( Ky. 1954 ).

Evidence supported findings of fact that roofing material was sold to individual owner and it followed that 75 days’ notice under this section was not required to perfect lien. Sowards v. Williamson Supply Co., 291 S.W.2d 26, 1956 Ky. LEXIS 362 ( Ky. 1956 ).

If supplier of plumbing fixtures postponed perfection of his lien under this section on promise of property owner to pay its debts, to enable property owner to secure a smaller loan to satisfy other claimants, contract was enforceable notwithstanding statute of frauds and question of whether promise of property owner to pay its debt was without consideration was for the jury. M. N. Berry Co. v. Gay, 434 S.W.2d 43, 1968 Ky. LEXIS 224 ( Ky. 1968 ).

40.— Actual.

Actual notice must be something more than mere knowledge that the work is being done and material furnished. Scheas v. Boston & Paris, 125 Ky. 535 , 101 S.W. 942, 31 Ky. L. Rptr. 157 , 1907 Ky. LEXIS 312 ( Ky. 1907 ). See In re Wagner, 110 F. 931, 1901 U.S. Dist. LEXIS 177 (D. Ky. 1901 ); Humboldt Bldg. Ass'n v. Volmering, 47 S.W. 1084, 20 Ky. L. Rptr. 899 (1898); First Nat'l Bank v. Chowning Electric Co., 142 Ky. 624 , 134 S.W. 1156, 1911 Ky. LEXIS 270 ( Ky. 1911 ); Ideal Supplies Co. v. Underhill, 213 Ky. 741 , 281 S.W. 988, 1926 Ky. LEXIS 611 ( Ky. 1926 ); Coral Ridge Clay Products Co. v. Louisville Trust Co., 223 Ky. 694 , 4 S.W.2d 737, 1928 Ky. LEXIS 439 ( Ky. 1928 ); Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

Fact that mortgagee had seen a partial receipt given by the mechanic was not sufficient notice. Voss v. Home Loan & Bldg. Ass'n, 167 Ky. 231 , 180 S.W. 368, 1915 Ky. LEXIS 835 ( Ky. 1915 ).

To have actual notice of a mechanics’ lien a mortgagee must have known that the mechanic or materialman had done labor or furnished materials for which payment had not been made, and for which he was entitled to assert a lien hereunder. Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

If the purchaser or creditor knows that there are unpaid mechanics’ liens which the owner or contractor is unable to pay, or that the claimant intends to file a lien, he has actual notice. Ideal Supplies Co. v. Underhill, 213 Ky. 741 , 281 S.W. 988, 1926 Ky. LEXIS 611 ( Ky. 1926 ).

Where the mortgagee knows there are unpaid claims and the owner is unable to pay them, the mortgagee is charged with notice as brings him within this section. Collier v. Dillon, 313 Ky. 244 , 230 S.W.2d 617, 1950 Ky. LEXIS 835 ( Ky. 1950 ).

In order to have actual notice the mortgagee must know that there are unpaid claims for which a lien may be asserted and that the debtor is unable to pay such claims or that the claimant intends to “file a lien.” Grider v. Mutual Federal Sav. & Loan Asso., 565 S.W.2d 647, 1978 Ky. App. LEXIS 514 (Ky. Ct. App. 1978).

Actual notice does not serve as a substitute for the required statutory notice. Therefore, the perfected lien of the mechanic or materialman does not depend on the knowledge of the owner, but on whether the mechanic or materialman has followed the requirements of the statute as to notice and as to the filing of the statement required by the statute. The knowledge or the lack of knowledge by the owner is immaterial. Middletown Engineering Co. v. Main Street Realty, Inc., 839 S.W.2d 274, 1992 Ky. LEXIS 149 ( Ky. 1992 ).

41.— Sufficiency.

A notice not specifying the amount that would be claimed is insufficient. Wolflin-Luhring Lumber Co. v. Mosely, 152 Ky. 701 , 154 S.W. 22, 1913 Ky. LEXIS 736 ( Ky. 1913 ). See National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ); Jackson v. Rechtin, 207 Ky. 539 , 269 S.W. 714, 1925 Ky. LEXIS 133 ( Ky. 1925 ).

Presentation by materialman to owner of a statement of his account is not a sufficient notice hereunder. Wright v. Monroe Lumber Co., 156 Ky. 83 , 160 S.W. 788, 1913 Ky. LEXIS 385 ( Ky. 1913 ). See Clinton Mfg. & Packing Co. v. Fullerton, 167 Ky. 573 , 181 S.W. 172, 1916 Ky. LEXIS 446 ( Ky. 1916 ).

Presentation to owner of an order by the contractor to pay the materialman is not a sufficient notice hereunder. Wright v. Monroe Lumber Co., 156 Ky. 83 , 160 S.W. 788, 1913 Ky. LEXIS 385 ( Ky. 1913 ).

The provision for notice is mandatory, and must be substantially followed in order to acquire a lien. Wright v. Monroe Lumber Co., 156 Ky. 83 , 160 S.W. 788, 1913 Ky. LEXIS 385 ( Ky. 1913 ). See Jackson v. Rechtin, 207 Ky. 539 , 269 S.W. 714, 1925 Ky. LEXIS 133 ( Ky. 1925 ).

A notice informing owner where to secure statement of account is insufficient. Jackson v. Rechtin, 207 Ky. 539 , 269 S.W. 714, 1925 Ky. LEXIS 133 ( Ky. 1925 ).

Where the lien statements located the property as being two and one-half miles north of Beaver Dam, Kentucky, on Highway No. 62 in Ohio County, and on the north side of the Illinois Central Railway’s right of way and identified the property as the land, building, etc., used by a coal mining company, the description was sufficient to describe the property involved. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

Where the mortgagee was never told that materialman intended to “file a lien,” and where no information was given as to when payment by the builder was due or even if it was then due or past due, but only a request was made to assist in collecting the debt, the mortgagee did not receive actual notice prior to disbursing loan and its mortgage was superior to materialman’s lien. Grider v. Mutual Federal Sav. & Loan Asso., 565 S.W.2d 647, 1978 Ky. App. LEXIS 514 (Ky. Ct. App. 1978).

A complaint which is properly filed and served on the owner of property within 120 days after the last materials are furnished for improvement of the property may not substitute for or constitute the written notice required by subsection (3) of this section; a prior-to-litigation notice is a prerequisite to perfecting any lien where the materialman has not contracted with the owner. Laferty v. Wickes Lumber Co., 708 S.W.2d 107, 1986 Ky. App. LEXIS 1047 (Ky. Ct. App. 1986).

The two types of notices enunciated in subsection (3) of this section and KRS 376.080(1) are clearly distinct. Subsection (3) of this section states that a mechanic’s lien will not be acquired unless the claimant, within 120 days after the last item of material and labor is furnished, gives notice to the owner of the property of its intent to hold the property liable and the amount for which a lien will be claimed. KRS 376.080(1) states that the lien acquired pursuant to this section will be dissolved unless the claimant, within six (6) months after it ceases to furnish material and labor, files a copy of its statement of mechanic’s lien in the office of the county clerk of the appropriate county and sends a copy of the statement to the property owner within seven (7) days of the filing. Neither statute provides that a notice given pursuant to one section will satisfy the notice requirement of the other section. Middletown Engineering Co. v. Main Street Realty, Inc., 839 S.W.2d 274, 1992 Ky. LEXIS 149 ( Ky. 1992 ).

42.— Time.

When contractor defaults, and the owner requests the same materialman to continue to furnish materials pursuant to the specifications of the original contract, the time for giving the statutory notice should date from the time the last item was furnished after the owner requested completion. National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ).

Where contract was indivisible and subcontractor filed notice of intention to claim lien within thirty-five days (now seventy-five days) after completion of last five houses, subcontractor was entitled to excess over contract price even if the excess was a balance due on houses completed more than thirty-five days (now seventy-five days) prior to filing of notice of intention to claim lien from the owner. Will B. Miller Co. v. Laval, 283 Ky. 55 , 140 S.W.2d 376, 1940 Ky. LEXIS 273 ( Ky. 1940 ) (decision prior to 1952 amendment).

Where company furnished materials to principal contractor and to subcontractor, and evidence established that there was agreement that principal contractor would pay for materials furnished to subcontractor and that credit was extended in reliance on such agreement, filing of lien notice within thirty-five days (now seventy-five days) after last item of material was furnished to subcontractor was sufficient, although more than thirty-five days (now seventy-five days) had elapsed since furnishing of last item directly to principal contractor. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ) (decision prior to 1952 amendment).

Where mechanics’ lien for full contract price of plumbing installations was not filed within thirty-five days (now seventy-five days) required by this section, time was not extended by later performance of repairs and trivial work. Cutsinger v. King, 240 S.W.2d 608, 1951 Ky. LEXIS 994 ( Ky. 1951 ) (decision prior to 1952 amendment).

Notice of lien must be received by the owner within the time limit and not merely be mailed within the limit. Maloney v. Waller, 261 S.W.2d 418, 1953 Ky. LEXIS 1010 ( Ky. 1953 ).

Summary judgment for a corporation on a subcontractor’s claim for enforcement of a mechanic’s lien was proper because the subcontractor failed to notify the corporation of his intent to file a lien until more than 120 days after the date on which he last furnished labor or materials to the property; there was no evidence to support the subcontractor’s contention that the contractor was the corporation’s agent. Because there was no direct contract between the subcontractor and the corporation or any of its agents, the pre-lien notice was untimely. Brock v. Pilot Corp., 234 S.W.3d 381, 2007 Ky. App. LEXIS 329 (Ky. Ct. App. 2007).

43.— — Extension.

The time for giving notice cannot be extended by furnishing labor or material that is trivial and not necessary for the completion of the contract. Wolflin-Luhring Lumber Co. v. Mosely, 152 Ky. 701 , 154 S.W. 22, 1913 Ky. LEXIS 736 ( Ky. 1913 ). See National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ); Henry Koehler & Co. v. Hines, 185 Ky. 270 , 214 S.W. 906, 1919 Ky. LEXIS 282 ( Ky. 1919 ).

The voluntary correction of defects by a contractor without authority of the owner after the time for completion of the contract has expired does not extend the time for giving notice. National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ).

When the service or material is required by the contract and requested by the owner, it will extend the time for claiming a lien, or will revive an expired lien as to a contract theretofore substantially completed. National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ). See Akers & Co. v. Weil, 251 Ky. 689 , 65 S.W.2d 712, 1933 Ky. LEXIS 924 ( Ky. 1933 ).

Work done under a subsequent contract cannot be tacked onto a previous contract so as to extend time for giving notice under the first contract. National Surety Co. v. Price, 162 Ky. 632 , 172 S.W. 1072, 1915 Ky. LEXIS 138 ( Ky. 1915 ).

The time for giving notice cannot be extended when the material is not delivered to the owner or on his property nor used in the construction. Whitfield v. Kentucky Sales Corp., 211 Ky. 809 , 278 S.W. 105, 1925 Ky. LEXIS 973 ( Ky. 1925 ).

Installation of sillcock and other small items by plumbing contractor constituted furnishing of last item of materials, as against contention that it was repair work or work of a trivial nature not done in good faith, where evidence showed that such items were included in contract and specifications but had been overlooked or forgotten by the contractor. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

In such case, the fact that the materials furnished the subcontractor were charged on the books to the subcontractor did not control over other evidence showing that credit was really extended to principal contractor. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where electrical contractor had completed performance of contract and work had been accepted, subsequent labor and materials furnished in repairing a short circuit caused by settling of the building, although done under a time guarantee, could not be counted as the last item of work and materials for the purpose of extending the time for filing notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Work done or repairs made pursuant to a time guarantee cannot extend the time for giving notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Work done to remedy defects or to repair damages caused by casualty after the completion of the contract does not extend the time to give notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

The time for giving notice to the landowner cannot be extended by furnishing labor or material that is trivial and not necessary for the completion of the contract. Haynie v. Benton, 258 S.W.2d 488, 1953 Ky. LEXIS 844 ( Ky. 1953 ).

The time for giving notice cannot be prolonged by furnishing labor or material that is trivial and not necessary for the completion of the contract. Drummy v. Stern, 269 S.W.2d 198, 1954 Ky. LEXIS 958 ( Ky. 1954 ).

Minor finishing work done at the request of the owner may revive and renew the running of the time limits for notice and recording under this section and KRS 376.080 . Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

44.Waiver.

Waiver does not arise out of the renewal of a lien note. Gilbert v. Moody, 36 S.W. 523, 18 Ky. L. Rptr. 312 (1896).

A mechanic or materialman does not waive his lien by taking a note for the amount of his claim. Waddy Blue Grass Creamery Co. v. Davis-Rankin Bldg. & Mfg. Co., 103 Ky. 579 , 45 S.W. 895, 20 Ky. L. Rptr. 259 , 1898 Ky. LEXIS 105 ( Ky. 1898 ). See Mivelaz v. Genovely, 121 Ky. 235 , 89 S.W. 109, 28 Ky. L. Rptr. 203 , 1905 Ky. LEXIS 186 ( Ky. 1905 ); Mivelaz v. Johnson, 124 Ky. 251 , 98 S.W. 1020, 30 Ky. L. Rptr. 389 , 1907 Ky. LEXIS 180 ( Ky. 1907 ); Miller v. Johnson, 213 Ky. 473 , 281 S.W. 467, 1926 Ky. LEXIS 543 ( Ky. 1926 ).

A lien may be waived by express agreement upon a valuable consideration, or by implication, the question being one of intention unless the facts show an estoppel. Taylor v. Fuller, 162 Ky. 568 , 172 S.W. 959, 1915 Ky. LEXIS 114 ( Ky. 1915 ).

A mechanic or materialman does not waive his lien by taking a note for the amount of his claim, unless it is intended to be a novation or waiver of the mechanics’ lien but where such a note is not accepted by the claimant there can be no novation or waiver although there may be an estoppel. Bass & Co. v. Trustees of Madisonville Christian Church, 250 Ky. 36 , 61 S.W.2d 1074, 1933 Ky. LEXIS 644 ( Ky. 1933 ).

In order for an express waiver of a mechanics’ lien to be binding there must be a consideration. McCorkle v. Lawson & Co., 259 S.W.2d 27, 1953 Ky. LEXIS 911 ( Ky. 1953 ).

In order for there to be an implied waiver of a mechanics’ lien a party must have engaged in conduct or performed acts inconsistent with the existence of the right alleged to have been waived, misleading the other party to his prejudice. McCorkle v. Lawson & Co., 259 S.W.2d 27, 1953 Ky. LEXIS 911 ( Ky. 1953 ).

45.Procedure.

After sustaining an exception to the sufficiency of the notice, the court properly refused to hear further proof thereon. Hoosier Bldg. Tile & Silo Co. v. Peet, 243 Ky. 290 , 47 S.W.2d 1066, 1932 Ky. LEXIS 76 ( Ky. 1932 ).

46.— Pleading.

A materialman who failed to file statement until after sale to corporate vendee cannot plead that the corporation’s purchase was ultra vires. Henry Koehler & Co. v. G. E. Stanley Co., 214 Ky. 261 , 283 S.W. 75, 1926 Ky. LEXIS 313 ( Ky. 1926 ).

Where a contractor provided materials for a construction project and sought to record a mechanic’s lien under KRS 376.010 , the contractor’s first lien statement complied with KRS 376.080 and was timely, because the signature of the contractor’s attorney and agent on the first lien statement and the prepared by statement listing the attorney’s name and address, but not separately signed by him, was sufficient under KRS 382.335(1). Since the county clerk improperly rejected the first lien statement, the doctrine of equitable tolling allowed the second lien statement to relate back to the filing of the first lien statement. PBI Bank, Inc. v. Schnabel Found. Co., 392 S.W.3d 421, 2013 Ky. App. LEXIS 13 (Ky. Ct. App. 2013).

47.— Burden of Proof.

The burden of proof on the issue of notice is on the materialman, not the mortgagee. Scheas v. Boston & Paris, 125 Ky. 535 , 101 S.W. 942, 31 Ky. L. Rptr. 157 , 1907 Ky. LEXIS 312 ( Ky. 1907 ). See Coral Ridge Clay Products Co. v. Louisville Trust Co., 223 Ky. 694 , 4 S.W.2d 737, 1928 Ky. LEXIS 439 ( Ky. 1928 ). But see Dersch v. Miller, 137 Ky. 89 , 122 S.W. 177, 1909 Ky. LEXIS 479 ( Ky. 1909 ).

The burden of proving a lien is on the one claiming it. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

48.— Evidence.

Where there existed no evidence that there had been a contract negotiated for the improvement of the lot in question, no construction on the lot had been commenced and petitioners’ contracts for the improvement of an adjacent lot did not include the lot in question, petitioners were not entitled to mechanics’ liens under this section. In re Hi-Tek, Inc., 352 F. Supp. 1390, 1973 U.S. Dist. LEXIS 15472 (E.D. Ky. 1973 ).

49.Other Remedies.

Since this section does not expressly state that its remedy is sole or exclusive, the doctrine of unjust enrichment was not abrogated by its enactment; furthermore, because it does not alter the common-law duties of parties to pay for improvements to their property, the remedy established by this section is cumulative and not exclusive. Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

This section is not the sole and exclusive remedy for a materialman or subcontractor when he or she is not paid for labor or materials used to benefit another’s property. Under such circumstances, an action in quantum meruit may lie against the landowner to recover the reasonable value of said labor and materials. Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

Sprinkler company’s failure to properly file a mechanics’ lien under KRS 376.010 did not preclude it from attempting to recover under a theory of unjust enrichment for money that a property owner owed for a sprinkler system installed for the property’s lessee because KRS 376.010 did not specifically abrogate the common law. Brown Sprinkler Corp. v. Somerset-Pulaski County Dev. Found., Inc., 335 S.W.3d 455, 2010 Ky. App. LEXIS 122 (Ky. Ct. App. 2010).

50.Bankruptcy Situations.

Where Chapter 11 debtor contracted to build a house for a third party and upon completion of construction, to sell the house to that party, debtor’s personal knowledge of a subcontractor’s intent to file a mechanic’s lien prior to debtor’s filing for bankruptcy could not be imputed to said debtor once his status became that of a hypothetical bona fide purchaser and, where subcontractor’s lien was filed subsequent to debtor’s filing for bankruptcy, it was not enforceable, as subcontractor did not file a statement of intent to furnish labor or materials prior to debtor’s bankruptcy filing. In re English, 112 B.R. 20, 1989 Bankr. LEXIS 2449 (Bankr. W.D. Ky. 1989 ).

51.Equipment Rental Charges.

This section provides for a lien for a person who “performs labor” or “furnishes materials.” The definition of labor in subsection (5) of this section does no more than specify that a lien is conferred for work actually done by machinery, etc., not for the leasing of machinery to another who performs or has the work performed with the machinery. Thus, equipment and machinery rental charges are not lienable on private projects. Dirt & Rock Rentals, Inc. v. Irwin & Powell Constr., Inc., 838 S.W.2d 412, 1992 Ky. App. LEXIS 106 (Ky. Ct. App. 1992).

Cited:

Sandusky Foundry & Machine Co. v. Wickliffe, 369 F. Supp. 439, 1972 U.S. Dist. LEXIS 13344 (W.D. Ky. 1972 ), aff’d, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. 1973); Fite & Warmath Constr. Co. v. MYS Corp., 559 S.W.2d 729, 1977 Ky. LEXIS 559 ( Ky. 1977 ); Williams v. Central Concrete, Inc., 599 S.W.2d 460, 1979 Ky. App. LEXIS 530 (Ky. Ct. App. 1979); In re Brame, 26 B.R. 309, 1982 Bankr. LEXIS 5279 (Bankr. W.D. Ky. 1982 ); Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. 1986), cert. denied, United Pacific Ins. Co. v. Laurel County, 484 U.S. 817, 108 S. Ct. 72, 98 L. Ed. 2d 36, 1987 U.S. LEXIS 3579, 56 U.S.L.W. 3243 (1987); Mullins v. Wyatt, 887 S.W.2d 356, 1994 Ky. LEXIS 133 ( Ky. 1994 ).

DECISIONS UNDER PRIOR LAW

Analysis

  1. In General.
  2. Owner.
  3. — Written Consent.
  4. Lien.
  5. — Persons Entitled.
  6. — Failure of Performance.
  7. — Time of Attachment.
  8. — Priority.
  9. — Enforcement.
  10. — Estoppel.
1.In General.

Although in derogation of common law, the mechanics’ lien statute should have been liberally construed. Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

Unless construction contracts conformed to the statute there was no lien. Hardin v. Marble, 76 Ky. 58 , 1877 Ky. LEXIS 10 ( Ky. 1877 ).

2.Owner.
3.— Written Consent.

Only the interest of an employing owner or an owner consenting in writing could be sold. Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ).

4.Lien.
5.— Persons Entitled.

An architect or superintendent of the building had no lien. Foushee v. Grigsby & Robinson, 75 Ky. 75 , 1876 Ky. LEXIS 35 ( Ky. 1876 ).

6.— Failure of Performance.

The owner could estop himself from pleading the failure of consideration. Parrish v. Christopher, 3 S.W. 603, 8 Ky. L. Rptr. 868 (1887).

7.— Time of Attachment.

The lien attached at the beginning of the work or the furnishing of the material. Nazareth Literary & Benevolent Institution v. Lowe, 40 Ky. 257 , 1841 Ky. LEXIS 2 7 ( Ky. 1841 ). See Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ).

8.— Priority.

A mechanics’ lien for constructing a building had priority over dower. Nazareth Literary & Benevolent Institution v. Lowe, 40 Ky. 257 , 1841 Ky. LEXIS 27 ( Ky. 1841 ).

A mechanics’ lien was inferior to liens existing when the first work or material was furnished. Orr v. Batterton, 53 Ky. 100 ( Ky. 1853 ). See Jones v. Jeffress, 74 Ky. 636 , 1876 Ky. LEXIS 13 ( Ky. 1876 ); Louisville Bldg. Asso. v. Korb, 79 Ky. 190 , 2 Ky. L. Rptr. 71 , 1880 Ky. LEXIS 111 (Ky. Ct. App. 1880); Northern Bank of Kentucky v. Deckebach, 83 Ky. 154 , 7 Ky. L. Rptr. 65 , 1885 Ky. LEXIS 50 ( Ky. 1885 ).

In the absence of waiver in the manner prescribed by law a homestead had priority over a mechanics’ lien for labor or materials furnished for repairs or additions but was inferior to a mechanics’ lien arising out of construction of the building. Roberts v. Riggs, 84 Ky. 251 , 1 S.W. 431, 8 Ky. L. Rptr. 247 , 1886 Ky. LEXIS 61 ( Ky. 1886 ).

9.— Enforcement.

Where there were mutual accounts between the builder and mechanic, and no balance was due the mechanic at time of performance of work, the suit should have been dismissed, particularly as against an innocent grantee. Graham & Co. v. Holt, 43 Ky. 61 , 1843 Ky. LEXIS 96 ( Ky. 1843 ).

When the building was constructed in sections at different times, and the interests of the different owners varied in the different sections, the only saleable interest of the employing owner was in that part of the building improved by the particular claimant. Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ).

Premature actions should have been dismissed. Hardin v. Marble, 76 Ky. 58 , 1877 Ky. LEXIS 10 ( Ky. 1877 ).

10.— Estoppel.

Judgment on materialman’s lien providing for sale of the land on order of plaintiff and reciting that the case was subject to future orders was not lost by failure to have the land sold for eight years or by filing the case away after judgment with leave to redocket, in the absence of facts constituting an estoppel. Pittman v. Wakefield, 90 Ky. 171 , 13 S.W. 525, 11 Ky. L. Rptr. 972 , 1890 Ky. LEXIS 64 ( Ky. 1890 ).

11.Notice.

Actual notice had to be something more than mere knowledge that the work was being done and material furnished. Foushee v. Grigsby & Robinson, 75 Ky. 75 , 1876 Ky. LEXIS 35 ( Ky. 1876 ).

Constructive notice was created when the laborer or materialmen either filed statement or filed suit. Foushee v. Grigsby & Robinson, 75 Ky. 75 , 1876 Ky. LEXIS 35 ( Ky. 1876 ).

A judgment on a materialman’s lien is constructive notice to subsequent purchasers and encumbrancers. Pittman v. Wakefield, 90 Ky. 171 , 13 S.W. 525, 11 Ky. L. Rptr. 972 , 1890 Ky. LEXIS 64 ( Ky. 1890 ).

12.— Waiver of Lien.

A mechanic or materialman did not waive his lien by taking a note for the amount of his claim. Graham & Co. v. Holt, 43 Ky. 61 , 1843 Ky. LEXIS 96 ( Ky. 1843 ). See Laviolette v. Redding, 43 Ky. 81 , 1843 Ky. LEXIS 99 ( Ky. 1843 ); Gere v. Cushing, 68 Ky. 304 , 1869 Ky. LEXIS 4 ( Ky. 1869 ).

The only effect of a note securing a mechanics’ lien was to suspend enforcement of the lien until the note matured. Graham & Co. v. Holt, 43 Ky. 61 , 1843 Ky. LEXIS 96 ( Ky. 1843 ). See Laviolette v. Redding, 43 Ky. 81 , 1843 Ky. LEXIS 99 ( Ky. 1843 ).

The lien is waived by failure to file statement or suit in time. Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ). See Rommel Bros. v. Clark, 255 Ky. 554 , 74 S.W.2d 933, 1934 Ky. LEXIS 2 66 ( Ky. 1934 ).

Opinions of Attorney General.

The docks of a marina are considered land and not buildings for the purposes of KRS 132.220(3) and are subject to administrative search in the absence of the owner, unless they are sufficiently structurally analogous to buildings. OAG 12-008 , 2012 Ky. AG LEXIS 95.

Research References and Practice Aids

Cross-References.

Animals, lien for taking up and altering, KRS 259.160 , 259.170 , 259.190 .

Assignment for the benefit of creditors, lien debt a preferred claim, KRS 379.010 .

Attorneys at law, lien for fee, KRS 30.200 .

Banks given lien on deposits on which they have paid state tax, KRS 132.040 .

Cooperative or assessment insurance company, lien upon property insured, KRS 299.390 .

Crop of tenant, lien of landlord on, KRS 383.110 .

Decedent or testator, estate subject to lien of creditor, KRS 396.080 .

Devised property charged with payment or duty to another, lien of latter on legacy, KRS 394.510 .

Drifts, logs, timber, lien on for taking up, KRS 364.020.

Fences, lien on cattle entering through, KRS 256.080 .

Fences, lien on property of party who fails to build his portion of division fence, KRS 256.040 .

Fire hazard, building may be removed or repaired and expenses made a lien against the property, KRS 227.390 .

Frozen food locker plant, lien of operator of, KRS 221.100 .

Insurance company, indebtedness on policy creates a lien upon all property of the company, KRS 299.140 .

Landlord’s lien, status with liens of others on personalty of lessee, removal of personalty from leased premises, KRS 383.070 , 383.080 .

Legislation, local or special, authorizing the creation, extension, enforcement, impairment or release of liens prohibited, Const., § 59(22).

Levees, lien on land within territory for establishment of or repairs on, KRS 266.180 .

Occupying claimant, lien of on improvements, KRS 381.550 .

Passways, lien on land for maintenance, KRS 381.650 .

Prostitution, costs of action for abatement of nuisance constitute a lien on realty, KRS 233.130 .

Public works, lien on benefited property for, KRS 94.314 , 94.322 .

Restitution of injured or stolen property, lien on estate of criminal, KRS 431.200 .

Taxes paid by person other than owner of property constitute a lien on the property, KRS 134.080 .

Trust company, lien upon personal property deposited with, KRS 287.210 .

Unemployment compensation, lien for unpaid contributions, KRS 341.310 .

Vendor’s lien on real estate conveyed for purchase money, KRS 382.070 .

Warehousemen, lien of, KRS 359.020.

Kentucky Law Journal.

Winn, The Examination of Titles in Kentucky, 27 Ky. L.J. 194 (1939).

Stevens, The Development of Labor Law in Kentucky, 28 Ky. L.J. 160 (1940).

Moore, Leslie’s Admx. et al. v. Branham et al., 31 Ky. L.J. 354 (1943).

Comments, Mechanics’ Liens — Potential Pitfall for the Homeowner, 62 Ky. L.J. 278 (1973-1974).

Comments, Fuentes v. Shevin: The Application Of Constitutional Due Process To The Garageman’s Lien In Kentucky, 62 Ky. L.J. 1133 (1973-1974).

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Kentucky Law Survey, Weinberg, Graham and Stipanowich, Modernizing Kentucky’s Uniform Commercial Code, 73 Ky. L.J. 515 (1984-85).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Northern Kentucky Law Review.

Yzenbaard, “Kentucky Real Property Law in Review”, see pgs. 407-417 for an analysis of recent cases, 25 N. Ky. L. Rev. 2 (1998).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Mechanic’s and Materialman’s Lien Statement, Form 153.01.

Caldwell’s Kentucky Form Book, 5th Ed., Notice of Intention to Hold Property Liable, Form 153.02.

Caldwell’s Kentucky Form Book, 5th Ed., Petition to Enforce Mechanic’s Lien, Form 153.04.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

Petrilli, Kentucky Family Law, Business Transactions, § 15.6.

ALR

Filing and recording. 85 A.L.R.2d 971.

Mechanics’ lien for grading, clearing, filling, excavating, and the like. 39 A.L.R.2d 866.

Mechanics’ lien for services in connection with subdividing land. 87 A.L.R.2d 1004.

Priority as between mechanics’ lien and purchase-money mortgage. 73 A.L.R.2d 1407.

Priority between mechanics’ liens and advances made under previously executed mortgage. 80 A.L.R.2d 179.

Right to mechanics’ lien for “labor” or “work,” in case of preparatory or fabricating work done on materials intended for use and used in particular building or structure. 25 A.L.R.2d 1370.

Right to mechanics’ lien upon leasehold for supplying labor or material in attaching or installing fixtures. 42 A.L.R.2d 685.

Sufficiency of notice under statute making notice by owner of nonresponsibility necessary to prevent mechanics’ lien. 85 A.L.R.2d 949.

Swimming pools and lienable items within mechanics’ lien statute. 95 A.L.R.2d 1371.

376.020. Lien follows property if executory contract for sale is rescinded.

If the owner claims by executory contract and for any cause the contract is rescinded or set aside, the lien provided for in KRS 376.010 shall follow the property into the hands of the person to whom the property may come or with whom it may remain by reason of the rescissions, but only to the extent that the actual value of the property is enhanced by the improvements so placed upon it.

History. 2464: amend. Acts 1944, ch. 173, § 22.

NOTES TO DECISIONS

1.Construction.

“Owner” in KRS 376.010 and 376.080 must be construed in the light of the language of this section as embracing or meaning an owner in fee simple or by an executory contract but vendor’s purchase money lien was superior to the lien for material. T. W. Spinks Co. v. Pachoud Bros., 263 Ky. 119 , 92 S.W.2d 50, 1936 Ky. LEXIS 154 ( Ky. 1936 ).

2.Application.

This section had no application where person claiming mechanics’ lien was purchaser of land under executory contract which was canceled for nonperformance. Haas v. Fidelity & Columbia Trust Co., 281 Ky. 671 , 136 S.W.2d 1088, 1940 Ky. LEXIS 92 ( Ky. 1940 ).

3.Contract.
4.— Penalty Clause.

A penalty clause in the contract between the vendee and the mechanic is not, as against the vendor, covered by the lien. Stark v. Petty Bros., 195 Ky. 445 , 243 S.W. 50, 1922 Ky. LEXIS 379 ( Ky. 1922 ), overruled, Scottsville Oil Co. v. Dye Bros., 203 Ky. 496 , 262 S.W. 615, 1924 Ky. LEXIS 937 ( Ky. 1924 ).

5.Lease.

A lease with option of purchase is not an executory contract for sale. Luigart v. Lexington Turf Club, 130 Ky. 473 , 113 S.W. 814, 1908 Ky. LEXIS 300 ( Ky. 1908 ).

6.Lien.
7.— Enforcement.

The owner who represents that he has sold his property and causes the mechanic to deal with the purported vendee is estopped from claiming title and resisting the enforcement of the lien. Stark v. Petty Bros., 195 Ky. 445 , 243 S.W. 50, 1922 Ky. LEXIS 379 ( Ky. 1922 ), overruled, Scottsville Oil Co. v. Dye Bros., 203 Ky. 496 , 262 S.W. 615, 1924 Ky. LEXIS 937 ( Ky. 1924 ).

The mechanic is entitled to enforce his lien for his entire claim where the owner represents he has sold his property and causes the mechanic to deal with the purported vendee. Scottsville Oil Co. v. Dye Bros., 203 Ky. 496 , 262 S.W. 615, 1924 Ky. LEXIS 937 ( Ky. 1924 ).

8.Pleadings.

The petition should allege that the labor or material enhanced the actual value of the property in the amount of his lien. Riehm v. Louis P. Hyman & Co., 161 Ky. 519 , 170 S.W. 1189, 1914 Ky. LEXIS 101 ( Ky. 1914 ).

9.Burden of Proof.

The burden is on plaintiff to show the extent to which the actual value of the property has been enhanced. Riehm v. Louis P. Hyman & Co., 161 Ky. 519 , 170 S.W. 1189, 1914 Ky. LEXIS 101 ( Ky. 1914 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.030. Eviction of owner — Rights of lienholder.

If the owner or claimant of the property is evicted from possession by the judgment of a court, and is entitled to compensation for improvements, the holder of a lien under KRS 376.010 shall, to the extent of the lien, debt and costs, be substituted to the rights of the person evicted and shall have satisfaction of his debt and costs out of the sum adjudged for improvements.

History. 2465.

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.040. Forfeiture or surrender of lease — Removal of improvements.

If labor is performed or materials furnished by contract with the lessee of real property for a term of years, and if before the expiration of the term by lapse of time the lessee’s interest therein shall, from any cause, be forfeited or surrendered to the lessor, and if the lessor refuses to pay for the labor or materials furnished, the person furnishing the labor or materials may remove the same from the premises, if this can be done without material injury to any previous improvement on the premises.

History. 2466.

NOTES TO DECISIONS

1.Lease.
2.— Forfeiture.

The sale of lessee’s property to satisfy his debts is not a forfeiture of the lease. Goodin & Barney Coal Co. v. Southern Elkhorn Coal Co., 219 Ky. 827 , 294 S.W. 792, 1927 Ky. LEXIS 456 ( Ky. 1927 ).

Failure of the court to adjudge forfeiture of the lease, although requested by the lessor, was not prejudicial to materialman when court adjudged a sale of the improvements for the payment of the liens in their proper priority. Mayfield Planing Mills, Inc. v. Jackson Purchase Stock Yards Co., 248 Ky. 449 , 58 S.W.2d 617, 1933 Ky. LEXIS 236 ( Ky. 1933 ).

One furnishing labor or material to a lessee has no right to tender delinquent rent to lessor under KRS 383.080 where the lease reserves an option to the grantor to forfeit the lease for nonpayment of rent. Mayfield Planing Mills, Inc. v. Jackson Purchase Stock Yards Co., 248 Ky. 449 , 58 S.W.2d 617, 1933 Ky. LEXIS 236 ( Ky. 1933 ).

3.— Knowledge of Provisions.

One furnishing labor or material to a lessee is chargeable with knowledge of all provisions of the lease which affect his lien. Mayfield Planing Mills, Inc. v. Jackson Purchase Stock Yards Co., 248 Ky. 449 , 58 S.W.2d 617, 1933 Ky. LEXIS 236 ( Ky. 1933 ).

4.Lien.
5.— Priority.

The lien of one furnishing labor or material to a lessee is inferior to lessor’s lien for rent. Mayfield Planing Mills, Inc. v. Jackson Purchase Stock Yards Co., 248 Ky. 449 , 58 S.W.2d 617, 1933 Ky. LEXIS 236 ( Ky. 1933 ).

6.Improvements.
7.— Removal.

Person who installed printing press for lessee in leased building did not have a lien under KRS 376.010 and could not remove the printing press under this section. In re Louisville Daily News & Enquirer, 20 F. Supp. 465, 1937 U.S. Dist. LEXIS 1641 (D. Ky. 1937 ).

Cited:

Johnson v. Commonwealth, 709 S.W.2d 838, 1986 Ky. App. LEXIS 1063 (Ky. Ct. App. 1986), cert. denied, Johnson v. Kentucky, 479 U.S. 865, 107 S. Ct. 222, 93 L. Ed. 2d 150, 1986 U.S. LEXIS 4055 (1986).

Research References and Practice Aids

Cross-References.

Owner of estate less than fee may remove improvements, KRS 381.450 .

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.050. Mortgage for building or improvement purposes to state facts — Misapplication of proceeds.

  1. Any mortgage taken to secure a loan made for the purpose of erecting, improving or adding to a building shall state such facts.
  2. No person shall willfully misappropriate or misapply the proceeds received from such a loan.

History. 2467.

NOTES TO DECISIONS

1.Misapplication of Proceeds.

The payment of court costs and attorney fees does not amount to wilful misappropriation or misapplication of funds from a mortgage taken for the purpose of erecting or improving a building. Mathis v. Ivor Lands, Inc., 442 S.W.2d 301, 1969 Ky. LEXIS 260 ( Ky. 1969 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.060. Sale or mortgage of property subject to lien — Proceeds to be applied to payment of lien.

If the owner of any legal or equitable interest in land or improvements thereon contracts for labor or material used in the erection, repair or improvement of any structure thereon under such circumstances that a lien for the payment therefor may attach to the property, and sells or mortgages the property before the expiration of the time provided for the filing and recording of a mechanic’s or materialman’s lien, he shall, on receiving the consideration for the sale or the proceeds of the loan, pay in full any sum owing for the labor and materials, unless released in writing by the person furnishing the labor or materials. If the sum received is insufficient to make such payment in full, the owner shall make pro rata payments on all claims for such labor and materials.

History. 2467a-1.

NOTES TO DECISIONS

1.Purpose.

Even if failure to file separate statements of lien against separate lots by materialman who supplied materials for houses on separate, noncontiguous lots, might be fatal to enforcing lien on property itself, that error should not defeat purpose of this section to make owner liable where he violated section by selling property to innocent purchasers without protecting prospective lienors and thereafter received consideration from purchasers. Will B. Miller Co. v. Peerless Lumber Co., 284 Ky. 93 , 143 S.W.2d 735, 1940 Ky. LEXIS 430 ( Ky. 1940 ).

2.Construction.

This section does not modify or repeal the homestead laws. In re Lyon, 35 F.2d 251, 1929 U.S. Dist. LEXIS 1578 (D. Ky. 1929 ).

3.Application.

This section does not affect the matter of priority between the mortgage lien and mechanics’ lien. Weil v. B. E. Buffaloe & Co., 251 Ky. 673 , 65 S.W.2d 704, 1933 Ky. LEXIS 923 ( Ky. 1933 ).

Unless claimant has valid potential or actual mechanics’ or materialman’s lien he may not avail himself of protection of this section. Will B. Miller Co. v. Peerless Lumber Co., 284 Ky. 93 , 143 S.W.2d 735, 1940 Ky. LEXIS 430 ( Ky. 1940 ).

4.Sale by Owner.
5.— Liability.

Where action is brought by materialman to recover money judgment for balance due from owner who has sold property to innocent purchasers without protecting those entitled to liens under this section, the consideration received by the owner without directions as to its application should be applied by court to effectuate legislative purpose disclosed by this section. Will B. Miller Co. v. Peerless Lumber Co., 284 Ky. 93 , 143 S.W.2d 735, 1940 Ky. LEXIS 430 ( Ky. 1940 ).

Where owner sold houses prior to the expiration of the time for filing subcontractor’s lien and at a time when his lien might attach to the houses, owner became liable to pay subcontractor out of the proceeds of the sale. Will B. Miller Co. v. Laval, 283 Ky. 55 , 140 S.W.2d 376, 1940 Ky. LEXIS 273 ( Ky. 1940 ).

6.Transfer of Action.

Where it was not shown that other mechanics and materialmen were claiming liens against the property and that the proceeds from sale of property were insufficient to pay the claims, failure to transfer the action to equity, if error, was not prejudicial since the action proceeded and was tried practically as such. Will B. Miller Co. v. Laval, 283 Ky. 55 , 140 S.W.2d 376, 1940 Ky. LEXIS 273 ( Ky. 1940 ).

7.Limitation.

The period of limitation applicable to the right created by this section was not the period provided in KRS 376.090 , applicable to the enforcement of mechanics’ and materialmen’s liens, but the period of five years provided in KRS 413.120 for an action upon a liability created by statute when no other time is fixed by the statute creating the liability. Paterson v. Miller, 283 Ky. 60 , 140 S.W.2d 379, 1940 Ky. LEXIS 274 ( Ky. 1940 ).

8.Indictment.

An indictment under KRS 376.990(2) for violating this section must allege that the mortgage was executed before the time to file the lien had expired, and that the lien had not been perfected at the time the mortgage was executed. Wolking v. Commonwealth, 236 Ky. 741 , 33 S.W.2d 647, 1930 Ky. LEXIS 809 ( Ky. 1930 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.070. Contractor or architect to apply payments to claims — Exception where lien waived.

  1. Any contractor, architect or other person who builds, repairs or improves the property of another under such circumstances that a mechanic’s or materialman’s lien may be imposed on the property shall, from the proceeds of any payment received from the owner, pay in full all persons who have furnished material or performed labor on the property.
  2. If any payment by the owner to the contractor, architect or other person is not sufficient to pay in full all bills for material and labor, then such claims shall be paid on a pro rata basis to the amount of payments received, unless otherwise agreed between the contractor, architect or other person and the holder of the claim for material or labor.
  3. This section shall not apply where persons furnishing material or performing labor have waived in writing their right to file mechanics’ or materialmen’s liens.

History. 2467b-1 to 2467b-3.

NOTES TO DECISIONS

1.Construction.

This section is not made dependent upon the assertion of a lien as provided elsewhere in this chapter but requires payment to materialman where the circumstances are such that a “lien may be imposed.” Henry A. Petter Supply Co. v. Hal Perry Constr. Co., 563 S.W.2d 749, 1978 Ky. App. LEXIS 489 (Ky. Ct. App. 1978).

This section is both preceded and followed by sections governing materialmen’s liens, but is not made dependent on the assertion of a lien. It creates a legal obligation on the contractor to pay in full all claims for material and labor out of the sum received on the primary contract, and if the amount received by the contractor is insufficient to pay all claims, they must be paid on a pro rata basis. Wehr Constructors, Inc. v. Steel Fabricators, Inc., 769 S.W.2d 51, 1988 Ky. App. LEXIS 197 (Ky. Ct. App. 1988).

This section does not require contractors to hold funds for the benefit of any person, or that the contractor is to act in a “fiduciary capacity.” It does not utilize the term “trust” or even the term “fund”; it simply directs the course of payments received, and nothing more. Riden v. Sigler (In re Sigler), 196 B.R. 762, 1996 Bankr. LEXIS 671 (Bankr. W.D. Ky. 1996 ).

2.Prorating.

Contractor could not complain that trial court erred in failing to decide the claim of a creditor not a party to the appeal since the failure to pro-rate affects only the creditors and only they may complain. Mathis v. Ivor Lands, Inc., 442 S.W.2d 301, 1969 Ky. LEXIS 260 ( Ky. 1969 ).

A contractor clearly had a legal obligation to pay in full all claims for material and labor furnished on a residence out of the sum of $22,000 received on the contract from the owner, and if the amount paid by the owner was not sufficient to pay all such bills, then it was the contractor’s duty to pay all bills for material and labor on a pro rata basis. Blanton v. Commonwealth, 562 S.W.2d 90, 1978 Ky. App. LEXIS 466 (Ky. Ct. App. 1978).

3.Criminal Liability.

If this section and KRS 376.990 (2) were construed to impose absolute criminal liability upon a contractor acting in good faith for a simple breach of contract, the statute probably would violate § 18 of the Kentucky Constitution which restricts imprisonment for debt and accordingly the statutes must be construed to require a culpable mental state before a contractor can be guilty of even a misdemeanor. Blanton v. Commonwealth, 562 S.W.2d 90, 1978 Ky. App. LEXIS 466 (Ky. Ct. App. 1978).

This section imposes an express trust upon contractors and misuse of funds from such trusts is actionable under 11 USCS § 523(a)(4). Fiduciary duties are imposed on a contractor under this section prior to and independent of any claim of misappropriation although a contractor may be held criminally liable for any misappropriation or defalcation which occur. In re Weedman, 65 B.R. 288, 1986 Bankr. LEXIS 5215 (Bankr. W.D. Ky. 1986 ).

While this section imposes a duty upon a building contractor to apply payments from the property owner to the claims of the subcontractors and materialmen who have provided labor and materials, KRS 376.990 enforces that duty by imposing a criminal penalty in the event that a contractor fails to comply with those obligations. Accordingly KRS 376.990 converts this section into the nature of a criminal statute and any trust thereby created only arises upon the contractor’s misappropriation of funds. Riden v. Sigler (In re Sigler), 196 B.R. 762, 1996 Bankr. LEXIS 671 (Bankr. W.D. Ky. 1996 ).

4.Trust for Materialman.

Under this section requiring contractors to pay, in full, all materialmen from funds they receive from the owner, the property interest conferred upon the materialman is greater than the interest which may be secured by filing the statutory materialmen’s lien under KRS 376.210 and creates a trust for the materialman, wherein its claim of title transcends an attack by the trustee in bankruptcy, whether under a hypothetical lien creditor or a voidable preference theory, since the funds pass outside the bankrupt’s estate; thus, the materialman has an enforcible interest in the trust fund represented by checks jointly payable to the debtor and materialman creditor. In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ), disapproved, Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ).

This section does not expressly create a trust fund in accounts receivable assigned to materialman. Thus, such accounts were “property” of the taxpayer/debtor to which federal tax lien attached. In re Dave Thomas Co., 51 B.R. 66, 1985 Bankr. LEXIS 5809 (Bankr. W.D. Ky. 1985 ).

This section does not create a trust fund by implication for the benefit of unpaid materialmen; therefore, the funds due under the contract were the property of the contractor and subject to levy by the Internal Revenue Service. Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ), cert. denied, 484 U.S. 817, 108 S. Ct. 72, 98 L. Ed. 2d 36, 1987 U.S. LEXIS 3579 (U.S. 1987).

5.Supplies.

This section imposes upon building contractors a fiduciary duty only with respect to “the proceeds of any payment received from the owner” and could not be applied to “supplies” as well as “proceeds”; consequently, subrogee for suppliers to bankrupt contractor could not recover supplies in contractor’s possession at time of bankruptcy. In re Jeanes Mechanical Contractors, Inc., 32 B.R. 657, 1983 Bankr. LEXIS 5493 (Bankr. W.D. Ky. 1983 ).

Cited:

Gramatan-Sullivan, Inc. v. Koslow, 143 F. Supp. 641, 1956 U.S. Dist. LEXIS 3006 (D.N.Y. 1956), aff’d, 240 F.2d 523, 1957 U.S. App. LEXIS 3376 (2d Cir. N.Y. 1957); American States Ins. Co. v. Glover Constr. Co., 30 B.R. 873, 1983 Bankr. LEXIS 6182 (Bankr. W.D. Ky. 1983 ); In re Lafollette Sheet Metal, Inc., 35 B.R. 634, 1983 Bankr. LEXIS 4874 (Bankr. E.D. Tenn. 1983); Taylor v. Commonwealth, 799 S.W.2d 818, 1990 Ky. LEXIS 134 ( Ky. 1990 ).

Opinions of Attorney General.

The only method of making a valid sale of a motor vehicle for storage and towing charges is by action to enforce the lien created in this section. OAG 61-342 .

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.075. Engineers’, architects’, landscape architects’, real estate brokers’, and land surveyors’ liens — When lien not required of real estate broker — Filing statement of amount claimed.

  1. Any professional engineer, licensed architect, licensed landscape architect, real estate broker, or professional land surveyor who performs professional services or services as defined in KRS 322.010(4) for professional engineers, KRS 323.010(3) for architects, KRS 323A.010(3) for landscape architects, KRS 324.010(1) for real estate brokers, and KRS 322.010(10) for professional land surveyors shall have a lien on the building, structure, land, or project relative to which the services were performed, to secure the amount of the charges for services with interest as provided in KRS 360.040 and costs.
  2. The provisions of KRS 376.010(1) and (2) shall determine when a lien created under this section shall take precedence over a mortgage or other contract lien or bona fide conveyance for value without notice.
  3. No person who has not contracted directly with the owner or his agent shall acquire a lien under this section.
  4. Any lien provided for under this section shall be dissolved unless the claimant, within six (6) months after he ceases to provide services, files in the office of the county clerk of the county in which the property is situated a statement of the amount due the claimant, with all just credits and setoffs known to him, together with a description of the property intended to be covered by the lien sufficiently accurate to identify it, the name of the owner, if known, and whether the services were furnished by contract with the owner or with a contractor or architect. This statement shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf.
  5. Any lien created under this section shall be dissolved unless an action is brought to enforce the lien within twelve (12) months from the day of filing the statement in the clerk’s office as required by subsection (4) of this section. If the lienholder complies with all filing requirements under this section, and does so within the time fixed, his lien shall be valid and effective against any creditor of, or bona fide or other purchaser from, the owner of the property.
  6. The provisions of this section shall in no way abridge or conflict with the provisions of KRS 376.210 which provide for liens on public improvements, and any potential lien or valid lien of a professional engineer, architect, landscape architect, real estate broker, or professional land surveyor on a public improvement shall be governed by KRS 376.210 .
  7. No real estate broker shall acquire a lien under this section relative to newly constructed residential real estate unless the purchaser has agreed in writing to directly compensate such broker for performing brokerage services related to the transaction.
  8. No real estate broker shall acquire a lien under this section unless:
    1. The owner or the owner’s authorized agent:
      1. Lists the subject property with the broker under the terms of a written agreement to sell, lease, or otherwise convey any interest in the subject property; or
      2. Agrees in a written agreement to pay the broker a fee for his or her services as a buyer’s representative; and
    2. The broker or the broker’s affiliated sales associate provides licensed services that result, during the term of a written agreement described in paragraph (a) of this subsection, in the procuring of a person or entity ready, willing, and able to purchase, lease, or otherwise accept a conveyance of the property or any interest in the property:
      1. Upon terms contained in a written agreement described in paragraph (a) of this subsection; or
      2. Upon terms that are otherwise acceptable to the owner or the owner’s authorized agent as evidenced by a written agreement to convey any interest in the property signed by the owner or the owner’s authorized agent.

History. Enact. Acts 1974, ch. 270, § 1; 1978, ch. 384, § 502, effective June 17, 1978; 1984, ch. 111, § 151, effective July 13, 1984; 1992, ch. 118, § 1, effective July 14, 1992; 1998, ch. 214, § 45, effective January 1, 1999; 2002, ch. 107, § 1, effective July 15, 2002.

NOTES TO DECISIONS

1.Engineer’s Lien.

Engineer’s lien was properly filed, where the engineer was licensed and he performed engineering services. Perkins v. Daugherty, 722 S.W.2d 907, 1987 Ky. App. LEXIS 418 (Ky. Ct. App. 1987).

Cited:

Guarantee Electric Co. v. Big Rivers Electric Corp., 669 F. Supp. 1371, 1987 U.S. Dist. LEXIS 12361 (W.D. Ky. 1987 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.080. Lien dissolved unless statement filed with county clerk and copy mailed to property owner — Form of statement.

  1. Any lien provided for in KRS 376.010 shall be dissolved unless the claimant, within six (6) months after he ceases to labor or furnish materials, files in the office of the county clerk of the county in which the building or improvement is situated a statement of the amount due him, with all just credits and set-offs known to him, together with a description of the property intended to be covered by the lien sufficiently accurate to identify it, the name of the owner, if known, and whether the materials were furnished or the labor performed by contract with the owner or with a contractor or subcontractor. Lien statement forms shall require the name and address of the claimant. If the claimant is a corporation, the statement shall require the name and address of the corporation’s process agent, or some other address at which service of process under the Rules of Civil Procedure may be accomplished. If no name and address is included in the statement, service of process in an action involving the real property may be accomplished by serving the person who signs the lien statement. This statement shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf. The claimant shall send by regular mail a copy of the statement to the property owner at his last known address within seven (7) days of filing the statement with the county clerk. Any lien provided for in KRS 376.010 shall be dissolved if a copy of the statement is not sent to the property owner as provided in this subsection.
  2. The county clerk shall endorse upon each statement the date of its filing, and shall make an abstract of the statement in a book to be kept by him for that purpose, properly endorsed and indexed, containing the date of filing, the name of the person seeking to enforce the lien, the amount claimed, the name of the person against whose property the lien is filed, and a description of the property charged with the lien. The clerk shall receive a fee pursuant to KRS 64.012 from the person filing the statement as full compensation, which shall be taxed and collected as other costs.

History. 2468, 2469: amend. Acts 1978, ch. 84, § 13, effective June 13, 1978; 1978, ch. 384, § 503, effective June 13, 1978; 1988, ch. 259, § 2, effective July 15, 1988; 1990, ch. 468, § 1, effective July 13, 1990.

NOTES TO DECISIONS

1.Construction.

KRS 376.010(2) provides for a preliminary notice providing for a priority of a mechanics’ lien, whereas this section provides for a final notice which preserves the notice for a given time. Scheas v. Boston & Paris, 125 Ky. 535 , 101 S.W. 942, 31 Ky. L. Rptr. 157 , 1907 Ky. LEXIS 312 ( Ky. 1907 ).

Whether the owner has knowledge of the labor or material is immaterial if statutory requirements have been met since lien acts only in rem against property. Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ).

Compliance with the recordation and notice provisions of this section and KRS 376.010 will preserve and perfect the lien, but to protect it against a bona fide purchaser for value without notice KRS 376.010 expressly requires that the claimant get to the courthouse first. Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

The statutory provisions for perfecting a lien must be strictly followed; unless the lien has been properly perfected, there is nothing to enforce by a suit, and there is no basis for a lien claim in a complaint. Laferty v. Wickes Lumber Co., 708 S.W.2d 107, 1986 Ky. App. LEXIS 1047 (Ky. Ct. App. 1986).

A materialman’s lien is created before a lien statement is filed, and the filing of the statement serves to perfect a lien that has already been created at the time the labor or materials were first provided. Metal Sales Mfg. Corp. v. Newton, 12 S.W.3d 691, 1999 Ky. App. LEXIS 37 (Ky. Ct. App. 1999).

2.Application.

A suit brought under KRS 378.030 by a materialman need not show compliance with this section. Taylor v. Rapp Lumber Co., 248 Ky. 560 , 59 S.W.2d 5, 1933 Ky. LEXIS 272 ( Ky. 1933 ).

3.Statement.
4.— Contents.

The statement need not incorporate the complete account. A statement of the unpaid balance is sufficient. Dobson v. Thurman, 101 S.W. 310, 30 Ky. L. Rptr. 1331 (1907).

A recital in a statement that the contract was made “at the instance and request of said E. C. Hegan, his agents and contractors,” while not commendable, is sufficient allegation of a contract with the owner, but is not a sufficient allegation of a contract with the contractor. Tischendorf-Chreste Lumber Co., 134 Ky. 1 , 119 S.W. 163, 1909 Ky. LEXIS 342 ( Ky. 1 909).

The provision requiring the statement to specify with whom the contract was made must be substantially complied with. Tischendorf-Chreste Lumber Co., 134 Ky. 1 , 119 S.W. 163, 1909 Ky. LEXIS 342 ( Ky. 1 909).

The requirement that the statement contain “a description of the property-sufficiently accurate to identify it” is mandatory. Lebanon Lumber Co. v. Clarke, 151 Ky. 543 , 152 S.W. 550, 1913 Ky. LEXIS 518 ( Ky. 1913 ).

The statement itself must furnish a description that will enable a person familiar with the locality to identify it, and that will exclude all other property. Powers v. Brewer, 238 Ky. 579 , 38 S.W.2d 466, 1931 Ky. LEXIS 290 ( Ky. 1931 ). See Tackett v. Pikeville Supply & Planing Mill Co., 249 Ky. 835 , 61 S.W.2d 881, 1933 Ky. LEXIS 612 ( Ky. 1933 ).

“Owner” implies either an owner in fee or by executory contract. T. W. Spinks Co. v. Pachoud Bros., 263 Ky. 119 , 92 S.W.2d 50, 1936 Ky. LEXIS 154 ( Ky. 1936 ).

Mechanics’ lien statement, which incorrectly described lots on which house was located, was fatally defective, though containing correct description of houses and lots on each side to aid in identification, since description must be complete and exclusive, and not depend on extrinsic facts. Headrick v. Waterbury, 277 Ky. 288 , 126 S.W.2d 411, 1939 Ky. LEXIS 645 ( Ky. 1939 ).

Contractor’s first lien statement complied with KRS 376.080 and was timely, because the signature of the contractor’s attorney and agent on the first lien statement and the prepared by statement listing the attorney’s name and address, but not separately signed by him, was sufficient under KRS 382.335(1). Since the county clerk improperly rejected the first lien statement, the doctrine of equitable tolling allowed the second lien statement to relate back to the filing of the first lien statement. PBI Bank, Inc. v. Schnabel Found. Co., 392 S.W.3d 421, 2013 Ky. App. LEXIS 13 (Ky. Ct. App. 2013).

5.—Mistake.

A mere error in describing the boundary does not invalidate the lien. Mivelaz v. Johnson, 124 Ky. 251 , 98 S.W. 1020, 30 Ky. L. Rptr. 389 , 1907 Ky. LEXIS 180 ( Ky. 1907 ).

A mistake in the form of the owner’s name as contained in the statement does not affect the validity of the lien. Mivelaz v. Johnson, 124 Ky. 251 , 98 S.W. 1020, 30 Ky. L. Rptr. 389 , 1907 Ky. LEXIS 180 ( Ky. 1907 ).

Inclusion of husband as an owner, when wife was sole owner, is not fatal. Tackett v. Pikeville Supply & Planing Mill Co., 249 Ky. 835 , 61 S.W.2d 881, 1933 Ky. LEXIS 612 ( Ky. 1933 ).

Circuit court properly granted the property owner summary judgment on the issue of a mechanic's lien where a tenant's contractor's lien was defective for failing to use the language “subscribed and sworn to,” as required by Ky. Rev. Stat. Ann. § 376.080 , and statements the owner made in the tenant's bankruptcy proceeding did not prevent it from challenging the lien's validity. Prodigy Constr. Corp. v. Brown Capital, Ltd., 525 S.W.3d 108, 2017 Ky. App. LEXIS 400 (Ky. Ct. App. 2017).

6.— Filing.

The statement may be filed by the agent who executed it on behalf of the claimant. Menne v. American Radiator Co., 150 Ky. 151 , 150 S.W. 24, 1912 Ky. LEXIS 851 ( Ky. 1912 ).

Filing of the statement required by KRS 376.010(2) is not essential to the creation of a lien if the statement required herein is filed. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ), rehearing denied, Grigsby v. Lexington & E. R. Co., 152 Ky. 164 , 153 S.W. 232, 1913 Ky. LEXIS 633 ( Ky. 1913 ). See Kentucky Lumber & Mill Work Co. v. Kentucky Title Sav. Bank & T. Co., 184 Ky. 244 , 211 S.W. 765, 1919 Ky. LEXIS 61 ( Ky. 1919 ).

7.— — Time.

The provision for filing statement within six (6) months is mandatory. Lebanon Lumber Co. v. Clarke, 151 Ky. 543 , 152 S.W. 550, 1913 Ky. LEXIS 518 ( Ky. 1913 ). See Woods v. Constantine, 217 Ky. 195 , 289 S.W. 282, 1926 Ky. LEXIS 77 ( Ky. 1926 ).

That statement required by this section was filed within six (6) months from the date the last labor and material was furnished was adequately supported by the evidence. Whitaker v. Howell & Goins, 283 Ky. 738 , 143 S.W.2d 179, 1940 Ky. LEXIS 404 ( Ky. 1940 ).

Where the record shows the statement was filed within less than a month of the furnishing of the last item of material it is sufficient to comply with this section. Siler v. Corbin Bldg. & Supply Co., 296 Ky. 122 , 176 S.W.2d 250, 1943 Ky. LEXIS 111 ( Ky. 1943 ).

8.— — — Extension.

When the period for filing the statement is extended by an amendatory statute, contractors who have not filed and who are not yet barred under the former statute may file within the extended period provided by the amendment. But, if they do so, all their right must be determined under the later act. Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ). See Fox v. Somerset Odd Fellows Hall & Auditorium Co., 54 S.W. 835, 21 Ky. L. Rptr. 1272 , 1900 Ky. LEXIS 332 (Ky. Ct. App. 1900); Vass v. Otting, 58 S.W. 433, 22 Ky. L. Rptr. 551 , 1900 Ky. LEXIS 308 (Ky. Ct. App. 1900); Kinsy v. Eilerman, 110 Ky. 948 , 62 S.W. 1009, 23 Ky. L. Rptr. 913 , 1901 Ky. LEXIS 145 ( Ky. 1901 ); Harris' Assignee v. Gardner, 68 S.W. 8, 24 Ky. L. Rptr. 103 , 1902 Ky. LEXIS 394 (Ky. Ct. App. 1902).

The time for filing lien cannot be prolonged by furnishing labor or material that is trivial and not necessary for the completion of the contract. Vogt v. Cannon Electric Co., 245 Ky. 766 , 54 S.W.2d 338, 1932 Ky. LEXIS 684 ( Ky. 1932 ).

Minor finishing work done at the request of the owner may revive and renew the running of the time limits for notice and recording under KRS 376.010 and this section. Walker v. Valley Plumbing, Inc., 370 S.W.2d 136, 1963 Ky. LEXIS 71 ( Ky. 1963 ).

9.— Amendment.

A material defect in the statement may not be cured by an amendment to the petition after the time for filing the statement has expired. Lebanon Lumber Co. v. Clarke, 151 Ky. 543 , 152 S.W. 550, 1913 Ky. LEXIS 518 ( Ky. 1913 ).

A statement may be amended within the statutory period. Andrews v. Wilson, 253 Ky. 237 , 69 S.W.2d 343, 1934 Ky. LEXIS 639 ( Ky. 1934 ).

A corrected or amended statement of lien, filed within the statutory period, to replace an incorrect statement of lien previously filed, becomes the original claim or statement and the one (1) -year period for filing an action to enforce the lien commences with the filing of the corrected statement. Hellman Lumber Co. v. Landrum, 639 S.W.2d 379, 1982 Ky. App. LEXIS 248 (Ky. Ct. App. 1982).

10.Priority.

An independent contractor who furnished materials to a mining company and filed a statement of his claim in the county clerk’s office as required by this section was properly refused a labor lien under KRS 376.150 and his lien under this section was inferior to royalty lien, labor liens and mortgage lien filed prior to his lien. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ).

11.Oath.

When the claimant made oath to the statement, the mere failure of the clerk to fill out and sign the jurat is not fatal. Dobson v. Thurman, 101 S.W. 310, 30 Ky. L. Rptr. 1331 (1907).

An acknowledgment of the statement is insufficient; it must be sworn to. Indiana Quarries Co. v. Simms, 158 Ky. 415 , 165 S.W. 422, 1914 Ky. LEXIS 636 ( Ky. 1914 ).

Where the plaintiffs sought to enforce certain mechanics’ and materialmen’s liens which had been acknowledged, but not “sworn and subscribed to”, as required by subsection (1) of this section, the liens were invalid since the language of this section is mandatory; the language of KRS 423.200 , which removed the requirement that instruments be sworn in order to be recorded, did not lift the requirement that mechanics’ liens must be sworn to in order to be valid, since the specific language of this section, concerning perfection of a lien governs over the general provisions of KRS 423.200 . Hub City Wholesale Electric, Inc. v. Mik-Beth Electrical Co., 621 S.W.2d 242, 1981 Ky. App. LEXIS 288 (Ky. Ct. App. 1981).

12.Dissolution.

Where lien claim perfected and valid under this section was filed in bankruptcy proceedings before expiration of twelve (12) months from date of filing of statement of lien as established by KRS 376.090 , it was a secured claim in the bankruptcy proceedings and had the effect of an action to enforce the lien and lien was not dissolved by failure of lienholder to institute proceedings as provided in KRS 376.090 . American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

A materialman acquires no lien on property for which materials are furnished unless his right to the lien is completed and perfected by filing the statement required by this section. Fugate v. Taulbee Lumber & Coal Co., 294 Ky. 422 , 172 S.W.2d 61, 1943 Ky. LEXIS 478 ( Ky. 1943 ).

The lien was waived by failure to file statement in time. Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ).

13.Notice.

The two (2) types of notices enunciated in KRS 376.010 (3) and subsection (1) of this section are clearly distinct. KRS 376.010 (3) states that a mechanic’s lien will not be acquired unless the claimant, within 120 days after the last item of material and labor is furnished, gives notice to the owner of the property of its intent to hold the property liable and the amount for which a lien will be claimed. Subsection (1) of this section states that the lien acquired pursuant to KRS 376.010 will be dissolved unless the claimant, within six (6) months after it ceases to furnish material and labor, files a copy of its statement of mechanic’s lien in the office of the county clerk of the appropriate county and sends a copy of the statement to the property owner within seven (7) days of the filing. Neither statute provides that a notice given pursuant to one (1) section will satisfy the notice requirement of the other section. Middletown Engineering Co. v. Main Street Realty, Inc., 839 S.W.2d 274, 1992 Ky. LEXIS 149 ( Ky. 1992 ).

14.— Actual.

Actual notice does not serve as a substitute for the required statutory notice. Therefore, the perfected lien of the mechanic or materialman does not depend on the knowledge of the owner, but on whether the mechanic or materialman has followed the requirements of the statute as to notice and as to the filing of the statement required by the statute. The knowledge or the lack of knowledge by the owner is immaterial. Middletown Engineering Co. v. Main Street Realty, Inc., 839 S.W.2d 274, 1992 Ky. LEXIS 149 ( Ky. 1992 ).

Cited:

Ohio Oil Co. v. Smith-Haggard Lumber Co., 288 Ky. 278 , 156 S.W.2d 111, 1941 Ky. LEXIS 92 ( Ky. 1941 ); Minter Homes Corp. v. Forsythe, 297 Ky. 11 , 178 S.W.2d 829, 1944 Ky. LEXIS 645 ( Ky. 1944 ); Woodson Bend, Inc. v. Masters’ Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978); In re Brame, 26 B.R. 309, 1982 Bankr. LEXIS 5279 (Bankr. W.D. Ky. 1982 ).

Opinions of Attorney General.

Filing a lien in compliance with this section serves to preserve the lien for the duration of the statute of limitations and to give statutory notice of the existence of the lien so that any creditor or purchaser taking the affected property during that time takes subject to the lien. OAG 78-339 .

There is no reason why the requirements for releasing a lien should be any stricter than the requirements for the filing of the lien, thus a lien release is sufficient if it contains the following information required on lien statements: the amount due; any credits and set-offs; a description of the property; the name of the owner; whether the contract was with the owner or with a contractor; the name and address of the claimant; the lien release should be subscribed and sworn to by the person claiming the lien or by someone on his behalf, and a valid lien release may simply cite the lien statement by proper reference to the clerk’s abstract index, although the lien release still carries the requirement that it be notarized. OAG 91-213 .

Research References and Practice Aids

Kentucky Law Journal.

Winn, The Examination of Titles in Kentucky, 27 Ky. L.J. 194 (1939).

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Kentucky Law Survey, Catron, Wills, Probate and Real Property Law, 71 Ky. L.J. 333 (1982-83).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Mechanic’s and Materialman’s Lien Statement, Form 153.01.

Caldwell’s Kentucky Form Book, 5th Ed., Petition to Enforce Mechanic’s Lien, Form 153.04.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

376.090. Limitation on action to enforce lien — Priority of lien.

  1. Any lien provided for in KRS 376.010 shall be deemed dissolved unless an action is brought to enforce the lien within twelve (12) months from the day of filing the statement in the clerk’s office, as required by KRS 376.080 . If the debtor against whose property the lien is claimed dies before the expiration of the time prescribed for bringing the action, a further period of six (6) months from the date of the qualification of his personal representative shall be allowed within which the action may be brought.
  2. Any lien provided for in KRS 376.010 shall, if the lienholder complies with the requirements of KRS 376.080 and subsection (1) of this section, and does so within the time therein fixed, be valid and effectual against any creditor of, or bona fide or other purchaser from, the owner of the property.

History. 2470, 2477.

NOTES TO DECISIONS

1.Construction.

The statutory provisions for perfecting a lien must be strictly followed; unless the lien has been properly perfected, there is nothing to enforce by a suit, and there is no basis for a lien claim in a complaint. Laferty v. Wickes Lumber Co., 708 S.W.2d 107, 1986 Ky. App. LEXIS 1047 (Ky. Ct. App. 1986).

2.Application.

Where creditor argued that it had not received a preference from debtor because creditor was actually harmed by the agreed judgment, in reality no valuable rights were yielded by creditor in agreed judgment because creditor’s lien on debtor’s leases was subordinate to another party’s prior mortgage, enforcement of the liens was not sought within one (1) year, and the enforcement action was not brought in the county in which the interest existed. Perkins v. Petro Supply Co. (In re Rexplore Drilling), 971 F.2d 1219, 1992 U.S. App. LEXIS 17711 (6th Cir. Ky. 1992 ).

3.Lien.
4.— Dissolution.

If, by the terms of the construction contract, the claim does not mature by the time this period has expired, there is no lien unless the date is conditional upon giving of security which is not done. Cunningham v. Fischer, 48 S.W. 993, 20 Ky. L. Rptr. 1167 (1899).

The lien was waived by failure to file suit in time. Trustees Caldwell Institute v. Young, 63 Ky. 582 , 1864 Ky. LEXIS 2 ( Ky. 1864 ).

If, by the terms of the construction contract, the claim did not mature by the time this period had expired, there was no lien. Hardin v. Marble, 76 Ky. 58 , 1877 Ky. LEXIS 10 ( Ky. 1877 ).

5.— Counterclaim.

The mechanics’ lien may be presented by counterclaim in action by owner to cancel it. Wagner v. Swoope, 246 Ky. 19 , 54 S.W.2d 395, 1932 Ky. LEXIS 701 ( Ky. 19 32).

6.— Purchaser.

A mortgagee for value without actual or constructive notice is a bona fide purchaser. Kentucky Bldg. & Loan Ass'n v. Kister, 101 Ky. 321 , 41 S.W. 293, 19 Ky. L. Rptr. 494 , 1897 Ky. LEXIS 208 ( Ky. 1897 ).

7.— — Assumption.

Liens of materialmen were not affected or displaced by an agreement between seller and purchaser allocating the liens between property purchased and remaining property although the agreement was good as between the seller and purchaser. Ward v. Butcher, 263 Ky. 585 , 92 S.W.2d 741, 1936 Ky. LEXIS 188 ( Ky. 1936 ).

Where purchaser of property assumed liens and agreed to pay them and the liens increased by his failure to pay. Ward v. Butcher, 263 Ky. 585 , 92 S.W.2d 741, 1936 Ky. LEXIS 188 ( Ky. 1936 ).

8.Limitation.

The period of limitation applicable to the right created by KRS 376.060 was not the period provided in this section, applicable to the enforcement of mechanics’ and materialmen’s liens, but the period of five (5) years provided in KRS 413.120 for an action upon a liability created by statute when no other time is fixed by the statute creating the liability. Paterson v. Miller, 283 Ky. 60 , 140 S.W.2d 379, 1940 Ky. LEXIS 274 ( Ky. 1940 ).

The time limit for enforcement of lien was not a statute of limitations to be pleaded in bar of an action, but was a limitation beyond which the lien did not extend. Yeiser v. Todd, 6 Ky. L. Rptr. 595 (1885).

9.Commencement of Limitation Period.

A corrected or amended statement of lien, filed within the statutory period, to replace an incorrect statement of lien previously filed, becomes the original claim or statement and the one (1) -year period for filing an action to enforce the lien commences with the filing of the corrected statement. Hellman Lumber Co. v. Landrum, 639 S.W.2d 379, 1982 Ky. App. LEXIS 248 (Ky. Ct. App. 1982).

10.Bankruptcy.

The filing of mechanics’ lien claim as a secured claim in bankruptcy proceedings had the effect of an action under Kentucky statutes to enforce the lien. American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

Where a mechanics’ lien claim properly perfected under KRS 376.010 and 376.080 was filed in bankruptcy court, the lien was not later invalidated under this section by failure of claimant to enforce lien through action in equity pursuant to KRS 376.110 . American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

11.Notice.

Actual notice does not serve as a substitute for the required statutory notice. Therefore, the perfected lien of the mechanic or materialman does not depend on the knowledge of the owner, but on whether the mechanic or materialman has followed the requirements of the statute as to notice and as to the filing of the statement required by the statute. The knowledge or the lack of knowledge by the owner is immaterial. Middletown Engineering Co. v. Main Street Realty, Inc., 839 S.W.2d 274, 1992 Ky. LEXIS 149 ( Ky. 1992 ).

Cited:

Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. 1986), cert. denied, United Pacific Ins. Co. v. Laurel County, 484 U.S. 817, 108 S. Ct. 72, 98 L. Ed. 2d 36, 1987 U.S. LEXIS 3579, 56 U.S.L.W. 3243 (1987); Montgomery v. Milam, 910 S.W.2d 237, 1995 Ky. LEXIS 133 ( Ky. 1995 ).

Opinions of Attorney General.

A creditor, bona fide or other purchaser, who has no actual notice of a pending suit to enforce a mechanic’s lien may disregard a mechanic’s lien which has been filed longer than one (1) year where no lis pendens affecting the subject property appears of record during the one (1) year period of limitations. OAG 78-339 .

A filed mechanic’s lien is not the type of fact which would raise a duty of inquiry under the rationale of Dick v. Jasper, 195 Ky. 539 , 242 S.W. 834, 1922 Ky. LEXIS 345 (1922) where the one (1) year statute of limitations has passed and no lis pendens has appeared of record. OAG 78-339 .

KRS 382.440 was enacted after subsection (2) of this section, and, therefore, the provisions and requirements of KRS 382.440 shall control those of subsection (2) of this section where the two are in conflict. OAG 78-339 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition to Enforce Mechanic’s Lien, Form 153.04.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

376.100. Release of lien by execution of bond.

The owner or claimant of property against which a lien has been asserted, or any contractor or other person contracting with the owner or claimant of such property for the furnishing of any improvements or services for which a lien is created by this chapter or any subcontractor or other person in privity with the contractor, may, at any time before a judgment is rendered enforcing the lien, execute before the county clerk in which the lien was filed a bond for double the amount of the lien claimed with good sureties to be approved by the clerk, conditioned upon the obligors satisfying any judgment that may be rendered in favor of the person asserting the lien. The bond shall be preserved by the clerk, and upon its execution the lien upon the property shall be discharged. The person asserting the lien may make the obligors in the bond parties to any action to enforce his claim, and any judgment recovered may be against all or any of the obligors on the bond.

History. 2478: amend. Acts 1978, ch. 384, § 504, effective June 17, 1978; 1986, ch. 390, § 1, effective July 15, 1986; 2011, ch. 96, § 1, effective June 8, 2011.

NOTES TO DECISIONS

1.Construction.

The legislature intended to provide a method of only freeing the property of the lien in order that the owner might make disposition of the property, and that the obligation of the bond should not extend beyond the obligation of the lien for which it was intended or substituted. Jungbert v. Marret, 313 Ky. 338 , 231 S.W.2d 84, 1950 Ky. LEXIS 891 ( Ky. 1950 ).

Cited:

Woodson Bend, Inc. v. Masters’ Supply, Inc., 571 S.W.2d 95, 1978 Ky. App. LEXIS 585 (Ky. Ct. App. 1978).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition to Enforce Mechanic’s Lien, Form 153.04.

376.110. Action to enforce lien — Referred to master commissioner — Special commissioner.

  1. An action to enforce a lien provided for in KRS 376.010 shall be by equitable proceedings, and conducted as other proceedings in equity in similar cases except as otherwise provided. The petition shall allege the facts necessary to secure a lien, and shall describe the property charged and the interest the plaintiff seeks to subject. As many of the lien-holders as wish to do so may unite in the action as plaintiffs, and those who are not plaintiffs shall be made defendants. The debtor or his personal representative or heirs or devisees, and all other persons having liens on or interests in the property sought to be subjected, shall be made defendants. The clerk of the court in which the petition is filed shall issue the proper process against the resident defenders, enter warning orders against the nonresidents and appoint an attorney to defend for them, and appoint guardians for the infants. After the expiration of ten (10) days from the filing of the petition, the clerk of the court in which the petition was filed shall draw up an order referring the action to the master commissioner of the court and file it with the petition, deliver to the commissioner the pleadings and papers of the action, and make a memorandum thereof in his minute book.
  2. If for any cause it should be improper to refer the case to the master commissioner, he is then directed to select some suitable person to act as commissioner for the occasion and refer the case to him; but before such person shall proceed to act, he shall, before the clerk, take an oath, and execute bond, with sufficient surety, similar in all respects to the bond required to be executed by the master commissioner, which bond shall be preserved by the clerk, and reported to the court.

History. 2471, 2476: amend. Acts 1942, ch. 125, §§ 1, 2; 1976 (Ex. Sess.), ch. 14, § 287, effective January 2, 1978.

NOTES TO DECISIONS

1.Lien.
2.— Perfection.

When the contractor’s bond called for payment for all labor and material, the surety cannot complain that mechanics’ liens were not perfected. American Surety Co. v. Noe, 245 Ky. 42 , 53 S.W.2d 178, 1932 Ky. LEXIS 532 ( Ky. 1932 ).

3.— Enforcement.

Enforcement of a mechanics’ lien does not avoid a fire insurance policy issued during construction of the building providing for its invalidity in case of foreclosure, mortgage or sale. Speagle v. Dwelling-House Ins. Co., 97 Ky. 646 , 31 S.W. 282, 17 Ky. L. Rptr. 610 , 1895 Ky. LEXIS 225 ( Ky. 1895 ).

A party seeking to enforce a mechanics’ lien must, by his pleading, bring himself strictly within the terms of the statutes creating the lien. Newport & Dayton Lumber Co. v. Lichtenfeldt, 72 S.W. 778, 24 Ky. L. Rptr. 1969 , 1903 Ky. LEXIS 427 (Ky. Ct. App. 1903).

A materialman could not assert his lien without first perfecting it according to the method prescribed by the law. Steenberger v. Gowdy, 93 Ky. 146 , 19 S.W. 186 ( Ky. 1892 ).

4.—Petition.

When the statement is to the effect that the material was furnished under contract with both the owner and contractor, a petition alleging that the contract was with the owner alone is defective. Tischendorf-Chreste Lumber Co., 134 Ky. 1 , 119 S.W. 163, 1909 Ky. LEXIS 342 ( Ky. 1 909).

A vague, indefinite and defective allegation concerning the mechanics’ lien statement may be aided by the filing of copy of the statement. Noble v. Poeple's Stock & Poultry Feed Co., 189 Ky. 549 , 225 S.W. 491, 1920 Ky. LEXIS 471 ( Ky. 1920 ). See Tackett v. Pikeville Supply & Planing Mill Co., 249 Ky. 835 , 61 S.W.2d 881, 1933 Ky. LEXIS 612 ( Ky. 1933 ).

When the statement set up a contract to furnish material to the contractor, a petition alleging that the contract was with the owner is demurrable. Whitfield v. Kentucky Sales Corp., 211 Ky. 809 , 278 S.W. 105, 1925 Ky. LEXIS 973 ( Ky. 1925 ).

Creditor's Complaint was clearly an action for breach of the Agreement which resulted in an in personam judgment against debtor rather than an in rem judgment identifying a specific piece of property owned by debtor which was the subject of a mechanic's lien. Although the creditor contended it timely filed an action to enforce the mechanic's lien, in fact its action did not adhere strictly to the terms of Ky. Rev. Stat. Ann. § 376.110 , and thus, the mechanic's lien dissolved per the terms of Ky. Rev. Stat. Ann. § 376.090 . In re Morris, 2017 Bankr. LEXIS 3289 (Bankr. W.D. Ky. Sept. 28, 2017).

5.— Contents.

The omission of an allegation concerning the mechanics’ lien statement is not supplied by filing a copy of the statement. Newport & Dayton Lumber Co. v. Lichtenfeldt, 72 S.W. 778, 24 Ky. L. Rptr. 1969 , 1903 Ky. LEXIS 427 (Ky. Ct. App. 1903). But see Lorton v. Ashbrook, 220 Ky. 830 , 295 S.W. 1027, 1927 Ky. LEXIS 614 ( Ky. 1927 ).

6.— Description of Property.

Petition alleging statutory lien on either “all the property and assets” of bankrupt mining company or “real estate described herein and the personal property and assets, tipple, building . . . . . ” described the property charged as required by this section. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

7.— Acknowledgment.

The petition should allege that the statement was subscribed and sworn to by plaintiff or someone in his behalf. Newport & Dayton Lumber Co. v. Lichtenfeldt, 72 S.W. 778, 24 Ky. L. Rptr. 1969 , 1903 Ky. LEXIS 427 (Ky. Ct. App. 1903).

An allegation of the petition that the statement required under KRS 376.080 was sworn to, will not avail against the copy of the statement filed with the petition as an exhibit which shows that it was merely acknowledged. Indiana Quarries Co. v. Simms, 158 Ky. 415 , 165 S.W. 422, 1914 Ky. LEXIS 636 ( Ky. 1914 ).

Failure to allege that statement was subscribed and sworn to by plaintiff or someone in his behalf does not render void a judgment based thereon, and the question cannot be raised for the first time after entry of judgment, by another party in another suit. Noble v. Poeple's Stock & Poultry Feed Co., 189 Ky. 549 , 225 S.W. 491, 1920 Ky. LEXIS 471 ( Ky. 1920 ).

The failure to allege that statement was subscribed and sworn to by plaintiff or someone in his behalf cannot be raised by defendant in the same suit after judgment. Lorton v. Ashbrook, 220 Ky. 830 , 295 S.W. 1027, 1927 Ky. LEXIS 614 ( Ky. 1927 ).

8.— Counterclaim.

The mechanics’ lien may be presented by counterclaim in action by owner to cancel it. Wagner v. Swoope, 246 Ky. 19 , 54 S.W.2d 395, 1932 Ky. LEXIS 701 ( Ky. 19 32).

9.Parties.

Lien creditors of the lessee are necessary and proper parties. Continental Supply Co. v. Sandy River Oil Co., 218 Ky. 248 , 291 S.W. 49, 1927 Ky. LEXIS 137 ( Ky. 1927 ).

10.— Joinder.

All persons having an interest in the property should be joined. Dallas v. Gardner, 207 Ky. 93 , 268 S.W. 847, 1925 Ky. LEXIS 23 ( Ky. 1925 ).

11.Referral to Commissioner.

Failure to refer the cause to the commissioner and have his report does not deprive the court of the power or jurisdiction to enter a judgment enforcing the lien as disclosed upon the face of the pleadings. Lorton v. Ashbrook, 220 Ky. 830 , 295 S.W. 1027, 1927 Ky. LEXIS 614 ( Ky. 1927 ).

12.Bankruptcy.

The filing of mechanics’ lien claim as a secured claim in bankruptcy proceedings had the effect of an action under Kentucky statutes to enforce the lien. American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

Where a mechanics’ lien claim properly perfected under KRS 376.010 and 376.080 was filed in bankruptcy court, the lien was not later invalidated under KRS 376.090 by failure of claimant to enforce lien through an action in equity pursuant to this section. American Coal Burner Co. v. Merritt, 129 F.2d 314, 1942 U.S. App. LEXIS 3347 (6th Cir. Ky. 1942 ).

13.Evidence.

Evidence identifying the property must be definite. Henry Koehler & Co. v. Anderson, 217 Ky. 368 , 289 S.W. 314, 1926 Ky. LEXIS 91 ( Ky. 1926 ).

Court erred in entering judgment for defendant on counterclaim in equitable action under this section where proof was necessary on original petition and no order was entered providing evidence be heard in the same manner as in ordinary actions. Boyles v. Walker, 314 Ky. 120 , 234 S.W.2d 497, 1950 Ky. LEXIS 1039 ( Ky. 1950 ).

14.— Sufficiency.

An allegation in the statement and petition that the goods were furnished to the owner or her agent is not supported by proof that it was furnished to the contractor who acted for himself. Phalin v. Standard Planing Mill Co., 199 Ky. 495 , 251 S.W. 635, 1923 Ky. LEXIS 872 ( Ky. 1923 ).

A petition alleging a sale of material to a contractor and subcontractor is not sustained by proof that the material was sold to the subcontractor alone. Southern Brick & Tile Co. v. Walker, 216 Ky. 760 , 288 S.W. 685, 1926 Ky. LEXIS 997 ( Ky. 1926 ).

15.Dismissal.

An action hereunder is not subject to dismissal for failure to procure an occupational license tax. Howard v. Lebby, 197 Ky. 324 , 246 S.W. 828, 1923 Ky. LEXIS 626 ( Ky. 1923 ).

16.Appeal.

The Court of Appeals has jurisdiction of appeals in mechanics’ lien cases regardless of the amount involved. Fowler & Guy v. Pompelly, 76 S.W. 173, 25 Ky. L. Rptr. 615 (1903). See Napier v. Trace Fork Mining Co., 193 Ky. 291 , 235 S.W. 766, 1921 Ky. LEXIS 232 ( Ky. 1921 ); Stidham v. Little's Adm'r, 251 Ky. 707 , 65 S.W.2d 1028, 1933 Ky. LEXIS 956 ( Ky. 1933 ). See also New York Indem. Co. v. Hurst, 252 Ky. 59 , 66 S.W.2d 8, 1933 Ky. LEXIS 989 ( Ky. 1933 ).

Research References and Practice Aids

Cross-References.

Requirements for enforcing lien, KRS 426.006 , 426.690 .

Kentucky Law Journal.

Dow, The Pre-Trial Conference. 41 Ky. L.J. 363 (1953).

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition to Enforce Mechanic’s Lien, Form 153.04.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

376.120. Notice to parties of time and place of hearing by commissioner.

  1. The commissioner shall immediately ascertain the name of each person who has filed a lien against the property sought to be subjected, and fix a time and place at which he will hear proof touching claims against the property. Any person holding a lien against the property, whether arising under the provisions of KRS 376.010 or otherwise, is required to present his claim with the evidence in its support to the commissioner. The owner of the property, or any other person whose interest may be affected by the action, may contest any claim presented.
  2. Any person shall be deemed a party to the action, though not made so by the pleadings or by the service of process, who presents to the commissioner a claim against the property sought to be subjected or who appears before the commissioner to contest the claim of another.
  3. The commissioner shall give reasonable written notice to all parties to the action, and to any other lien-holders known to him or those that reside in the county, or to their attorneys, of the time and place of receiving proof of claims. He shall also post a similar notice on the front door of the courthouse of the county.

History. 2472, 2474, 2475.

NOTES TO DECISIONS

1.Construction.

This section authorized assertion of lien after appointment of the special commissioner and advertisement of claims by lower court and claimant who established the existence of a contract between himself and bankrupt company, the use of the products and the description and location of the mining property followed procedure authorized by this section. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

2.Application.

This section applies to actions to enforce liens for wages under KRS 376.150 to 376.190 and employes seeking to enforce liens for wages must present evidence in support of their claims. Commonwealth ex rel. Division of Unemployment Ins. v. 20th Century Coal Co., 373 S.W.2d 159, 1963 Ky. LEXIS 155 ( Ky. 1963 ).

3.Notice.

Each party to the suit is entitled to notice so that he may present his proof, and when no such notice is given it is error to deny opportunity to give proof or to dismiss such party’s pleading for lack of proof. Carl v. Grosse, 65 S.W. 604, 23 Ky. L. Rptr. 1586 , 1901 Ky. LEXIS 546 (Ky. Ct. App. 1901). See Continental Supply Co. v. Sandy River Oil Co., 218 Ky. 248 , 291 S.W. 49, 1927 Ky. LEXIS 137 ( Ky. 1927 ).

4.Right to Jury Trial.

There is no right to jury trial in this type of case when the contract is between the owner and subcontractor. Rieger v. Schulte & Eicher, 151 Ky. 129 , 151 S.W. 395, 1912 Ky. LEXIS 778 ( Ky. 1912 ).

When the contract is between the owner and the original contractor, either has a right to a jury. Scott v. Kirtley, 166 Ky. 727 , 179 S.W. 825, 1915 Ky. LEXIS 762 ( Ky. 1915 ). See Castleman v. Continental Car Co., 201 Ky. 770 , 258 S.W. 658, 1923 Ky. LEXIS 348 ( Ky. 1923 ).

Unless the accounts or facts are too complicated to make such a course practical, when the contract is between the owner and the original contractor either has a right to a jury. Reusch v. Hemmer, 236 Ky. 546 , 33 S.W.2d 618, 1930 Ky. LEXIS 796 ( Ky. 1930 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.130. Taking of depositions and hearing of evidence by the commissioner — Auditing of accounts and report on claims.

The commissioner shall issue subpoenas for witnesses to appear before him at his sittings, and upon their failure to attend he shall issue attachments as in other cases. The commissioner shall have the same power and authority as an examiner in taking depositions, and shall be governed by the same rules and regulations in respect to the evidence which may be produced before him. He may adjourn from day to day and from time to time, until his duties in the action have been completed and he is ready to report. He shall audit the statements, and make up his report showing the amount due to each claimant, the nature and character of the respective liens, and the evidence upon which each claim was allowed.

History. 2473.

NOTES TO DECISIONS

1.Duties of Commissioner.

The court ordered the master commissioner to have a survey of property made and to return it with the report he was required to make under this section and to report the amount of all taxes and street apportionment warrants that were liens upon the property and to state in his report how much was due on mortgage debts and the probable value of the property as ascertained by him from the proof he was to take. Ward v. Butcher, 263 Ky. 585 , 92 S.W.2d 741, 1936 Ky. LEXIS 188 ( Ky. 1936 ).

Research References and Practice Aids

Cross-References.

Examiners, KRS 28.660 to 28.670 .

Kentucky Law Journal.

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

376.135. Lien on farm crop for service by custom operator.

  1. Any custom operator who performs a service on a farm, including but not limited to filling of silos, hay baling and crop spraying, by contract with, or by the written consent of the owner or manager of the farm, shall have a lien upon the farm crop involved to secure the cost of the service furnished.
  2. The recording provisions of KRS 376.010 and 376.080 to 376.130 shall apply to the lien provided in subsection (1) of this section.

History. Enact. Acts 1972, ch. 210, § 1.

NOTES TO DECISIONS

Cited:

In re Brame, 26 B.R. 309, 1982 Bankr. LEXIS 5279 (Bankr. W.D. Ky. 1982 ).

Research References and Practice Aids

Kentucky Law Journal.

Bland, Insolvencies in Farming and Agribusinesses, 73 Ky. L.J. 795 (1984-85).

376.140. Lien on gas, oil or other mineral leasehold — Provisions governing such a lien.

  1. Any person who performs labor or furnishes materials, supplies, fixtures, machinery or other things of value to a lessee holding or owning a leasehold, or any right conferred by a lease, relating to oil, gas or other minerals, in the development or improvement of the leasehold, by contract with or by the written consent of the owner or the agent or representative of the owner of the leasehold, shall have a lien on the leasehold or the entire interest of the lessee including oil or gas wells, machinery and equipment, to secure the payment for the labor or things furnished. If the labor or things are furnished at the written request or by the written consent of any contractor or subcontractor, or the agent of either, the lien herein given shall be for the benefit of whoever may furnish any of the labor or things mentioned. The lien herein provided for shall be effective against the leasehold, or the entire interest of the lessee therein, including all improvements thereon belonging to the lessee.
  2. If the lessee claims by executory contract, and if for any cause, the contract shall be rescinded or set aside, the lien provided for in subsection (1) of this section shall follow the leasehold into the hands of the person to whom the same may go, or with whom it may remain by reason of the rescission. If by the rescission the interest covered by the lease becomes vested in the lessor, the interest so covered by the lease shall be subject to said lien. If the lessee should be evicted from the possession of the leasehold by the judgment of a court, the lien shall nevertheless be effective against the leasehold and the improvements placed thereon by the lessee or those under whom he claims, while he or they were in possession thereof. If the lease expires or is forfeited, or the lessee in any other way loses his rights thereunder, the lien provided for shall nevertheless be effective against the leasehold, whoever may be the owner thereof, to the extent of the interest held by the lessee at the time the labor was performed or the things mentioned furnished, and this shall be true although the interest of the lessee may revert to the lessor. The lienholder may elect to remove any improvements from the premises if it can be done without material injury to any previous improvements on the leasehold, and when the election is made and improvement is removed the owner of the leasehold shall be given credit by the value of the improvements so removed and the lien-holder may enforce his lien to the extent of any balance remaining unpaid.
  3. The provisions of KRS 376.010 and KRS 376.080 to 376.130 shall apply to the lien provided for in subsection (1) of this section. When necessary for the purposes of such application, “owner” shall be construed to mean “lessee” and “property” to mean “leasehold.”

History. 2479a-1 to 2479a-7.

NOTES TO DECISIONS

1.Construction.

KRS 376.020 and 376.030 must be read in connection with subsection (2) of this section. Weir v. Jarecki Mfg. Co., 254 Ky. 738 , 72 S.W.2d 450, 1933 Ky. LEXIS 5 ( Ky. 1933 ).

2.Interest Subject to Lien.

A lease requiring lessees to complete wells without expense to lessors is not a consent by the lessors that their interest be subjected to mechanics’ liens, and when recorded is notice that lessors’ interests are not to be subjected to such liens. Weir v. Jarecki Mfg. Co., 254 Ky. 738 , 72 S.W.2d 450, 1933 Ky. LEXIS 5 ( Ky. 1933 ).

In the absence of consent in writing, only the interest of the owner creating the lien is subject to the lien. Weir v. Jarecki Mfg. Co., 254 Ky. 738 , 72 S.W.2d 450, 1933 Ky. LEXIS 5 ( Ky. 1933 ).

Allowance of mechanics and materialmen’s liens on assets purchased from another company was not objectionable although it included personalty where the realty was sufficient to satisfy claim. Central Contractors Service, Inc. v. Ohio County Stone Co., 255 S.W.2d 17, 1952 Ky. LEXIS 1137 ( Ky. 1952 ).

Proceeds from the sale of oil are subject to a mechanic’s lien. Stagg Industrial Dev. Corp. v. General Oil Field Supply Co., 743 S.W.2d 41, 1988 Ky. App. LEXIS 6 (Ky. Ct. App. 1988).

3.Priority.

Mechanics’ liens hereunder have priority over attachment liens. Continental Supply Co. v. Sandy River Oil Co., 218 Ky. 248 , 291 S.W. 49, 1927 Ky. LEXIS 137 ( Ky. 1927 ).

Generally a statutory lien does not take precedence over a prior contractual lien, but the legislature has power to give a statutory lien priority over all other liens, and if the statute clearly shows such an intention, the courts must give effect to it. Adkins v. Carol Mining Co., 281 Ky. 328 , 136 S.W.2d 32, 1940 Ky. LEXIS 40 ( Ky. 1940 ).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

376.150. Lien of employees on property of a mine, railroad, public improvement company, manufacturing establishment or other business — Of persons furnishing supplies for operation of a railroad.

  1. When the property or effects of any mine, railroad or canal, or other public improvement company, or of any rolling mill, foundry or other manufacturing establishment, or of any other business, whether incorporated or not, are assigned for the benefit of, or are to be distributed among creditors, whether by operation of law or by its own act, the employees of the owner or operator of the business shall have a lien upon the property and effects which have been involved in the business and upon the accessories connected therewith, including any interest in real property used in carrying on the business.
  2. Any person who has furnished materials or supplies for carrying on or operating any railroad shall likewise have a lien upon the property of the company involved in the business and upon the accessories connected therewith, including the interest of the company in the real property used in carrying on the business.

History. 2487: amend. Acts 1952, ch. 52.

NOTES TO DECISIONS

1.Constitutionality.

This section does not violate the equal protection clause of the federal constitution. Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. Ky. 1915 ).

This section is constitutional. Graham v. Magann, Fawke Lumber Co., 118 Ky. 192 , 80 S.W. 799, 26 Ky. L. Rptr. 70 , 1904 Ky. LEXIS 27 ( Ky. 1904 ).

2.Application.

The mere fact that various creditors had filed suits does not in itself make this statute applicable. Bogard v. Tyler's Adm'r, 119 Ky. 637 , 55 S.W. 709, 21 Ky. L. Rptr. 1452 , 1900 Ky. LEXIS 111 ( Ky. 1900 ).

KRS 376.230 providing for filing lien with county clerk has no application to liens given by this section. W. H. Hall & Son v. J. D. Guthrie's Sons, 103 S.W. 721, 31 Ky. L. Rptr. 801 (1907). See Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ); In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ); In re Lynn Camp Coal Co., 168 F. 998, 1908 U.S. App. LEXIS 5486 (C.C.D. Ky. 1908 ); Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ); Rockcastle Lumber Co. v. Burns, 175 Ky. 224 , 194 S.W. 95, 1917 Ky. LEXIS 296 ( Ky. 1917 ).

Subsection (1) of this section applies to all manufacturers. In re I. Rheinstrom & Sons Co., 207 F. 119, 1913 U.S. Dist. LEXIS 1303 (D. Ky. 1913 ), aff’d, Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. 1915). See Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. Ky. 1915 ).

An independent contractor has no lien hereunder. Katz v. Scott, 229 Ky. 738 , 17 S.W.2d 1024, 1929 Ky. LEXIS 840 ( Ky. 1929 ).

An employe of an independent contractor has no lien hereunder. Superior Elkhorn Coal Co. v. Allen, 238 Ky. 280 , 37 S.W.2d 52, 1931 Ky. LEXIS 220 ( Ky. 1931 ). See Cairns v. Louisville & N. R. Co., 248 Ky. 84 , 58 S.W.2d 248, 1933 Ky. LEXIS 184 ( Ky. 1933 ).

KRS 376.120 applies to actions to enforce liens for wages under this section and employes seeking to enforce liens for wages must present evidence in support of their claims even though employer does not deny claim. Commonwealth ex rel. Division of Unemployment Ins. v. 20th Century Coal Co., 373 S.W.2d 159, 1963 Ky. LEXIS 155 ( Ky. 1963 ).

3.Creation.

The lien does not come into existence or attach until the happening of one of the contingencies provided for herein or in KRS 376.180 . Ohio Falls Car Mfg. Co. v. Central Trust Co., 71 F. 916, 1895 U.S. App. LEXIS 2643 (6th Cir. Ky. 1895 ). See In re Falls City Shirt Mfg. Co., 98 F. 592, 1899 U.S. Dist. LEXIS 268 (D. Ky. 1899 ); In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ); In re Lynn Camp Coal Co., 168 F. 998, 1908 U.S. App. LEXIS 5486 (C.C.D. Ky. 1908 ); Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

There is no lien hereunder so long as the property remains in the hands of the debtor and is managed and operated by him in his own account. Ohio Falls Car Mfg. Co. v. Central Trust Co., 71 F. 916, 1895 U.S. App. LEXIS 2643 (6th Cir. Ky. 1895 ).

The lien did not come into existence or attach until the happening of one of the contingencies provided for by lien law. Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ).

4.Distributed Among Creditors.

When a company ceases to operate, its property is encumbered so it cannot meet its payrolls and current bills, and suit is filed against it, its property and effects, “have come to be distributed among creditors,” within the meaning of this section. Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ); Producers' Coal Co. v. Barnaby, 210 Ky. 244 , 275 S.W. 625, 1925 Ky. LEXIS 654 ( Ky. 1925 ); Freeman v. Craft, 220 Ky. 15 , 294 S.W. 822, 1927 Ky. LEXIS 480 ( Ky. 1927 ).

5.Employees’ Liens.

An employe is not entitled to a lien for services rendered his employer outside of the business of the manufacturing establishment. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

A superintendent or bookkeeper in a manufacturing establishment is an employe entitled to a lien for wages. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

One who is either a director, stockholder or local manager of a light company is not an employe entitled to a lien for wages. Trust Co. of America v. Casey, 131 Ky. 771 , 115 S.W. 780, 1909 Ky. LEXIS 56 ( Ky. 1909 ).

An employee is not entitled to a lien for services rendered outside of the mining operations. Freeman v. Craft, 220 Ky. 15 , 294 S.W. 822, 1927 Ky. LEXIS 480 ( Ky. 1927 ) (decision prior to 1942 amendment).

An employee’s lien should be first satisfied out of unencumbered property; and, as against other encumbrancers holding liens of equal dignity among themselves against various properties, the balance should be satisfied pro rata from the proceeds of the various encumbered properties. N. L. Curry Grocery Co. v. Chinn Mineral Co., 222 Ky. 437 , 1 S.W.2d 536, 1927 Ky. LEXIS 945 ( Ky. 1927 ).

An employee’s lien is of statutory origin. Superior Elkhorn Coal Co. v. Allen, 238 Ky. 280 , 37 S.W.2d 52, 1931 Ky. LEXIS 220 ( Ky. 1931 ).

In the absence of contract or statute there is no employee’s lien. Cairns v. Louisville & N. R. Co., 248 Ky. 84 , 58 S.W.2d 248, 1933 Ky. LEXIS 184 ( Ky. 1933 ).

Fact that certain miners left their wages with the company was evidence of intention to make a loan. Consequently, said sums were not protected by miners’ lien for wages. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ).

This lien is only for unpaid wages of employes, and does not include sums due independent contractors for services and materials furnished under their contracts. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ).

A lien of unemployment compensation commission to secure payments of contributions to be made by employers under KRS 341.310 was superior lien on property of corporate employer in receivership to lien given by this section to secure laborers’ wages. Commonwealth ex rel. Unemployment Compensation Com. v. Durham, 290 Ky. 408 , 161 S.W.2d 610, 1942 Ky. LEXIS 411 ( Ky. 1942 ).

Mortgage lien was not subordinate to laborers’ lien under this section where it was a duly recorded previous mortgage and laborers’ lien was not asserted anywhere or in any manner within sixty days after suspension of operations as provided by KRS 376.190 . McGlone v. Smith, 293 Ky. 131 , 168 S.W.2d 566, 1943 Ky. LEXIS 574 ( Ky. 1943 ).

Laborers who had claims against insolvent decedent’s estate acquired a lien by filing their claims with the administrator within sixty days after the administrator brought suit to settle the estate. International Harvester Co. v. Dyer's Adm'r, 297 Ky. 55 , 178 S.W.2d 966, 1944 Ky. LEXIS 669 ( Ky. 1944 ).

In action by employes to enforce lien under this section and KRS 376.160 an order of lower court to answer depositions for discovery making inquiries concerning the private affairs of nonparties to the action and not relevant to the subject matter of the action was prohibited under Const., § 110 and a showing of great and irreparable injury as ordinarily defined was not an absolute necessity where the erroneous order would have resulted in a substantial miscarriage of justice. Carpenter v. Wells, 358 S.W.2d 524, 1962 Ky. LEXIS 190 ( Ky. 1962 ).

Payment of 11 U.S.C.S. § 503(b)(1)(A) administrative claim for unpaid salary filed by a former officer of a Chapter 11 debtor and characterized as secured per KRS 376.150 was rejected on a finding that its payment would not benefit the estate given that the officer did not have a valid state law wrongful termination claim. In re Black Diamond Mining Co., LLC, 2010 Bankr. LEXIS 340 (Bankr. E.D. Ky. Feb. 10, 2010).

6.— Subrogation.

Where merchant who bought scrip issued to mining company employes had contract with mining company calling for redemption of scrip at a fixed discount, merchant was not entitled to be subrogated to employes’ lien upon insolvency of mining company. Lankford v. Sunshine Mining Co., 287 Ky. 53 , 151 S.W.2d 402, 1940 Ky. LEXIS 613 ( Ky. 1940 ).

Under contract between mine company and mine commissary whereby commissary was to accept company scrip, the company to redeem same at ninety per cent, and run bulk of its scrip through the commissary, the commissary is not subrogated to the wage lien of the employes, the lien being extinguished when the employes received money therefor. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ).

In general, one who lends money to an employer to pay laborers, who if their wages had remained unpaid would be entitled to a lien therefor, is not entitled to be subrogated to the laborers’ liens merely by virtue of making the loan to the employer. The loan must be made in expectation of being subrogated and under an agreement to that effect. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ). See Skaggs v. Elkhorn Coal Corp., 297 Ky. 330 , 180 S.W.2d 88, 1944 Ky. LEXIS 7 27 ( Ky. 1944 ).

7.Manufacturing Establishments.

A sawmill is a manufacturing establishment. Bogard v. Tyler's Adm'r, 119 Ky. 637 , 55 S.W. 709, 21 Ky. L. Rptr. 1452 , 1900 Ky. LEXIS 111 ( Ky. 1900 ). See Graham v. Magann, Fawke Lumber Co., 118 Ky. 192 , 80 S.W. 799, 26 Ky. L. Rptr. 70 , 1904 Ky. LEXIS 27 ( Ky. 1904 ).

A laundry is not a manufacturing establishment. Muir v. Samuels, 110 Ky. 605 , 62 S.W. 481, 23 Ky. L. Rptr. 14 , 1901 Ky. LEXIS 114 ( Ky. 1901 ).

A flour mill is a manufacturing establishment. W. H. Hall & Son v. J. D. Guthrie's Sons, 103 S.W. 721, 31 Ky. L. Rptr. 801 (1907).

One who preserves and cans fruit in such a way as to change its name, character and use is a manufacturer. In re I. Rheinstrom & Sons Co., 207 F. 119, 1913 U.S. Dist. LEXIS 1303 (D. Ky. 1913 ), aff’d, Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. 1915). See Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. Ky. 1915 ).

A tailoring establishment which made suits on special order was not a manufacturer under a municipal revenue ordinance. Standard Tailoring Co. v. Louisville, 152 Ky. 504 , 153 S.W. 764, 1913 Ky. LEXIS 690 ( Ky. 1913 ).

A company engaged in making stoves by hand was a manufacturer under Constitution, § 170 and KRS 91.260 . Louisville v. Louisville Tin & Stove Co., 170 Ky. 557 , 186 S.W. 124, 1916 Ky. LEXIS 65 ( Ky. 1916 ).

The mere assembling and sorting of tobacco for shipment to the factor not manufacturing under KRS 132.200 . American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ). See P. Lorrilard Co. v. Ross, 183 Ky. 217 , 209 S.W. 39, 1919 Ky. LEXIS 475 ( Ky. 1919 ).

A company which imports raw coffee and prepares it for consumption and marketing is a manufacturer under KRS 132.200 . Louisville & J. Zinmeister & Sons, 188 Ky. 570 , 222 S.W. 958, 1920 Ky. LEXIS 324 ( Ky. 1920 ).

A newspaper was not a manufacturer, under a municipal revenue ordinance. Lexington v. Lexington Leader Co., 193 Ky. 107 , 235 S.W. 31, 1921 Ky. LEXIS 203 ( Ky. 1921 ).

A company engaged in making buggies was a manufacturer under KRS 132.200 . Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ).

Contractor, in cutting, hauling and delivering logs to a sawmill for an agreed compensation, was a manufacturer, and came within provisions of this section. Leslie's Adm'x v. Branham, 289 Ky. 409 , 158 S.W.2d 949, 1942 Ky. LEXIS 558 ( Ky. 1942 ).

8.Public Improvement Companies.

A “public improvement company” as the term is here used, refers to corporations or individuals owning some such public improvement as is mentioned in the statute, and does not refer to contractors who construct such improvements. Cairns v. Louisville & N. R. Co., 248 Ky. 84 , 58 S.W.2d 248, 1933 Ky. LEXIS 184 ( Ky. 1933 ).

9.Property Covered by Lien.

As applied against a manufacturer the lien extends only to such of his property as is used in the manufacturing business. In re Floyd & Bohr Co., 200 F. 1016, 1912 U.S. Dist. LEXIS 1152 (D. Ky. 1912 ).

Employes have a lien on accounts receivable of their manufacturing employer which have been assigned to another as security, but the possession of which was retained by the employer. Fels v. Geo. Lueders & Co., 246 F. 436, 1917 U.S. App. LEXIS 1369 (6th Cir. Ky. 1917 ).

The mechanics’ lien law dealt with claims arising in the carrying on of the business, not the claims arising out of construction work. Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ).

When the materials furnished were capable of use either in construction or in carrying on the business, the one claiming the benefit of lien law was required to show the amount of materials actually used in carrying on the business. Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ).

10.Security.

The lien is waived if such security is taken as is inconsistent with an intention to retain the lien. Ohio Falls Car Mfg. Co. v. Central Trust Co., 71 F. 916, 1895 U.S. App. LEXIS 2643 (6th Cir. Ky. 1895 ).

Fact that creditor took a note with personal security does not release the lien. In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ).

When one having an inchoate lien hereunder accepts a mortgage as security for his debt which is later held invalid, he is restored to his statutory lien. In re Lynn Camp Coal Co., 168 F. 998, 1908 U.S. App. LEXIS 5486 (C.C.D. Ky. 1908 ).

11.Assignment.

The lien is governed by the law in effect when the assignment is made. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

Claims hereunder are assignable. In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ).

The assignee is subrogated to all the rights of the assignor. In re Alabama Coal & Coke Co., 210 F. 940, 1913 U.S. Dist. LEXIS 1066 (D. Ky. 1913 ).

12.Operation of Railroad.

A railroad company which is operating another railroad company does not have a lien hereunder for advances made. United States Trust Co. v. Western Contract Co., 81 F. 454, 1897 U.S. App. LEXIS 1875 (6th Cir. Ky.), modified, 82 F. 272, 1897 U.S. App. LEXIS 1968 (6th Cir. 1897).

13.Bankruptcy.

Where trustee in bankruptcy, although served with summons, neither contested the validity of assignments in the state court nor offered any defense to the action, the judgment in the state court was binding on bankruptcy court as a preferred claim. Freeman Furniture Factories, Inc. v. Bowlds, 136 F.2d 136, 1943 U.S. App. LEXIS 2982 (6th Cir. Ky. 1943 ).

Cited:

In re Hall-Luton Coal Mining Co., 29 F. Supp. 484, 1939 U.S. Dist. LEXIS 2342 (D. Ky. 1939 ); Norris v. Bowles, 292 Ky. 541 , 166 S.W.2d 981, 1942 Ky. LEXIS 114 (1942); Ritchie v. Dyer’s Adm’r, 299 Ky. 835 , 187 S.W.2d 739 (1945) (prior to amendment of KRS 21.060 ); Bogar v. Phillips, 247 S.W.2d 37, 1952 Ky. LEXIS 665 ( Ky. 1952 ); In re Becknell & Crace Coal Co., 761 F.2d 319, 1985 U.S. App. LEXIS 31103 (6th Cir. 1985).

Research References and Practice Aids

Kentucky Law Journal.

Roberts, Receiverships in Kentucky, Grounds for Appointment. 27 Ky. L.J. 127 (1939).

Moore, Leslie’s Admr. et al v. Branham et al. 31 Ky. L.J. 354 (1943).

Bratt, Family Protection Under Kentucky’s Inheritance Laws: Is the Family Really Protected? 76 Ky. L.J. 387 (1987-88).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint by Employee to Enforce Lien on Manufacturing Establishment, Form 282.14.

376.160. Priority of liens — Persons not deemed employees.

Any lien provided for in KRS 376.150 and 376.180 shall be superior to the lien of any mortgage or other encumbrance thereafter created, and shall be for the whole amount due the employees as such, or due for such materials or supplies. Liens of employees for wages coming due to them within six months before the property or effects shall come to be distributed among the creditors shall be superior to the lien of any mortgage or other encumbrance theretofore or thereafter created. No president or other chief officer, nor any director or stockholder of any such company, shall be deemed an employee within the meaning of KRS 376.150 .

History. 2488.

NOTES TO DECISIONS

1.Constitutionality.

This section is constitutional. Graham v. Magann, Fawke Lumber Co., 118 Ky. 192 , 80 S.W. 799, 26 Ky. L. Rptr. 70 , 1904 Ky. LEXIS 27 ( Ky. 1904 ). See also Central Trust Co. v. George Lueders & Co., 221 F. 829, 1915 U.S. App. LEXIS 1374 (6th Cir. Ky. 1915 ).

2.Construction.

Generally a statutory lien does not take precedence over a prior contractual lien; but the legislation has power to give a statutory lien priority over all other liens, and if the statute clearly shows such an intention, the courts must give effect to it. Adkins v. Carol Mining Co., 281 Ky. 328 , 136 S.W.2d 32, 1940 Ky. LEXIS 40 ( Ky. 1940 ).

3.Application.

This section applies to KRS 376.180 as well as to KRS 376.150 . Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ).

This section does not restrict the priority of employes’ liens for workmen’s compensation, as provided for by KRS 342.175 , to claims accruing within six months before the distribution of the employer’s property among his creditors. Adkins v. Carol Mining Co., 281 Ky. 328 , 136 S.W.2d 32, 1940 Ky. LEXIS 40 ( Ky. 1940 ).

Lien on property of employer to secure unemployment compensation contributions, under KRS 341.310 , is superior both to the lien on the employer’s assets to secure workmen’s compensation awards, under KRS 342.175 , and to the lien securing laborers’ wages, under KRS 376.150 and this section. Commonwealth ex rel. Unemployment Compensation Com. v. Durham, 290 Ky. 408 , 161 S.W.2d 610, 1942 Ky. LEXIS 411 ( Ky. 1942 ).

4.Encumbrances Thereafter Created.

“Encumbrances thereafter created” means created after the materials or supplies are furnished. Fels v. Geo. Lueders & Co., 246 F. 436, 1917 U.S. App. LEXIS 1369 (6th Cir. Ky. 1917 ).

6.Materialman’s.

KRS 376.210 and 376.260 had no application in case of assignment for benefit of creditors under KRS 376.150 and 376.190 and all that was necessary was that suit be instituted within sixty days to enforce such lien and goods furnished within one year were within the statute since the six months, limitation of this section applied to employes’ wages only. W. H. Hall & Son v. J. D. Guthrie's Sons, 103 S.W. 721, 31 Ky. L. Rptr. 801 (1907).

A materialman’s lien hereunder is superior to a landlord’s lien under a lease made after shipment and delivery of the raw materials to the tenant. Louisville Woolen Mills v. Tapp, 239 F. 463, 1917 U.S. App. LEXIS 2228 (6th Cir. Ky. 1917 ).

Prior mortgage lien has preference over claim of a materialman. Leslie's Adm'x v. Branham, 289 Ky. 409 , 158 S.W.2d 949, 1942 Ky. LEXIS 558 ( Ky. 1942 ).

7.— Employe’s.

As against subsequent encumbrances the priority of an employe’s lien covers the whole amount due to the employes as such. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

An employe’s lien is superior to the claim of an assignee of accounts receivable possession of which was retained by the employer. Fels v. Geo. Lueders & Co., 246 F. 436, 1917 U.S. App. LEXIS 1369 (6th Cir. Ky. 1917 ).

As against earlier encumbrances the priority of an employe’s lien covers only wages accruing within six months prior to the time of the assignment or cessation. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ). See Graham v. Magann, Fawke Lumber Co., 118 Ky. 192 , 80 S.W. 799, 26 Ky. L. Rptr. 70 , 1904 Ky. LEXIS 27 ( Ky. 1904 ); Producers' Coal Co. v. Barnaby, 210 Ky. 244 , 275 S.W. 625, 1925 Ky. LEXIS 654 ( Ky. 192 5); Turner v. Randolph, 213 Ky. 55 , 280 S.W. 462, 1926 Ky. LEXIS 448 ( Ky. 1926 ).

A lien for rent created by lease is inferior to an employe’s lien. Middlesboro Coal Lands Owning & Leasing Co. v. Climax Coal Co., 53 F.2d 132, 1930 U.S. Dist. LEXIS 1741 (D. Ky. 1930 ).

As against subsequent encumbrances the priority of an employe’s lien covers the whole amount due to the employes as such. Winter v. Howell's Assignee, 109 Ky. 163 , 58 S.W. 591, 22 Ky. L. Rptr. 697 , 1900 Ky. LEXIS 186 ( Ky. 1900 ).

A labor lien is superior to a widow’s exemption. International Harvester Co. v. Dyer's Adm'r, 297 Ky. 55 , 178 S.W.2d 966, 1944 Ky. LEXIS 669 ( Ky. 1944 ).

Laborers who had claims against insolvent decedent’s estate acquired a lien by filing their claims with the administrator within sixty days after the administrator brought suit to settle the estate. International Harvester Co. v. Dyer's Adm'r, 297 Ky. 55 , 178 S.W.2d 966, 1944 Ky. LEXIS 669 ( Ky. 1944 ).

This section limits lien to wages coming due to employes within six months after the receivership. Skaggs v. Elkhorn Coal Corp., 297 Ky. 330 , 180 S.W.2d 88, 1944 Ky. LEXIS 727 ( Ky. 1944 ).

8.— — Mortgages.

Prior mortgage lien does not have preference over claim of a wage earner for labor performed. Leslie's Adm'x v. Branham, 289 Ky. 409 , 158 S.W.2d 949, 1942 Ky. LEXIS 558 ( Ky. 1942 ).

Where claim for laborer’s lien was not filed until after expiration of sixty days from time business of mine was suspended, KRS 376.190 was not complied with and the lien lost its priority over mortgages. McGlone v. Smith, 293 Ky. 131 , 168 S.W.2d 566, 1943 Ky. LEXIS 574 ( Ky. 1943 ).

A labor lien is superior to a mortgage. International Harvester Co. v. Dyer's Adm'r, 297 Ky. 55 , 178 S.W.2d 966, 1944 Ky. LEXIS 669 ( Ky. 1944 ).

9.Proof of Claim.

Objections to manner in which claims are proved are waived unless timely made. Southern Coal Co. v. Martin's Fork Coal Co., 286 Ky. 679 , 151 S.W.2d 394, 1940 Ky. LEXIS 7 ( Ky. 1940 ).

The burden of proof on the issue of priority is on the one claiming the benefit of the statutory lien. Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ).

10.Bankruptcy.

Bankruptcy does not alter priorities established by state law. In re Falls City Shirt Mfg. Co., 98 F. 592, 1899 U.S. Dist. LEXIS 268 (D. Ky. 1899 ). See In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ).

A claim against a bankrupt employer based on a workmen’s compensation award for death of claimant’s son had priority over claims of general creditors in a bankruptcy proceeding. In re Hall-Luton Coal Mining Co., 29 F. Supp. 484, 1939 U.S. Dist. LEXIS 2342 (D. Ky. 1939 ).

Cited:

Commonwealth ex rel. Unemployment Compensation Com. v. Durham, 290 Ky. 408 , 161 S.W.2d 610, 1942 Ky. LEXIS 411 , 140 A.L.R. 1040 ( Ky. 1942 ); In re Megamarket of Lexington, 207 B.R. 527, 1997 Bankr. LEXIS 415 (Bankr. E.D. Ky. 1997 ).

Research References and Practice Aids

Cross-References.

See notes to KRS 376.150 . Freeman Furn. Factories, Inc. v. Bowlds (1933), 136 Fed. (2d) 136, 1943 U.S. App. LEXIS 2982; Carpenter v. Wells (1962), 358 S.W.2d 524, 1962 Ky. LEXIS 190 .

Kentucky Law Journal.

Moore, Leslie’s Admx. et al v. Branham et al. 31 Ky. L.J. 354 (1943).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint by Employee to Enforce Lien on Manufacturing Establishment, Form 282.14.

376.170. Distribution of income when operation of property is continued.

If the trustee or other person having the administration or distribution of the property or effects continues to operate the business, he shall, at the end of each calendar month, after payment of current expenses and any debt due the United States or this state, distribute the remaining money in his hands pro rata among the persons to whom a lien is given by KRS 376.150 and 376.180 , except twenty percent (20%) thereof which he may, if necessary, reserve for contingent expenses.

History. 2489.

NOTES TO DECISIONS

1.Subrogation of Claims.

Sureties on employer’s self-insurer’s bond who discharged outstanding workmen’s compensation claims against employer in receivership were subrogated to the compensation claims which had the same preference or priority as allowed by law for any unpaid wages or labor since other lienholders or creditors would have been in the same position if the claims had been paid directly from the assets of the company in the first place. Non-Marine Underwriters at Lloyd's London v. Carrs Fork Coal Co., 421 S.W.2d 852, 1967 Ky. LEXIS 86 ( Ky. 1967 ).

Research References and Practice Aids

Cross-References.

See note to KRS 376.150 . Freeman Furniture Factories v. Bowlds (1943), 136 Fed. (2d) 136, 1943 U.S. App. LEXIS 2982.

376.180. Lien attaches when business is transferred, suspended or attached — Enforcement.

When any company or establishment referred to in KRS 376.150 suspends, sells or transfers its business, or when the property or effects engaged in the business are taken in attachment or execution so that the business is stopped or suspended, a lien shall attach as provided in KRS 376.150 and may be enforced by proceedings in equity.

History. 2490.

NOTES TO DECISIONS

1.Suspension of Business.

A company has suspended business within the meaning of this section when its employes quit work because of failure of the company to pay them for several weeks. Producers' Coal Co. v. Barnaby, 210 Ky. 244 , 275 S.W. 625, 1925 Ky. LEXIS 654 ( Ky. 1925 ).

The fact that the suspension is temporary is immaterial. Producers' Coal Co. v. Barnaby, 210 Ky. 244 , 275 S.W. 625, 1925 Ky. LEXIS 654 ( Ky. 1925 ).

2.— Lien.

A lien hereunder, to the extent of wages due to employes during the six months prior to suspension, is prior to existing mortgages. Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ).

Cited:

McGlone v. Smith, 293 Ky. 131 , 168 S.W.2d 566, 1943 Ky. LEXIS 574 ( Ky. 1943 ).

Research References and Practice Aids

Cross-References.

See note to KRS 376.150 . Freeman Furniture Factories v. Bowlds (1943), 136 Fed. (2d) 136, 1943 U.S. App. LEXIS 2982.

Kentucky Law Journal.

Roberts, Receiverships in Kentucky, Grounds for Appointment, 27 Ky. L.J. 127 (1939).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.190. Joinder of parties — Limitation on action or filing of claim for lien.

The plaintiff in an action to enforce a lien given by KRS 376.150 or 376.180 may unite with him as co-plaintiffs any similar lien-holders who consent thereto, and shall make all lien-holders and encumbrancers parties. Where the parties are numerous, any one (1) or more may be designated by the court to prosecute or defend for the same class. Action to enforce the lien shall be filed within sixty (60) days from the date of the assignment, or from the date when the property goes into the hands of a receiver or trustee, or from the date when the business is stopped, suspended or sold; or the claims for which a lien is asserted shall be filed in said time with the person authorized to receive and report claims.

History. 2491.

NOTES TO DECISIONS

1.Joinder of Parties.

The purchaser of a labor claim with whom the employe joins as plaintiff for his use and benefit may enforce a lien hereunder. Producers' Coal Co. v. Barnaby, 210 Ky. 244 , 275 S.W. 625, 1925 Ky. LEXIS 654 ( Ky. 1925 ).

2.Time Limitation.

A claimant who fails to file suit or claim within sixty days loses priority except in bankruptcy proceedings. In re Falls City Shirt Mfg. Co., 98 F. 592, 1899 U.S. Dist. LEXIS 268 (D. Ky. 1899 ).

A claimant loses priority by not filing suit or claim within sixty days. Rockcastle Lumber Co. v. Burns, 175 Ky. 224 , 194 S.W. 95, 1917 Ky. LEXIS 296 ( Ky. 1917 ). See Freeman v. Craft, 220 Ky. 15 , 294 S.W. 822, 1927 Ky. LEXIS 480 ( Ky. 1927 ).

Where merchant who had purchased scrip from mining company employes commenced action on scrip, alleging merely an account for money due, within sixty days after business was stopped or suspended, but amended petition asserting right of subrogation to employes’ lien was not filed until after sixty-day period had expired, claim to lien was not filed in time. Lankford v. Sunshine Mining Co., 287 Ky. 53 , 151 S.W.2d 402, 1940 Ky. LEXIS 613 ( Ky. 1940 ).

Where claim for laborer’s lien was not filed until after expiration of sixty days from time business of mine was suspended, the lien lost its priority over mortgages. McGlone v. Smith, 293 Ky. 131 , 168 S.W.2d 566, 1943 Ky. LEXIS 574 ( Ky. 1943 ).

Laborers who had claims against insolvent decedent’s estate acquired a lien by filing their claims with the administrator within sixty days after the administrator brought suit to settle the estate. International Harvester Co. v. Dyer's Adm'r, 297 Ky. 55 , 178 S.W.2d 966, 1944 Ky. LEXIS 669 ( Ky. 1944 ).

Suit must be brought within sixty days from the date the ancillary receivers were appointed. Skaggs v. Elkhorn Coal Corp., 297 Ky. 330 , 180 S.W.2d 88, 1944 Ky. LEXIS 727 ( Ky. 1944 ).

Settlement of a disputed claim that a debtor had with a bank was not, as a matter of law, a preferential transfer under 11 U.S.C.S. § 547 because the creditor bank received nothing of clear value, and the bank’s claim was a secured claim that took priority pursuant to KRS 355.9-333 over any nonpossessory wage lien. Moreover, under KRS 376.190 , the wage lien was filed too late because it was filed more than 60 days after the date the debtor’s business stopped. Scherer v. Quality Communs., Inc. (In re Quality Communs., Inc.), 347 B.R. 227, 2006 Bankr. LEXIS 1678 (Bankr. W.D. Ky. 2006 ).

3.Pleadings.

An allegation that the company was a manufacturing concern and that the pleader had a lien on its property stated a mere conclusion. Bassett v. O'Neil Coal & Coke Co., 140 Ky. 346 , 131 S.W. 25, 1910 Ky. LEXIS 254 ( Ky. 1910 ).

The petition of an employe hereunder must show that it was filed within the sixty days allowed. Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ).

Unless the petition of the employe shows the claim to be for wages accruing within six months he cannot claim priority over pre-existing encumbrances. Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ).

Liens for compensation awards and labor claims were properly asserted within sixty days by way of answer, counterclaim and cross-petition against insolvent mining company in an action by lessor seeking recovery of rentals and royalties from the mining company and were thus perfected. Adkins v. Carol Mining Co., 281 Ky. 328 , 136 S.W.2d 32, 1940 Ky. LEXIS 40 ( Ky. 1940 ).

As an action brought under KRS 376.150-376.190 is a special statutory proceeding such proceeding requires proof of claims whether or not denied by the debtor and therefore rules relating to responsive pleadings are not applicable. Commonwealth ex rel. Division of Unemployment Ins. v. 20th Century Coal Co., 373 S.W.2d 159, 1963 Ky. LEXIS 155 ( Ky. 1963 ).

Cited:

Leslie’s Adm’x v. Branham, 289 Ky. 409 , 158 S.W.2d 949, 1942 Ky. LEXIS 558 ( Ky. 1942 ).

Research References and Practice Aids

Cross References

See note to KRS 376.150 . Freeman Furniture Factories v. Bowlds (1943), 136 Fed. (2d) 136, 1943 U.S. App. LEXIS 2982.

Kentucky Law Journal.

Moore, Leslie’s Admx. et al. v. Branham et al., 31 Ky. L.J. 354 (1943).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint by Employee to Enforce Lien on Manufacturing Establishment, Form 282.14.

376.195. Definitions for KRS 376.195 and 376.210.

As used in this section and in subsection (1) of KRS 376.210 :

  1. “Labor” includes all work done by teams, trucks, machinery, and mechanical equipment, whether the owner furnishes a driver or operator or not, but it shall not include labor performed by any officer, superintendent or stockholder of any corporation even though he may perform manual labor on the public work;
  2. “Materials” includes all materials of every kind or character used in the public improvement which shall remain as a part of the completed improvement, and all the materials substantially consumed or the value thereof substantially destroyed in making the public improvement, including explosives, gasoline, oil, grease, form lumber and other similar articles; and,
  3. “Supplies” includes small tools and equipment reasonably necessary in performing the work required to be done, including picks, shovels, sledge hammers, axes, pulleys, wire cables, ropes, and other similar items costing not more than fifty dollars ($50) per item, and tires and tubes furnished for use on vehicles engaged in the performance of the work;
  4. “Supplies” also includes the cost of labor, materials, and repair parts supplied or furnished for keeping all machinery and equipment used in the performance of the work in good operating condition; and, shall include the agreed or reasonable rental price of equipment and machinery used in performing the work to be done;
    1. The lien for rental of equipment or machinery shall not be more than the aggregate sum of six (6) months’ rental, and the aggregate amount of such rental shall not exceed sixty percent (60%) of the agreed value of the machinery or equipment; and
    2. The liens for supplies as defined in this subsection are subordinate to the liens for labor, material and supplies as defined in subsections (1) to (3) of this section.

History. Enact. Acts 1954, ch. 103, § 2; 1964, ch. 126, § 1; 1966, ch. 255, § 261; 1968, ch. 152, § 155.

NOTES TO DECISIONS

1.Application.

This section does not apply to equipment purchased under a conditional sales contract. Traylor Bros., Inc. v. Indiana Equipment Co., 336 S.W.2d 590, 1960 Ky. LEXIS 349 ( Ky. 1960 ).

2.Reasonable Rental Price.

The rental price is lienable only when there is in fact a rental contract of some kind and the reference in this section to “reasonable” rental price is intended only to cover the situation where the rental contract does not fix an agreed price or where the agreed price is for some reason unacceptable. Traylor Bros., Inc. v. Indiana Equipment Co., 336 S.W.2d 590, 1960 Ky. LEXIS 349 ( Ky. 1960 ).

Amounts spent by the construction company on rights of way, salaries, office expenses, guaranties and legal services are not lienable. Richmond & I. Constr. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. 1895).

3.Failure to Perfect Lien.

Where only one creditor was a supplier of leased equipment and it had not filed or perfected a lien against funds due the debtor, the claim was subordinated to the claims of other suppliers in distribution of funds held by the court. Whayne Supply Co. v. Morgan Constr. Co., 440 S.W.2d 779, 1969 Ky. LEXIS 346 ( Ky. 1969 ).

4.Materials.

A large pulp and paper machine was a lienable item under this section which provides for liens on materials permanently affixed to the realty. Sandusky Foundry & Machine Co. v. Wickliffe, 369 F. Supp. 439, 1972 U.S. Dist. LEXIS 13344 (W.D. Ky. 1972 ), aff'd, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. Ky. 1973 ).

Claim for rent for machinery furnished contractor was not lienable. Steele & Lebby v. Flynn-Sullivan Co., 245 Ky. 772 , 54 S.W.2d 325, 1932 Ky. LEXIS 676 ( Ky. 1932 ).

5.Supplies.

Earth mover tires are supplies within the definitions provided by the statutes. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

A groceryman furnishing food to a contractor who boarded his workers had no lien hereunder. Carson & Co. v. Shelton, 128 Ky. 248 , 107 S.W. 793, 32 Ky. L. Rptr. 1083 , 1908 Ky. LEXIS 45 ( Ky. 1908 ).

Machinery, lost or mislaid equipment, repairs of machinery and payment of freight to and from factory were not “materials” or “supplies” as these terms were universally defined. Century Indem. Co. v. Shunk Mfg. Co., 253 Ky. 50 , 68 S.W.2d 772, 1934 Ky. LEXIS 604 ( Ky. 1934 ).

6.Vehicles.

The word “vehicle” within the meaning of subsection (3) of this section encompasses more than passenger cars and trucks. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

7.Labor.

KRS 376.010 provides for a lien for a person who “performs labor” or “furnishes materials.” The definition of labor contained in KRS 376.010 (5) does no more than specify that a lien is conferred for work actually done by machinery, etc., not for the leasing of machinery to another who performs or has the work performed with the machinery. Thus, equipment and machinery rental charges are not lienable on private projects. Dirt & Rock Rentals, Inc. v. Irwin & Powell Constr., Inc., 838 S.W.2d 412, 1992 Ky. App. LEXIS 106 (Ky. Ct. App. 1992).

Any necessary labor which was performed in and for the construction of the road was within the law. Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

A civil engineer who actually supervised part of the construction was entitled to a lien. Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

Cited:

Holloway & Son Constr. Co. v. Mattingly Bridge Co., 581 S.W.2d 568, 1979 Ky. LEXIS 259 ( Ky. 1979 ); Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. 1986); ABCO-Bramer, Inc. v. Markel Ins. Co., 55 S.W.3d 841, 2000 Ky. App. LEXIS 151 (Ky. Ct. App. 2000).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Complaint to Enforce Mechanic’s and Materialman’s Lien, Form 153.08.

376.200. Definitions for KRS 376.210 to 376.260. [Repealed.]

Compiler’s Notes.

This section (2495-2) was repealed by Acts 1954, ch. 103, § 4.

376.205. Lien for labor, materials or supplies furnished on public improvement — Assertion, filing and enforcement. [Repealed.]

Compiler’s Notes.

This section (Acts 1954, ch. 103, §§ 1, 3) was repealed by Acts 1965, ch. 255, § 283.

376.210. Lien for labor, material, or supplies furnished on public improvement — Assertion, filing, and enforcement.

  1. Any person, firm, or corporation who performs labor or furnishes materials or supplies for the construction, maintenance, or improvement of any canal, railroad, bridge, public highway, or other public improvement in this state by contract, express or implied, with the owner thereof or by subcontract thereunder shall have a lien thereon, and upon all the property and the franchises of the owner, except property owned by the state, a subdivision or agency thereof, or by any city, county, urban-county, or charter county government. If the property improved is owned by the state or by any subdivision or agency thereof, or by any city, county, urban-county, or charter county government, the person furnishing the labor, materials, or supplies shall have a lien on the funds due the contractor from the owner of the property improved. Except as provided in KRS 376.195 , the lien shall be for the full contract price of the labor, materials, and supplies furnished, and shall be superior to all other liens thereafter created.
  2. Any person undertaking or expecting to furnish labor, materials, or supplies as provided in this section may acquire the lien herein provided by filing in the clerk’s office of each county in which he has undertaken to furnish labor, materials, or supplies, except as provided in subsection (3), a statement in writing that he has undertaken and expects to furnish labor, materials, or supplies and the price at which they are to be furnished, and the lien for labor, material, or supplies furnished thereafter shall relate back and take effect from the date of the filing of the statement. In all cases of original construction the liens shall be prior to all liens theretofore or thereafter created on the part so constructed and on no other part.
  3. In all cases where the labor, materials, or supplies are furnished for the improvement of any public highway or other public property owned by the state or by any city, county, urban-county, or charter county government, the statement shall be filed in the county clerk’s office of the county in which is located the seat of government of the owner of the property improved, and the lien shall attach only to any unpaid balance due the contractor for the improvement from the time a copy of the statement, attested by the county clerk, is delivered to the owner or the owner’s authorized agent with whom the contract for improving the public highway or other public property was made.

History. 2492: amend. Acts 1966, ch. 255, § 262; 1998, ch. 397, § 3, effective July 15, 1998.

NOTES TO DECISIONS

1.Purpose.

The purpose of this section was to protect laborers and materialmen, and it does not permit a construction broad enough to include a lien for unpaid premiums due on workmen’s compensation and public liability insurance. In re Zaepfel & Russell, Inc., 49 F. Supp. 709, 1941 U.S. Dist. LEXIS 2192 (D. Ky. 1941 ), aff'd, 135 F.2d 215, 1943 U.S. App. LEXIS 3254 (6th Cir. Ky. 1943 ).

2.Application.

This section applies to street railroads. Montgomery v. Allen, 107 Ky. 298 , 53 S.W. 813, 21 Ky. L. Rptr. 1001 , 1899 Ky. LEXIS 171 ( Ky. 1899 ).

3.Construction.

The scheme of protection provided by the Legislature in this section has utility within its specific limitations, and, consequently, will not permit expansion by construction. McLean County v. Meuth Carpet Supply, 573 S.W.2d 340, 1978 Ky. LEXIS 408 ( Ky. 1978 ).

4.Property Subject to Lien.

The lien attaches only to funds actually earned by the contractor and does not attach to funds that are unearned because they are neither “unpaid” nor “due.” McLean County v. Meuth Carpet Supply, 573 S.W.2d 340, 1978 Ky. LEXIS 408 ( Ky. 1978 ).

A public improvement lien created under this section attaches to funds due and owing to the contractor while a private improvement lien created under KRS 376.010 attaches to the improved property itself or the owner’s interest therein. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

5.Public Improvement.

An ice plant is such a manufacturing plant as is included in the term “public improvement.” United States Cast Iron Pipe & Foundry Co. v. Henry Vogt Mach. Co., 182 Ky. 473 , 206 S.W. 806, 1918 Ky. LEXIS 407 ( Ky. 1918 ).

The construction of an addition to a city waterworks plant is a “public improvement” within the meaning of this section. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where the debtor contractor had been engaged as the general contractor of a construction project for an automobile company’s assembly division and the city of Bowling Green relative to an automobile production facility, and the evidence indicated that the city had taken all actions required by statute in order to create a public improvement project, with the exception of actually issuing the contemplated revenue bonds, the construction project was considered a public improvement project and, therefore, mechanics’ liens attached, if at all, to the funds due the debtor contractor. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

6.Subcontract.

“Subcontract” includes all subcontracts, no matter how many degrees removed from the principal contract. Grigsby v. Lexington & E. R. Co., 152 Ky. 164 , 153 S.W. 232, 1913 Ky. LEXIS 633 ( Ky. 1913 ). See E. I. Du Pont De Nemours Powder Co. v. Louisville & N. R. Co., 153 Ky. 593 , 156 S.W. 116, 1913 Ky. LEXIS 881 ( Ky. 1913 ).

7.Subcontractors’ Liens.

Payment by the owner to the contractor, whether in money or otherwise, does not prejudice the lien of the subcontractors. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

The existence of a subcontractor’s lien does not depend on the existence or nonexistence of the contractor’s lien. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

Bankruptcy of principal contractor would not preclude subcontractor from completing, at request of college regents constructing swimming pool, contract to improve such property, and thereafter timely asserting lien on funds held by regents. Fidelity & Casualty Co. v. Board of Regents, 287 Ky. 439 , 152 S.W.2d 581, 1941 Ky. LEXIS 514 ( Ky. 1941 ).

Pursuant to this section and KRS 376.230 , subcontractor acquired valid lien on funds held by college regents for construction of swimming pool, where he completed his work on June 13, immediately notified regents in writing of intention to claim lien on such funds and filed statement of lien of Aug. 18; but if subcontractor was precluded from furnishing labor and materials after bankruptcy of principal contractor in March he should have filed lien statement in May. Fidelity & Casualty Co. v. Board of Regents, 287 Ky. 439 , 152 S.W.2d 581, 1941 Ky. LEXIS 514 ( Ky. 1941 ).

Where the contractor on county project was paid for all work it performed at least several weeks before any statements of lien were filed and delivered by subcontractors, at the time of filing and delivery there was nothing to which liens could attach and subcontractors could not recover for their labor and material from county funds constituting part of the contract price. McLean County v. Meuth Carpet Supply, 573 S.W.2d 340, 1978 Ky. LEXIS 408 ( Ky. 1978 ).

Trial court erred in dismissing a general contractor's cause of action for damages caused by a subcontractor's excessive mechanics' lien because the general contractor's cause of action did not accrue until the subcontractor's enforcement action was concluded, where the original pleading in the case was the general contractor's answer in the subcontractor's enforcement action and the general contractor's cause of action was not a compulsory counterclaim to the subcontractor's initial lien enforcement action. DCI Props.-DKY, LLC v. Coppage Constr. Co., 465 S.W.3d 886, 2015 Ky. App. LEXIS 26 (Ky. Ct. App. 2015).

8.— Materialmen.

Contractors overpaying subcontractor are not liable personally to the latter’s materialmen. Steele & Lebby v. Ayer & Lord Tie Co., 246 Ky. 379 , 55 S.W.2d 52, 1932 Ky. LEXIS 776 ( Ky. 1932 ).

This section clearly vests in materialmen a property right exceeding any other interest they may have as an ordinary creditor. In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ), disapproved, Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ).

Under KRS 376.070 requiring contractors to pay, in full, all materialmen from funds they receive from the owner, the property interest conferred upon the materialman is greater than the interest which may be secured by filing the statutory materialmen’s lien under this section and creates a trust for the materialman wherein its claim of title transcends an attack by the trustee in bankruptcy whether under a hypothetical lien creditor or a voidable preference theory, since the funds pass outside the bankrupt’s estate; thus, the materialman has an enforcible interest in the trust fund represented by checks jointly payable to the debtor and materialman creditor. In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ), disapproved, Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ).

A trustee in bankruptcy has the power under federal bankruptcy law to avoid materialmen’s liens that are not so perfected nor enforceable against him as of the date of the bankruptcy petition as to have priority over the claim of the debtor’s estate. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

This section enables a materialman to obtain a lien on the funds due a contractor from the state, and this lien must be filed with the county clerk within 30 days after the last day of the month within which materials were furnished. Safeco Ins. Co. v. W.B. Browning Constr. Co., 886 F.2d 807, 1989 U.S. App. LEXIS 14757 (6th Cir. Ky. 1989 ).

9.— — Supplies.

Earth mover tires are supplies within the definitions provided by the statutes. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

No statutory language or case law requires the consumption of supplies furnished before a lien will apply. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

10.Assignment of Claim.

The assignee of a laborer’s tickets cannot file the statement required herein. Frailey v. Winchester & B. R. Co., 96 Ky. 570 , 29 S.W. 446, 16 Ky. L. Rptr. 645 , 1895 Ky. LEXIS 128 ( Ky. 1895 ).

When the assignor has perfected the lien prior to assignment, the assignee receives full benefit of the lien. Steele & Lebby v. Flynn-Sullivan Co., 245 Ky. 772 , 54 S.W.2d 325, 1932 Ky. LEXIS 676 ( Ky. 1932 ).

Where contract pursuant to which surety company signed performance bond of road contractor contained provision assigning to surety all sums due from the department of highways under road contract, and surety company paid claims of materialmen after default by contractor, it was not necessary that materialmen have perfected their liens under this section and KRS 376.230 to entitle surety to equitable lien on sum due contractor from department of highways, as against attaching creditor. National Surety Corp. v. Massachusetts Bonding & Ins. Co., 280 Ky. 785 , 134 S.W.2d 611, 1939 Ky. LEXIS 201 ( Ky. 1939 ).

Bank, which lent money to contractor building road for state to enable contractor to pay workmen and materialmen having liens, was entitled, through subrogation, to lien on fund due from state to contractor, notwithstanding there was no writing or formal assignment by contractor as the bank was not a volunteer. Southern Exchange Bank v. American Surety Co., 284 Ky. 251 , 144 S.W.2d 203, 1940 Ky. LEXIS 460 ( Ky. 1940 ), limited, York v. Cline Constr. Co., 336 S.W.2d 34, 1960 Ky. LEXIS 311 ( Ky. 1960 ), overruled, National Surety Corp. v. State Nat'l Bank, 454 S.W.2d 354, 1970 Ky. LEXIS 277 ( Ky. 1970 ).

11.Priority.

A mortgage recorded before filing of preliminary statement has priority. Trust Co. of America v. Casey, 131 Ky. 771 , 115 S.W. 780, 1909 Ky. LEXIS 56 ( Ky. 1909 ).

Failure to file preliminary notice is fatal to claim of priority. Millett v. Swift, 138 Ky. 408 , 128 S.W. 312, 1910 Ky. LEXIS 85 ( Ky. 1910 ).

The preliminary statement does not create the lien but merely confers priority over other lienholders. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ).

Bank, which lent money to contractor building road for state to enable contractor to pay workmen and materialmen having liens, was entitled to priority over surety on contractor’s bond which had theretofore received assignment from contractor of all moneys payable under construction contract. Southern Exchange Bank v. American Surety Co., 284 Ky. 251 , 144 S.W.2d 203, 1940 Ky. LEXIS 460 ( Ky. 1940 ), limited, York v. Cline Constr. Co., 336 S.W.2d 34, 1960 Ky. LEXIS 311 ( Ky. 1960 ), overruled, National Surety Corp. v. State Nat'l Bank, 454 S.W.2d 354, 1970 Ky. LEXIS 277 ( Ky. 1970 ).

The liens of the contractor and subcontractor are of equal dignity. Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

12.Liability of Taxing Districts.

Mechanics, materialmen and contractors are not entitled to a lien on public property, but are entitled to a lien on funds due the contractor from the taxing district. Roe v. Scanlan, 98 Ky. 24 , 32 S.W. 216, 17 Ky. L. Rptr. 595 , 1895 Ky. LEXIS 10 ( Ky. 1895 ). See Noonan v. Hastings, 101 Ky. 312 , 41 S.W. 32, 19 Ky. L. Rptr. 485 , 1897 Ky. LEXIS 199 ( Ky. 1897 ); Ausbeck v. Schardien, 45 S.W. 507, 20 Ky. L. Rptr. 178 , 1898 Ky. LEXIS 292 (Ky. Ct. App. 1898); Allen County v. United States Fidelity & Guaranty Co., 122 Ky. 825 , 93 S.W. 44, 29 Ky. L. Rptr. 356 , 1906 Ky. LEXIS 10 5 ( Ky. 1906 ); Blatz Co. v. Stivers, 200 Ky. 801 , 255 S.W. 699, 1923 Ky. LEXIS 190 ( Ky. 1923 ); Knott County Board of Education v. Martin, 218 Ky. 688 , 291 S.W. 1062, 1927 Ky. LEXIS 225 ( Ky. 1927 ); Mid-Continent Petroleum Corp. v. Southern Surety Co., 225 Ky. 501 , 9 S.W.2d 229, 1928 Ky. LEXIS 810 ( Ky. 1928 ); Steele & Lebby v. Flynn-Sullivan Co., 245 Ky. 772 , 54 S.W.2d 325, 1932 Ky. LEXIS 676 ( Ky. 1932 ); Steele & Lebby v. Ayer & Lord Tie Co., 246 Ky. 379 , 55 S.W.2d 52, 1932 Ky. LEXIS 776 ( Ky. 1932 ).

Taxing districts are liable to mechanics even when there is no fund in existence which is liable for the claim, and may be required to levy a tax therefor. Roe v. Scanlan, 98 Ky. 24 , 32 S.W. 216, 17 Ky. L. Rptr. 595 , 1895 Ky. LEXIS 10 ( Ky. 1895 ). See Allen County v. United States Fidelity & Guaranty Co., 122 Ky. 825 , 93 S.W. 44, 29 Ky. L. Rptr. 356 , 1906 Ky. LEXIS 10 5 ( Ky. 1906 ).

Portion of judgment awarding lien on waterworks but not providing for sale to enforce lien was improper, but would be treated as mere surplusage. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where, at time notice of lien was given by materialman who furnished materials to contractor for construction of improvement to city waterworks plant, the money appropriated by the city for the work had all been paid to the contractor, the materialman was entitled to judgment ordering the city to provide the necessary funds to pay his claim. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

The right of the trustees of laborer pension funds on a state construction project is superior to that of the surety to those funds undisbursed and unappropriated from payments due before default. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

13.— Laborers.
14.— — Fringe Benefits.

Since there is a statute declaring that in dealing with the prevailing wage on public works fringe benefits are to be included, and a second statute guaranteeing that laborers who are not paid for their work on public projects shall have a lien for the payment of that labor, it would be inconsistent to attempt to exclude fringe benefits from the recovery of the laborer. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

15.Destruction of Property.

When the property under construction was destroyed before completion, the builder is not entitled to a lien for the materials lost. Richmond & I. Constr. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. 1895).

16.Undelivered Materials.

The lien does not secure materials never delivered, even though the contractor refused to receive them, and even though they were made under special order. Richmond & 1. Const. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. Ky. 1895 ). But see Grainger & Co. v. Johnson, 286 F. 833, 1923 U.S. App. LEXIS 2765 (6th Cir. Ky.), cert. denied, 262 U.S. 749, 43 S. Ct. 524, 67 L. Ed. 1213, 1923 U.S. LEXIS 3070 (U.S. 1923).

17.Waiver of Lien.

An agreement by the contractor to accept security for his claim, inconsistent with the intention that the statutory lien should exist, does not waive the statutory lien when the agreement was not performed. If partly performed, the lien is waived to that extent. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

Where supplier creditor had authority to file a lien against all materials furnished to a public construction project, but failed to file a materialman’s lien within 30 days of furnishing the materials as required by this section, waiver of the right to assert a lien in consideration of receipt of checks jointly payable to creditor and debtor one (1) month after the expiration of filing period was ineffective against the trustee, who had the status of a “hypothetical” lien creditor on the date of bankruptcy under 11 USCS 110, since creditor had not perfected a lien at the date of bankruptcy and there was no equitable lien where creditor suffered no actual detriment through waiver. In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ), disapproved, Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ).

18.Notice.

As against another lienholder, the fact that construction is original does not dispense with filing of the preliminary notice. Trust Co. of America v. Casey, 131 Ky. 771 , 115 S.W. 780, 1909 Ky. LEXIS 56 ( Ky. 1909 ).

Filing of the preliminary statement is not essential to the creation of the lien if the statement required by KRS 376.230 is filed. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ).

Where plaintiff furnished what it believed to be the last material on the job in July but some of such material was defective and was subsequently replaced under warranty in November, notice of mechanics’ lien filed in December under KRS 376.230 was timely, since a lien filed under this section is anticipatory and relates only to priorities and does not bar claimant who files notice after completion of his work pursuant to KRS 376.230 . Sandusky Foundry & Machine Co. v. Wickliffe, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. Ky. 1973 ).

19.— Sufficiency.

Allegation that work was done on a railroad owned by defendant is sufficient, in absence of showing that it was a private railroad. Simmons v. Fletcher & Snodgrass, 161 Ky. 295 , 170 S.W. 628, 1914 Ky. LEXIS 48 ( Ky. 1914 ).

20.Interest.

Interest should be allowed according to the contract and, if no provision is made therein, then from the filing of the statement. Richmond & I. Constr. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. 1895).

Where contract for construction of improvement to city waterworks plant provided that money was due when contract was completed, materialman whose claim was not paid was entitled to interest on the amount of his claim from the date of filing notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

21.Parties.

The trustees of employes pension, health and welfare funds were proper parties to file claims on behalf of laborers on a state construction project where the contractor had gone bankrupt before completing the project. Reliance Ins. Co. v. Commonwealth, Dep't of Transp., 576 S.W.2d 231, 1978 Ky. App. LEXIS 653 (Ky. Ct. App. 1978).

22.Protest.

All defenses of a general contractor are precluded by failure to file a timely protest to a lien. Jim Skaggs, Inc. v. Smith, 788 S.W.2d 274, 799 S.W.2d 585, 1990 Ky. App. LEXIS 63 (Ky. Ct. App. 1990).

Cited:

American Radiator & Standard Sanitary Corp. v. Albany Municipal Housing Com., 441 S.W.2d 433, 1969 Ky. LEXIS 322 ( Ky. 1969 ); In re Allgeier & Dyer, Inc., 28 B.R. 371, 1982 U.S. Dist. LEXIS 9992 (W.D. Ky. 1982 ); In re Lafollette Sheet Metal, Inc., 35 B.R. 634, 1983 Bankr. LEXIS 4874 (Bankr. E.D. Tenn. 1983); Wehr Constructors, Inc. v. Steel Fabricators, Inc., 769 S.W.2d 51, 1988 Ky. App. LEXIS 197 (Ky. Ct. App. 1988).

Research References and Practice Aids

Kentucky Bench & Bar.

Baker and Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Mechanic’s and Materialman’s Lien on Public Improvement Project, Form 153.05.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Complaint to Enforce Mechanic’s and Materialman’s Lien, Form 153.08.

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Owner Letter, Form 153.07.

376.212. Bond to discharge lien created by KRS 376.210 — Requirements — Liability of obligors on bond.

  1. Any contractor or other person contracting with the public authority for the furnishing of any improvements or services for which a lien is created by KRS 376.210 or any person in privity with the contractor or other person may, at any time before a judgment is rendered enforcing the lien, execute before the county clerk in the county in which the lien was filed a bond for double the amount of the lien claimed.
  2. The bond executed under subsection (1) of this section shall be subject to the following conditions:
    1. The bond shall be approved by the clerk only if the bond is secured by:
      1. Cash;
      2. A letter of credit from a bank; or
      3. Surety insurance as defined by KRS 304.5-060 that is issued by a licensed insurer; and
    2. The bond shall require that the obligor satisfy any judgment that may be rendered in favor of the person asserting the lien.
  3. The bond shall be preserved by the clerk, and upon its execution, the lien provided by KRS 376.210 shall be discharged.
  4. The person asserting the lien may make the obligors on the bond parties to any action to enforce his claim, and any judgment received may be against any of the obligors on the bond.

History. Enact. Acts 2000, ch. 250, § 2, effective July 14, 2000; 2011, ch. 96, § 2, effective June 8, 2011.

376.220. Limit of amount of lien — Pro rata distribution — Liability for filing claim in excess of amount due.

  1. The liens provided for in KRS 376.210 shall not be for a greater amount in the aggregate than the contract price of the original contractor, and should the aggregate amount of liens exceed the price agreed upon between the original contractor and the owner there shall be a pro rata distribution of the original contract price among the lien-holders.
  2. On claims for labor, materials or supplies furnished for the improvement of any bridge, public highway or other public property owned by the state or by any county or city, the provisions of this section for a pro rata distribution of the original contract price among lien-holders shall not apply to liens on the unpaid balance due the contractors, except as provided in KRS 376.240 .
  3. If any person files a statement asserting a lien against any contractor on any fund due the contractor, for an amount in excess of the amount actually due, the person filing the lien shall be liable to any person damaged thereby to the extent of such damage, including reasonable court costs and attorney’s fees incurred by the injured parties. Any such claim for damages may be asserted and prosecuted in the county in which the lien statement was filed.

History. 2493, 2495-4.

NOTES TO DECISIONS

1.Contract Price.

When the contractor agreed, among other things, to pay interest for a certain period on the owner’s bonds, such interest should be deducted in determining the contract price. Richmond & I. Constr. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. 1895).

2.Lienholder’s Share.

The share of each lienholder is ascertained by the ratio that the contract price bears to the total of all claims of mechanics and materialmen, whether perfected or not. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

3.Payment in Bonds.

The lien of a subcontractor who received bonds at an agreed value is not discharged to any greater extent than if he had received a like payment in money. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

4.Materialmen.

Portion of judgment awarding lien on waterworks but not providing for sale to enforce lien was improper, but would be treated as mere surplusage. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where, at time notice of lien was given by materialman who furnished materials to contractor for construction of improvement to city waterworks plant, the money appropriated by the city for the work had all been paid to the contractor, the materialman was entitled to judgment ordering the city to provide the necessary funds to pay his claim. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

5.Accrual of Action.

Trial court erred in dismissing a general contractor's cause of action for damages caused by a subcontractor's excessive mechanics' lien because the general contractor's cause of action did not accrue until the subcontractor's enforcement action was concluded, where the original pleading in the case was the general contractor's answer in the subcontractor's enforcement action and the general contractor's cause of action was not a compulsory counterclaim to the subcontractor's initial lien enforcement action. DCI Props.-DKY, LLC v. Coppage Constr. Co., 465 S.W.3d 886, 2015 Ky. App. LEXIS 26 (Ky. Ct. App. 2015).

Cited:

Riley v. West Kentucky Production Credit Asso., 603 S.W.2d 916, 1980 Ky. App. LEXIS 347 (Ky. Ct. App. 1980).

Research References and Practice Aids

Kentucky Bench & Bar.

Mapother, Attorneys’ Fees Recoverable in Kentucky Liti- gation, Vol. 44, No. 4, October 1980, Ky. Bench & Bar 28.

376.230. Lien dissolved unless statement timely filed with county clerk — Form and content of statement — Duties and fees of clerk.

  1. The lien provided for in KRS 376.210 shall be dissolved unless the person who furnishes the labor, materials, or supplies shall, whichever is later, within sixty (60) days after the last day of the month in which any labor, materials, or supplies were furnished, or by the date of substantial completion, file in the county clerk’s office of each county in which labor, materials, or supplies were furnished, except as hereinafter provided, a statement in writing verified by affidavit of the claimant or his or her authorized agent or attorney, setting forth the amount due for which the lien is claimed, the date on which labor, materials, or supplies were last furnished and the name of the canal, railroad, bridge, public highway, or other public improvement upon which it is claimed.
  2. In all cases where a lien is claimed for labor, materials, or supplies furnished for the improvement of any bridge, public highway, or other public property owned by the state or by any county, charter county, urban-county, consolidated local government, or city, the statement of lien shall be filed only in the county clerk’s office of the county in which the seat of government of the owner of the property is located.
  3. The county clerk, upon the filing of the statement, shall make an abstract and entry thereof as now provided by law in case of mechanics’ liens in the same book used for that purpose, and shall make proper index thereof. The clerk shall be paid by the party filing the claim, and for attesting any copy of the lien statement. If he or she is required to make the copy, he or she may make an additional charge as provided by law. The clerk’s fees shall be determined pursuant to KRS 64.012 . All of these charges may be recovered by the lien claimant as costs from the party and out of the fund against which the claim is filed.

History. 2494: amend. Acts 1972, ch. 296, § 1; 1978, ch. 84, § 14, effective June 17, 1978; 2005, ch. 104, § 1, effective June 20, 2005; 2007, ch. 136, § 7, effective June 26, 2007.

NOTES TO DECISIONS

1.Applicability.

This section referred solely to liens provided for in KRS 376.210 and had no application to liens given by KRS 376.150 (2). W. H. Hall & Son v. J. D. Guthrie's Sons, 103 S.W. 721, 31 Ky. L. Rptr. 801 (1907). See In re Bennett, 153 F. 673, 1907 U.S. App. LEXIS 4447 (6th Cir. Ky. 1907 ); Gugenheim v. Watkins, 167 Ky. 639 , 181 S.W. 357, 1916 Ky. LEXIS 472 ( Ky. 1916 ); Rockcastle Lumber Co. v. Burns, 175 Ky. 224 , 194 S.W. 95, 1917 Ky. LEXIS 296 ( Ky. 1917 ).

2.Filing of Statement.

The lien did not attach unless the claimant filed his statement as required. (Decided under prior law) Tod v. Kentucky Union R. Co., 52 F. 241, 1892 U.S. App. LEXIS 1396 (6th Cir. Ky. 1892 ).

The premature filing of the statement did not affect its validity. (Decided under prior law) Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

A detailed statement of the claim was not required. (Decided under prior law) Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

Laborers employed by the month could file a statement at the termination of each month for work done during that month. (Decided under prior law) Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

The lien does not attach unless the claimant files his statement as herein required. Linn v. East Eagle & H. M. Turnpike Co., 70 S.W. 401, 24 Ky. L. Rptr. 978 (1902). See United States Cast Iron Pipe & Foundry Co. v. Henry Vogt Mach. Co., 182 Ky. 473 , 206 S.W. 806, 1918 Ky. LEXIS 407 ( Ky. 1918 ); Steele & Lebby v. Ayer & Lord Tie Co., 246 Ky. 379 , 55 S.W.2d 52, 1932 Ky. LEXIS 776 ( Ky. 1932 ).

Filing of the statement required by KRS 376.210(2) is not essential to the creation of a lien if the statement required herein is filed. Grigsbey v. Lexington & E. R. Co., 150 Ky. 557 , 150 S.W. 687, 1912 Ky. LEXIS 945 ( Ky. 1912 ).

Pursuant to KRS 376.210 and this section, subcontractor acquired valid lien on funds held by college regents for construction of swimming pool, where he completed his work on June 13, immediately notified regents in writing of intention to claim lien on such funds and filed statement of lien on Aug. 18; but if subcontractor was precluded from furnishing labor and materials after bankruptcy of principal contractor in March he should have filed lien statement in May. Fidelity & Casualty Co. v. Board of Regents, 287 Ky. 439 , 152 S.W.2d 581, 1941 Ky. LEXIS 514 ( Ky. 1941 ).

3.— Waiver After Failure to File.

Where supplier creditor had authority to file a lien against all materials furnished to a public construction project, but failed to file a materialman’s lien within 30 days of furnishing the materials as required by this section, waiver of the right to assert a lien in consideration of receipt of checks jointly payable to creditor and debtor one (1) month after the expiration of filing period was ineffective against the trustee, who had the status of a “hypothetical” lien creditor on the date of bankruptcy under 11 USCS 110, since creditor had not perfected a lien at the date of bankruptcy and there was no equitable lien where creditor suffered no actual detriment through waiver. In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ), disapproved, Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. Ky. 1986 ).

4.— Time.

The period for filing statement dates from the furnishing of the last labor or material by the particular claimant. Central Trust Co. v. Richmond, N. I. & B. R. Co., 68 F. 90, 1895 U.S. App. LEXIS 2848 (6th Cir. Ky.), cert. denied, 163 U.S. 679, 16 S. Ct. 1199, 41 L. Ed. 310, 1895 U.S. LEXIS 3819 (U.S. 1895).

Installation of sillcock and other small items by plumbing contractor constituted furnishing of last item of materials, as against contention that it was repair work or work of a trivial nature not done in good faith, where evidence showed that such items were included in contract and specifications but had been overlooked or forgotten by the contractor. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Where plaintiff furnished what it believed to be the last material on a job in July but such material was defective and was subsequently replaced under a warranty in November, a notice of mechanics’ lien filed in December was timely. Sandusky Foundry & Machine Co. v. Wickliffe, 369 F. Supp. 439, 1972 U.S. Dist. LEXIS 13344 (W.D. Ky. 1972 ), aff'd, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. Ky. 1973 ).

KRS 376.210 enables a materialman to obtain a lien on the funds due a contractor from the state, and this lien must be filed with the county clerk within 30 days after the last day of the month within which materials were furnished. Safeco Ins. Co. v. W.B. Browning Constr. Co., 886 F.2d 807, 1989 U.S. App. LEXIS 14757 (6th Cir. Ky. 1989 ).

5.— — Extension.

Where electrical contractor had completed performance of contract and work had been accepted, subsequent labor and materials furnished in repairing a short circuit caused by settling of the building, although done under a time guarantee, could not be counted as the last item of work and materials for the purpose of extending the time for filing notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Work done or repairs made pursuant to a time guarantee cannot extend the time for giving notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

Work done to remedy defects or to repair damages caused by casualty after the completion of the contract does not extend the time to give notice of lien. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

6.Description of Property.

There should have been a sufficient description of the property to show the county where the work had been done or the material furnished. (Decided under prior law) Central Trust Co. v. Richmond, N. I. & B. R. Co., 54 F. 723, 1892 U.S. App. LEXIS 2090 (C.C.D. Ky. 1892 ).

7.Railroad.

Allegation that work was done on a railroad owned by defendant is sufficient, in absence of showing that it was a private railroad. Simmons v. Fletcher & Snodgrass, 161 Ky. 295 , 170 S.W. 628, 1914 Ky. LEXIS 48 ( Ky. 1914 ).

8.Work Done in County Where No Statement Filed.

Work done in a county in which no statement is filed is not protected by a statement filed in a county where the larger part of the work was done. Richmond & I. Constr. Co. v. Richmond, 68 F. 105, 1895 U.S. App. LEXIS 2849 (6th Cir. 1895).

9.Liability of Contractor’s Surety.

Bankruptcy of principal contractor would not preclude subcontractor from completing, at request of college regents constructing swimming pool, contract to improve such property and thereafter timely asserting lien on funds held by regents and contractor’s surety bond was liable for subcontractor’s lien. Fidelity & Casualty Co. v. Board of Regents, 287 Ky. 439 , 152 S.W.2d 581, 1941 Ky. LEXIS 514 ( Ky. 1941 ).

10.Bankruptcy.

A trustee in bankruptcy has the power under federal bankruptcy law to avoid materialmen’s liens that are not so perfected nor enforceable against him as of the date of the bankruptcy petition as to have priority over the claim of the debtor’s estate. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

Cited:

National Surety Corp. v. Massachusetts Bonding & Ins. Co., 280 Ky. 785 , 134 S.W.2d 611, 1939 Ky. LEXIS 201 ( Ky. 1939 ); Wehr Constructors, Inc. v. Steel Fabricators, Inc., 769 S.W.2d 51, 1988 Ky. App. LEXIS 197 (Ky. Ct. App. 1988).

Opinions of Attorney General.

Since delinquent taxes are a debt to the state, under KRS 44.030 , a lien for taxes, under KRS 134.420 , which has accrued is superior to a materialman’s lien, under this section, thereafter filed and perfected. OAG 80-15 .

Research References and Practice Aids

Cross-References.

Fees of county clerk, KRS 64.012 .

Kentucky Bench & Bar.

Glover, The Fairness in Construction Act, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 20.

Kentucky Law Journal.

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Complaint to Enforce Mechanic’s and Materialman’s Lien, Form 153.08.

376.240. Perfecting a lien on funds due contractor from public authority.

Upon the filing of the statement of lien provided for in subsection (2) of KRS 376.230 in the county clerk’s office and the delivery of an attested copy thereof to the public authority making the contract for the improvement of any bridge, public highway or other public property owned by the state or any county or city, and the filing with the public authority of a signed copy of a letter addressed to the contractor or subcontractor at his address given in the contract, with a post office receipt showing that an attested copy of the lien statement has been sent by the lien claimant to the contractor or subcontractor by certified mail, return receipt requested or by registered mail, the claimant shall have a lien superior to any lien subsequently perfected on any unpaid balance due the contractor under the contract of improvement.

History. 2494: amend. Acts 1974, ch. 315, § 80.

NOTES TO DECISIONS

1.Assignment of Funds.

Where contract pursuant to which surety company signed performance bond of road contractor contained provision assigning to surety all sums due from the department of highways under road contract, and surety company paid claims of materialmen after default by contractor, it was not necessary that materialmen have perfected their liens under KRS 376.210 and KRS 376.230 to entitle surety to equitable lien on sum due contractor from department of highways, as against attaching creditor. National Surety Corp. v. Massachusetts Bonding & Ins. Co., 280 Ky. 785 , 134 S.W.2d 611, 1939 Ky. LEXIS 201 ( Ky. 1939 ).

2.Bankruptcy.

The enforceability of a statutory materialmen’s lien depends upon its state of perfection as of the date the bankruptcy petition is filed. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

A trustee in bankruptcy has the power under federal bankruptcy law to avoid materialmen’s liens that are not so perfected nor enforceable against him as of the date of the bankruptcy petition as to have priority over the claim of the debtor’s estate. In re Allgeier & Dyer, Inc., 18 B.R. 82, 1982 Bankr. LEXIS 4878 (Bankr. W.D. Ky. 1982 ).

Cited:

Sandusky Foundry & Machine Co. v. Wickliffe, 369 F. Supp. 439, 1972 U.S. Dist. LEXIS 13344 (W.D. Ky. 1972 ), aff’d, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. 1973); Wehr Constructors, Inc. v. Steel Fabricators, Inc., 769 S.W.2d 51, 1988 Ky. App. LEXIS 197 (Ky. Ct. App. 1988).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Complaint to Enforce Mechanic’s and Materialman’s Lien, Form 153.08.

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Contractor Letter, Form 152.06.

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Owner Letter, Form 153.07.

376.250. Withholding by public authority of funds due contractor and their payment to lien claimant — Protest by contractor — Suit by lien claimant.

  1. When an attested copy of the lien statement and proof of the delivery of an attested copy as provided in KRS 376.240 is delivered to any public authority which has contracted for the construction or improvement of any bridge, public highway, or other public property owned by the state, a subdivision or agency thereof, or by any city, county, urban-county, or charter county government, the public authority shall endorse on the attested copy the date of its receipt, file the copy and deduct and withhold the amount thereof, plus pursuant to KRS 64.012 to cover the fee of the county clerk for filing the statement and attesting a copy, from any amount then due the contractor, and if a sufficient amount is not then due the contractor from the next payments which become due.
  2. Unless the contractor, within thirty (30) days from the date of the delivery of the attested copy, files with the public authority a written protest putting in issue the correctness of the amount due the lien claimant or the liability of the fund for payment thereof, the amount withheld shall be paid by the public authority to the lien claimant and charged to the account of the contractor, which payment shall operate as a pro tanto release of the public authority from any claim of the contractor under the contract for the amount so paid. The filing in the county clerk’s office of the statement of lien provided for in KRS 376.230(2) shall be constructive notice to the contractor of the filing of the claim.
  3. If the contractor files a written protest as provided in subsection (2) of this section, the public authority with whom the protest is filed shall endorse thereon the date of its receipt. The public authority shall promptly send written notice of the protest to the lien claimant by certified mail, return receipt requested and shall not pay over to the lien claimant any of the money withheld from the contractor until authorized to do so by the contractor or until directed to do so by an order or judgment of court.
  4. If suit is not instituted by the lien claimant for the enforcement of the lien and summons in the suit is not served on the public authority or its chairman within thirty (30) days after the written notice of the protest is mailed to the claimant, then the lien shall automatically be released and the funds withheld pursuant to the filing of the lien statement shall be released and promptly paid to the contractor. If suit is filed and summons served within the time provided, the payment of the funds shall be withheld until ordered to be released or paid over by an order or judgment of the court, and then paid as directed by the order or judgment.
  5. All suits for the enforcement of these liens on public funds shall be instituted in the Circuit Court of the county in which is located the property on which the improvement is made, except where the property is owned by a public university. Where the property is owned by a public university, the suit shall be instituted in the Circuit Court of the county in which is located the main campus of the public university. This court shall have exclusive jurisdiction for the enforcement of liens asserted against the public funds due the contractors, subject to the same rights of appeal as in other civil cases.

History. 2494, 2494-1; 1998, ch. 397, § 1, effective July 15, 1998; 2000, ch. 250, § 1, effective July 14, 2000; 2006, ch. 255, § 29, effective January 1, 2007.

NOTES TO DECISIONS

1.Rights of Lien Claimant.

Where, at time notice of lien was given by materialman who furnished materials to contractor for construction of improvement to city waterworks plant, the money appropriated by the city for the work, had all been paid to the contractor, the materialman was entitled to judgment ordering the city to provide the necessary funds to pay his claim and in such case, portion of judgment awarding lien on waterworks but not providing for sale to enforce lien was improper, but would be treated as mere surplusage. Ashland v. Ben Williamson & Co., 294 Ky. 446 , 171 S.W.2d 968, 1943 Ky. LEXIS 443 ( Ky. 1943 ).

When a subcontractor filed its complaint seeking to enforce its mechanic’s lien against funds withheld by a public authority from a general contractor one day late, it did not strictly comply with the requirements of KRS 376.250(4), so the public authority was required to release these funds to the general contractor. 3D Enters. Contr. Corp. v. Louisville & Jefferson County Metro. Sewer Dist., 174 S.W.3d 440, 2005 Ky. LEXIS 224 ( Ky. 2005 ).

2.Protest.
3.— Failure to File.

Where the prime contractor failed to file with the city a written protest putting in issue the liability of the fund in the city’s hands for payment of the subcontractor’s lien, the prime contractor and the city had no standing to raise the defense that the funds which were in the hands of the city had passed into the hands of the receiver in bankruptcy prior to the filing of the subcontractor’s lien. Sandusky Foundry & Machine Co. v. Wickliffe, 483 F.2d 695, 1973 U.S. App. LEXIS 8199 (6th Cir. Ky. 1973 ).

General contractor working for a county water district could not object to payment by the water district of a lien against equipment rented by a subcontractor; general contractor did not file a written protest within 30 days of delivery of an attested copy of the lien. Jim Skaggs, Inc. v. Smith, 788 S.W.2d 274, 799 S.W.2d 585, 1990 Ky. App. LEXIS 63 (Ky. Ct. App. 1990).

All defenses of a general contractor are precluded by failure to file a timely protest to a lien. Jim Skaggs, Inc. v. Smith, 788 S.W.2d 274, 799 S.W.2d 585, 1990 Ky. App. LEXIS 63 (Ky. Ct. App. 1990).

4.Release of Bond.

Circuit court did not err in releasing the owner's mechanic's lien bond where the requirements for the lien were clearly not met, the contractor failed to file a supersedeas bond or request a stay, and thus, the contractor was entitled to the release. Prodigy Constr. Corp. v. Brown Capital, Ltd., 525 S.W.3d 108, 2017 Ky. App. LEXIS 400 (Ky. Ct. App. 2017).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Coleman and Peltier, Mechanics’ Liens, 68 Ky. L.J. 681 (1979-1980).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Mechanic’s Liens, § 153.00.

376.260. Action to enforce lien — Notice — Limitation — Proof of use of materials.

  1. Any lien acquired under KRS 376.210 shall be enforced by proper proceedings in equity, to which other lien-holders shall be made parties. If a court action is filed to enforce a lien acquired under KRS 376.210 and the owner of the property is the state, a subdivision or agency thereof, or any city, county, urban-county, or charter county government, that owner shall be given notice of the court action to enforce the lien, but that owner shall not be required to respond to or participate in the court action. The proceedings shall be begun within six (6) months from the filing of the claim in the county clerk’s office, except as provided in subsection (4) of KRS 376.250 .
  2. If, in any suit brought for the enforcement of a lien, it is shown by evidence that the items embraced in the account were sold and delivered for use on a particular project or public work, that evidence shall make out a prima facie case that those items were used in the performance of the contract.

History. 2495, 2495-3; 1998, ch. 397, § 2, effective July 15, 1998.

NOTES TO DECISIONS

1.Application.

There is serious doubt as to whether this section authorizes a lien merely for towing and storage. Wagner v. Emmett, 280 S.W.2d 210, 1955 Ky. LEXIS 151 ( Ky. 1955 ).

2.Who May Enforce.

The contractor may sue to enforce lien even though he has assigned it as security. Wagner v. Swoope, 246 Ky. 19 , 54 S.W.2d 395, 1932 Ky. LEXIS 701 ( Ky. 19 32).

The lien may be presented by counterclaim in action by owner to cancel it. Wagner v. Swoope, 246 Ky. 19 , 54 S.W.2d 395, 1932 Ky. LEXIS 701 ( Ky. 19 32).

3.Statute of Limitations.

Cross petition filed by subcontractor to enforce its lien against fund held by college regents constructing swimming pool stopped statute of limitations, though no summons was issued. Fidelity & Casualty Co. v. Board of Regents, 287 Ky. 439 , 152 S.W.2d 581, 1941 Ky. LEXIS 514 ( Ky. 1941 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Baker and Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Public Project Complaint to Enforce Mechanic’s and Materialman’s Lien, Form 153.08.

376.265. Lien on real property for service to retail business by municipal utility — Priority — Statement of lien — Action to enforce — Release of lien by execution of bond.

  1. As used in this section, unless the context requires otherwise:
    1. “Charges” means all rates, charges, and other amounts payable for services rendered by a municipal utility, including and without limitation penalties, interest, reasonable attorney’s fees, and other costs of enforcing the lien;
    2. “Municipal utility” means any public agency that owns or operates a system or facilities for the provision of gas, electric, sewer, water, or telecommunications service to retail customers;
    3. “Public agency” has the same meaning as specified in KRS 65.230 ;
    4. “Retail business ratepayer” means any nonresidential ratepayer of a municipal utility that is in arrears on the utility bill in an amount in excess of ten thousand dollars ($10,000); and
    5. “Service” means gas, electric, sewer, or water service provided by the municipal utility.
  2. Any municipal utility shall have a lien on the real property of a retail business ratepayer served by the municipal utility. The lien shall be for the collection of rates and charges for retail utility service provided to the retail business ratepayer. In no instance shall this lien attach to the real property of an owner who has leased the property to a retail business ratepayer unless the property owner is responsible for paying the utility charges under the lease agreement.
  3. The lien shall arise and attach as services are provided to the retail business ratepayer and shall remain in place until the rates and charges for the services are paid in full. The lien is deemed a statutory lien within the meaning of 11 U.S.C. sec. 101(53) .
  4. The rights to a lien under this section:
    1. Are in addition to any other rights or remedies a municipal utility may have under the law or pursuant to a contract; and
    2. Are not intended to impair or alter any of the municipal utility’s other rights or remedies, including the ability to require an additional deposit or to shut off and discontinue service.
  5. The lien may take priority over a mortgage, a contract lien, or a bona fide conveyance for value if:
    1. The municipal utility files notice which is duly recorded or lodged for record according to law;
    2. The utility claiming the prior lien files a statement of lien in the office of the county clerk of the county where the service has been furnished before the recording of the mortgage, the contract lien, or the conveyance; and
    3. The statement of lien is in the form prescribed in subsections (6) and (7) of this section.
  6. The statement of lien shall be subscribed and sworn to by an authorized representative of the municipal utility and shall identify the following:
    1. The municipal utility claiming the lien, including an address and a contact person;
    2. The property, by legal description, against which the lien is claimed;
    3. The nature of the service provided;
    4. The contract, if any, pursuant to which the services were provided; and
    5. The amounts, if any, due for services provided.
    1. The statement of lien shall be recorded in the office of the county clerk of the county where the service is furnished or the property or some portion of the property serviced by the municipal utility is situated. The utility shall send a copy of the statement of lien by regular mail, postage prepaid, to the owner of the property at the owner’s last known address or to the address associated with the tax bill for the property. The copy of the statement of lien shall be sent within ten (10) business days of its filing in the office of the county clerk. (7) (a) The statement of lien shall be recorded in the office of the county clerk of the county where the service is furnished or the property or some portion of the property serviced by the municipal utility is situated. The utility shall send a copy of the statement of lien by regular mail, postage prepaid, to the owner of the property at the owner’s last known address or to the address associated with the tax bill for the property. The copy of the statement of lien shall be sent within ten (10) business days of its filing in the office of the county clerk.
    2. At any time, a municipal utility may supplement the statement of lien by recording the supplement in the same manner as the original statement of lien. Any supplement to the statement of lien shall relate back to the date of the original recording of the statement of lien.
  7. The county clerk shall endorse each statement of lien on the date of its filing and the clerk shall make an abstract of the statement, endorse the abstract, and place it in a book to be kept by the clerk for that purpose. The book shall contain the following:
    1. The endorsed and indexed abstracts;
    2. The date of filing the statement;
    3. The name of the municipal utility;
    4. The name of the person against whose property the lien is filed; and
    5. A description of the property charged with the lien.
  8. The clerk shall receive a fee pursuant to KRS 64.012 from the person filing the statement as full compensation, which shall be taxed and collected as other costs.
  9. An action to enforce the lien under this section shall be by equitable proceedings and conducted as other proceedings in equity in similar cases. The petition shall allege the facts necessary to secure a lien, describe the property charged, and the plaintiff’s interest in enforcing the lien. Lienholders may unite in the action to enforce the lien as plaintiffs, and those who are not plaintiffs shall be made defendants. The debtor or the debtor’s personal representative, heirs, devisees, and all other persons having liens on or interests in the property sought to be subjected shall be made defendants.
  10. The clerk of the court in which the petition is filed shall issue the proper process against the defendants. After the expiration of ten (10) days from the filing of the petition, the clerk of the court in which the petition was filed shall:
    1. Draw up an order referring the action to the master commissioner of the court and file it with the petition;
    2. Deliver the pleadings and papers of the action to the commissioner; and
    3. Make a memorandum of the action in the minute book.
  11. If, for any cause, it should be improper to refer the case to the master commissioner, the master commissioner is directed to select some suitable person to act as a new commissioner for the case and refer the case to him or her. However, before proceeding to act on the case, the new commissioner shall take an oath before the clerk and execute bond with sufficient surety. The bond shall be preserved by the clerk and reported to the court.
  12. The owner or claimant of property against which a lien has been asserted may file a bond for double the amount of the lien claimed with the county clerk in the county where the lien was filed. Bond may be asserted at any time before a judgment is rendered enforcing the lien, and the bond shall have good sureties approved by the clerk and be conditioned upon the obligors satisfying any judgment that may be rendered in favor of the person asserting the lien. The bond shall be preserved by the clerk, and upon its execution, the lien upon the property shall be discharged. The person asserting the lien may make the obligors in the bond parties to any action to enforce its claim. Any judgment recovered may be against all or any of the obligors on the bond.

History. Enact. Acts 2010, ch. 169, § 1, effective July 15, 2010.

376.268. Definitions for KRS 376.270 and 376.275.

As used in KRS 376.270 and 376.275 :

  1. “Contents” means personal items located in a motor vehicle, but does not include manufacturer-installed or after-market accessories permanently affixed to the motor vehicle;
  2. “Motor vehicle” includes vessels used or designed for navigation of or operation on waterways, rivers, lakes, and streams, as well as those used or designed for operation on the public highways; and
  3. “Reasonable charges” means those charges which are usual and customary, not discriminatory, and which are typical charges for services provided by similar towing or storage companies with similar equipment and facilities operating in the region or comparable-size city or county from which the vehicle was towed or stored.

History. Enact. Acts 1984, ch. 241, § 1, effective July 13, 1984; 2015 ch. 8, § 1, effective June 24, 2015.

NOTES TO DECISIONS

Cited:

Central Trust Co., N.A. v. Dan’s Marina, 858 S.W.2d 211, 1993 Ky. App. LEXIS 91 (Ky. Ct. App. 1993).

376.270. Lien on motor vehicle for repairs, storage or accessories — Filing of statement with county clerk.

Any person engaged in the business of selling, repairing or furnishing accessories or supplies for motor vehicles shall have a lien on the motor vehicle for the reasonable or agreed charges for repairs, work done or accessories or supplies furnished for the vehicle, and for storing or keeping the vehicle, and may detain any motor vehicle in his possession on which work has been done by him until the reasonable or agreed charge therefor has been paid. The lien shall not be lost by the removal of the motor vehicle from the garage or premises of the person performing labor, repairing or furnishing accessories or supplies therefor, if the lien shall be asserted within six (6) months by filing in the office of the county clerk a statement showing the amount and cost of materials furnished or labor performed on the vehicle. The statement shall be filed in the same manner as provided in the case of a mechanic’s and materialman’s lien, after the removal of the vehicle, unless the owner of the vehicle consents to an additional extension of time, in which event the lien shall extend for the length of time the parties agree upon. The agreement shall be reduced to writing and signed by the parties thereto.

History. 2739h-1.

NOTES TO DECISIONS

1.Constitutionality.

This section is merely declaratory of the common law and is not unconstitutional under Const., §§ 22 and 59. Willis v. La Fayette-Phoenix Garage Co., 202 Ky. 554 , 260 S.W. 364, 1924 Ky. LEXIS 759 ( Ky. 1924 ).

The detention provisions of this section do not violate constitutional due process and are thus constitutional. 378 F. Supp. 491, 1974 U.S. Dist. LEXIS 7567.

2.Construction.

The first sentence restates the common law as to a repair lien on machines. Willis v. La Fayette-Phoenix Garage Co., 202 Ky. 554 , 260 S.W. 364, 1924 Ky. LEXIS 759 ( Ky. 1924 ).

The security afforded to mechanics and materialmen by the statutes of the several states of the union has no recognition in the common law, but rests and must find support in the statute creating the lien or security. The language of each particular statute therefore, must govern its interpretation without much aid from the judicial declarations from other jurisdictions. In re Perdue, 21 B.R. 1, 1981 Bankr. LEXIS 3200 (Bankr. W.D. Ky. 1981 ).

3.Criminal Penalty Not Imposed.

This section does not impose a criminal penalty for removing an automobile from the possession of the garageman without his consent. Smith v. Kidd, 246 S.W.2d 155, 1951 Ky. LEXIS 1272 ( Ky. 1951 ).

4.Failure to File Lien.

Repairman who failed to file lien under this section for repairs to taxicabs could not recover his charges, under bulk sales law, from person to whom taxicab business was sold. St. Matthews Motor Co. v. Schnepp, 306 Ky. 823 , 209 S.W.2d 481, 1948 Ky. LEXIS 659 ( Ky. 1948 ).

5.Holding for Charges.

When a car owner delivers a car to a garageman to be repaired, the holding of the car by the garageman for his repair bill is not wrongful. Perry Garage v. Combs, 221 Ky. 576 , 299 S.W. 196, 1927 Ky. LEXIS 776 ( Ky. 1927 ).

6.Sale Not Authorized.

KRS 376.280 does not authorize a garageman to sell a vehicle for storage charges even though this section gives a lien for such charges. Mastin v. Hisle, 343 S.W.2d 592, 1960 Ky. LEXIS 112 ( Ky. 1960 ).

7.Priority.

A garageman’s lien is superior to an attachment thereafter levied. Willis v. La Fayette-Phoenix Garage Co., 202 Ky. 554 , 260 S.W. 364, 1924 Ky. LEXIS 759 ( Ky. 1924 ).

To the extent a foreign conditional sales contract is the equivalent of a chattel mortgage, it is superior to a garageman’s statutory lien but if the parties contemplated removal of the chattel to this state and instrument is not recorded in this state, the rights of the lienor cannot be prejudiced and to that extent his rights are superior. Evansville Morris Plan, Inc. v. Howard, 314 Ky. 661 , 236 S.W.2d 919, 1951 Ky. LEXIS 720 ( Ky. 1951 ).

A duly recorded chattel mortgage on a motor vehicle is superior to subsequent statutory lien for labor and accessories. Lincoln Bank & Trust Co. v. Netter, 253 S.W.2d 260, 1952 Ky. LEXIS 1078 ( Ky. 1952 ).

Statutory lien for repairs on motor vehicle created by this section has priority over perfected security interest created under KRS 355.9-310 notwithstanding the latter interest was created before the repairs were made. Corbin Deposit Bank v. King, 384 S.W.2d 302, 1964 Ky. LEXIS 83 ( Ky. 1964 ).

8.Assignment.

The assignee of a prior mortgage who pays the garageman’s claim cannot recover said payment from the indorser of the mortgage note without showing that the garageman’s lien had been perfected. C. I. T. Corp. v. Studebaker Sales of Kentucky, 251 Ky. 349 , 65 S.W.2d 84, 1933 Ky. LEXIS 884 ( Ky. 1933 ).

9.Sale of Fuel.

Oil and fuel supplied by a garage man for a motor vehicle does not entitle the garage man to a lien against the motor vehicle under this section. In re Perdue, 21 B.R. 1, 1981 Bankr. LEXIS 3200 (Bankr. W.D. Ky. 1981 ).

10.Place of Filing Lien.

A mechanic’s lien filed in one county on a houseboat could not be exerted against a purchaser of the boat in another county where the mechanic knew that the boat was present in the other county and took no steps to assert the lien in that county and the purchaser had no way of knowing that there was a lien in another county. BTC Leasing v. Martin, 685 S.W.2d 191, 1984 Ky. App. LEXIS 649 (Ky. Ct. App. 1984), modified, 1988 Ky. App. LEXIS 206 (Ky. Ct. App. Aug. 24, 1988).

11.“Work Done.”

Towing of boat by marina was properly included as “work done” in marina’s mechanic’s lien superior to that of lender’s prior acquired security interest in the boat. Central Trust Co., N.A. v. Dan's Marina, 858 S.W.2d 211, 1993 Ky. App. LEXIS 91 (Ky. Ct. App. 1993).

12.Service Charges.

Service charges were not included in that portion of marina’s mechanic’s lien on a boat superior to that of a lender’s prior acquired security interest. Central Trust Co., N.A. v. Dan's Marina, 858 S.W.2d 211, 1993 Ky. App. LEXIS 91 (Ky. Ct. App. 1993).

13.Abuse of Process Claim.

Prima facie case of abuse of process was established because a jury could determine that the customer, a criminal attorney, harbored an ulterior purpose to use the complaint and resulting arrest to defeat the statutory lien and to obtain his car without compensating the owner. Garcia v. Whitaker, 400 S.W.3d 270, 2013 Ky. LEXIS 302 ( Ky. 2013 ).

14.Airplane.

Airplane inspector was entitled to a lien on the plane for the storage fees incurred in keeping the plane because he was in the business of repairing airplanes. An airplane was considered a motor vehicle. Airrich, LLC v. Fortener Aviation, Inc., 489 S.W.3d 254, 2016 Ky. App. LEXIS 61 (Ky. Ct. App. 2016).

Cited:

Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 ( Ky. 1966 ); Barnes v. Crowe, 240 S.W.2d 604, 1951 Ky. LEXIS 992 ( Ky. 1951 ).

Opinions of Attorney General.

A county clerk cannot make a valid transfer of a motor vehicle to a lot owner when an abandoned vehicle taken to the lot by the police is sold for storage and towing charges until there has been a judicial sale of the vehicle. OAG 61-342 .

The only method of making a valid sale of a motor vehicle for storage and towing charges is by action to enforce the lien created in KRS 376.070 . OAG 61-342 .

An ordinance authorizing garagemen to sell vehicles delivered to their possession by the employees of the city of Louisville for traffic violations was invalid and void. OAG 61-916 .

A lien created by KRS 376.270 is superior to an already perfected security interest. OAG 63-41 .

The sale of a motor vehicle under the provisions of this sectionwill extinguish any prior recorded liens; modified by OAG 66-430 . OAG 66-413 .

A county court clerk is required to properly file and index a lien on motor vehicles for repairs, storage or accessories furnished in connection with a specific vehicle and, if the vehicle is sold and it is registered in that clerk’s office, to prepare the transfer of registration, but the clerk has no additional responsibility in connection with the statutory lien. OAG 76-189 .

The time for recording a mechanic’s lien statement begins to run from the time that possession is given up by the repairman rather than from the time when the work on the motor vehicle is completed, since the language of this section indicates that a person maintains a lien for as long as possession of the vehicle is maintained, and if possession is relinquished, the lien is maintained if a lien statement is recorded within six (6) months of the removal of the vehicle. OAG 81-297 .

Research References and Practice Aids

Kentucky Law Journal.

Comments, Fuentes v. Shevin: The Application Of Constitutional Due Process To The Garageman’s Lien In Kentucky, 62 Ky. L.J. 1133 (1973-1974).

Weinberg, Commercial Law, 63 Ky. L.J. 727 (1974-75).

ALR

Automobiles: Priorities as between vendor’s lien and subsequent title or security interest obtained in another state to which vehicle has been removed. 42 A.L.R.3d 1168.

376.272. Marina may enforce lien on boat asserted pursuant to KRS 376.270 by civil action.

  1. Any marina asserting a possessory lien pursuant to KRS 376.270 may enforce the lien by filing a civil action in the county in which the boat is located.
  2. Prior to filing an action pursuant to subsection (1) of this section, the marina shall send, by certified mail, return receipt requested, notice of intent to enforce the lien to:
    1. All known owners at their last known address; and
    2. All secured parties discernible through reasonable effort. For the purposes of this paragraph, “reasonable effort” includes notice to any secured party that has:
      1. Properly perfected its security interest in the boat by having its lien indicated on a certificate of title for the boat;
      2. Properly perfected its security interest through an unexpired sufficient financing statement filed in the jurisdiction of the boat owner’s residence, as that jurisdiction appears on the certificate of title, or equivalent document, for the boat; or
      3. Become a mortgagee of a federally documented vessel by recording a ship mortgage on the vessel pursuant to Chapter 313 of Title 46 of the United States Code.

        In addition to the notice required in this subsection, the marina shall advertise the notice of intent to enforce the lien at least once per week for two (2) consecutive weeks pursuant to KRS Chapter 424.

  3. Upon the marina properly sending notice of its intent to enforce its lien in accordance with subsection (2) of this section, a boat’s owner may not remove the boat from the marina without a court order.
  4. The notice of intent to enforce the lien required by subsection (2) of this section shall include:
    1. The name of the owner of the boat as indicated on the certificate of title, certificate of registration, or certificate of documentation;
    2. The owner’s last known address;
    3. The make, model, length, and hull identification number of the boat if visually discernable; and
    4. A description of any attached outboard motor, including make, horsepower, and serial number if visually discernable.
  5. Any secured party to whom notice was sent pursuant to subsection (2) of this section shall be named as a party in any civil action filed to enforce a marina’s lien under KRS 376.270 and called upon to enter therein and set forth its claim or interest in the boat that is subject to the action, and the secured party shall be served with summons at its address as indicated on the certificate of title, financing statement, or ship mortgage through which its security interest was perfected.
  6. Upon judgment being entered in favor of a marina pursuant to this section, and subject to any restrictions of the United States Code, or any regulations issued pursuant thereto, regarding federally documented vessels, the court shall order the boat, or any part of the furniture and tackle as may be sufficient, to be sold for the satisfaction of the judgment. The marina shall conduct the sale in conformity with reasonable commercial practices among dealers in the type of boat being sold and in accordance with the court order. The sale shall be advertised in conformity with reasonable commercial practices among dealers for the type of boat being sold and, additionally, shall be advertised at least ten (10) days prior to the sale pursuant to KRS Chapter 424.
  7. The court shall authorize and direct the county clerk to issue a title to the purchaser of the boat at a sale authorized by and conducted in conformance with this section, and the purchaser shall take title to the boat free of any liens or encumbrances. Any liens or encumbrances attached to the boat shall attach to the proceeds of the sale in the same order of priority that the liens and encumbrances attach to the boat pursuant to applicable law.

HISTORY: 2016 ch. 120, § 2, effective July 15, 2016.

Legislative Research Commission Note.

(7/15/2016). In 2016 Ky. Acts ch. 120, sec. 2, a portion of subsection (2) of this statute was divided into paragraphs (a), (b), and (c). In codification, the paragraph designation “(c)” has been removed, because the sentence following that designation is not properly part of the list enumerated by paragraphs (a) and (b). The wording of the statute has not been changed. The Reviser of Statutes has made this correction under the authority of KRS 7.136(1).

376.275. Lien on motor vehicles and contents for reasonable and applicable charges under KRS 281.920 to 281.936 — Forfeiture and sale of contents — Exempted contents — Limitation of storage or towing company’s liability.

    1. Any person engaged in the business of storing or towing motor vehicles, who has complied with the notification requirements of KRS 281.928 , shall have a lien on the motor vehicle and its contents, except as set forth in subsection (2) of this section, for the applicable and reasonable charges assessed in accordance with KRS 281.926 and 281.932 , as long as it remains in his or her possession. (1) (a) Any person engaged in the business of storing or towing motor vehicles, who has complied with the notification requirements of KRS 281.928 , shall have a lien on the motor vehicle and its contents, except as set forth in subsection (2) of this section, for the applicable and reasonable charges assessed in accordance with KRS 281.926 and 281.932 , as long as it remains in his or her possession.
    2. If, after a period of forty-five (45) days, the applicable and reasonable charges assessed in accordance with KRS 281.926 and 281.932 have not been paid, the motor vehicle and its contents, except as set forth in subsection (2) of this section, may be sold to pay the charges after the owner and any lienholder have been notified by certified mail at the addresses specified in KRS 281.928(1), ten (10) days prior to the time and place of the sale. If the proceeds of the sale of any vehicle pursuant to this section are insufficient to satisfy accrued charges, the sale and collection of proceeds shall not constitute a waiver or release of responsibility for payment of unpaid charges by the owner or responsible casualty insurer of the vehicle. A lien on a vehicle under this subsection shall be subject to prior recorded liens, unless released by any existing lienholder pursuant to paragraph (c) of this subsection.
    3. A lienholder having a prior recorded lien listed on the title issued by the Commonwealth of Kentucky shall be notified by certified mail within the first ten (10) days of impoundment in accordance with KRS 281.928. Such notification, in addition to the requirements of KRS 281.928 shall include the make, model, license number, vehicle identification number, owner’s name and last known address, and tentative date of sale for the vehicle, and state that the towing company or storage facility seeks to obtain a new title free and clear of any liens, excluding tax liens. If the above-referenced certified letter is not sent within the ten (10) days by the towing and storage company, then only ten (10) days of storage may be charged. The lienholder has the right to take possession of the motor vehicle after showing proof of lien still enforced, and paying the reasonable or agreed towing and storage charges on the motor vehicle. If a lienholder does not exercise the right to take possession of the motor vehicle under this paragraph within forty-five (45) days of notification, and all lienholders agree in writing, the tow company or storage facility may obtain a new title under KRS 186A.145 free and clear of any liens, excluding tax liens. Nothing in this section shall allow the transfer of a vehicle subject to a lien, except as provided in KRS 186A.190 .
    4. If there are no lienholders required to be notified under KRS 281.920 to 281.936 and 359.230 and this section, and the owner does not exercise the right to take possession of the motor vehicle under this section within forty-five (45) days of notification required under KRS 281.928, the towing company or storage facility may obtain a new title under KRS 186A.145 free and clear of any liens, excluding tax liens.
  1. Subsection (1) of this section shall not apply to the following contents of a motor vehicle, which shall be released to the vehicle owner or the owner’s designated agent upon request, if the request is made within forty-five (45) days of the date the vehicle was towed:
    1. Prescription medication in its proper container;
    2. Personal medical supplies and equipment or records;
    3. Educational materials, including but not limited to calculators, books, papers, and school supplies;
    4. Documents, files, electronic devices, or equipment which may be able to store personal information or information relating to a person’s employment or business;
    5. Firearms and ammunition. Notwithstanding the provisions of subsection (3) of this section, firearms and ammunition which are not claimed by the owner of the vehicle within forty-five (45) days of the date the vehicle was towed shall be transferred to the Department of Kentucky State Police for disposition as provided by KRS 16.220 ;
    6. Cargo in the possession of persons engaged in transportation in interstate commerce as registered under KRS 186.020 ;
    7. Cargo in the possession of an integrated intermodal small package carrier as defined by KRS 281.605(12);
    8. Child restraint systems or child booster seats; and
    9. Checks, checkbooks, debit or credit cards, money orders, stocks, or bonds.
  2. Except as provided in subsection (2)(e) of this section, any contents exempted under subsection (2)(c), (d), (f), and (g) of this section that are not claimed by the owner of the vehicle within forty-five (45) days of the date the vehicle was towed may be sold or otherwise legally disposed of by the storage or towing company. Any contents exempted under subsection (2)(a), (b), (h), and (i) of this section that are not claimed by the owner of the vehicle within forty-five (45) days of the date the vehicle was towed shall not be sold, but shall be otherwise legally disposed of by the storage or towing company.
  3. The storage or towing company shall not be responsible for contents in a vehicle’s trunk or other locked compartment to which the storage or towing company is without access, unless the towing company intentionally opens the area without the owner’s consent.
  4. This section shall not apply when a local government causes a vehicle to be towed pursuant to KRS 82.605 to 82.640 or if state government causes a vehicle to be towed.

History. Enact. Acts 1962, ch. 20; 1986, ch. 238, § 1, effective July 15, 1986; 1990, ch. 9, § 1, effective July 13, 1990; 2015 ch. 8, § 2, effective June 24, 2015; 2021 ch. 74, § 12, effective June 29, 2021.

NOTES TO DECISIONS

1.Purpose.

This section was enacted to remedy the failure to provide a private sale for enforcement of the statutory lien to secure towing and storage charges. Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 ( Ky. 1966 ).

2.Construction.

It is implicit in this section that the sale must be commercially reasonable. Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 ( Ky. 1966 ).

3.Application.

Based upon the particular facts of this case, owner cannot be required to pay storage fees as a condition to regaining possession of his motor vehicle seized during search for marijuana but later determined to have not been used in furtherance of crime. Bush v. Commonwealth, 893 S.W.2d 798, 1995 Ky. App. LEXIS 31 (Ky. Ct. App. 1995).

4.Validity of Sale.

Sale of vehicle under this section to satisfy lien for towing and storage after notice was given owners by registered mail was sufficient to authorize the purchaser to obtain a registration and license for the vehicle. Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 ( Ky. 1966 ).

Cited:

Central Trust Co., N.A. v. Dan’s Marina, 858 S.W.2d 211, 1993 Ky. App. LEXIS 91 (Ky. Ct. App. 1993); Knott v. Crown Colony Farm, 865 S.W.2d 326, 1993 Ky. LEXIS 153 ( Ky. 1993 ).

Opinions of Attorney General.

Only the courts may make a valid transfer of title on a vehicle as a result of a sale for storage and towing charges where the owner is unavailable to make the transfer. OAG 62-1154 .

An ex parte order by a county judge would not authorize a county clerk to transfer the registration of a motor vehicle sold to satisfy a lien for storing and towing. OAG 63-573 .

A lien for towing or storing a motor vehicle may be enforced by a nonjudicial sale provided the requirements of both this section and KRS 376.280 are met. OAG 66-369 .

Where a lien for towing or storing a motor vehicle is enforced by a nonjudicial sale, to effect a transfer of registration the bill of sale or the affidavit described in KRS 186.200 and the original or duplicate of the current registration receipt should be presented. OAG 66-369 .

A sale under this section would be subject to a prior perfected security interest and such lien must be carried forward on a transfer receipt where the motor vehicle is sold for only towing or storage charges. OAG 66-430 . Modifies OAG 66-413 .

This section does not apply to motor boats. OAG 74-718 .

A county court clerk cannot make a valid transfer of a motor vehicle to a buyer when the vehicle is sold for the charges described in KRS 376.280 , unless and until there is a court order validating such sale, but such a transfer may still be made when a vehicle is sold under the provisions of this section to satisfy the lien for towing and storage. OAG 74-865 . ( OAG 66-369 withdrawn where conflicting.)

This section is constitutional under the holding in Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 (Ky. Ct. App. 1966). OAG 74-865 , modified by OAG 82-74 .

In the absence of a waiver by the prior recorded lienholder or a stipulation in the lien instrument to the contrary, where the storage lienholder effects a sale of the vehicle in question, the prior recorded lienholder is entitled to the first priority as applied to the sales proceeds. OAG 78-29 .

A city has no legal interest in an abandoned vehicle other than to have it removed and stored, or disposed of where it is found to be unfit for future use pursuant to KRS 189.751 (3); of course, the city can purchase the vehicle at a sale pursuant to this section. OAG 78-254 .

In order to effect the valid transfer of a transfer of registration after a nonjudicial sale for the enforcement of the statutory lien under this section, the bill of sale or a properly executed affidavit containing the information required by KRS 186.200 , and the original or a duplicate of the current registration receipt for the motor vehicle should be presented to the county clerk. OAG 81-359 , modified by OAG 82-74 .

This section is constitutional. OAG 82-74 .

A district court has no constitutional authority to issue a nonjudicial order relating to the nonjudicial sale of a vehicle under this section. OAG 84-154 .

Where a nonjudicial sale of a motor vehicle held for storage charges meets the terms of KRS 376.280 and this section, the lienholder filing an affidavit and a duplicate of the current registration receipt, the purchaser is entitled to a change of registration and issuance of a current license. OAG 84-154 .

In order to minimize potential liability to lien holders, a county police agency, or other agency, should, as a minimum, send notice, allowing a sufficient opportunity to respond, by certified mail, of possible sale of a vehicle unclaimed following impoundment. Such notice should be sent to both the registered owner of such vehicle, and any lien holders of record regarding such vehicle. Such notice must be given with respect to both in-state and out-of-state vehicles. Agencies should retain documentation of their efforts in such regard. OAG 91-96 .

Research References and Practice Aids

Cross-References.

Lien on motor vehicles abandoned on property of department of highways, KRS 189.750 .

Kentucky Law Journal.

Comments, Fuentes v. Shevin: The Application Of Constitutional Due Process To The Garageman’s Lien In Kentucky, 62 Ky. L.J. 1133 (1973-1974).

ALR

Automobiles: Priorities as between vendor’s lien and subsequent title or security interest obtained in another state to which vehicle has been removed. 42 A.L.R.3d 1168.

376.280. Sale of boat or motor vehicle for charges — Advertisement of sale — Definition of “boat.”

  1. Any boat or motor vehicle remaining in the possession of a person who has made repairs, performed labor or furnished accessories or supplies therefor and to whom the charges for such repairs, labor, accessories or supplies has been owing for a period of more than thirty (30) days, may be sold to pay such deferred purchase money or charges. The proposed sale shall be advertised pursuant to KRS Chapter 424, and notice thereof shall be sent by certified mail, return receipt requested or by registered mail to the owner of the boat or motor vehicle and to any other person known to have any interest therein, addressed to such persons at their last known addresses, at least ten (10) days before the sale is held.
  2. The term “boat,” as used in subsection (1) of this section, means any watercraft not enumerated in subsection (1) of KRS 376.360 and sloops having an overall length of forty (40) feet or less.

History. 2739h-2: amend. Acts 1952, ch. 40; 1966, ch. 239, § 214; 1974, ch. 315, § 81.

NOTES TO DECISIONS

1.Constitutionality.

This section is constitutional. Willis v. La Fayette-Phoenix Garage Co., 202 Ky. 554 , 260 S.W. 364, 1924 Ky. LEXIS 759 ( Ky. 1924 ).

Subsection (1) of this section is unconstitutional since it does not provide for a presale judicial hearing and is therefore in derogation of the Fourteenth Amendment of the United States Constitution.378 F. Supp. 491, 1974 U.S. Dist. LEXIS 7567.

2.Sale.
3.— Persons Entitled.

One claiming a garageman’s lien must, to entitle him to a sale, show that he is conducting the business of selling, repairing or furnishing accessories or supplies for motor vehicles. Neekamp v. Damron, 219 Ky. 517 , 293 S.W. 1081, 1927 Ky. LEXIS 390 ( Ky. 1927 ) (decision prior to 1952 amendment).

4.— Lawful Advertisement.

A purchaser of a car hereunder must, in an action to recover upon an insurance policy, prove himself to be the owner by showing that the sale was lawfully advertised. Runyon v. Aetna Casualty & Surety Co., 229 Ky. 392 , 17 S.W.2d 206, 1929 Ky. LEXIS 746 ( Ky. 1929 ).

5.Storage Charges.

No sale can be had pursuant to this section for storage charges. But when a sale is had to satisfy a claim for repairs or accessories, the garage may then subject the proceeds to its storage charges, or at least is not bound to refund such part of the proceeds until its storage lien is satisfied. Willis v. La Fayette-Phoenix Garage Co., 202 Ky. 554 , 260 S.W. 364, 1924 Ky. LEXIS 759 ( Ky. 1924 ) (see KRS 376.275 ).

This section does not authorize a garageman to sell a vehicle for storage charges even though KRS 376.270 gives him a lien for such charges. Mastin v. Hisle, 343 S.W.2d 592, 1960 Ky. LEXIS 112 ( Ky. 1960 ) (see KRS 376.275 ).

6.Liability for Excess Proceeds.

Court of appeals assumed garageman sold car for its actual value, which was value when delivered to him plus reasonable value of work done and materials furnished by him, and where testimony showed car was worth $400 when delivered to him for repair and he sold it for $666.55, he was liable to owners for $400. Perry Garage v. Combs, 221 Ky. 576 , 299 S.W. 196, 1927 Ky. LEXIS 776 ( Ky. 1927 ).

Cited:

Barnes v. Crowe, 240 S.W.2d 604, 1951 Ky. LEXIS 992 ( Ky. 1951 ); Department of Revenue v. Derringer, 399 S.W.2d 482, 1966 Ky. LEXIS 467 ( Ky. 1966 ); BTC Leasing v. Martin, 685 S.W.2d 191, 1984 Ky. App. LEXIS 649 (Ky. Ct. App. 1984).

Opinions of Attorney General.

A county clerk cannot make a valid transfer of a motor vehicle to a lot owner when an abandoned vehicle taken to the lot by the police is sold for storage and towing charges until there has been a judicial sale of the vehicle. OAG 61-342 .

The only method of making a valid sale of a motor vehicle for storage and towing charges is by action to enforce the lien created in KRS 376.070 . OAG 61-342 .

An ordinance authorizing garagemen to sell vehicles delivered to their possession by the employees of the city of Louisville for traffic violations was invalid and void. OAG 61-916 .

This section does not provide a lien for the storage or towing of a boat but under the common law as long as the creditor has possession of boat he is entitled to retain possession until the storage charge is paid, but if he surrenders possession of the boat no lien will exist. OAG 74-518 .

A county court clerk cannot make a valid transfer of a motor vehicle to a buyer when the vehicle is sold for the charges described in this section, unless and until there is a court order validating such sale, but such a transfer may still be made when a vehicle is sold under the provisions of KRS 376.275 to satisfy the lien for towing and storage. OAG 74-865 . (OAG 66--369 withdrawn where conflicting.)

In view of the dispositive effect of Flagg Bros. v. Brooks, 436 U.S. 149, 98 S. Ct. 1729, 56 L. Ed. 2d 185, 1978 U.S. LEXIS 90 (1978), this section is constitutional. OAG 82-74 . Modifying OAG 74-865 , 81-359.

Where a nonjudicial sale of a motor vehicle held for storage charges meets the terms of KRS 376.275 and this section, the lienholder filing an affidavit and a duplicate of the current registration receipt, the purchaser is entitled to a change of registration and issuance of a current license. OAG 84-154 .

Research References and Practice Aids

Kentucky Law Journal.

Weinberg, Commercial Law, 63 Ky. L.J. 727 (1974-75).

Comments, Fuentes v. Shevin: The Application Of Constitutional Due Process To The Garageman’s Lien In Kentucky, 62 Ky. L.J. 1133 (1973-1974).

376.281. Lien on aircraft for storage, repairs or accessories.

As used in KRS 376.270 and 376.280 , “motor vehicle” shall include vehicles used or designed for navigation of or flight in the air, as well as those used or designed for operation on the public highways.

History. Enact. Acts 1950, ch. 209.

NOTES TO DECISIONS

1.Lien proper.

Airplane inspector was entitled to a lien on the plane for the storage fees incurred in keeping the plane because he was in the business of repairing airplanes. An airplane was considered a motor vehicle. Airrich, LLC v. Fortener Aviation, Inc., 489 S.W.3d 254, 2016 Ky. App. LEXIS 61 (Ky. Ct. App. 2016).

Cited:

Barnes v. Crowe, 240 S.W.2d 604, 1951 Ky. LEXIS 992 ( Ky. 1951 ).

376.290. Lien on watches and jewelry for repairs — Sale for charges.

  1. Any person performing work upon any watch, clock or jewelry for a price shall have a lien upon that article for the amount due for the work. The lien shall include the value or agreed price of all materials furnished in connection with the work, whether added to the article or not. The lien may be enforced by legal action or as hereafter provided.
  2. If the account remains unpaid six (6) months after completing the work, the person holding the lien may, upon thirty (30) days’ notice in writing to the owner specifying the amount due and informing the owner that the payment of the amount due within thirty (30) days will entitle him to redeem the property, sell the article at public or bona fide private sale to satisfy the account. The notice may be served by mail directed to the owner’s last known address, or, if the owner or his address is unknown, it may be published pursuant to KRS Chapter 424.
  3. The proceeds of the sale, after paying the expenses thereof, shall be applied in liquidation of the indebtedness secured by the lien, and the balance, if any, shall be held for a period of twelve (12) months for the owner, and if it is not called for in that time it shall be paid into the district school fund.

History. 2504a-1: amend. Acts 1966, ch. 239, § 215.

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

376.300. Lien of dry cleaner, launderer, or tailor on article for work done — Sale for charges — Notification and criteria for sale.

  1. Any person who cleans, presses, glazes, launders, alters, or repairs any wearing apparel or household goods shall have a lien on the article remaining in his possession to secure the reasonable or agreed charge for the service. If the charge is not paid within ninety (90) days, the article may be sold to pay the charges and costs of notice, after notice has been given the customer of the time and place of sale.
  2. The notice of time and place of sale, when given, shall be by registered letter mailed to the last known address of the customer. The person sending the letter may do so anytime after an article has been held for at least sixty (60) days, and the notice by registered letter shall specify that the article may be sold unless it is redeemed within thirty (30) days from the date of the letter.
  3. Any article which is left with any person who cleans, presses, glazes, launders, alters, or repairs any wearing apparel or other household goods and which is not redeemed by the customer within one hundred eighty (180) days shall be considered abandoned. It may, without any liability or responsibility for the article on the part of the person holding it and without notification to the customer, be sold or otherwise disposed of.
  4. The foregoing provisions shall not apply to property that is to be placed in storage with the person rendering any service mentioned above, but such property shall be subject to the provisions of KRS 376.310 .

History. 2504b-2: amend. Acts 1992, ch. 67, § 1, effective July 14, 1992.

376.310. Lien for storage and services on article prior to storage — Sale for charges.

  1. Any person who keeps any wearing apparel or household goods in storage, or who has performed any of the services mentioned in KRS 376.300 on such an article and then keeps it in storage, shall have a lien on the article as long as it remains in his possession. If the reasonable or agreed charges have not been paid for a period of twelve (12) months the article may be sold to pay the charges, after the owner has been notified of the time and place of sale.
  2. The provisions of this section shall not apply to any person operating as a warehouseman under KRS Chapter 359.

History. 2504b-3.

376.320. Notice of sale of article for charges — Distribution of proceeds.

  1. The mailing of a registered letter with the return address marked thereon, addressed to the owner at the address given at the time of delivery of the article to the person rendering any service set out in KRS 376.300 or 376.310 , stating the time and place of sale, shall constitute notice of the sale. The notice shall be mailed at least fifteen (15) days before the date of sale. The cost of mailing the letter shall be added to the charges.
  2. The person to whom the charges are payable shall, from the proceeds of sale, deduct the charges due plus the cost of notifying the owner, and hold the balance, if any, subject to the order of the owner. He shall immediately thereafter mail to the owner at his address, if known, notification of the sale and notice of the balance due him, and at any time within twelve (12) months, upon demand pay to the owner the balance. If the balance is unclaimed after twelve (12) months it shall be paid into the State Treasury, and held for a period of two (2) years subject to the order of the owner or his personal representative upon satisfactory proof of rightful ownership.

History. 2504b-4, 2504b-5.

376.330. Posting of notices necessary to claim liens.

No person shall obtain a lien under KRS 376.300 or 376.310 unless at all times he keeps posted in prominent places in his receiving office two (2) notices which shall read as follows: “All articles cleaned, pressed, glazed, laundered, washed, altered or repaired and not called for in 90 days will be sold to pay charges. All articles stored 12 months on which charges have not been paid will be sold to pay charges.”

History. 2504b-6.

376.340. Lien of keeper of hotel, inn, boarding house or house of private entertainment on personal property of guest for charges.

Any keeper of a hotel, inn, boarding house or house of private entertainment shall have a lien on all baggage and other personal property owned and brought in by the person receiving board, nursing, care or attention from the landlord, for the contract price of the service received, or, if no contract price is set, for a reasonable price.

History. 2179a-1.

NOTES TO DECISIONS

1.Reasonable Charge.

In an action against administratrix there was sufficient proof to justify submission to jury the question as to whether or not board and lodging had been furnished decedent for the time indicated and what was a reasonable charge for such services since one who furnishes services is entitled to a reasonable price under this section if there is no contract. Kemper v. Asher's Adm'x, 272 Ky. 461 , 114 S.W.2d 525, 1938 Ky. LEXIS 142 ( Ky. 1938 ).

Research References and Practice Aids

Cross-References.

Penalty for removing baggage without proprietor’s consent, KRS 434.290 .

376.350. Enforcement of lien on property of guest.

Any person in whose favor a lien created by KRS 376.340 exists may, before the District Court of the county where the debt was created, by himself, agent or attorney, make affidavit of the amount due him and in arrear for services to the person receiving them and describing, as nearly as possible, the baggage or other personal property owned and brought in by the guest. The court shall then issue a warrant directed to the sheriff or any constable or town marshal of the county, authorizing him to levy upon and seize the property described in the affidavit for the amount due, with interest and costs. If the property has been removed with the consent of the landlord, the lien shall not continue longer than ten (10) days from and after the removal.

History. 2179a-3, 2179a-4: amend. Acts 1976 (Ex. Sess.), ch. 14, § 288, effective January 2, 1978.

Research References and Practice Aids

Cross-References.

Proceedings upon distress warrants, KRS 426.620 to 426.715 .

376.360. Liens on steamboats and other vessels for work and supplies.

  1. Any officer or employee, except the captain, employed on board a steamboat, brig, schooner, sloop or model barge shall have a lien on the vessel or on the engine, tackle, furnishing and apparel for their wages, whether contracted for or earned in or out of this state, with priority therefor over any other debt due from the owner of the vessel, and over all other liens thereon.
  2. Mechanics, tradesmen and other persons shall have a like lien to that given by subsection (1) of this section for work, supplies, materials, stores and provisions done or furnished on the building, repairing, fitting, furnishing or equipping the vessel in this state, with priority therefor over any other debt of the owner, except that to the officers and employees, and over all other liens thereafter created. Any mechanic, tradesman or other person who does work or furnishes material or supplies out of this state shall have a like lien therefor, which shall have precedence next after that given when done or furnished in this state; but if done or furnished out of this state, subsequent to that done or furnished in this state, the liens shall be joint and equal.

History. 2480.

NOTES TO DECISIONS

1.Application.

A houseboat does not fall within the purview of this section. BTC Leasing v. Martin, 685 S.W.2d 191, 1984 Ky. App. LEXIS 649 (Ky. Ct. App. 1984), modified, 1988 Ky. App. LEXIS 206 (Ky. Ct. App. Aug. 24, 1988).

2.Jurisdiction of Action.

Contracts to build or furnish boats were not maritime contracts and state circuit court had jurisdiction under this section. S.B. Hyatt v. Reitz & Haney, 67 Ky. 395 , 1868 Ky. LEXIS 144 ( Ky. 1868 ) See Roach & Long v. Chapman, 63 U.S. 129, 16 L. Ed. 294, 1859 U.S. LEXIS 706 (U.S. 1860); Rounds & Jesse v. Cloverport Foundry & Machine Co., 159 Ky. 414 , 167 S.W. 384, 1914 Ky. LEXIS 804 ( Ky. 1914 ), aff'd, 237 U.S. 303, 35 S. Ct. 596, 59 L. Ed. 966, 1915 U.S. LEXIS 1337 (U.S. 1915).

3.Place of Enforcement of Lien.

When the owner contracted for the reconstruction of a vessel at its home port, but due to low water the work was completed at a foreign port, any claim for lien had to be determined under the law of the state in which the work was begun. The Rapid Transit, 11 F. 322, 1882 U.S. Dist. LEXIS 57 (D. Tenn. 1882).

4.Priority of Claims.

A part owner who paid local creditors could not claim as against unpaid foreign creditors, to be the assignee or subrogee of the local claims. The Rapid Transit, 11 F. 322, 1882 U.S. Dist. LEXIS 57 (D. Tenn. 1882).

376.370. Liability for damage done by vessel.

A steamboat or other vessel named in KRS 376.360 and its owner shall be liable to the party injured for any damage done by her through the willful or negligent conduct of her officers or crew while acting for her as such.

History. 2481.

NOTES TO DECISIONS

1.Jurisdiction.

An action hereunder was not a maritime case and state circuit court had jurisdiction. Rake v. Owners of S.B. Potomac, 69 Ky. 25 , 1869 Ky. LEXIS 91 ( Ky. 1869 ).

376.380. Enforcement of lien and liability against vessel.

The lien given in KRS 376.360 , and the liability provided for in KRS 376.370 , may be enforced by attachment from the court having jurisdiction.

History. 2482.

NOTES TO DECISIONS

1.Actions in Personam.

Actions hereunder are in personam. Rounds & Jesse v. Cloverport Foundry & Machine Co., 159 Ky. 414 , 167 S.W. 384, 1914 Ky. LEXIS 804 ( Ky. 1914 ), aff'd, 237 U.S. 303, 35 S. Ct. 596, 59 L. Ed. 966, 1915 U.S. LEXIS 1337 (U.S. 1915).

2.Jurisdiction.

The jurisdiction of actions hereunder is in the state courts, not in the federal courts. United States Mail Line Co. v. McCracken, 33 S.W. 82, 17 Ky. L. Rptr. 1111 (1895). See Rounds & Jesse v. Cloverport Foundry & Machine Co., 159 Ky. 414 , 167 S.W. 384, 1914 Ky. LEXIS 804 ( Ky. 1914 ), aff'd, 237 U.S. 303, 35 S. Ct. 596, 59 L. Ed. 966, 1915 U.S. LEXIS 1337 (U.S. 1915).

Research References and Practice Aids

Cross-References.

Provisions concerning attachment, KRS 426.620 to 426.715 .

376.390. Joinder of lienholders as plaintiffs — When lien may be enforced against purchaser without notice.

  1. Any person having a lien under KRS 376.360 to 376.380 against a vessel may unite in an action to enforce the lien, and any person having a lien who is not so united may, by petition filed by leave of court, become a plaintiff in any action pending to enforce a lien without the issuing of additional process.
  2. Any lien given by KRS 376.360 to 376.380 shall not be enforced against a purchaser without actual notice thereof unless action is instituted within one (1) year from the time the cause of action accrued, or unless notice thereof is endorsed on or attached to the enrollment of the vessel.

History. 2485, 2486.

NOTES TO DECISIONS

1.Place of Filing Lien.

A mechanic’s lien filed in one county on a houseboat could not be exerted against a purchaser of the boat in another county where the mechanic knew that the boat was present in the other county and took no steps to assert the lien in that county and the purchaser had no way of knowing that there was a lien in another county. BTC Leasing v. Martin, 685 S.W.2d 191, 1984 Ky. App. LEXIS 649 (Ky. Ct. App. 1984), modified, 1988 Ky. App. LEXIS 206 (Ky. Ct. App. Aug. 24, 1988).

376.400. Lien of keeper of livery stable or agister for care of livestock — Sale of livestock cared for — Conditions.

  1. Any owner or keeper of a livery stable or other business providing for the care of animals, and a person feeding, grazing, or caring for any animal for compensation, shall, except as provided in subsection (2) of this section, have a lien for one (1) year upon the animal placed in the stable, kennel, or similar facility, or put out to be fed or grazed by the owner, for his or her reasonable charges for keeping, caring for, feeding, and grazing the animal. The lien shall attach whether the animal is merely temporarily lodged, fed, grazed, and cared for, or is placed at the stable or other place or pasture for regular board. The lien shall take priority over a lien created pursuant to KRS 376.420(1).
  2. Any person who has agreed to provide feed or care for an animal for compensation may, in lieu of the lien provided for in subsection (1) of this section, cause the animal to be sold if:
    1. The owner of the animal is at least forty-five (45) days in arrears on his or her payment for the care and feeding of the animal, and the animal is in the possession of the person or business providing for the care of the animal;
    2. The proposed sale is published in one (1) or more newspapers and qualified pursuant to KRS Chapter 424, with a publication area in the locale where the person providing care for the animal is located and the locale where the owner of the animal was last known to reside; and
    3. Written notice of the sale is sent by certified mail, return receipt requested, or registered mail, to the owner of the animal, addressed to such person at his or her last known address, and to all lien holders of record with the Kentucky Secretary of State and the local county clerk’s office, at least ten (10) days before the sale is conducted. The written notice shall include:
      1. The amount due the person or business providing care for the animal;
      2. The date, time, and location of the sale; and
      3. A statement that the sale proceeds shall be disbursed as provided in subsection (3) of this section.
  3. If a sale is conducted as provided in subsection (2) of this section, the proceeds of the sale shall be disbursed in the following order:
    1. Payment for costs associated with the sale;
    2. Payment of amounts due to the person or business providing for the care and feeding of the animal;
    3. Payment to lien holders and creditors pursuant to a court order; and
    4. The remainder, if any, held for the owner for a period of twelve (12) months and, if not claimed at that time, then paid into the district school fund.

History. 2500: amend. Acts 1984, ch. 231, § 1, effective July 13, 1984; 1996, ch. 28, § 1, effective July 15, 1996; 2009, ch. 91, § 1, effective June 25, 2009.

NOTES TO DECISIONS

1.Constitutionality.

This section is constitutional. Griffith v. Gross, 108 Ky. 160 , 55 S.W. 1077, 1900 Ky. LEXIS 23 ( Ky. 1900 ).

2.Application.

A lessor of land cannot claim an agister’s lien on cattle of the lessee grazing on the leased land. Patchen-Wilkes Stock Farm Co. v. Walton, 166 Ky. 705 , 179 S.W. 823, 1915 Ky. LEXIS 761 ( Ky. 1915 ).

3.Remedy Not Exclusive.

Where action was brought for stallion fees and board of horses but the time for enforcement of statutory lien had lapsed, statutes did not provide exclusive remedy and creditor was allowed to maintain action. Benjamin v. Goff, 314 Ky. 639 , 236 S.W.2d 905, 1951 Ky. LEXIS 714 ( Ky. 1951 ).

4.Time of Lien.

Agistment, being a species of bailment, arises only when the animals are delivered unto the person claiming the agister’s lien. Patchen-Wilkes Stock Farm Co. v. Walton, 166 Ky. 705 , 179 S.W. 823, 1915 Ky. LEXIS 761 ( Ky. 1915 ).

5.Priority.

An agister’s lien is inferior to recorded encumbrances in existence when the stock came into his possession. Lee v. Vanmeter, 98 Ky. 1 , 32 S.W. 137, 17 Ky. L. Rptr. 548 , 1895 Ky. LEXIS 3 ( Ky. 1 895). See Indiana Truck Corp. v. Hurry Up Broadway Co., 222 Ky. 521 , 1 S.W.2d 990, 1928 Ky. LEXIS 202 ( Ky. 1928 ).

An agister’s lien is inferior to encumbrances of which he had notice. Bean v. Johnson, 32 S.W. 175, 17 Ky. L. Rptr. 585 (1895).

A thief left a stolen horse at a stable, the keeper not knowing of the theft. The lien of the keeper was superior to the claim of the true owner. Black v. Brennan, 35 Ky. 310 , 1837 Ky. LEXIS 61 ( Ky. 1837 ).

Cited:

Griffith v. Gross, 108 Ky. 160 , 55 S.W. 1077, 1900 Ky. LEXIS 23 ( Ky. 1900 ); Griffith v. Speaks, 111 Ky. 149 , 23 Ky. L. Rptr. 561 , 63 S.W. 465, 1901 Ky. LEXIS 190 ( Ky. 1901 ); Knott v. Crown Colony Farm, 865 S.W.2d 326, 1993 Ky. LEXIS 153 ( Ky. 1993 ).

Opinions of Attorney General.

The lien described in this section applies only to cattle put out by the owner to be fed and thus does not apply to animals treated by a veterinarian. OAG 77-637 .

Research References and Practice Aids

Cross-References.

“Cattle,” definition of KRS 446.010 .

Landlord’s lien for rent, restrictions on KRS 383.070 .

Kentucky Bench & Bar.

Schneiter, Equine Statutory Liens, Vol. 67, No. 4, July 2003, Ky. Bench & Bar 23.

Toby, Equine Law: Agister’s Liens in Kentucky: How Much Process Is Due., Vol. 71, No. 3, May 2007, Ky. Bench & Bar 24.

Kentucky Law Journal.

Whiteside, Kostas, Recent Developments in the Kentucky Law of Wills — 1949-1954, 42 Ky. L.J. 671 (1954).

Lester, Security Interests in Thoroughbred and Standardbred Horses: A Transactional Approach, 70 Ky. L.J. 1065 (1981-82).

Sales and Use Tax Planning for the Horse Industry, 78 Ky. L.J. 601 (1989-90).

Northern Kentucky Law Review.

Ellerman & Linneman, A Survey of Kentucky Commercial Law., 31 N. Ky. L. Rev. 201 (2004).

376.410. Enforcement of lien for care of livestock.

Any person in whose favor a lien provided for in KRS 376.400 exists may, before the District Court of the county where the cattle were fed or grazed, by himself or agent, make affidavit of the amount due him and in arrears for keeping and caring for the cattle, and describing as nearly as possible the cattle so kept by him. The court shall then issue a warrant, directed to the sheriff or any constable or town marshal of the county, authorizing him to levy upon and seize the cattle for the amount due, with interest and costs. If the cattle are removed with the consent and from the custody of the livery stable keeper or the person feeding or grazing them, the lien shall not continue longer than one (1) year from and after the removal, nor shall the lien in case of such removal be valid against a bona fide purchaser without notice at any time after the removal. The warrant may be issued to a county other than that in which the cattle were fed or grazed, and the lien may also be enforced by action as in the case of other liens.

History. 2501, 2502: amend. Acts 1976 (Ex. Sess.), ch. 14, § 289, effective January 2, 1978; 1984, ch. 231, § 2, effective July 13, 1984.

NOTES TO DECISIONS

1.Constitutionality.

This section is constitutional. Griffith v. Gross, 108 Ky. 160 , 55 S.W. 1077, 1900 Ky. LEXIS 23 ( Ky. 1900 ).

2.Rights of Keeper.

When several horses are delivered to the keeper at the same time, a lien may be asserted for the keep of those removed more than ten days before issuance of warrant and enforced against those remaining in the keeper’s possession. Griffith v. Speaks, 111 Ky. 149 , 63 S.W. 465, 23 Ky. L. Rptr. 561 , 1901 Ky. LEXIS 190 ( Ky. 1901 ).

3.Bond.
4.— Execution by Owner.

Execution by owner of bond under KRS 383.063 and 383.064 does not deprive him of any defense he might otherwise make. Griffith v. Speaks, 111 Ky. 149 , 63 S.W. 465, 23 Ky. L. Rptr. 561 , 1901 Ky. LEXIS 190 ( Ky. 1901 ).

5.Stock.
6.— Retention.

The keeper may retain the stock until his claim is satisfied. Speth v. Brangman, 84 S.W. 1149, 27 Ky. L. Rptr. 295 , 1905 Ky. LEXIS 263 (Ky. Ct. App. 1905).

When the contract was made at will the keeper could retain the stock until his claim was satisfied. Von Cotzhausen v. Barker, 154 Ky. 624 , 157 S.W. 1093, 1913 Ky. LEXIS 116 ( Ky. 1913 ).

7.— Consent to Removal.

A keeper expressly or impliedly consenting to the removal of the livestock loses his lien after ten days, as against a bona fide purchaser within that time. Speth v. Brangman, 84 S.W. 1149, 27 Ky. L. Rptr. 295 , 1905 Ky. LEXIS 263 (Ky. Ct. App. 1905).

8.Enforcement.

The lien may be enforced by distress warrant or by action as in cases of other liens. Speth v. Brangman, 84 S.W. 1149, 27 Ky. L. Rptr. 295 , 1905 Ky. LEXIS 263 (Ky. Ct. App. 1905).

9.Judgment.

A judgment directing the return of the cattle to the keeper was not prejudicial to the owner. Speth v. Brangman, 84 S.W. 1149, 27 Ky. L. Rptr. 295 , 1905 Ky. LEXIS 263 (Ky. Ct. App. 1905).

Research References and Practice Aids

Cross-References.

Proceedings upon distress warrants, KRS 426.620 to 426.715 .

Kentucky Bench & Bar.

Toby, Equine Law: Agister’s Liens in Kentucky: How Much Process Is Due., Vol. 71, No. 3, May 2007, Ky. Bench & Bar 24.

Kentucky Law Journal.

Lester, Security Interests in Thoroughbred and Standardbred Horses: A Transactional Approach, 70 Ky. L.J. 1065 (1981-82).

Bland, Insolvencies in Farming and Agribusinesses, 73 Ky. L.J. 795 (1984-85).

Sales and Use Tax Planning for the Horse Industry, 78 Ky. L.J. 601 (1989-90).

376.420. Lien for service fee of stallion, jack, or bull — Enforcement of lien.

  1. Any licensed keeper of a stallion, jack, or bull shall have a lien for the payment of the service fee upon the get of the stallion, jack, or bull, for one (1) year after the birth of the progeny. However, a lien created pursuant to KRS 376.400 shall take priority over a lien created pursuant to this subsection.
  2. This lien may be enforced by action as in cases of other liens, or by warrant as permitted in the case of the enforcement of the lien of the keeper of a livery stable or an agister.

History. 2503, 2504; 1996, ch. 28, § 2, effective July 15, 1996.

NOTES TO DECISIONS

1.Remedy Not Exclusive.

Where action was brought for stallion fees and board of horses but the time for enforcement of statutory lien had lapsed, statutes did not provide exclusive remedy and creditor was allowed to maintain action. Benjamin v. Goff, 314 Ky. 639 , 236 S.W.2d 905, 1951 Ky. LEXIS 714 ( Ky. 1951 ).

Opinions of Attorney General.

This section establishes a lien upon the get of the stallion, not upon the mare, and would not prevent the entry of the mare in a claiming race. OAG 68-112 .

Research References and Practice Aids

Kentucky Bench & Bar.

Schneiter, Equine Statutory Liens, Vol. 67, No. 4, July 2003, Ky. Bench & Bar 23.

Kentucky Law Journal.

Lester, Security Interests in Thoroughbred and Standardbred Horses: A Transactional Approach, 70 Ky. L.J. 1065 (1981-82).

Kropp, Landen and Donath, The Prevention and Treatment of Breeding Contract Controversies, 74 Ky. L.J. 715 (1985-86).

Sales and Use Tax Planning for the Horse Industry, 78 Ky. L.J. 601 (1989-90).

Northern Kentucky Law Review.

Ellerman & Linneman, A Survey of Kentucky Commercial Law., 31 N. Ky. L. Rev. 201 (2004).

376.430. Lien on radios, phonographs and other electrical or electronic devices, for repair.

  1. All persons, firms and corporations engaged in the business of repairing radios, phonographs, combinations thereof, automatic music instruments, refrigerators, televisions, electrical or electronic recording devices, and any and all portable electrical or electronic instruments or appliances shall have a lien upon such articles and appliances for the agreed or reasonable charge for parts, supplies, accessories and labor performed in their repair, said lien to attach upon completion of such repairs. The lien may be enforced by legal action or as hereafter provided.
  2. After completion of repairs, the owner shall be notified thereof by certified mail, return receipt requested or by registered mail, and if the repaired article be not removed and all charges paid within thirty (30) days after giving the notice, the person, firm or corporation making such repairs may hold such repaired articles and sell same at public or bona fide private sale to pay all agreed or reasonable charges, including charges for storage after notice of completion of repairs, and expenses incidental to advertisement and sale, accounting to the owner for any excess of charges and expenses.
  3. Before any sale of the repaired article, the person, firm or corporation making the repairs shall notify the owner of the article of the time and place of the sale. The notice may be served by certified mail, return receipt requested, or by registered mail directed to the owner’s last known address, or, if the owner or his address is unknown, notice of the sale shall be published pursuant to KRS Chapter 424.

History. Enact. Acts 1948, ch. 30; 1966, ch. 239, § 216; 1974, ch. 315, § 82; 1988, ch. 326, § 1, effective July 15, 1988.

376.435. Lien on die, mold, form, or pattern — Respective rights of molder and customer.

  1. As used in this section, unless the context otherwise requires:
    1. “Customer” means any person who causes a molder to fabricate, cast, or otherwise make a die, mold, form, or pattern, or who provides a molder with a die, mold, form, or pattern, to manufacture, assemble, cast, fabricate, or otherwise make a product for a customer; and
    2. “Molder” means any person who fabricates, casts, or otherwise makes or uses a die, mold, form, or pattern for the purpose of manufacturing, assembling, casting, fabricating, or otherwise making a product for a customer. “Molder” includes, but is not limited to, a tool or die maker.
    1. In the absence of any agreement to the contrary, a customer shall have all rights and title to any die, mold, form, or pattern in the possession of a molder. (2) (a) In the absence of any agreement to the contrary, a customer shall have all rights and title to any die, mold, form, or pattern in the possession of a molder.
    2. If a customer does not claim possession from a molder of a die, mold, form, or pattern, all rights and title to any die, mold, form, or pattern shall be transferred by operation of law to the molder for the purpose of destroying or otherwise disposing of the die, mold, form, or pattern, consistent with this subsection.
    3. If a molder chooses to have all rights and title to any die, mold, form, or pattern transferred to the molder by operation of law, the molder shall send written notice by registered mail to the chief executive officer of the customer or, if the customer is not a business entity, to the customer, at the customer’s last known address. The written notice shall indicate that the molder intends to terminate the customer’s rights and title by having the rights and title transferred to the molder by operation of law under this section. The notice shall include a statement of the customer’s rights set forth in paragraph (d) of this subsection.
      1. If a customer does not respond in person or by mail to claim possession of a particular die, mold, form, or pattern within one hundred twenty (120) days following the date that the notice was mailed, or does not make contractual arrangements with the molder for storage of the die, mold, form, or pattern, all rights and title of the customer, except patents and copyrights, shall transfer by operation of law to the molder. Thereafter, the molder may destroy or otherwise dispose of the particular die, mold, form, or pattern as the molder’s own property without any risk of liability to the customer. (d) 1. If a customer does not respond in person or by mail to claim possession of a particular die, mold, form, or pattern within one hundred twenty (120) days following the date that the notice was mailed, or does not make contractual arrangements with the molder for storage of the die, mold, form, or pattern, all rights and title of the customer, except patents and copyrights, shall transfer by operation of law to the molder. Thereafter, the molder may destroy or otherwise dispose of the particular die, mold, form, or pattern as the molder’s own property without any risk of liability to the customer.
      2. This section shall not be construed in any manner to affect any right of the customer under federal patent or copyright law or federal law pertaining to unfair competition.
    1. A molder shall have a lien, dependent on possession, on all dies, molds, forms, or patterns in his hands and that belong to a customer, for the balance due him from the customer for any manufacturing or fabrication work, and in the value of all material related to the work. The molder may retain possession of the die, mold, form, or pattern until the charges are paid. (3) (a) A molder shall have a lien, dependent on possession, on all dies, molds, forms, or patterns in his hands and that belong to a customer, for the balance due him from the customer for any manufacturing or fabrication work, and in the value of all material related to the work. The molder may retain possession of the die, mold, form, or pattern until the charges are paid.
    2. Before enforcing a lien, a molder shall give notice in writing to the customer, whether delivered personally or sent by registered mail to the last known address of the customer. The notice shall state that a lien is claimed for the damages set forth in or attached to the writing for manufacturing or fabrication work contracted or performed for the customer. The notice shall also include a demand for payment.
    3. If the molder has not been paid the amount due within sixty (60) days after the notice has been received by the customer, as provided in paragraph (b) of this subsection, the molder may sell the die, mold, form, or pattern at a public auction.
    1. Before a molder may sell the die, mold, form, or pattern, the molder shall notify the customer by registered mail, return receipt requested. The notice shall include: (4) (a) Before a molder may sell the die, mold, form, or pattern, the molder shall notify the customer by registered mail, return receipt requested. The notice shall include:
      1. The molder’s intention to sell the die, mold, form, or pattern thirty (30) days after the customer’s receipt of the notice;
      2. A description of the die, mold, form, or pattern to be sold;
      3. The time and place of the sale; and
      4. An itemized statement for the amount due.
    2. If there is not a return of the receipt of the mailing or if the postal service returns the notice as being nondeliverable, the molder shall publish the notice of the molder’s intention to sell the die, mold, form, or pattern in a newspaper of general circulation in the customer’s last known place of business. The notice shall include a description of the die, mold, form, or pattern.
      1. If the sale is for a sum greater than the amount of the lien, the excess shall be paid to any prior lienholder known to the molder at the time of the sale and any remainder shall be paid to the customer, if the customer’s address is known, or the Kentucky State Treasurer for deposit in the general fund if the customer’s address is unknown to the molder at the time of the sale. (c) 1. If the sale is for a sum greater than the amount of the lien, the excess shall be paid to any prior lienholder known to the molder at the time of the sale and any remainder shall be paid to the customer, if the customer’s address is known, or the Kentucky State Treasurer for deposit in the general fund if the customer’s address is unknown to the molder at the time of the sale.
      2. A molder shall not conduct a sale if the sale violates any right of a customer under federal patent or copyright law.

History. Enact. Acts 1998, ch. 435, § 1, effective July 15, 1998.

376.440. Lien on equipment, machinery and motors for work and supplies — Filing of lien statement.

  1. Any person engaged in the business of selling, repairing, or furnishing accessories, or supplies for any kind of equipment or machinery, including motors, shall have a lien on the equipment, machine, machinery, or motor, for the reasonable or agreed charges for repairs, work done, accessories, parts, and supplies furnished for the equipment, machine, machinery, or motor until the reasonable or agreed charge therefor has been paid. The lien shall not be lost by the removal of the equipment, machine, machinery or motor from the premises of the person performing labor, repairing, or furnishing accessories, parts or supplies therefor, if the lien shall be asserted within three (3) months by filing in the office of the county clerk a statement showing the amount and cost of materials furnished or labor performed on the equipment, machine, machinery, or motor. This statement shall be filed in the office of the county clerk of the county in which the owner of the equipment, machine, machinery, or motor resides, unless such owner be a nonresident, in which event the lien statement shall be filed in the office of the county clerk of the county in which such equipment, machine, machinery, or motor is at the time being kept or used.
  2. The lien provided for in this section shall attach regardless of whether or not the equipment, machine, machinery, motor, or motors, are ever upon the premises of or in the possession of the person making the repairs, furnishing the parts, or the supplies for such repairs.

History. Enact. Acts 1954, ch. 102, § 1, effective June 17, 1954; 1978, ch. 384, § 505, effective June 17, 1978.

NOTES TO DECISIONS

1.Priority of Repairman’s Lien.

A statutory lien possessed by a creditor for materials furnished and repairs rendered takes priority over a previously perfected security interest. In re Pendleton, 40 B.R. 306, 1984 Bankr. LEXIS 6271 (Bankr. W.D. Ky. 1984 ).

Where leasing company at time of lease of drilling rig to drilling company perfected a security interest in the rig and where supply company that performed repair work on rig’s engine perfected material and service lien against the engine under the provisions of KRS 376.440 to 376.450 , since under Kentucky law a mortgage does not mean or include a security interest, KRS 376.450 did not give a perfected security interest priority over a perfected KRS 376.440 service and supply lien; therefore, KRS 355.9-310 governs the priority of the interest, and thus the lien of the supply company was superior to the security interest of the leasing company. In re Yost, 40 B.R. 962, 1984 Bankr. LEXIS 5198 (Bankr. W.D. Ky. 1984 ).

2.Residency.

A corporate owner resides for purposes of this section in the county where his registered office is located. ITT Commercial Finance Corp. v. Madisonville Recapping Co., 793 S.W.2d 849, 1990 Ky. App. LEXIS 93 (Ky. Ct. App. 1990).

Research References and Practice Aids

Cross-References.

See note to KRS 376.450 . Corbin Deposit Bank v. King (1964), 384 S.W.2d 302, 1964 Ky. LEXIS 83 .

Northern Kentucky Law Review.

Montague and Muehlenkamp, Kentucky Corporate Law Developments, 21 N. Ky. L. Rev. 413 (1994).

376.445. Contents of lien statement — Indorsement and filing by county clerk — Fee.

  1. The lien statement referred to in KRS 376.440 shall be construed to mean a statement in writing in which is stated the amount due the claimant, with all just credits and setoffs known to him, together with a description of the property intended to be covered by the lien sufficiently accurate to identify it and the name of the owner. This statement shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf.
  2. The county clerk shall endorse upon each statement the date of its filing, and shall make an abstract of the statement in a book to be kept by him for that purpose, properly endorsed and indexed, containing the date of filing, the name of the person seeking to enforce the lien, the amount claimed, the name of the person against whose property the lien is filed, and a description of the property charged with the lien. The clerk shall receive a fee as provided for in KRS 64.012 from the person filing the statement as full compensation, which shall be taxed and collected as other costs.

History. Enact. Acts 1954, ch. 102, § 2, effective June 17, 1954; 1978, ch. 84, § 22, effective June 17, 1978; 1978, ch. 384, § 506, effective June 17, 1978.

Legislative Research Commission Note.

This section was amended by two 1978 acts which do not appear to be in conflict and which have been compiled together.

Research References and Practice Aids

Cross-References.

See note to KRS 376.450 . Corbin Deposit Bank v. King (1964), 384 S.W.2d 302, 1964 Ky. LEXIS 83 .

376.450. Lien inferior to mortgage or sale unless statement filed.

The lien shall not take precedence over a mortgage or bona fide sale and delivery for value without notice, unless the person claiming the prior lien shall, before the recording of the mortgage, or before sale and delivery, file in the office of the county clerk a statement showing that he has furnished or expects to furnish labor, or materials, or parts, or supplies, and the amount in full thereof. The lien shall not, as against the holder of a mortgage, or a purchaser for value, exceed the amount of the lien claimed, as set forth in the statement. The statement shall in all other respects be in the form provided in KRS 376.445 .

History. Enact. Acts 1954, ch. 102, § 3, effective June 17, 1954; 1978, ch. 384, § 507, effective June 17, 1978.

NOTES TO DECISIONS

1.Construction.

The language of this section as it relates to precedence for a mortgage has no validity as to the security interest prescribed in KRS 355.9-310. Corbin Deposit Bank v. King, 384 S.W.2d 302, 1964 Ky. LEXIS 83 ( Ky. 1964 ).

2.Priority of Repairman’s Lien.

Where leasing company at time of lease of drilling rig to drilling company perfected a security interest in the rig and where supply company that performed repair work on rig’s engine perfected material and service lien against the engine under the provisions of KRS 376.440 to 376.450 , since under Kentucky law a mortgage does not mean or include a security interest, this section did not give a perfected security interest priority over a perfected KRS 376.440 service and supply lien; therefore, KRS 355.9-310 governs the priority of the interest, and thus the lien of the supply company was superior to the security interest of the leasing company. In re Yost, 40 B.R. 962, 1984 Bankr. LEXIS 5198 (Bankr. W.D. Ky. 1984 ).

Research References and Practice Aids

Kentucky Law Journal.

Lester, Security Interests in Thoroughbred and Standardbred Horses: A Transactional Approach, 70 Ky. L.J. 1065 (1981-82).

376.455. Sale of equipment, machinery or motor to pay charges.

Any equipment, machine, machinery, motor or motors remaining in the possession of a person who has made repairs, furnished parts, performed labor, or furnished accessories or supplies for the equipment, machine, machinery, motor, or motors, for more than thirty (30) days, may be sold to pay the charges. The proposed sale shall be advertised by publication pursuant to KRS Chapter 424. The owner of the equipment, machine, machinery, motor or motors, shall be served with written notice of such proposed sale at least two (2) weeks before the date of such sale. The notice may be in writing addressed to the owner at his last known address and sent by registered United States mail, postage prepaid. Such written notice may be served upon the owner in any other mode generally recognized by the laws and practice before courts in this state.

History. Enact. Acts 1954, ch. 102, § 4; 1966, ch. 239, § 217.

376.460. Attorney’s lien.

Each attorney shall have a lien upon all claims, except those of the state, put into his hands for suit or collection or upon which suit has been instituted, for the amount of any fee agreed upon by the parties or, in the absence of such agreement, for a reasonable fee. If the action is prosecuted to a recovery of money or property, the attorney shall have a lien upon the judgment recovered, legal costs excepted, for his fee. If the records show the name of the attorney, the defendant shall be deemed to have notice of the lien. If the parties in good faith and before judgment compromise or settle their controversy without the payment of money or other thing of value, the attorney for the plaintiff shall have no claim against the defendant for any part of his fee.

History. Enact. Acts 1976, ch. 58, § 9.

NOTES TO DECISIONS

1.Contingency Fee Contract.

Where client had wrongfully discharged an attorney who had done considerable work, under a contingency fee contract, in her behalf, the attorney would be entitled to a lien upon the eventual recovery equal to the percentage in the contract, less the reasonable value of the work of the successor attorney required to bring the matter to a successful completion. La Bach v. Hampton, 585 S.W.2d 434, 1979 Ky. App. LEXIS 443 (Ky. Ct. App. 1979), overruled, Baker v. Shapero, 203 S.W.3d 697, 2006 Ky. LEXIS 260 ( Ky. 2006 ).

Attorney who signed on as co-counsel in a child sexual abuse class action lawsuit and then negotiated individual settlements for the victims before withdrawing as class counsel was denied attorney fees from the class settlement because the attorney voluntarily withdrew and violated fiduciary duties to the class by negotiating individual settlements while serving as class counsel. Bonar v. Waite, Schneider, Bayless & Chesley Co., L.P.A., 2009 Ky. App. LEXIS 201 (Ky. Ct. App. Oct. 16, 2009), superseded, 373 S.W.3d 419, 2012 Ky. LEXIS 103 ( Ky. 2012 ).

2.Effect of Lien.

The existence of the lien against the proceeds of the recovery causes the claim for a fee to be an integral part of the subject matter of the action rather than a matter foreign to it. La Bach v. Hampton, 585 S.W.2d 434, 1979 Ky. App. LEXIS 443 (Ky. Ct. App. 1979), overruled, Baker v. Shapero, 203 S.W.3d 697, 2006 Ky. LEXIS 260 ( Ky. 2006 ).

Where the only remaining issue in an adversary proceeding was one of state law, a bankruptcy court found that the majority of the factors weighed in favor of abstention under 28 U.S.C.S. § 1334(c)(1). The remaining issue, whether an attorneys’ fee lien attached to future maintenance payments pursuant to KRS 376.460 , was one of first impression, and the state divorce court was the more appropriate forum to resolve the issue; the divorce court had a jurisdictional basis for adjudicating this matter, as it entered the orders that formed the basis for the dispute; and resolution of this dispute would have no effect on the bankruptcy estate, as the debtor had already received a Chapter 7 discharge, and the trustee filed a report of no distribution. Dodd v. Micek (In re Micek), 2012 Bankr. LEXIS 4361 (Bankr. E.D. Ky. Sept. 19, 2012).

3.Failure to Request.

Where attorney did not request award of attorney’s fees by Workmen’s Compensation Board, he did not have statutory lien under this section for portion of award paid by special fund entirely to claimant, since KRS 342.320 specifically and emphatically requires board approval of attorney’s fees and cannot approve them on its own motion if attorney fails to request them. Land v. Newsome, 614 S.W.2d 948, 1981 Ky. LEXIS 241 ( Ky. 1981 ).

4.Recovery Allowed.

Attorneys were entitled to recover attorneys’ fees through a lien upon a judgment, even though the judgment for their client was less than the judgment for the opposing party, and despite opposing party’s attempt to set-off the two judgments. Exchange Bank v. Wells, 860 S.W.2d 785, 1993 Ky. App. LEXIS 42 (Ky. Ct. App. 1993).

5.Recovery Not Allowed.

Attorney improperly used this section to recover his fees in the dissolution action because there was nothing obtained in that action to which a lien could properly attach; this section is not applicable in dissolution cases. Ruby v. Scherzer, 2013 Ky. App. LEXIS 146 (Ky. Ct. App. Sept. 27, 2013).

The Kentucky attorney's fees lien statute does not apply to property assigned or divided in divorce proceedings. However, an attorney may obtain a contractual lien through a contract of employment with a client, and such liens may not be upheld against the property belonging to third parties unless they have timely notice of the lien, but the lien can be upheld against assets held by a client after entry of the decree if the employment contract so provides. Stone v. Dubarry, 513 S.W.3d 325, 2016 Ky. LEXIS 557 ( Ky. 2016 ).

6.Illegal Lien.

Trial court did not err in awarding an attorney summary judgment in a trust’s action alleging she filed an illegal attorney’s lien because no evidence supported the claim; the lien was not forged, did not contain any false statements, and was not a false claim for money not due the attorney; the attorney had an order from the district court appointing her specifying her hourly rate and that she was be to be paid from the trust’s assets, and she removed the lien after the trust filed suit. Ford v. Faller, 439 S.W.3d 173, 2014 Ky. App. LEXIS 114 (Ky. Ct. App. 2014).

Even if an attorney’s lien was improper, it was not groundless because the attorney had a reasonable argument that the law had to be interpreted, applied, modified, and/or extended to allow her to file her lien; the definition of groundless, i.e., lacking any factual or legal basis or rationale, is appropriate and in accord with the General Assembly’s intent and purpose. Ford v. Faller, 439 S.W.3d 173, 2014 Ky. App. LEXIS 114 (Ky. Ct. App. 2014).

General Assembly’s purpose in adopting the illegal lien statute was to protect individuals from liens that are forged, false, or fraudulent, and in the case of an attorney’s lien, the illegal lien statute would be violated where an attorney filed a lien related to a matter for which she never worked, misrepresented the nature of fee she was due, or the like; the statute was not designed to criminalize a mistaken legal interpretation. Ford v. Faller, 439 S.W.3d 173, 2014 Ky. App. LEXIS 114 (Ky. Ct. App. 2014).

Research References and Practice Aids

Kentucky Bench & Bar.

Mapother, Attorneys’ Fees Recoverable in Kentucky Liti- gation, Vol. 44, No. 4, October 1980, Ky. Bench & Bar 28.

Kentucky Law Journal.

Gaetke, Kentucky’s New Rules of Professional Conduct for Lawyers, 78 Ky. L.J. 767 (1989-90).

Treatises

Petrilli, Kentucky Family Law, Court Procedure, § 23.23.

376.470. Veterinarian’s lien.

  1. Any licensed veterinarian who performs professional services for an animal, by contract with, or by the written consent of, the owner or authorized agent shall have a lien on the animal to secure the cost of the service provided.
  2. The priority among veterinarian’s liens filed under this section shall be according to the first lien filed.

History. Enact. Acts 1990, ch. 452, § 2, effective July 13, 1990.

Research References and Practice Aids

Kentucky Bench & Bar.

Schneiter, Equine Statutory Liens, Vol. 67, No. 4, July 2003, Ky. Bench & Bar 23.

Northern Kentucky Law Review.

Ellerman & Linneman, A Survey of Kentucky Commercial Law., 31 N. Ky. L. Rev. 201 (2004).

376.475. Filing requirement — Indexing — Dissolution for nonenforcement.

  1. Any lien provided for in KRS 376.470 shall be dissolved unless the claimant, within six (6) months after he ceases to provide services for the animal, files in the office of the county clerk of the county in which the animal is located, a statement of the amount due him, together with a description of the animal intended to be covered by the lien sufficiently accurate to identify it, the name of the owner, and whether the services were furnished by contract or written consent of the owner or agent. This statement shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf. The claimant shall send by regular mail a copy of the statement to the owner at his last known address within seven (7) days of filing the statement with the county clerk. Any lien provided for in KRS 376.470 shall be dissolved if a copy of the statement is not sent to the property owner as provided in this subsection.
  2. The county clerk shall endorse upon each statement the date of its filing, and shall make an abstract of the statement in a book to be kept by him for that purpose, properly endorsed and indexed, containing the date of filing, the name of the person seeking to enforce the lien, the amount claimed, the name of the person against whose animal the lien is filed, and a description of the animal charged with the lien. The clerk shall receive a fee pursuant to KRS 64.012 from the person filing the statement as full compensation, which shall be taxed and collected as other costs.
  3. Any lien created under this section shall be dissolved unless an action is brought to enforce the lien within twelve (12) months from the day of filing the statement in the clerk’s office as required by subsection (1) of this section. If the lienholder complies with all filing requirements under this section, and does so within the time herein fixed, his lien shall be valid and effective against any creditor of, or bona fide or other purchaser from, the owner of the animal, except as provided in KRS 257.105(2).
  4. The procedure to enforce a lien under KRS 376.470 shall be as provided in KRS 376.110 , 376.120 , and 376.130 .

History. Enact. Acts 1990, ch. 452, § 3, effective July 13, 1990.

Research References and Practice Aids

Northern Kentucky Law Review.

Ellerman & Linneman, A Survey of Kentucky Commercial Law., 31 N. Ky. L. Rev. 201 (2004).

376.480. Lien for rent due on space for parking abandoned house trailer or mobile home — Sale of abandoned property.

  1. Any owner of real property who rents space on which a house trailer or mobile home is parked shall have a lien for rent due on any house trailer or mobile home, its contents, and other personalty abandoned by the occupant on the landowner’s property for rent due, reasonable storage, cleanup costs, and utilities furnished to the unit and paid for by the landowner.
  2. If, after a period of sixty (60) days, the rent, reasonable storage, cleanup costs, and utilities have not been paid, the house trailer or mobile home, its contents, and other personalty abandoned by the occupant may be sold to pay the rent, reasonable storage, cleanup costs, and utilities after the unit owner has been notified of the time and place of the sale, at the unit owner’s last known address. Notice shall be made by registered mail at least ten (10) days prior to the time of the sale. If there is a valid recorded lien against the property to be sold, the landowner shall notify the lienholder of the time and place of sale by registered mail at least ten (10) days prior to the time of the sale. If the proceeds of the sale are insufficient to pay the debt and costs of sale, the sale and collection of proceeds shall not constitute a waiver or release of responsibility for payment of the debt owed by the unit owner. This lien shall be subject to prior recorded liens and property taxes.
  3. Any money obtained in excess of the sale costs, taxes, and liens shall be paid by the seller to the unit owner; and if the unit owner cannot be located, the excess money shall escheat to the state pursuant to the provisions of KRS Chapter 393.
  4. Before the sale, the landowner shall advertise a description of the property to be sold and the time and place of sale for three (3) consecutive publishing periods in a local newspaper distributed in the county where the property is located.
  5. The sale may be by written bids or by auction, or both, and the seller may bid on the property. The sale shall be to the highest bidder.
  6. The house trailer or mobile home shall be transferred to the purchaser in the county where the sale is conducted upon an affidavit being filed by the seller stating that the provisions of this section have been met, listing the sale price, and containing any other information that may be required by the state or county.

History. Enact. Acts 1992, ch. 275, § 1, effective July 14, 1992.

376.990. Penalties.

  1. Any person who violates the provisions of subsection (2) of KRS 376.050 shall be guilty of a Class D felony.
  2. Any person who violates any of the provisions of KRS 376.060 or 376.070 shall be guilty of a Class A misdemeanor.

History. 2467, 2467a-2, 2467b-4: amend. Acts 1992, ch. 463, § 43, effective July 14, 1992.

NOTES TO DECISIONS

1.In General.

If KRS 376.070 and subsection (2) of this section were construed to impose absolute criminal liability upon a contractor acting in good faith for a simple breach of contract, the statute probably would violate § 18 of the Kentucky Constitution which restricts imprisonment for debt and accordingly the statutes must be construed to require a culpable mental state before a contractor can be guilty of even a misdemeanor. Blanton v. Commonwealth, 562 S.W.2d 90, 1978 Ky. App. LEXIS 466 (Ky. Ct. App. 1978).

While KRS 376.070 imposes a duty upon a building contractor to apply payments from the property owner to the claims of the subcontractors and materialmen who have provided labor and materials, this section enforces that duty by imposing a criminal penalty in the event that a contractor fails to comply with those obligations. Accordingly this section converts KRS 376.070 into the nature of a criminal statute and any trust thereby created only arises upon the contractor’s misappropriation of funds. Riden v. Sigler (In re Sigler), 196 B.R. 762, 1996 Bankr. LEXIS 671 (Bankr. W.D. Ky. 1996 ).

2.Indictment.

An indictment hereunder for violating KRS 376.060 must allege that the mortgage was executed before the time to file the lien had expired, and that the lien had not been perfected at the time the mortgage was executed. Wolking v. Commonwealth, 236 Ky. 741 , 33 S.W.2d 647, 1930 Ky. LEXIS 809 ( Ky. 1930 ).

3.Good Faith Dispute.

The failure to pay claims for labor and material out of amounts received from the owner constitutes a misdemeanor under this section only if the contractor fails to pay sums which he knows to be due and owing and no criminal liability may be imposed for failure to pay an amount which is disputed in good faith by the contractor. Blanton v. Commonwealth, 562 S.W.2d 90, 1978 Ky. App. LEXIS 466 (Ky. Ct. App. 1978).

4.Instructions.

Where a jury could find that a contractor failed to make the payments required by this section and yet entertain a reasonable doubt from the evidence that he did so with the intention of dealing with the progress payments as his own by failing to satisfy known legal obligations to pay laborers and materialmen such contractor was entitled to a misdemeanor instruction. Blanton v. Commonwealth, 562 S.W.2d 90, 1978 Ky. App. LEXIS 466 (Ky. Ct. App. 1978).

Cited:

Gramatan-Sullivan, Inc. v. Koslow, 143 F. Supp. 641, 1956 U.S. Dist. LEXIS 3006 (D.N.Y. 1956), aff’d, 240 F.2d 523, 1957 U.S. App. LEXIS 3376 (2d Cir. N.Y. 1957); In re D & B Electric, Inc., 4 B.R. 263, 1980 Bankr. LEXIS 5135 (Bankr. W.D. Ky. 1980 ); In re Lafollette Sheet Metal, Inc., 35 B.R. 634, 1983 Bankr. LEXIS 4874 (Bankr. E.D. Tenn. 1983); Kentucky for benefit of United Pacific Ins. Co. v. Laurel County, 805 F.2d 628, 1986 U.S. App. LEXIS 33647 (6th Cir. 1986); In re Weedman, 65 B.R. 288, 1986 Bankr. LEXIS 5215 (Bankr. W.D. Ky. 1986 ); Taylor v. Commonwealth, 799 S.W.2d 818, 1990 Ky. LEXIS 134 ( Ky. 1990 ).

Research References and Practice Aids

Cross-References.

Sale or concealment of personal property subject to statutory lien, penalty for, KRS 434.210 .

Sale or conversion of property from realty covered by lien, penalty for, KRS 434.200 .

CHAPTER 377 Bulk Sales [Superseded]

377.010. Construction and application of chapter. [Repealed.]

Compiler’s Notes.

This section (2651a-5, 2651a-6: amend. Acts 1942, ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.020. Bulk sales of merchandise or fixtures; statement of creditors of vendor required. [Repealed.]

Compiler’s Notes.

This section (2651a-1: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.030. Notice of proposed sale to be given creditors of vendor. [Repealed.]

Compiler’s Notes.

This section (2651a-2.: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.040. Application of purchase money. [Repealed.]

Compiler’s Notes.

This section (2651a-3: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.050. When sale is deemed fraudulent and void; effect of such sale; limitation of action to invalidate. [Repealed.]

Compiler’s Notes.

This section (2651a-3: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.060. Vendor not to make an incomplete or false statement. [Repealed.]

Compiler’s Notes.

This section (2651a-4: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.070. Vendor may require security from purchaser. [Repealed.]

Compiler’s Notes.

This section (2651a-7: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

377.990. Penalties. [Repealed.]

Compiler’s Notes.

This section (2651a-4: amend. Acts 1942 ch. 208, § 1, effective October 1, 1942) was repealed by Acts 1958, ch. 77, Art. 10, § 10-102. For present law see KRS Chapter 355.

CHAPTER 378 Fraudulent and Preferential Conveyances

378.010. Fraudulent conveyances and encumbrances — Void as to whom — Exception. [Repealed.]

HISTORY: 1906; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.020. Conveyance or encumbrance without consideration — Effect. [Repealed.]

History. 1907; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.030. Action on fraudulent conveyance or encumbrance of real property — Proceedings. [Repealed.]

HISTORY: 1907a; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.040. Conveyance or encumbrance of personal property without delivery — Effect prior to recording. [Repealed.]

Compiler’s Notes.

This section (1908: amend. Acts 1958, ch. 77, § 10-106) was repealed by Acts 2006, ch. 242, § 64, effective July 12, 2006.

378.050. Loan of personal property with possession for five years or reservation — Effect in absence of recorded evidence or will. [Repealed.]

HISTORY: 1909; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

Compiler's Notes

This section (1909) was repealed by Acts ch. 37, § 16, effective January 1, 2016.

378.060. Preferential conveyance, encumbrance or other act in contemplation of insolvency — Effect — Exception. [Repealed.]

HISTORY: 1910; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.070. Action on transfer by preferential act — Limitation and extension of limitation — Parties — Proceedings. [Repealed.]

HISTORY: 1911, 1912, 1917: amend. Acts 2006, ch. 247, § 35, effective July 12, 2006; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.080. Property to be surrendered to receiver — Disclosure — Writ of ne exeat may be granted. [Repealed.]

HISTORY: 1913, 1915: amend. Acts 1976 (Ex. Sess.), ch. 14, § 290, effective January 2, 1978; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

378.090. Distribution of assets by the court — Appeal — Preferred claims. [Repealed.]

HISTORY: 1914, 1916; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

Compiler's Notes

This section (1914, 1916) was repealed by Acts 2015, ch. 37, § 16, effective January 1, 2016.

378.100. Provisions concerning actions for settlements applicable to proceedings for sale of property held in trust or preferentially assigned. [Repealed.]

HISTORY: C.C. 438: trans. Acts 1952, ch. 84, § 1; repealed by 2015 ch. 37, § 16, effective January 1, 2016.

CHAPTER 378A Kentucky Uniform Voidable Transactions Act

HISTORY: 2015 ch. 37, § 1, effective January 1, 2016.

378A.005. Short title.

This chapter may be cited as the Kentucky Uniform Voidable Transactions Act.

HISTORY: 2015 ch. 37, § 15, effective January 1, 2016.

NOTES TO DECISIONS

1.Prospective Operation.

As the Kentucky Uniform Voidable Transactions Act did not state that it was retroactive, any transfer occurring prior to its enactment had to be considered under repealed chapter 378. Spradlin v. Pryor Cashman LLP (In re Licking River Mining, LLC), 565 B.R. 794, 2017 Bankr. LEXIS 805 (Bankr. E.D. Ky. 2017 ).

378A.010. Definitions for chapter.

As used in this chapter:

  1. “Affiliate” means:
    1. A person that directly or indirectly owns, controls, or holds with power to vote, twenty percent (20%) or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote;
    2. A corporation twenty percent (20%) or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor or a person that directly or indirectly owns, controls, or holds, with power to vote, twenty percent (20%) or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote;
    3. A person whose business is operated by the debtor under a lease or other agreement, or a person substantially all of whose assets are controlled by the debtor; or
    4. A person that operates the debtor’s business under a lease or other agreement or controls substantially all of the debtor’s assets;
  2. “Asset” means property of a debtor, but the term does not include:
    1. Property to the extent it is encumbered by a valid lien;
    2. Property to the extent it is generally exempt under nonbankruptcy law; or
    3. An interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one (1) tenant.
  3. “Claim,” except as used in “claim for relief,” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secure, or unsecured;
  4. “Creditor” means a person that has a claim;
  5. “Debt” means liability on a claim;
  6. “Debtor” means a person that is liable on a claim;
  7. “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities;
  8. “Insider” includes:
    1. If the debtor is an individual:
      1. A relative of the debtor or of a general partner of the debtor;
      2. A partnership in which the debtor is a general partner;
      3. A general partner in a partnership described in subparagraph 2. of this paragraph; or
      4. A corporation of which the debtor is a director, officer, or person in control;
    2. If the debtor is a corporation:
      1. A director of the debtor;
      2. An officer of the debtor;
      3. A person in control of the debtor;
      4. A partnership in which the debtor is a general partner;
      5. A general partner in a partnership described in subparagraph 4. of this paragraph; or
      6. A relative of a general partner, director, officer, or person in control of the debtor;
    3. If the debtor is a partnership:
      1. A general partner in the debtor;
      2. A relative of a general partner in, a general partner of, or a person in control of the debtor;
      3. Another partnership in which the debtor is a general partner;
      4. A general partner in a partnership described in subparagraph 3. of this paragraph; or
      5. A person in control of the debtor;
    4. An affiliate, or an insider of an affiliate as if the affiliate were the debtor; and
    5. A managing agent of the debtor;
  9. “Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien;
  10. “Organization” means a person other than an individual;
  11. “Person” means an individual, estate, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity;
  12. “Property” means anything that may be the subject of ownership;
  13. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
  14. “Relative” means an individual related by consanguinity within the third degree as determined by the common law, a spouse, or an individual related to a spouse within the third degree as so determined, and includes an individual in an adoptive relationship within the third degree;
  15. “Sign” means, with present intent to authenticate or adopt a record:
    1. To execute or adopt a tangible symbol; or
    2. To attach to or logically associate with the record an electronic symbol, sound, or process;
  16. “Transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance; and
  17. “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

HISTORY: 2015 ch. 37, § 1, effective January 1, 2016.

378A.020. Insolvency.

  1. A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.
  2. A debtor that is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.
  3. Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.
  4. Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

HISTORY: 2015 ch. 37, § 2, effective January 1, 2016.

378A.030. Value.

  1. Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.
  2. For the purposes of KRS 378A.040(1)(b) and 378A.050 , a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust, or security agreement.
  3. A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.

HISTORY: 2015 ch. 37, § 3, effective January 1, 2016.

378A.040. Transfer or obligation voidable as to present or future creditor.

  1. A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
    1. With actual intent to hinder, delay, or defraud any creditor of the debtor; or
    2. Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
      1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
      2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.
  2. In determining actual intent under subsection (1)(a) of this section, consideration may be given, among other factors, to whether:
    1. The transfer or obligation was to an insider;
    2. The debtor retained possession or control of the property transferred after the transfer;
    3. The transfer or obligation was disclosed or concealed;
    4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
    5. The transfer was of substantially all the debtor’s assets;
    6. The debtor absconded;
    7. The debtor removed or concealed assets;
    8. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
    9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
    10. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
    11. The debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.
  3. A creditor making a claim for relief under subsection (1) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

HISTORY: 2015 ch. 37, § 4, effective January 1, 2016.

378A.050. Transfer or obligation voidable as to present creditor.

  1. A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at the time or the debtor became insolvent as a result of the transfer or obligation.
  2. A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made, if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.
  3. Subject to KRS 378A.020(2), a creditor making a claim for relief under subsection (1) or (2) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

HISTORY: 2015 ch. 37, § 5, effective January 1, 2016.

NOTES TO DECISIONS

23.Pleading.

Facts alleged in the complaint, accepted as true, allowed a reasonable inference that defendants were plausibly liable under the litigating trustee’s Kentucky and Bankruptcy Code constructive fraudulent transfer claims, as she pled facts showing that debtors made prepetition transfers or conveyances when insolvent, or were otherwise made insolvent by the transfers, and that debtors did not receive valuable or reasonably equivalent consideration in return. The trustee also pleaded facts that showed the existence of a creditor with an allowable unsecured claim on the petition date to pursue the state law fraudulent transfer claims. Cambrian Holding Co. v. Alliance Prime Assocs., 2021 Bankr. LEXIS 1183 (Bankr. E.D. Ky. May 4, 2021).

378A.060. When transfer is made or obligation is incurred.

For the purposes of this chapter:

  1. A transfer is made:
    1. With respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against which applicable laws permit the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
    2. With respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this chapter that is superior to the interest of the transferee.
  2. If applicable law permits the transfer to be perfected as provided in subsection (1) of this section, and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action.
  3. If applicable law does not permit the transfer to be perfected as provided in subsection (1) of this section, the transfer is made when it becomes effective between the debtor and the transferee.
  4. A transfer is not made until the debtor has acquired rights in the asset transferred.
  5. An obligation is incurred:
    1. If oral, when it becomes effective between the parties; or
    2. If evidenced by a record, when the record, signed by the obligor, is delivered to or for the benefit of the obligee.

HISTORY: 2015 ch. 37, § 6, effective January 1, 2016.

378A.070. Remedies of creditor.

  1. In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in KRS 378A.080 , may obtain:
    1. Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;
    2. An attachment or other provisional remedy against the asset transferred or other property of the transferee if available under applicable law; and
    3. Subject to applicable principles of equity and in accordance with applicable Rules of Civil Procedure:
      1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
      2. Appointment of a receiver to take charge of the asset transferred or of the other property of the transferee; or
      3. Any other relief the circumstances may require.
  2. If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

HISTORY: 2015 ch. 37, § 7, effective January 1, 2016.

378A.080. Defenses, liability, and protection of transferee or obligee.

  1. A transfer or obligation is not voidable under KRS 378A.040(1)(a) against a person that took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferee or obligee.
  2. To the extent a transfer is avoidable in an action by a creditor under KRS 378A.070(1)(a), the following rules apply:
    1. Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (3) of this section, or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against:
      1. The first transferee of the asset or the person for whose benefit the transfer was made; or
      2. An immediate or mediate transferee of the first transferee, other than:
        1. A good-faith transferee that took for value; or
        2. An immediate or mediate good-faith transferee of a person described in subdivision a. of this subparagraph; and
    2. Recovery pursuant to KRS 378A.070(1)(a) or (b) of or from the asset transferred or its proceeds, by levy or otherwise, is available only against a person described in subsection (2)(a)1. or 2. of this section.
  3. If the judgment under subsection (2) of this section is based upon the value of the asset transferred, the judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.
  4. Notwithstanding voidability of a transfer or an obligation under this chapter, a good-faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to:
    1. A lien on or a right to retain an interest in the asset transferred;
    2. Enforcement of an obligation incurred; or
    3. A reduction in the amount of the liability on the judgment.
  5. A transfer is not voidable under KRS 378A.040(1)(b) or 378A.050 if the transfer results from:
    1. Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law; or
    2. Enforcement of a security interest in compliance with Subtitle 9 of KRS Chapter 355, other than acceptance of collateral in full or partial satisfaction of the obligation it secures.
  6. A transfer is not voidable under KRS 378A.050(2):
    1. To the extent the insider gave new value to or for the benefit of the debtor after the transfer was made, except to the extent the new value was secured by a valid lien;
    2. If made in the ordinary course of business or financial affairs of the debtor and the insider; or
    3. If made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given for that purpose as well as an antecedent debt of the debtor.
  7. The following rules determine the burden of proving matters referred to in this section:
    1. A party that seeks to invoke subsection (1), (4), (5), or (6) of this section has the burden of proving the applicability of the subsection invoked;
    2. Except as otherwise provided in paragraphs (c) and (d) of this subsection, the creditor has the burden of proving each applicable element of subsections (2) or (3) of this section;
    3. The transferee has the burden of proving the applicability to the transferee of subsection (2)(a)2.a. or b. of this section; and
    4. A party that seeks adjustment under subsection (3) of this section has the burden of proving the adjustment.
  8. The standard of proof required to establish matters referred to in this section is preponderance of the evidence.

HISTORY: 2015 ch. 37, § 8, effective January 1, 2016.

378A.090. Extinguishment of claim for relief.

A claim for relief with respect to a transfer or obligation under this chapter is extinguished unless action is brought:

  1. Under KRS 378A.040(1)(a), not later than four (4) years after the transfer was made or the obligation was incurred or, if later, not later than one (1) year after the transfer or obligation was or could reasonably have been discovered by the claimant;
  2. Under KRS 378A.040(1)(b) or 378A.050(1), not later than four (4) years after the transfer was made or the obligation was incurred; or
  3. Under KRS 378A.050(2), no later than one (1) year after the transfer was made.

HISTORY: 2015 ch. 37, § 9, effective January 1, 2016.

378A.100. Governing law.

  1. In this section, the following rules determine a debtor’s location:
    1. A debtor who is an individual is located at the individual’s principal residence;
    2. A debtor that is an organization and has only one (1) place of business is located at its place of business; and
    3. A debtor that is an organization and has more than one (1) place of business is located at its chief executive office.
  2. A claim for relief in the nature of a claim for relief under this chapter is governed by the local laws of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.

HISTORY: 2015 ch. 37, § 10, effective January 1, 2016.

378A.110. Application to series organization.

  1. In this section:
    1. “Protected series” means an arrangement, however denominated, created by a series organization that, pursuant to the law under which the series organization is organized, has the characteristics set forth in paragraph (b) of this subsection; and
    2. “Series organization” means an organization that, pursuant to the law under which it is organized, has the following characteristics:
      1. The organic record of the organization provides for creation by the organization of one (1) or more protected series, however denominated, with respect to specified property of the organization, and for records to be maintained for each protected series that identify the property of, or associated with, the protected series;
      2. Debt incurred or existing with respect to the activities of, or property of, or associated with, a particular protected series is enforceable against the property of, or associated with, the protected series only, and not against the property of, or associated with, the organization or other protected series of the organization; and
      3. Debt incurred or existing with respect to the activities or property of the organization is enforceable against the property of the organization only, and not against the property of, or associated with, a protected series of the organization.
  2. A series organization and each protected series of the organization is a separate person for purposes of this chapter, even if for other purposes a protected series is not a person separate from the organization or other protected series of the organization.

HISTORY: 2015 ch. 37, § 11, effective January 1, 2016.

378A.120. Supplementary provisions.

Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions.

HISTORY: 2015 ch. 37, § 12, effective January 1, 2016.

378A.130. Uniformity of application and construction.

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

HISTORY: 2015 ch. 37, § 13, effective January 1, 2016.

378A.140. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. secs. 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that Act, 15 U.S.C. sec. 7001(c) , or authorize electronic delivery of any of the notices described in Section 103(B) of that Act, 15 U.S.C. sec. 7003(b) .

HISTORY: 2015 ch. 37, § 14, effective January 1, 2016.

CHAPTER 379 Voluntary Assignments

379.010. Voluntary assignments for benefit of creditors — Preferred claims.

  1. Every voluntary assignment made by a debtor to any person in trust for his creditors shall be for the benefit of all his creditors, except as provided in subsections (2) and (3) of this section, in proportion to their respective claims after the payment of the expenses of the trust.
  2. Any property conveyed by the deed of assignment upon which there is a valid lien shall be first applied to the discharge of the lien debt, and if the property is not sufficient to satisfy the lien debt, the lien creditor may present the unsatisfied remainder as a claim against the estate and receive thereon his pro rata share of the assets in the same manner as general creditors.
  3. Debts due by the assignor as guardian, conservator, trustee of an express trust created by deed or will or as personal representative shall be paid in full before the general creditors receive anything.

History. 74: amend. Acts 1982, ch. 141, § 95, effective July 1, 1982.

Compiler’s Notes.

This section was amended by § 104 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

NOTES TO DECISIONS

1.Constitutionality.

This section is constitutional. Mattingly v. Elder, 44 S.W. 215, 19 Ky. L. Rptr. 1645 (1898).

The provision that debts due by an assignor as guardian, committee or trustee of an express trust shall be paid in full before general creditors, does not violate the obligations of contracts. Weiser v. Muir, 103 Ky. 499 , 45 S.W. 512, 20 Ky. L. Rptr. 179 , 1898 Ky. LEXIS 87 ( Ky. 1898 ).

2.Application.

Subsection (3) applies only to debts owed by the assignor in a trust capacity. It does not apply to debts on which the assignor was liable only in a personal capacity. Anderson v. Van Rensselaer, 184 Ky. 133 , 211 S.W. 553, 1919 Ky. LEXIS 33 ( Ky. 1919 ).

In Kentucky insolvency laws do not apply to counties. Perry County v. Catholic Order of Foresters, 17 F. Supp. 316, 1936 U.S. Dist. LEXIS 1776 (D. Ky. 1936 ).

A creditor who had assented to a composition agreement on condition that all creditors sign could not disregard the agreement and secure priority by attachment solely because one creditor holding a debt of insignificant amount had not signed. Fahey v. Clarke, 80 Ky. 613 , 4 Ky. L. Rptr. 590 , 1883 Ky. LEXIS 8 (Ky. Ct. App. 1883).

An unrecorded deed of assignment had priority over a subsequent attachment lien. First Nat'l Bank v. D. Keefer Milling Co., 95 Ky. 97 , 23 S.W. 675, 15 Ky. L. Rptr. 457 , 1893 Ky. LEXIS 128 ( Ky. 1893 ).

A trust created by assignor for his children at a time when he was solvent and prosperous was entitled to preference when the assignor later misappropriated same. Shinkle's Assignees v. Bristow, 95 Ky. 84 , 23 S.W. 670, 15 Ky. L. Rptr. 673 , 1893 Ky. LEXIS 126 ( Ky. 1893 ).

An assignment had priority over an attachment theretofore issued when the attaching creditor directed the officer not to execute it until directed to do so, and the attachment was actually executed after the assignment was lodged for record. Blakely v. Smith, 26 S.W. 584, 16 Ky. L. Rptr. 109 (1894).

A deed of assignment did not pass title to property which assignor had while solvent conveyed in trust for his daughter, subject to a right of revocation, when the power of revocation was never exercised by him. Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

3.Bankruptcy.

Creditors may, within four (4) months of an assignment, file a petition in involuntary bankruptcy against the assignor, provided they have not become parties to the proceedings in the state court. Sinsheimer v. Simonson, 96 F. 579, 1899 U.S. Dist. LEXIS 347 (D. Ky. 1899 ). See Simonson v. Sinsheimer, 100 F. 426, 1900 U.S. App. LEXIS 4274 (6th Cir. Ky. 1900 ).

Although an assignee is a proper party to a petition in bankruptcy, and may question steps affecting his rights, nevertheless he is not subject to the orders of the bankruptcy court as to matters peculiarly within his own province of action. Sinsheimer v. Simonson, 107 F. 898, 1901 U.S. App. LEXIS 4038 (6th Cir. Ky. 1901 ), aff'd, 184 U.S. 18, 22 S. Ct. 293, 46 L. Ed. 413, 1902 U.S. LEXIS 2315 (U.S. 1902).

A proceeding under an assignment has prior jurisdiction over bankruptcy proceedings only when the assignment was made four (4) months or more before the proceedings in bankruptcy were instituted. In re Knight, 125 F. 35, 1903 U.S. Dist. LEXIS 68 (D. Ky. 1903 ).

4.Foreign Assignments.

When an assignment executed in another state is such as would have been valid if executed here, it vests title in assignee to personalty in this state and he may sue in courts of this state without requalification. Peach Orchard Coal Co. v. Woodward, 105 Ky. 790 , 49 S.W. 793, 20 Ky. L. Rptr. 1613 , 1899 Ky. LEXIS 273 ( Ky. 1899 ). See Salyer v. Blessing, 151 Ky. 459 , 152 S.W. 275, 1913 Ky. LEXIS 505 ( Ky. 1913 ).

A subsequent attaching creditor in Kentucky will be given priority over a receiver of a foreign corporation. Zacher v. Fidelity Trust & Safety-Vault Co., 109 Ky. 441 , 59 S.W. 493, 22 Ky. L. Rptr. 987 , 1900 Ky. LEXIS 222 ( Ky. 1900 ).

When there are two (2) assignments covering property in several states, creditors who have filed with the foreign assignee may not participate in the Kentucky distribution until those who filed with the Kentucky assignee have been made equal with those filing with the foreign assignee. Weller v. Hull's Assignee, 74 S.W. 172, 24 Ky. L. Rptr. 2185 , 1903 Ky. LEXIS 519 (Ky. Ct. App. 1903).

When an assignment executed in another state was such as would have been valid if executed here, it vested title in assignee to personalty in this state and he could sue in courts of this state without requalification. Coflin v. Kelling, 83 Ky. 649 , 7 Ky. L. Rptr. 724 , 1886 Ky. LEXIS 21 (Ky. Ct. App. 1886). See Rubel v. Louisville Bkg. Co., 10 Ky. L. Rptr. 1021 (1889).

5.Assignee.

When partners assigned the firm’s property, and each separately assigned his individual property, the effect was the same as if all assignments had been made jointly. Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

6.— Liability.

Assignee purchased the property sold and conveyed it to another pursuant to a contract theretofore made by the assignor. The assignee is chargeable with the contract price and not its bid. Mitchell v. Tyler, 49 S.W. 422, 20 Ky. L. Rptr. 1249 , 1899 Ky. LEXIS 632 ( Ky. 1899 ).

When the assignee of a logging firm improperly continued the business, he was not chargeable with logs having no value. Cooper v. Lankford, 117 Ky. 792 , 78 S.W. 197, 25 Ky. L. Rptr. 1578 , 1904 Ky. LEXIS 206 ( Ky. 1904 ).

An assignee is liable for losses, deficiencies or injuries occasioned by an affirmative or negative violation of his duties. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

Judgment against assignee for losses, occasioned by his fraud or negligence in sale of assigned goods should be credited by amount actually received at the sale, and by depreciation. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

When, through fraud or negligence of the assignee in the sale of the assigned goods the estate suffers losses, he is chargeable with such amount as the goods on the day of sale could reasonably be expected to bring at forced sale in view of their then condition. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

The liability of the assignee continues until he settles his accounts, distributes the assets, and is discharged by order of court. Anderson v. City Nat'l Bank, 153 Ky. 268 , 155 S.W. 385, 1913 Ky. LEXIS 826 ( Ky. 1913 ).

When the assignee, without consent of the creditors, turns over to the assignor for distribution the proceeds of the property sold, he remains liable to the extent of assets actually received or which he, in the exercise of ordinary prudence, should have received. Anderson v. City Nat'l Bank, 153 Ky. 268 , 155 S.W. 385, 1913 Ky. LEXIS 826 ( Ky. 1913 ).

An assignee was not liable for loss in continuing the business when the continuation was agreed to by the creditors. Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

An attaching creditor who directed execution of his attachment upon assigned property and caused it to be sold was jointly liable with the officer. Blakely v. Smith, 26 S.W. 584, 16 Ky. L. Rptr. 109 (1894).

7.— Powers and Duties.

An assignee may sue to recover usury paid. Louisville Trust Co. v. Ky. Nat. Bank, 87 F. 143, 1898 U.S. App. LEXIS 2564 (C.C.D. Ky. 1898 ).

The assignor has no right to mortgage a crop planted by him subsequent to the assignment. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

An assignee must show diligence and good faith. McDowell v. Columbia Bldg., Loan & Sav. Ass'n's Assignee, 51 S.W. 1013, 21 Ky. L. Rptr. 81 (1899).

The assignee should, within a reasonable time, apply the assets to the payment of assignor’s debts. McDowell v. Columbia Bldg., Loan & Sav. Ass'n's Assignee, 51 S.W. 1013, 21 Ky. L. Rptr. 81 (1899).

An assignee who is also a creditor may sue for personal judgment in his favor, but cannot after taking possession of the property have an attachment of same. Muir v. Samuels, 110 Ky. 605 , 62 S.W. 481, 23 Ky. L. Rptr. 14 , 1901 Ky. LEXIS 114 ( Ky. 1901 ).

The assignee should proceed without unnecessary delay to convert the assigned estate into money, and to apply the proceeds to the payment of the debts, unless by authority of court or assent of creditors he is granted permission to continue the business. Cooper v. Lankford, 117 Ky. 792 , 78 S.W. 197, 25 Ky. L. Rptr. 1578 , 1904 Ky. LEXIS 206 ( Ky. 1904 ).

An assignee, or other trustee, in the management of the estate intrusted to him, is bound to exercise the same care that an ordinarily prudent person would use in his own affairs under like circumstances, and for such losses, deficiencies, or injuries as may be occasioned by his affirmative or negative violation of this rule, and the duties it imposes, he is answerable for the loss thereby inflicted. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

The assignee of an insolvent corporation cannot enforce the double liability of stockholders. Farmers' Bank of Wickliff's Assignee v. Scott, 144 Ky. 575 , 139 S.W. 801, 1911 Ky. LEXIS 679 ( Ky. 1911 ).

The assignee has no right, without consent of the creditors, to turn over to the assignor for distribution the proceeds of the property sold. Anderson v. City Nat'l Bank, 153 Ky. 268 , 155 S.W. 385, 1913 Ky. LEXIS 826 ( Ky. 1913 ).

A void contract of sale made by the assignor does not prevent the assignee from recovering the reasonable value of goods sold by him as assignee to the same vendee at the same price. Arctic Ice Co. v. Franklin Electric & Ice Co.'s Assignee, 156 Ky. 326 , 160 S.W. 1075, 1913 Ky. LEXIS 435 ( Ky. 1913 ).

The assignee should have, within a reasonable time, applied the assets to the payment of assignor’s debts. Dobyns v. Dobyns' Assignee, 79 Ky. 95 , 1 Ky. L. Rptr. 400 , 2 Ky. L. Rptr. 274 , 1880 Ky. LEXIS 95 (Ky. Ct. App. 1880).

An assignee could sue to recover usury paid by him to a national bank. Henderson Nat'l Bank v. Alves, 91 Ky. 142 , 15 S.W. 132, 12 Ky. L. Rptr. 722 , 1891 Ky. LEXIS 18 ( Ky. 1891 ).

Continuation of the business for a short time with the assent of creditors, was not objectionable. Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

Only the assignee, who had legal title, could sue for sale of property in which another had a joint interest. Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

8.— — Waiver or Estoppel.

The assignor and creditors may waive or become estopped to demand strict compliance with the statutes by the assignee, and when such is the case the vendee cannot complain. Butler v. Dillehay Brick Co.'s Trustee, 187 Ky. 224 , 219 S.W. 154, 1920 Ky. LEXIS 107 ( Ky. 1920 ).

The statutory duties of an assignee can be waived only by the creditors. In re Bradley, 27 F. Supp. 475, 1939 U.S. Dist. LEXIS 2938 (D. Ky. 1939 ).

The statutory powers and duties of the assignee cannot be curtailed by the deed and subsequent acts of the assignor. In re Bradley, 27 F. Supp. 475, 1939 U.S. Dist. LEXIS 2938 (D. Ky. 1939 ).

9.Deed.

“Deed” as herein used means any recordable instrument sufficient to create or declare a trust, whether signed by the settlor or trustee, even though the property involved is intangible personalty. St. Catherine's Cemetery v. Fidelity Trust Co., 152 Ky. 797 , 154 S.W. 29, 1913 Ky. LEXIS 739 ( Ky. 1913 ).

10.Marshalling of Liens.

One whose claim is partly satisfied by application of security may prove the balance as a general claim and share pro rata in the unencumbered assets. Weller v. Hull's Assignee, 74 S.W. 172, 24 Ky. L. Rptr. 2185 , 1903 Ky. LEXIS 519 (Ky. Ct. App. 1903). See Miller Supply Co. v. Louisa Water Co.'s Assignee, 128 Ky. 476 , 108 S.W. 870, 33 Ky. L. Rptr. 388 , 1908 Ky. LEXIS 73 ( Ky. 1908 ).

Rule as to marshalling of liens has no application to a case where there are only two (2) funds to be participated in by two (2) creditors, one of whom has a prior lien on both funds. Davis v. Doublin, 283 Ky. 39 , 140 S.W.2d 652, 1940 Ky. LEXIS 281 ( Ky. 1940 ).

11.Corporations.

The assets of an insolvent corporation are administered on the theory that they belong in equity to the creditors and stockholders. Louisville Banking Co. v. Etheridge Mfg. Co., 43 S.W. 169, 19 Ky. L. Rptr. 908 (1897).

12.Building and Loan Associations.

A building and loan association may make an assignment for the benefit of its creditors. Globe Bldg. & Loan Co.’s Assignee v. Wood, 110 Ky. 4 , 60 S.W. 858, 22 Ky. L. Rptr. 1500 , 1901 Ky. LEXIS 53 ( Ky. 1901 ). See United States Bldg. & Loan Assn.’s Assignee v. Jones, 64 S.W. 447, 23 Ky. L. Rptr. 853 (1901)But see KRS 289.426OhioOhio Valley Fire & Marine Ins. Co. v. Wash, 205 Ky. 819 , 266 S.W. 921, 1924 Ky. LEXIS 248 ( Ky. 1924 ); Tipton's Adm'x v. Ball, 256 Ky. 816 , 77 S.W.2d 50, 1934 Ky. LEXIS 499 ( Ky. 1934 ).

13.Prejudicing Lien Creditors.

The assignment will not be allowed to prejudice lien creditors. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ).

Liens cannot be destroyed without the consent of or by some act of the holders thereof. Exchange Bank of Kentucky v. Gillespie's Assignee, 43 S.W. 401, 19 Ky. L. Rptr. 1317 (1897).

The assignee cannot prejudice a landlord’s rent lien by an assignment of the lease without the landlord’s consent. Meyer Bros.' Assignee v. Gaertner, 106 Ky. 481 , 50 S.W. 971, 21 Ky. L. Rptr. 52 , 1899 Ky. LEXIS 71 ( Ky. 1899 ).

A mere assignment for the benefit of creditors does not create such an intervening lien or equity in favor of the general creditors as to defeat a prior lien on rents, issues and profits held by the assignee. Title Ins. & Trust Co. v. Clark, 271 Ky. 22 , 111 S.W.2d 409, 1937 Ky. LEXIS 183 ( Ky. 1937 ).

When the purchaser from the assignee paid with money furnished by the assignor, a creditor who had received his pro rata share could nevertheless proceed against the goods in the purchaser’s hands, even though the goods were not longer identical with those obtained from the assignee, and even though the purchaser had executed a claimant’s bond with surety. Rothschild's Adm'r v. Kohn, 93 Ky. 107 , 19 S.W. 180, 14 Ky. L. Rptr. 36 , 1892 Ky. LEXIS 58 ( Ky. 1892 ).

14.Trust for Benefit of Creditors.

An assignment for the benefit of creditors is not a continuing and subsisting trust. Richardson v. Whitaker, 103 Ky. 425 , 45 S.W. 774 ( Ky. 1898 ).

When a personal representative by writing assumes a personal responsibility for amounts due a remainderman, the mere silence of the remainderman during the continuance of the life estate, unless an estoppel as to creditors appears, does not alter the trust nature of the sums due. Walker v. Milliken, 150 Ky. 12 , 150 S.W. 71, 1912 Ky. LEXIS 866 ( Ky. 1912 ).

If a trust was intended it is immaterial that it would not have been a valid gift inter vivos. St. Catherine's Cemetery v. Fidelity Trust Co., 152 Ky. 797 , 154 S.W. 29, 1913 Ky. LEXIS 739 ( Ky. 1913 ).

That the trust is revocable is immaterial, unless it has been revoked. St. Catherine's Cemetery v. Fidelity Trust Co., 152 Ky. 797 , 154 S.W. 29, 1913 Ky. LEXIS 739 ( Ky. 1913 ). See also Hill v. Cornwall & Bro.'s Assignee, 95 Ky. 512 , 26 S.W. 540, 16 Ky. L. Rptr. 97 , 1894 Ky. LEXIS 60 ( Ky. 1894 ).

An agreement whereby the assignor was to sell the property and the assignee was to make a quitclaim deed thereto was not a good faith assignment. In re Bradley, 27 F. Supp. 475, 1939 U.S. Dist. LEXIS 2938 (D. Ky. 1939 ).

Whether an assignment hereunder was executed for the purpose of benefiting creditors depends on the intention of the parties at the time, evidenced by their actions then and subsequently. In re Bradley, 27 F. Supp. 475, 1939 U.S. Dist. LEXIS 2938 (D. Ky. 1939 ).

The statute of limitations did not apply to a continuing and existing trust but after settlement in full with assignee by creditors for whose benefit assignment was made the statute ran against an action by him for settlement of the trust. Richardson v. Whitaker, 103 Ky. 425 , 45 S.W. 774 ( Ky. 1898 ).

15.Priority.

The priority provided for in subsection (3) of this section is preserved in bankruptcy proceedings. In re Crow, 116 F. 110, 1902 U.S. Dist. LEXIS 142 (D. Ky. 1902 ).

Cited:

Title Ins. & Trust Co. v. Clark, 271 Ky. 22 , 111 S.W.2d 409, 1937 Ky. LEXIS 183 ( Ky. 1937 ); Jitney-Jungle, Inc. v. Planters Bank & Trust Co., 272 Ky. 26 , 113 S.W.2d 856, 1938 Ky. LEXIS 81 ( Ky. 1938 ); Bancokentucky Co.’s Receiver v. National Bank of Kentucky’s Receiver, 281 Ky. 784 , 137 S.W.2d 357, 1939 Ky. LEXIS 41 ( Ky. 1939 ).

Opinions of Attorney General.

Where a deed of trust, involving real and/or personal property, or a deed of assignment, as a conveyance of real and/or personal property for the benefit of creditors, is filed with the county clerk for record, the state tax of three dollars must be collected by the county clerk. OAG 85-66 .

Research References and Practice Aids

Cross-References.

Bank or trust company may act as assignee, KRS 287.200 , 287.210 .

Breach of fiduciary obligation, liability of person dealing with assignee, KRS 386.100 to 386.150 .

Debtor delivering estate for benefit of creditors not to be continued in prison, unless there is a strong presumption of fraud, Const., § 18.

Fraud in insolvency, Penal Code, KRS 517.080 .

Railroad, public improvement, manufacturing companies and other businesses, lien of employes, KRS 376.150 to 376.190 .

Settlement of estate assigned by debtor, KRS 395.510 to 395.550 and 378.100 .

Unemployment compensation contributions, lien upon assets of employer, KRS 341.310 .

Workmen’s compensation, claim for exemption from all claims of creditors, KRS 342.180 .

Kentucky Law Journal.

Dietzman, The Distinction Between the Equity Rule and the Bankruptcy Rule in Proving Secured Claims Against Insolvent Estates in Kentucky, 29 Ky. L.J. 96 (1940).

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

ALR

6 C.J.S, Assignments for Benefit of Creditors, §§ 1-5, 66, 69, 335.

379.020. Deed of assignment — Recordation — Effect of deed — Schedule of assignor.

  1. The deed of assignment shall be acknowledged by the assignor in the same manner as other deeds and shall be recorded in the county clerk’s office of the county where the assignor resides, where the business in respect to which the deed is made is carried on, and in each county where a tract of land or the greater part thereof conveyed by the deed is situated.
  2. The deed shall vest in the assignee title to all the property, real and personal, with all deeds, books and papers relating thereto belonging to the assignor at the time of making the assignment, except property exempt by law which shall not pass unless embraced in the deed. The intent of the assignor in making the assignment, whether appearing upon the face of the deed or otherwise, shall not invalidate the deed, unless he is solvent and it appears that the assignment was made to hinder or delay creditors.
  3. The assignor shall, within five (5) days from the day upon which the deed is lodged for record, file for record in the county where the assignee qualifies a schedule under oath, setting forth the general nature and full value of the property assigned, together with a list of his creditors, their post office address, the amount due each and whether secured by lien or not.

History. 75.

NOTES TO DECISIONS

1.Construction.

This section operated as a repeal of KRS 378.010 insofar as it pertained to fraudulent conveyances to assignees. Maskovitz v. Simon, 110 Ky. 841 , 62 S.W. 871, 23 Ky. L. Rptr. 252 , 1901 Ky. LEXIS 139 ( Ky. 1901 ).

This chapter was not intended to take from a man and his creditors the right to agree to the appointment of a trustee to hold his property under such terms as they prescribe. Baskett v. Ohio Valley Banking & Trust Co., 224 Ky. 29 , 5 S.W.2d 473, 1928 Ky. LEXIS 527 ( Ky. 1928 ).

2.Verbal Assignment.

A verbal assignment and transfer of personalty to another in trust for the benefit of his creditors is good when the assignee actually takes possession thereof under the agreement. Muir v. Samuels, 110 Ky. 605 , 62 S.W. 481, 23 Ky. L. Rptr. 14 , 1901 Ky. LEXIS 114 ( Ky. 1901 ).

3.Recordation.

An assignment to a trustee of a particular fund for the purpose of paying a certain debt is not such an assignment as is required to be acknowledged and lodged for record pursuant to this chapter. Bottoms v. McFerran, 43 S.W. 236, 19 Ky. L. Rptr. 1266 (1897).

4.Corporations.

A corporation may assign with fraudulent intent. Louisville Banking Co. v. Etheridge Mfg. Co., 43 S.W. 169, 19 Ky. L. Rptr. 908 (1897).

An assignment by a solvent corporation should be ratified by the stockholders. Powers v. Blue Grass Bldg. & L. Asso., 86 F. 705, 1898 U.S. App. LEXIS 2986 (C.C.D. Ky. 1898 ).

The stockholders of insolvent corporations may be barred by laches from questioning such an assignment. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (C.C.D. Ky. 1902 ), aff'd, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. Ky. 1906 ).

5.Fraudulent Assignments.

Allowing the assignor to remain in possession of the assigned property is evidence of fraud, but is not conclusive. Robinson v. Worley, 42 S.W. 95, 19 Ky. L. Rptr. 791 (1897).

An assignment made by a solvent assignor for the purpose of delaying his creditors is void. Robinson v. Worley, 42 S.W. 95, 19 Ky. L. Rptr. 791 (1897).

When an assignor and assignee delay settlement as a device to procure compromises with the creditors, neither will be allowed a recovery from the other of any sums due between them arising out of the assignment. Commonwealth use of Thompson v. Scoville, 101 S.W. 1188, 31 Ky. L. Rptr. 257 (1907).

Allowing the assignor to remain in possession of the assigned property was evidence of fraud, but was not conclusive. Vernon v. Morton, 38 Ky. 247 , 1839 Ky. LEXIS 51 ( Ky. 1839 ). See Christopher v. Covington, 41 Ky. 357 , 1842 Ky. LEXIS 49 ( Ky. 1842 ).

6.Homestead Rights.

An assignor is not entitled to a homestead exemption when it appears he has secreted goods of equivalent value without accounting for same. Maskovitz v. Simon, 110 Ky. 841 , 62 S.W. 871, 23 Ky. L. Rptr. 252 , 1901 Ky. LEXIS 139 ( Ky. 1901 ).

The assignor waived his homestead rights by failing to claim them. Bank of Commerce v. Payne, 86 Ky. 446 , 8 S.W. 856, 10 Ky. L. Rptr. 43 , 1887 Ky. LEXIS 153 ( Ky. 1887 ).

The fact that the homestead rights were reserved in general terms did not render the deed void or inoperative. Moore v. Stege, 93 Ky. 27 , 18 S.W. 1019, 13 Ky. L. Rptr. 948 , 1892 Ky. LEXIS 44 ( Ky. 1892 ).

7.Interest of Assignee.

Generally an assignee is not a purchaser for value, but stands in the position of his assignor, and can assert no equity that could not be asserted by the debtor himself. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ). See Ray v. First Nat'l Bank, 111 Ky. 377 , 63 S.W. 762, 23 Ky. L. Rptr. 717 , 1901 Ky. LEXIS 207 ( Ky. 1901 ); Burnes v. Daviess County Bank & Trust Co.'s Assignee, 135 Ky. 355 , 122 S.W. 182, 1909 Ky. LEXIS 295 ( Ky. 1909 ); Field Furniture Co. v. Community Loan Co., 257 Ky. 825 , 79 S.W.2d 211, 1934 Ky. LEXIS 570 ( Ky. 1934 ).

The assignee simply takes whatever interest in the assigned estate was possessed by his assignor. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ). See Exchange Bank of Kentucky v. Gillespie's Assignee, 43 S.W. 401, 19 Ky. L. Rptr. 1317 (1897); Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

After the trust has been executed the surplus of the assignment for benefit of creditors reverts to the assignor. Farnsworth v. Doom, 109 Ky. 794 , 60 S.W. 712, 22 Ky. L. Rptr. 1491 , 1901 Ky. LEXIS 40 ( Ky. 1901 ).

A deed of assignment passes contingent remainders. McAllister v. Ohio Val. Banking & Trust Co., 114 Ky. 540 , 71 S.W. 509, 24 Ky. L. Rptr. 1307 , 1903 Ky. LEXIS 13 ( Ky. 1903 ).

In an action under KRS 379.070 the assignee does not stand in the shoes of the assignor, but is invested with the rights of the creditors. Walton v. American Inv. Co.'s Receiver, 140 Ky. 472 , 131 S.W. 275, 1910 Ky. LEXIS 301 ( Ky. 1910 ).

Generally an assignee was not a purchaser for value, but stood in the position of his assignor, and could assert no equity that could not have been asserted by the debtor himself. Exchange & Deposit Bank v. Stone, 80 Ky. 109 , 3 Ky. L. Rptr. 594 , 1882 Ky. LEXIS 23 (Ky. Ct. App. 1882). See Bridgford v. Barbour, 80 Ky. 529 , 4 Ky. L. Rptr. 470 , 1882 Ky. LEXIS 99 ( Ky. 1882 ); Dietz's Assignee v. Sutcliffe, 80 Ky. 650 , 4 Ky. L. Rptr. 567 , 1883 Ky. LEXIS 12 (Ky. Ct. App. 1883); Bank of Commerce v. Payne, 86 Ky. 446 , 8 S.W. 856, 10 Ky. L. Rptr. 43 , 1887 Ky. LEXIS 153 ( Ky. 1887 ); Shinkle's Assignees v. Bristow, 95 Ky. 84 , 23 S.W. 670, 15 Ky. L. Rptr. 673 , 1893 Ky. LEXIS 12 6 ( Ky. 1893 ).

An assignment passed title to the assignee. Blakely v. Smith, 26 S.W. 584, 16 Ky. L. Rptr. 109 (1894).

Opinions of Attorney General.

Where a deed of trust, involving real and/or personal property, or a deed of assignment, as a conveyance of real and/or personal property for the benefit of creditors, is filed with the county clerk for record, the state tax of three dollars ($3.00) must be collected by the county clerk. OAG 85-66 .

Research References and Practice Aids

Cross-References.

Exemptions, KRS ch. 427.

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.030. Bond of assignee — Appointment of another on failure to qualify — On failure to furnish additional security.

  1. The assignee shall, when the deed of assignment is lodged for record or within seven (7) days thereafter, execute a bond with good security, approved by the District Court, conditioned upon the faithful discharge of his duties as assignee. The bond shall be recorded in the court clerk’s office. If the person named in the deed as assignee fails for any cause within the time named to qualify or to execute a sufficient bond, the District Court shall, by order entered of record, appoint an assignee who shall, within five (5) days, give bond with good surety, and who shall thereupon be vested with the same rights, powers and responsibilities with respect to the estate assigned as if named in the deed.
  2. The court may at any time, upon its own motion or upon motion of any party in interest and after ten (10) days’ notice to the assignee, require him to execute a new bond or give additional security if the original bond is not sufficient. If the assignee fails or refuses to execute a new bond or give additional security within the time allowed by the court, the court shall, by an order entered of record, remove the assignee and appoint another in his stead. The newly appointed assignee shall execute bond in the same manner as the original assignee and proceed to settle up the estate, and to this end he may institute any necessary proceedings against the former assignee and his sureties.

History. 76, 77: amend. Acts 1976 (Ex. Sess.), ch. 14, § 291, effective January 2, 1978.

NOTES TO DECISIONS

1.Officer of Court.

An assignee is an officer of the court. Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ). See Powers v. Blue Grass Bldg. & L. Asso., 86 F. 705, 1898 U.S. App. LEXIS 2986 (C.C.D. Ky. 1898 ).

2.Burden of Proof.

In suit against former assignee by a receiver to recover the estate and surcharge his settlements, the burden of proof is on the receiver to show incorrectness of items in the settlement, but is on the assignee as to assets received and unaccounted for. Husbands v. Fidelity & Deposit Co., 144 Ky. 93 , 137 S.W. 855, 1911 Ky. LEXIS 564 (Ky.), modified, Husbands' Receiver v. Fidelity Trust & Deposit Co., 144 Ky. 555 , 139 S.W. 812, 1911 Ky. LEXIS 686 ( Ky. 1911 ).

3.Failure to Execute Bond.

Failure of assignee to execute bond did not effect the assignment as against a subsequent attachment. Asher v. Louisville & N. R. Co., 87 Ky. 391 , 8 S.W. 854, 10 Ky. L. Rptr. 185 , 1888 Ky. LEXIS 80 ( Ky. 1888 ).

4.Delay in Qualifying.

A valid deed of assignment was not rendered invalid by assignee’s delay in qualifying. Bank of Commerce v. Payne, 86 Ky. 446 , 8 S.W. 856, 10 Ky. L. Rptr. 43 , 1887 Ky. LEXIS 153 ( Ky. 1887 ).

Research References and Practice Aids

Cross-References.

Bank, bond of as assignee, KRS 287.220 .

Bond to be not less than the estimated value of the estate, KRS 62.060 . § Judge and clerk of county court ineligible to act as assignee, KRS 25.220 .

Judge and clerk of county court ineligible to act as assignee, KRS 25.220 .

Oath of assignee, KRS 62.030 .

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.040. Resignation or removal of assignee.

  1. An assignee may resign his trust upon settling his accounts, and the settlement shall be confirmed and the assignee discharged from liability sixty (60) days after the settlement has been filed, if no exceptions are filed thereto. If exceptions are filed, they shall be heard and determined by the court.
  2. If an assignee moves his residence out of the state, or becomes insane or otherwise incapable of discharging the trust, the court may, upon ten (10) days’ notice to him, his attorney or committee, remove the assignee and appoint another in his stead. If creditors representing one-half (1/2) in number and two-thirds (2/3) of the amount of debts against the estate so request in writing, the court shall remove the assignee and appoint another in his stead.

History. 78, 79: amend. Acts 1976 (Ex. Sess.), ch. 14, § 292, effective January 2, 1978.

NOTES TO DECISIONS

1.Death of Assignee.

Upon death of the assignee, title to the assigned property passes by operation of law to his successor. Balck v. Chappell, 141 Ky. 85 , 132 S.W. 186, 1910 Ky. LEXIS 422 ( Ky. 1910 ). See Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ).

The county court, upon death of an assignee, has authority to appoint a successor. Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ).

When the assignee dies, notice of the appointment of his successor need not be given his personal representatives. Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ).

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.050. Supervision of assignee by District Court — Exception — Filing of inventory of assignee.

  1. The assignee shall, except as provided in KRS 379.170 , be subject to the orders and supervision of the District Court and may be required at any time upon reasonable notice to file any report ordered. He may, when the court so directs, be examined in open court touching the condition of the estate and its management.
  2. The assignee shall file in the clerk’s office of the District Court, as soon as possible, and within fifteen (15) days after his qualification unless the court allows a longer time, an inventory verified by him of all the property that came into his hands. If any property comes to the possession of the assignee after filing the inventory, he shall, in like manner, file an inventory thereof.

History. 81, 82: amend. Acts 1976 (Ex. Sess.), ch. 14, § 293, effective January 2, 1978.

NOTES TO DECISIONS

1.Officer of Court.

An assignee is an officer of the court. Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ). But see Powers v. Blue Grass Bldg. & L. Asso., 86 F. 705, 1898 U.S. App. LEXIS 2986 (C.C.D. Ky. 1898 ).

2.Jurisdiction.

In the absence of a suit under KRS 379.170 , the county court has exclusive original jurisdiction to settle assigned estates. Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ). See Clark-Lack Grocery Co.'s Assignee v. Price, 249 Ky. 150 , 60 S.W.2d 372, 1933 Ky. LEXIS 492 ( Ky. 1933 ); L. W. Henneberger Co.'s Assignee v. Price, 252 Ky. 402 , 67 S.W.2d 471, 1934 Ky. LEXIS 782 ( Ky. 1934 ).

3.Filing Inventory.

In an action to compel the assignee to file an inventory, it was not necessary to allege that he was in default, it appearing that his delinquency had existed for more than six months. Bohmer v. Louisville Deposit Bank, 30 S.W. 874, 17 Ky. L. Rptr. 16 (1895).

4.Possession of Property.

Property held by the assignee is not in the possession of the court. Powers v. Blue Grass Bldg. & L. Asso., 86 F. 705, 1898 U.S. App. LEXIS 2986 (C.C.D. Ky. 1898 ).

5.Bids.

The county judge has no authority to accept a bid made in court following an unsuccessful attempt to secure an upset bid at auction. Smith v. Sulzer Mach. Co.'s Assignee, 51 S.W. 449, 21 Ky. L. Rptr. 376 (1899).

Research References and Practice Aids

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.060. Proceedings, orders and summons of the court — Attendance of assignor or his debtors.

  1. All orders and proceedings in the District Court, except as otherwise provided, shall be ex parte and upon motion, and in no case need a petition be filed. A notice or summons shall not be issued to any person unless ordered by the court or requested by a person in interest. If an exception is filed to a claim or report, the party affected thereby shall have ten (10) days’ notice of the time of hearing.
  2. The court may, upon the request of the assignee or any creditor, require the assignor or any person indebted to him to appear in court after reasonable notice and answer questions deemed proper concerning the estate or claims against it.

History. 83, 89: amend. Acts 1976 (Ex. Sess.), ch. 14, § 294, effective January 2, 1978.

Research References and Practice Aids

Kentucky Law Journal.

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.070. Preferential or fraudulent transfer or purchase prior to deed of assignment — Effect — Action by assignee or creditor.

If the assignor has, before making the deed of assignment, made a preferential or fraudulent transfer, conveyance or gift of any of his property or a fraudulent purchase of any property in the name of another, the property fraudulently transferred, conveyed, given or purchased shall vest in the assignee. The assignee shall institute the proceedings necessary to recover the property so disposed of, using any remedy which a creditor might exercise. If the assignee upon demand refuses to institute such proceedings, any creditor may do so, and the property recovered shall become a part of the estate and be distributed as other assets.

History. 84.

NOTES TO DECISIONS

1.Construction.

This section is not inconsistent with KRS 378.060 and 378.070 . Hall's Assignees v. Rothchild, 102 Ky. 582 , 44 S.W. 108, 19 Ky. L. Rptr. 1621 , 1898 Ky. LEXIS 10 ( Ky. 1898 ).

2.Recovery for Benefit of Creditors.

A recovery hereunder is for the benefit of creditors and not for the benefit of the assignee’s vendee. Field Furniture Co. v. Community Loan Co., 257 Ky. 825 , 79 S.W.2d 211, 1934 Ky. LEXIS 570 ( Ky. 1934 ).

3.Bankruptcy.

The national bankruptcy act does not affect the remedy provided for herein unless the assignment or fraudulent conveyance is attacked in the federal courts as an act of bankruptcy. Downer v. Porter, 116 Ky. 422 , 76 S.W. 135, 25 Ky. L. Rptr. 571 , 1903 Ky. LEXIS 199 ( Ky. 1903 ).

4.Rights of Assignee.

This section confers on the assignee all rights that creditors had under former law regarding fraudulent conveyances. Loving v. Arnold, 84 F. 214, 1897 U.S. App. LEXIS 2954 (C.C.D. Ky. 1897 ).

It is immaterial that the transfer was valid as between the transferor and transferee. If it was void as to creditors then it was void as to the assignee. Burnes v. Daviess County Bank & Trust Co.'s Assignee, 135 Ky. 355 , 122 S.W. 182, 1909 Ky. LEXIS 295 ( Ky. 1909 ).

5.Transfers.
6.— Preferential.

An assignment by an insolvent debtor of certain of his property to one of his creditors thirty days prior to a general assignment is preferential. Planters' State Bank v. Willingham's Assignee, 111 Ky. 64 , 63 S.W. 12, 23 Ky. L. Rptr. 445 , 1901 Ky. LEXIS 173 ( Ky. 1901 ).

A prior preference did not invalidate a subsequent assignment. Rubel v. Louisville Bkg. Co., 10 Ky. L. Rptr. 1021 (1889).

7.— Fraudulent.

A life insurance policy of present value fraudulently assigned to a creditor enures to the benefit of all creditors under a subsequent assignment for the benefit of creditors generally. Planters' State Bank v. Willingham's Assignee, 111 Ky. 64 , 63 S.W. 12, 23 Ky. L. Rptr. 445 , 1901 Ky. LEXIS 173 ( Ky. 1901 ).

A trustee of funds fraudulently transferred for the purpose of covering up funds of the assignor is not entitled to withhold compensation for his services as such or for other services. For his other services he may file his claim with the assignee in the regular way. Walton v. American Inv. Co.'s Receiver, 140 Ky. 472 , 131 S.W. 275, 1910 Ky. LEXIS 301 ( Ky. 1910 ).

A preferential mortgage is fraudulent even though it was given to secure an antecedent debt. Mainous v. Brown Shoe Co., 222 Ky. 25 , 299 S.W. 1068, 1927 Ky. LEXIS 850 ( Ky. 1927 ).

Accounts fraudulently transferred prior to assignment do not ipso facto pass under the assignment to the assignee nor from him to his vendee. Field Furniture Co. v. Community Loan Co., 257 Ky. 825 , 79 S.W.2d 211, 1934 Ky. LEXIS 570 ( Ky. 1934 ).

8.Right of Creditor to Sue.

A creditor has no right to institute suit hereunder when the assignee has recovered possession of the fraudulently transferred property. Hall's Assignees v. Rothchild, 102 Ky. 582 , 44 S.W. 108, 19 Ky. L. Rptr. 1621 , 1898 Ky. LEXIS 10 ( Ky. 1898 ).

A petition by a creditor to recover property fraudulently transferred prior to the assignment must allege that the assignee, upon demand, had refused to take such action. Hall's Assignees v. Rothchild, 102 Ky. 582 , 44 S.W. 108, 19 Ky. L. Rptr. 1621 , 1898 Ky. LEXIS 10 ( Ky. 1898 ).

Right of creditor to sue is not prejudiced because his prayer for a receiver could not be granted. Wisdom v. Russell, 53 S.W. 284, 21 Ky. L. Rptr. 881 , 1899 Ky. LEXIS 598 ( Ky. 1899 ).

In a creditor’s action hereunder, to which assignee is a party, latter’s failure to assert his right to sue amounts to a waiver or refusal. Wisdom v. Russell, 53 S.W. 284, 21 Ky. L. Rptr. 881 , 1899 Ky. LEXIS 598 ( Ky. 1899 ).

Objection to right of creditor to sue because he has not alleged refusal of assignee to act must be raised by special demurrer, and is waived by answering to the merits. Wisdom v. Russell, 53 S.W. 284, 21 Ky. L. Rptr. 881 , 1899 Ky. LEXIS 598 ( Ky. 1899 ).

Fraudulent mortgagees are not in position to plead that the plaintiff creditors had not made a prior request of the assignee, in absence of a showing that the assignee had or was about to file a similar suit. Mainous v. Brown Shoe Co., 222 Ky. 25 , 299 S.W. 1068, 1927 Ky. LEXIS 850 ( Ky. 1927 ).

In an action by the creditor of an insolvent bank to set aside a fraudulent transfer to another creditor, the petition must allege that the banking commissioner has been requested, pursuant to this section, to file suit and has refused. Tipton's Adm'x v. Ball, 256 Ky. 816 , 77 S.W.2d 50, 1934 Ky. LEXIS 499 ( Ky. 1934 ).

9.Parties.

The assignor is a necessary party to an action hereunder. Loving v. Arnold, 84 F. 214, 1897 U.S. App. LEXIS 2954 (C.C.D. Ky. 1897 ).

Research References and Practice Aids

Cross-References.

Conveyances in contemplation of insolvency, KRS 378.060 .

Deed by trustee, when does not pass title, KRS 381.190 .

Deed to one person, consideration paid by another, fraudulent as to creditors of person paying consideration, KRS 381.170 .

Fraudulent and preferential conveyances, KRS ch. 378.

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

Nowka and Taylor, Kentucky Employees’ Wage Liens: A Sneak Attack on Creditors, but Beware of the Bankruptcy Trustee, 84 Ky. L.J. 317 (1995-96).

379.080. Exemptions claimed by assignor — Proceedings.

  1. If the assignor reserves any of his property as exempt, the court shall appoint three (3) competent and disinterested housekeepers, who, after being first duly sworn, shall set apart to the debtor the property exempt, and within ten (10) days thereafter the assignee shall file a report thereon. Exceptions may be filed to the report by any person in interest but not later than sixty (60) days after the report has been filed. The court shall hear and dispose of any exceptions and if none are filed it shall confirm the report.
  2. If land is exempt, an order shall be entered directing the assignee to employ, if necessary, a competent surveyor to lay off by metes and bounds the homestead exemption as set apart by the appraisers. The court may, with the consent of the assignor, and if it appears best for the interest of the creditors, or if the land is not divisible without impairing its value, order the property sold and the value of the homestead, not exceeding five thousand dollars ($5,000), paid to the assignor.

History. 85, 86: amend. Acts 1976 (Ex. Sess.), ch. 14, § 295, effective January 2, 1978; 1980, ch. 236, § 7, effective July 15, 1980.

NOTES TO DECISIONS

1.Assignor’s Rights in Lieu of Exemptions.

The assignor is not entitled, in lieu of exemptions, to part of the proceeds of crops planted by him subsequent to the assignment. But he is entitled, in lieu of exemptions, to part of the proceeds of crops and other personalty on hand at date of assignment which are unencumbered. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

2.Homestead.

Amounts becoming due the assignee from the assignor after the assignment cannot be deducted by assignee from the sum payable to assignor in lieu of homestead. McNamara v. Schwaniger, 106 Ky. 1 , 49 S.W. 1061, 20 Ky. L. Rptr. 1667 , 1899 Ky. LEXIS 13 ( Ky. 1 899).

One who was a creditor prior to the acquisition of the homestead may file exceptions to a report setting it apart. Matthews' Assignee v. Matthews' Assignee, 79 S.W. 188, 25 Ky. L. Rptr. 1873 (1904).

When the deed of assignment reserves homestead it is error to sell all the assigned estate except as provided in subsection two. Maupin v. Maupin's Assignee, 89 S.W. 238, 28 Ky. L. Rptr. 323 (1905).

3.Refusal of Assignee to Pay.

An assignee refusing to pay assignor amounts due him as exemptions assumes the risk of his depository’s solvency. Overley v. Given, 52 S.W. 1059, 21 Ky. L. Rptr. 760 , 1899 Ky. LEXIS 357 (Ky. Ct. App. 1899).

Research References and Practice Aids

Cross-References.

Exemptions, KRS ch. 427.

Homestead, when money to be paid in lieu of, KRS 427.090 .

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

379.090. Sale of property by assignee.

  1. Personal property conveyed by the deed of assignment shall be sold by the assignee at private or public sale as the court may direct, and the assignee may pass title as fully as the assignor could have done at the date of the assignment.
  2. Real property, when sold at public sale, shall be sold in the same manner and upon the same terms as real property sold at decretal sale. However, the purchaser may pay and the assignee accept cash in payment of the purchase price, and the court may make any order it deems proper concerning the advertisement of the sale. The assignee may convey and pass all the right and title which the grantor in the deed of assignment had at its date.
  3. The report of sale shall be filed by the assignee within ten (10) days after the sale, and if no exceptions are filed thereto within sixty (60) days after it has been filed, the report shall be confirmed. If exceptions are filed, they shall be heard by the court and disposed of.

History. 87: amend. Acts 1976 (Ex. Sess.), ch. 14, § 296, effective January 2, 1978.

NOTES TO DECISIONS

1.Authority to Sell.

The assignee may sell only so much of the realty as the court directs. Cook v. Burton, 92 S.W. 322, 29 Ky. L. Rptr. 28 (1906).

When property is assigned for the benefit of creditors it is in the possession of the court, and the assignee has authority to sell and convey only so much of the assigned real estate as he is directed by the court to sell. Kennedy v. Lack, 283 Ky. 95 , 140 S.W.2d 831, 1940 Ky. LEXIS 297 ( Ky. 1940 ).

2.Jurisdiction to Order Sale.

The county court having jurisdiction to order sale of the assigned estate is that in which the assignee qualified. Lexington & Carter County Mining Co. v. Columbia Finance & Trust Co., 124 Ky. 119 , 98 S.W. 332, 30 Ky. L. Rptr. 336 , 1906 Ky. LEXIS 247 ( Ky. 1906 ).

3.Form of Sale.

It is not necessary that property sold hereunder at private sale be appraised. Kentucky Distilleries & Warehouse Co. v. Blanton, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (U.S. 1907). See Kentucky Distilleries & Warehouse Co. v. Blanton, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. Ky. 1906 ), cert. denied, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (U.S. 1907).

The assignee may sell realty at either private or public sale, in his discretion, if so authorized by the deed, and pass good title, even after filing of suit to settle the estate. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (6th Cir. 1902), aff’d, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906). See Kentucky Distilleries & Warehouse Co. v. Blanton, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. Ky. 1906 ), cert. denied, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (U.S. 1907).

The county judge has no authority to accept a bid made in court following an unsuccessful attempt to secure an upset bid at auction. Smith v. Sulzer Mach. Co.'s Assignee, 51 S.W. 449, 21 Ky. L. Rptr. 376 (1899).

Real property assigned for the benefit of creditors, when sold at a public sale, must be sold in the same manner and on the same terms as property sold at a decretal sale, but it does not follow that all sales of realty under such circumstances must be at a public sale. Kennedy v. Lack, 283 Ky. 95 , 140 S.W.2d 831, 1940 Ky. LEXIS 297 ( Ky. 1940 ).

Conveyances by assignee had to conform to law that provided that sale of realty by trustee by virtue of pledge or deed of trust was not valid unless made pursuant to judgment of court or under voluntary deed of assignment or unless the maker of the deed or pledge joined in the sale. Shinkle's Assignees v. Bristow, 95 Ky. 84 , 23 S.W. 670, 15 Ky. L. Rptr. 673 , 1893 Ky. LEXIS 126 ( Ky. 1893 ).

4.Confirmation.

The report of sale cannot be confirmed on the same day it is filed. Maupin v. Maupin's Assignee, 89 S.W. 238, 28 Ky. L. Rptr. 323 (1905).

The report of sale should not be confirmed while questions of title remain undetermined. Maupin v. Maupin's Assignee, 89 S.W. 238, 28 Ky. L. Rptr. 323 (1905).

5.Bankruptcy.

A purchaser from the assignee who has not paid the purchase price has no title as against a trustee in bankruptcy. In re Knight, 125 F. 35, 1903 U.S. Dist. LEXIS 68 (D. Ky. 1903 ).

Research References and Practice Aids

Cross-References.

Advertisement of sale, requirements, KRS 426.560 .

Deed by assignee passes title, KRS 381.190 .

Executions and judicial sales, KRS ch. 426.

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

379.100. Receipt of claims by assignee — Notice of — Filing.

The assignee shall, within two (2) months after his appointment, give notice of the time and place where he will sit to receive claims against the estate. The notice shall be by publication pursuant to KRS Chapter 424. Creditors not residing in the county where the assignee qualifies shall be notified by mailing notice to their last known address. Any creditor failing to present his claim at the time named or within three (3) months thereafter, verified in the same manner as a claim against the estate of a decedent except that it need not be verified by a person other than the claimant, shall waive his right to any part of the assigned estate. However, the court may direct the assignee to receive a claim at any time before the final distribution of the estate, and allow it and pay dividends thereon as on other claims, if there are sufficient unappropriated assets in his hands. Claims not due shall be presented in the same manner as claims due, but if claims not due are not bearing interest a just abatement shall be made.

History. 90: amend. Acts 1966, ch. 239, § 218.

NOTES TO DECISIONS

1.Verification of Claim.

The furnishing of an unverified statement at request of assignee for purposes of comparison with assignor’s records, is not a filing under this section. Sinsheimer v. Simonson, 96 F. 579, 1899 U.S. Dist. LEXIS 347 (D. Ky. 1899 ).

A creditor is not entitled to present his claim or recover or receive any part of the proceeds of the assigned estate until the claim has been verified. Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ).

2.Three-Month Period.

The three (3) month period runs from the time set by the assignee for receiving claims. Walker v. Milliken, 150 Ky. 12 , 150 S.W. 71, 1912 Ky. LEXIS 866 ( Ky. 1912 ).

3.Notice.

When a creditor files his claim, he becomes a party to the action, and, if the assignee gives the notice required by this section, his acts are just as effective as the acts of a warning order attorney or a master commissioner. Jitney-Jungle, Inc. v. Planters Bank & Trust Co., 272 Ky. 26 , 113 S.W.2d 856, 1938 Ky. LEXIS 81 ( Ky. 1938 ).

4.Admission or Rejection.

It is within the sound discretion of the county or Circuit Court to admit or reject claims presented after expiration of the statutory period. Anderson v. Van Rensselaer, 184 Ky. 133 , 211 S.W. 553, 1919 Ky. LEXIS 33 ( Ky. 1919 ).

5.Proof of Claim.

In an action for settlement of an assignee’s accounts, an objection that plaintiff’s claim has not been proved by the statutory affidavit must be made before pleading to the merits by filing an affidavit setting up the deficiency, and by asking for a rule. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

Research References and Practice Aids

Cross-References.

Advertisement required, KRS 396.050 .

Claims against decedents’ estates, KRS ch. 396.

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

379.110. Compromise or sale of debts due or claims against estate.

If it appears to be to the interest of the estate, the court may enter an order directing the assignee to sell, compound or compromise any debt due the estate, or to compromise any claim against the estate, but no such order shall be made within thirty (30) days after the application therefor has been made and filed.

History. 94.

NOTES TO DECISIONS

1.Compromise.

An assignee, in the exercise of a sound business discretion, may make the best compromise reasonably possible of doubtful and uncollectible notes. Mitchell v. Stoddard County Bank, 58 S.W. 605, 22 Ky. L. Rptr. 721 , 1900 Ky. LEXIS 705 ( Ky. 1900 ).

2.Sale of Debts.

Where price paid for accounts and assets was approximately $54,800 and appraisal made at time of assignment for the benefit of creditors showed the company’s assets worth $46,000 and purchaser informed stockholders that if they so desired they could repay him in cash the purchase price he paid and he would turn over the accounts and assets purchased by him, the manner in which notes and accounts were sold was not in violation of this section. Kennedy v. Lack, 283 Ky. 95 , 140 S.W.2d 831, 1940 Ky. LEXIS 297 ( Ky. 1940 ).

379.120. Allowance or rejection of claims by assignee — Report to court — Exceptions — Court determination.

The assignee may administer oaths and examine witnesses concerning claims, and may allow or refuse to allow any claim or part thereof. He shall file in the District Court, within six (6) months after his appointment and every three (3) months thereafter until discharged, a list of all claims presented to him, together with his reasons for refusing any claim not allowed, and sixty (60) days thereafter the report shall be confirmed unless exceptions to it are filed. Any creditor may file exceptions to the report because of the failure to allow his claim, or because of the allowance of any claim, and the court shall hear and determine the exceptions.

History. 91: amend. Acts 1976 (Ex. Sess.), ch. 14, § 297, effective January 2, 1978.

NOTES TO DECISIONS

1.Confirmation.

Confirmation is essential to the finality of the report, and exceptions may be filed at any time prior to confirmation, although it be after the second regular term of court held thereafter. McNamara v. Schwaniger, 106 Ky. 1 , 49 S.W. 1061, 20 Ky. L. Rptr. 1667 , 1899 Ky. LEXIS 13 ( Ky. 1 899).

Research References and Practice Aids

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

379.130. Distribution — When to be made — Report on — Exceptions — Court determination.

As soon as practicable and within nine (9) months after his appointment, the assignee shall pay upon the claims allowed such an amount as the means on hand permit, after deducting expenses and his allowance, which shall be fixed by the court. He shall thereafter, when he has funds sufficient to pay five percent (5%) on the claims allowed, distribute that amount. Within fifteen (15) days after each distribution he shall file in court a report of the same, which shall lie over until the second regular term and if no exceptions are filed it shall then be confirmed. If exceptions are filed, they shall be heard and determined by the court.

History. 92.

NOTES TO DECISIONS

1.Allowances to Assignee.

When the assigned estate is insufficient to pay debts secured by pledge, the assignee is not entitled to commission for selling the pledged property against the wishes of the pledgees. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ).

When the assigned estate is insufficient to pay lien debts the assignee cannot recover costs of suit to settle the estate from the estate or its creditors. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ). See Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

Although the assignment was fraudulent and void, the assignee is entitled to a commission for services rendered prior to the time the assignment was attacked. Louisville Banking Co. v. Etheridge Mfg. Co., 43 S.W. 169, 19 Ky. L. Rptr. 908 (1897).

The assignee is entitled to an allowance for caring for personalty between the dates of assignment and sale. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

When assignee also acts as commissioner for purposes of sale he is entitled to the statutory fees due a commissioner. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

An assignee guilty of fraud or misconduct in the management of the estate is not entitled to compensation. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

A trustee was entitled to a reasonable compensation, even though he was also a creditor, and even though there was no agreement therefor, whenever it could be presumed that compensation was expected. Phillips' Adm'r v. Bustard, 40 Ky. 348 , 1841 Ky. LEXIS 49 ( Ky. 1841 ). See Fahey v. Clarke, 80 Ky. 613 , 4 Ky. L. Rptr. 590 , 1883 Ky. LEXIS 8 (Ky. Ct. App. 1883).

2.Costs.

The costs of suit should, when possible, be satisfied from the general fund. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ).

The costs of suit should, when possible, be satisfied from the general fund but when that is not sufficient, the balance will be satisfied from the secured fund. Kentucky Nat'l Bank v. Louisville Bagging Co., 98 Ky. 371 , 33 S.W. 101, 17 Ky. L. Rptr. 983 , 1895 Ky. LEXIS 69 ( Ky. 1895 ). See Farmers' & Traders' Bank v. Norton's Assignee, 44 S.W. 428, 19 Ky. L. Rptr. 1773 (1898); Shewmaker v. Yankey, 66 S.W. 1, 23 Ky. L. Rptr. 1759 (1902).

When the assignee delays in disposing of the estate and does not request permission to sell it, the court may appoint a receiver for purposes of sale, and require payment of the costs of sale by the assignee out of the estate. Robinson v. Worley, 42 S.W. 95, 19 Ky. L. Rptr. 791 (1897).

A creditor who secured an attachment in this state knowing of a prior assignment for the benefit of creditors executed by debtor in another state was liable for the costs of attachment. Coflin v. Kelling, 83 Ky. 649 , 7 Ky. L. Rptr. 724 , 1886 Ky. LEXIS 21 (Ky. Ct. App. 1886).

3.Liability of Secured Fund.

The secured fund may be made liable for insurance, taxes, repairs, or maintenance. Anderson v. Van Rensselaer, 184 Ky. 133 , 211 S.W. 553, 1919 Ky. LEXIS 33 ( Ky. 1919 ).

4.Attorneys’ Fees.

Although the assignment was fraudulent and void the estate should pay counsel fees for services rendered prior to the time the assignment was attacked. Louisville Banking Co. v. Etheridge Mfg. Co., 43 S.W. 169, 19 Ky. L. Rptr. 908 (1897).

When the assigned estate is insufficient to satisfy the lien debts the assignee is not entitled to counsel fees. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

Attorneys whose services result in benefit to the estate, though acting in hostility to the trustee, are entitled to an allowance direct from the estate. Mitchell v. Tyler, 49 S.W. 422, 20 Ky. L. Rptr. 1249 , 1899 Ky. LEXIS 632 ( Ky. 1899 ). See Mattingly's Trustee v. Mattingly, 72 S.W. 802, 24 Ky. L. Rptr. 2029 (1903).

Inasmuch as the assignee represents the creditors, a creditor representing all of a class is not entitled to an attorney’s fee to be paid out of amounts payable to such class of creditors. McDowell v. Columbia Bldg., Loan & Sav. Ass'n's Assignee, 51 S.W. 1013, 21 Ky. L. Rptr. 81 (1899).

Attorneys for the assignee are entitled to payment directly from the estate, even though the assignee defaulted. Courier-Journal Job-Printing Co. v. Columbia Fire Ins. Co., 54 S.W. 966, 21 Ky. L. Rptr. 1258 , 1900 Ky. LEXIS 382 (Ky. Ct. App. 1900).

The assignor may employ attorneys to surcharge the settlement of the assignee, and they may be allowed a fee out of the estate when their services are beneficial. Mattingly's Trustee v. Mattingly, 72 S.W. 802, 24 Ky. L. Rptr. 2029 (1903).

An allowance to a creditors’ attorney is not permissible when the assignee was ably represented. Weller v. Hull's Assignee, 74 S.W. 172, 24 Ky. L. Rptr. 2185 , 1903 Ky. LEXIS 519 (Ky. Ct. App. 1903).

When the efforts of the attorneys of a creditor enure to the benefit of the general creditors and there are funds going to the general creditors, an allowance to the attorneys may be made out of such funds. Mainous v. Brown Shoe Co., 222 Ky. 25 , 299 S.W. 1068, 1927 Ky. LEXIS 850 ( Ky. 1927 ).

An assignee was not permitted to charge an attorney fee for services rendered by himself, even though the assignment permitted “a reasonable attorney’s fee.” Kentucky Nat'l Bank v. Stone, 93 Ky. 623 , 20 S.W. 1040, 14 Ky. L. Rptr. 645 , 1893 Ky. LEXIS 155 ( Ky. 1893 ).

5.Surplus Funds.

If a surplus remains after payment of creditors, title to the funds or property reverts to the assignor. Farnsworth v. Doom, 109 Ky. 794 , 60 S.W. 712, 22 Ky. L. Rptr. 1491 , 1901 Ky. LEXIS 40 ( Ky. 1901 ).

6.Exemption from Suit.

An assignee is exempt from suit for nine months following his qualification. Neely v. City Nat'l Bank, 150 Ky. 512 , 150 S.W. 679, 1912 Ky. LEXIS 941 ( Ky. 1912 ).

7.Discharge of Liability.

After a lapse of over 30 years it will be presumed that the creditors were satisfied and that both assignor and assignee are discharged of liability, even though record title remains in the assignee. Farnsworth v. Doom, 109 Ky. 794 , 60 S.W. 712, 22 Ky. L. Rptr. 1491 , 1901 Ky. LEXIS 40 ( Ky. 1901 ).

379.140. Discharge of assignee — Notice — Proceedings.

The assignee may, when he believes it is no longer to the interest of the estate to keep the assignment open, move the District Court to discharge him from the trust and release him from all liability. He shall have notice of his application to discharge published pursuant to KRS Chapter 424. Sixty (60) days after the motion is entered, the court shall, upon proof that the required notice was given, enter an order discharging the assignee from his trust and releasing him from all liability, unless objection is made. If objection is made, the court shall hear the same and make such orders as are proper.

History. 93: amend. Acts 1966, ch. 239, § 219; 1976 (Ex. Sess.), ch. 14, § 298, effective January 2, 1978.

NOTES TO DECISIONS

1.Discharge.

After a lapse of over thirty (30) years it will be presumed that the creditors were satisfied and that both assignor and assignee are discharged of liability, even though record title remains in the assignee. Farnsworth v. Doom, 109 Ky. 794 , 60 S.W. 712, 22 Ky. L. Rptr. 1491 , 1901 Ky. LEXIS 40 ( Ky. 1901 ).

The assignee cannot be discharged on the same day his application is filed. Knoedler v. Teegarden, 72 S.W. 268, 24 Ky. L. Rptr. 1785 , 1903 Ky. LEXIS 455 (Ky. Ct. App. 1903).

Research References and Practice Aids

Cross-References.

Assignee to satisfy court that all taxes against the estate have been paid before he is discharged, KRS 132.510 .

379.150. Settlement or compromise by assignor with creditors to be filed in court — Assignee discharged.

If the assignor settles or compromises with his creditors before the final discharge of the assignee or settlement of the estate, the writing showing the settlement or compromise shall be filed in the District Court and an order made discharging the assignee.

History. 95: amend. Acts 1976 (Ex. Sess.), ch. 14, § 299, effective January 2, 1978.

NOTES TO DECISIONS

1.Compromises.

An assignor may, in good faith, and without manipulation of the assigned estate, or obstruction of the settlement, procure compromises from his creditors. Commonwealth use of Thompson v. Scoville, 101 S.W. 1188, 31 Ky. L. Rptr. 257 (1907).

379.160. Appeals from judgments.

An appeal may be taken from the judgment of the District Court overruling or sustaining an exception by the assignor, assignee or any party in interest, to the Circuit Court.

History. 88: amend. Acts 1976 (Ex. Sess.), ch. 14, § 300, effective January 2, 1978.

NOTES TO DECISIONS

1.Application.

The appeal herein provided for applies to cases where exceptions are filed under subsection (1) of KRS 379.060 . When the county court proceeding is ex parte, without exception, notice or formal trial, then an action in equity may be maintained in the circuit court to surcharge errors in the settlement. Pickerell v. Thompson, 109 Ky. 498 , 59 S.W. 751, 22 Ky. L. Rptr. 1382 , 1900 Ky. LEXIS 231 ( Ky. 1900 ). See Cooper v. Lankford, 117 Ky. 792 , 78 S.W. 197, 25 Ky. L. Rptr. 1578 , 1904 Ky. LEXIS 206 ( Ky. 1904 ).

2.Final Order.

An order referring the case to the commissioner for a settlement of the assigned estate is a final order authorizing an appeal. Mattingly v. Elder, 44 S.W. 215, 19 Ky. L. Rptr. 1645 (1898).

3.Lien Creditor.

A lien creditor may appeal from a judgment affecting unencumbered property when his security is insufficient to satisfy his debt. Columbia Finance & Trust Co. v. Morgan, 44 S.W. 389, 19 Ky. L. Rptr. 1761 (Ky.), modified, 44 S.W. 628, 19 Ky. L. Rptr. 1765 ( Ky. 1898 ).

4.Appeal.

The assignee may appeal to the circuit court from an order overruling his motion to set aside an order accepting a bid on the assigned property. Smith v. Sulzer Mach. Co.'s Assignee, 51 S.W. 449, 21 Ky. L. Rptr. 376 (1899).

When an appeal is taken by the assignee and judgment is superseded by him, an affirmance by the Court of Appeals of a judgment against him for the value of goods lost through his fraud or negligence carries with it a right to ten per cent damages under KRS 21.130 , notwithstanding plaintiff secured a reversal on cross-appeal. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

5.Irregular Proceedings.

Action of circuit court in affirming judgment of the county court on appeal under this section was correct although under this section was correct although some of the proceedings in the county court were irregular where subsequent proceedings in county court were such as to remove the question of prejudice. Kennedy v. Lack, 283 Ky. 95 , 140 S.W.2d 831, 1940 Ky. LEXIS 297 ( Ky. 1940 ).

Research References and Practice Aids

Cross-References.

Appeals from quarterly courts, how taken, CR 72.

Kentucky Law Journal.

Tribell, The Effect of the National Bankruptcy Act on Kentucky’s General Assignment Law, 41 Ky. L.J. 450 (1953).

379.170. Circuit court has jurisdiction of action for settlement of estate.

  1. The provisions of KRS 379.010 to 379.160 shall not prevent an action to settle an estate by the assignee, or by any creditor or creditors representing one-fourth (1/4) of the liabilities, from being brought in the Circuit Court. When an action involving a settlement of the estate is brought in the Circuit Court of the county in which the assignment was made, the jurisdiction of the District Court shall cease, and all papers relating to the estate filed in the District Court shall be transferred by the clerk of the Circuit Court to the files of the Circuit Court. The Circuit Court may exercise any power conferred on the District Court by KRS 379.010 to 379.160 in administering and settling the assigned estate.
  2. The assignee may sell the personal and real property belonging to the assigned estate, at public or private sale, and convey and pass all the right and title to the same which the grantor had in the deed of assignment at its date. The assignee shall, within ten (10) days after the sale, report the sale to the Circuit Court in which the suit for settlement of the estate is pending. The report shall thereupon be laid over ten (10) days for exceptions, and if no exceptions are filed within that time the report shall thereupon be confirmed. If exceptions are filed, they shall be heard and determined by the court.

History. 96: amend. Acts 1976 (Ex. Sess.), ch. 14, § 301, effective January 2, 1978.

NOTES TO DECISIONS

1.Jurisdiction.

Upon filing of action hereunder the jurisdiction of the county court ceases, and exclusive jurisdiction vests in the Circuit Court. McDowell v. Columbia Bldg., Loan & Sav. Ass'n's Assignee, 51 S.W. 1013, 21 Ky. L. Rptr. 81 (1899). See Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ); Clark-Lack Grocery Co.'s Assignee v. Price, 249 Ky. 150 , 60 S.W.2d 372, 1933 Ky. LEXIS 492 ( Ky. 1933 ); L. W. Henneberger Co.'s Assignee v. Price, 252 Ky. 402 , 67 S.W.2d 471, 1934 Ky. LEXIS 782 ( Ky. 1934 ).

The county court loses jurisdiction upon filing of suit hereunder, and all subsequent proceedings in the county court should be stricken from the record. Maupin v. Maupin's Assignee, 89 S.W. 238, 28 Ky. L. Rptr. 323 (1905).

The Circuit Court has no authority to appoint an assignee. Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ).

Circuit Courts have no original jurisdiction over assigned estates, except pursuant to this section. Clark-Lack Grocery Co.'s Assignee v. Price, 249 Ky. 150 , 60 S.W.2d 372, 1933 Ky. LEXIS 492 ( Ky. 1933 ).

A Circuit Court attempting to settle an assigned estate when it had not acquired jurisdiction is subject to writ of prohibition from the Court of Appeals. Clark-Lack Grocery Co.'s Assignee v. Price, 249 Ky. 150 , 60 S.W.2d 372, 1933 Ky. LEXIS 492 ( Ky. 1933 ).

A Circuit Court is not subject to writ of prohibition from the Court of Appeals when it is merely acting erroneously within its jurisdiction, unless resulting in great and irreparable loss, not remediable by appeal or otherwise. L. W. Henneberger Co.'s Assignee v. Price, 252 Ky. 402 , 67 S.W.2d 471, 1934 Ky. LEXIS 782 ( Ky. 1934 ).

2.Who May Bring Action.

Pendency of actions by creditors to recover judgment on their claims does not bar an action by them under this section. Mattingly v. Elder, 44 S.W. 215, 19 Ky. L. Rptr. 1645 (1898).

Actions hereunder must be instituted by the assignee or by creditors representing at least one fourth (1/4) of assignor’s liabilities. Richardson v. Whitaker, 103 Ky. 425 , 45 S.W. 774 ( Ky. 1898 ). See W. H. Hall & Son v. J. D. Guthrie's Sons, 103 S.W. 721, 31 Ky. L. Rptr. 801 (1907); Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ).

In an action hereunder, the court may, pursuant to KRS 378.100 and 395.550 , enjoin creditors from suing the assignee in separate suits, or seeking any relief against him or the assigned estate. However, creditors may prosecute a separate suit against the assignor and secure personal judgments against him. Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ). See also Muir v. Samuels, 110 Ky. 605 , 62 S.W. 481, 23 Ky. L. Rptr. 14 , 1901 Ky. LEXIS 114 ( Ky. 1901 ).

A trustee in bankruptcy may file action for settlement of an assignee’s accounts. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

The personal representative of a deceased assignee is not entitled to bring suit under this section. Stoll's Adm'r v. Tarr, 141 Ky. 296 , 132 S.W. 904, 1910 Ky. LEXIS 464 ( Ky. 1910 ).

The court could, pursuant to law that provided that certain provisions of the law should regulate proceedings for sale of property held in trust and law that provided actions by creditors could be enjoined while an action for settlement was pending, enjoin creditors from suing the assignee in separate suits, or seeking any relief against him or the assigned estate. However, creditors could prosecute a separate suit against the assignor and secure personal judgments against him. Dobyns v. Dobyns' Assignee, 79 Ky. 95 , 1 Ky. L. Rptr. 400 , 2 Ky. L. Rptr. 274 , 1880 Ky. LEXIS 95 (Ky. Ct. App. 1880).

3.Liabilities.

“Liabilities” as herein used means debts unpaid at the time suit is filed. Anderson v. City Nat'l Bank, 153 Ky. 268 , 155 S.W. 385, 1913 Ky. LEXIS 826 ( Ky. 1913 ).

4.Receivers.

A receiver should not be appointed when there is no valid objection to the assignee’s performance of his duties. Deposit Bank of Smiths Grove v. Kirby, 175 Ky. 700 , 194 S.W. 929, 1917 Ky. LEXIS 382 ( Ky. 1917 ).

Although appointment of the assignee as receiver violates KRS 27.062 , such action is not necessarily a reversible error. Title Ins. & Trust Co. v. Clark, 271 Ky. 22 , 111 S.W.2d 409, 1937 Ky. LEXIS 183 ( Ky. 1937 ).

5.Procedure.

When suit is brought under this section, the procedure prescribed by preceding sections also applies. In addition the Circuit Court may exercise its equitable powers. Jitney-Jungle, Inc. v. Planters Bank & Trust Co., 272 Ky. 26 , 113 S.W.2d 856, 1938 Ky. LEXIS 81 ( Ky. 1938 ).

6.Possession of Property.

The Circuit Court has possession of property involved in an action hereunder. Cook v. Burton, 92 S.W. 322, 29 Ky. L. Rptr. 28 (1906). But see Powers v. Blue Grass Bldg. & L. Asso., 86 F. 705, 1898 U.S. App. LEXIS 2986 (C.C.D. Ky. 1898 ).

7.Sale of Property.

It is not necessary that property sold hereunder at private sale be appraised. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (6th Cir. 1902), aff’d, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906). See Kentucky Distilleries & Warehouse Co. v. Blanton, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. Ky. 1906 ), cert. denied, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (U.S. 1907).

The assignee may sell realty at either private or public sale, in his discretion, if so authorized by the deed, and pass good title, even after filing of suit to settle the estate. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (6th Cir. 1902), aff’d, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906). See Kentucky Distilleries & Warehouse Co. v. Blanton, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. Ky. 1906 ), cert. denied, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (U.S. 1907).

8.Parties.

The Circuit Court may, in its discretion, make all creditors parties, and refer the case to the master commissioner to advertise for claims, but such a procedure is not necessary when KRS 379.100 has been followed. Jitney-Jungle, Inc. v. Planters Bank & Trust Co., 272 Ky. 26 , 113 S.W.2d 856, 1938 Ky. LEXIS 81 ( Ky. 1938 ).

9.Pleading.

It is the duty of the assignee to set up in his pleading the controverted questions of law and conflicting claims of creditors as they appear before him. McDowell v. Columbia Bldg., Loan & Sav. Ass'n's Assignee, 51 S.W. 1013, 21 Ky. L. Rptr. 81 (1899).

10.Refusal of Jury Trial.

It is not error to refuse a jury trial in an action to settle an assignee’s accounts, notwithstanding incidental issues of fraud and value. Comingor v. Louisville Trust Co., 128 Ky. 697 , 108 S.W. 950, 111 S.W. 681, 33 Ky. L. Rptr. 53 , 33 Ky. L. Rptr. 884 , 1908 Ky. LEXIS 90 (Ky. Ct. App. 1908).

11.Penalties.

Penalties not claimed until after assignment are not collectible in an action hereunder. Jitney-Jungle, Inc. v. Planters Bank & Trust Co., 272 Ky. 26 , 113 S.W.2d 856, 1938 Ky. LEXIS 81 ( Ky. 1938 ).

Research References and Practice Aids

Cross-References.

Commissioner to settle insolvent estates may be required to execute special bond, KRS 27.010 , 27.100 .

Settlements with fiduciaries may be recorded, certificate to be filed in county court, KRS 28.200 , 28.210 .

CHAPTER 380 Debt Adjusting

380.010. Definitions for chapter.

As used in this chapter, the following terms mean:

  1. “Person” includes, but is not limited to, individuals, partnerships, associations, corporations, limited liability companies, trusts, and other legal entities;
  2. “Debt adjuster” means a person engaged in the business of debt adjusting;
  3. “Debt adjusting” means doing business in this state in debt adjusting, budget counseling, debt management, debt modification or settlement, foreclosure assistance, or debt pooling service, or holding oneself out as acting or offering or attempting to act as an intermediary between a debtor and his or her creditors for a fee, contribution, or other consideration, or by words of similar import, as providing services to debtors in the management, settlement, modification, or adjustment of their debts, to do any of the following:
    1. Effect the adjustment, compromise, settlement, modification, or discharge of any account, note or other indebtedness of the debtor;
    2. Receive from the debtor and disburse to the debtor’s creditors any money or other thing of value; or
    3. Solicit business and advertise as a debt adjuster;
  4. “Reside” means to live in a particular place on a temporary or permanent basis;
  5. “Debtor” means an individual who resides in Kentucky and is indebted to a creditor or creditors, including two (2) or more individuals who are jointly and severally, or jointly or severally, indebted to a creditor or creditors;
    1. “Personal information” means any information: (6) (a) “Personal information” means any information:
      1. That a debtor provides to a debt adjuster to obtain a debt-adjusting product or service from the debt adjuster;
      2. About a debtor resulting from any transaction involving debt adjusting between a debtor and the debt adjuster; or
      3. That a debt adjuster otherwise obtains about a debtor in connection with providing a debt-adjusting product or service to that debtor.
    2. “Personal information” does not include information that a debt adjuster has a reasonable basis to believe is lawfully made available to the general public from:
      1. Federal, state, or local government records;
      2. Widely distributed media; or
      3. Disclosures to the general public that are required to be made by federal, state, or local law.

        For purposes of this paragraph, “reasonable basis” to believe that information is lawfully made available to the general public means the debt adjuster has taken steps to determine that the information is the type that is available to the general public and whether an individual may direct that the information not be made available to the general public and, if so, that the debt adjuster’s consumer has not done so; and

  6. “Additional interested party” means a party, including but not limited to the Attorney General, to whom written notice shall be sent at the same time that a notice is required to be sent to an insured regarding any cancellation, nonrenewal, modification, or change in the insurance coverage required by KRS 380.040(7).

History. Enact. Acts 1970, ch. 190, § 2; 2005, ch. 38, § 1, effective June 20, 2005; 2010, ch. 86, § 1, effective July 15, 2010.

Opinions of Attorney General.

A nonprofit consumer credit counseling service does not have the right under Kentucky law to charge a minimal fee to debtors who use this service. OAG 71-91 .

Where a company performs debt adjusting for clients, charges no compensation, but does take voluntary contributions from some of its clients to be used in providing consumer education to the community, and such contributions are not directly or indirectly coerced, the company has not violated this chapter. OAG 75-668 .

380.020. Injunction against debt adjuster — Appointment of receiver. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 190, § 4.) was repealed by Act 2005, ch. 38, § 6, effective June 20, 2005.

380.030. Persons exempt from classification as debt adjuster.

The following persons shall not be considered debt adjusters for the purposes of this chapter:

  1. Any attorney-at-law admitted to the practice of law in this state by the Supreme Court of this Commonwealth, who is not principally engaged in the business of debt adjusting, when the person renders services in the course of his or her practice as an attorney-at-law;
  2. Any person who is a regular, full-time employee of a debtor, and who acts as an adjuster of his employer’s debts;
  3. Any person acting pursuant to any order or judgment of court, or pursuant to authority conferred by any law of this state or of the United States;
  4. Any person who is a creditor of the debtor, or an agent of one (1) or more creditors of the debtor, and whose services in adjusting the debtor’s debts are rendered without cost to the debtor;
  5. Any person who arranges for or makes a loan to the debtor, and who, at the authorization of the debtor, acts as an adjuster of the debtor’s debts in the disbursement of the proceeds of the loan, without compensation from the debtor for the services rendered in adjusting the debts;
  6. Any charitable, religious or educational organization, determined to be exempt from taxation under Section 501(c)(3) of the Internal Revenue Code that is not in the business of debt adjusting, as defined in KRS 380.010 ; and
  7. Any person who is a creditor of the debtor, when adjusting a debt or debts owed by the debtor to the person.

History. Enact. Acts 1970, ch. 190, § 5; 1982, ch. 275, § 1, effective July 15, 1982; 2005, ch. 38, § 4, effective June 20, 2005; 2010, ch. 86, § 10, effective July 15, 2010.

Compiler’s Notes.

Section 501 of the Internal Revenue Code, referred to in subdivision (6), is compiled as 26 USCS § 501.

Opinions of Attorney General.

Service rendered to a debtor must be rendered without cost and any program in which the debtor tenders any payment must be closely scrutinized to determine that all payments are in fact donative. OAG 72-686 .

Where a collection agency acts as the agent for and on behalf of the other creditors of a debtor at no cost to the debtor in order to negotiate terms for payment of the debtor’s debts, it would appear that a collection agency would not be considered a debt adjuster pursuant to subsection (4) of this section. OAG 75-34 .

380.040. Persons engaged in debt adjusting — Powers and prohibitions — Requirements for registration, audits, insurance, and bond or letter of credit — Increase in amount of bond or insurance when debt is primarily for personal use.

  1. Subject to subsection (3) of this section, a person, whether or not located in this state, who is engaged in debt adjusting and actually or constructively receives any money or other thing of value, other than the fees permitted by this chapter, for the purpose of disbursing the money or thing of value to the debtor’s creditors, shall do both of the following:
    1. Unless specifically instructed otherwise by a debtor, disburse to the appropriate creditors all funds received from the debtor, less any contributions or fees not prohibited by subsection (2) of this section, within thirty (30) days of receipt of the funds from the debtor; and
    2. Maintain a separate trust account for the receipt of any funds from debtors and the disbursement of the funds to creditors on behalf of the debtors.
  2. If a fee, contribution, or other consideration for engaging in debt adjusting is accepted, directly or indirectly, a person engaged in debt adjusting shall not do any of the following:
    1. Accept a fee, contribution, or other consideration exceeding seventy-five dollars ($75) from a debtor residing in this state for an initial set up;
    2. Accept a fee, contribution, or other consideration exceeding fifty dollars ($50) per calendar year from a debtor residing in this state for consultation;
    3. If money or anything else of value is received and held by the person engaged in debt adjusting for the purpose of disbursing the money or thing of value to the debtor’s unsecured creditors, accept a periodic fee, contribution, or other consideration from a debtor who resides in this state that exceeds the greater of eight and one-half percent (8.5%) of the amount paid by the debtor each month for distribution to the debtor’s creditors or thirty dollars ($30); or
    4. Accept any other fee, contribution, or other consideration in advance of the complete performance of all promised services in relation to secured debt. Acceptance of a fee, contribution, or other consideration in advance of the complete performance of all promised services in relation to secured debt, including the placement of the fee, contribution, or other consideration into an escrow account to be paid upon completion of the services, is specifically prohibited. For purposes of this paragraph, “secured debt” means any debt primarily for personal, family, or household use that is secured by a mortgage, deed of trust, other equivalent consensual security interest on residential real property, or collateral that has a mortgage lien interest in residential real property.
  3. Subsections (1) and (2) of this section shall not prohibit a person engaged in debt adjusting for a debtor who resides in this state from charging the debtor a bad check charge of twenty dollars ($20) or the amount passed on from the debt adjuster’s bank, whichever is greater, in addition to fees, contributions, or other consideration not prohibited by subsection (2) of this section.
  4. Fees, contributions, or other consideration permitted in subsections (1), (2), and (3) of this section may be adjusted on an annual basis by the amount equivalent to any increase in the consumer price index, published by the United States Department of Labor, Bureau of Labor Statistics.
  5. Any person that engages in debt adjusting shall file an initial registration form, accompanied by an initial registration fee of two hundred fifty dollars ($250), and the registration shall be renewed each year thereafter for a fee of two hundred fifty dollars ($250) to cover the actual cost of filing the registration, in accordance with administrative regulations promulgated by the Attorney General.
  6. Any person that engages in debt adjusting shall arrange for and undergo an annual audit of the person’s business, including any trust funds deposited and distributed to creditors on behalf of debtors, which shall be conducted by an independent, third-party certified public accountant. Both of the following shall apply to an audit performed under this subsection:
    1. The person shall file the results of the audit and the auditor’s opinion with the Consumer Protection Division of the Office of the Attorney General within thirty (30) days of the anniversary date of filing the initial registration; and
    2. The Attorney General shall make available a summary of the results of the audit and the auditor’s opinion upon written request of any person and payment of a fee not to exceed the cost of copying the summary and opinion.
    1. A person engaged in debt adjusting shall obtain and at all times maintain insurance coverage for errors and omissions, employee dishonesty, depositor’s forgery, computer fraud, and violations of this chapter in the amount of ten percent (10%) of the monthly average for the immediately preceding six (6) months of the aggregate amount of all deposits made with the person by all debtors. The insurance coverage shall comply with all of the following: (7) (a) A person engaged in debt adjusting shall obtain and at all times maintain insurance coverage for errors and omissions, employee dishonesty, depositor’s forgery, computer fraud, and violations of this chapter in the amount of ten percent (10%) of the monthly average for the immediately preceding six (6) months of the aggregate amount of all deposits made with the person by all debtors. The insurance coverage shall comply with all of the following:
      1. The minimum limit of the insurance coverage shall not be less than one hundred thousand dollars ($100,000), and the maximum limit of the insurance coverage shall not be more than two hundred fifty thousand dollars ($250,000);
      2. The insurance coverage shall not include a deductible in excess of ten percent (10%) of the face amount of the policy coverage;
      3. The insurance coverage shall be issued by an insurer and rated at least A-, or its equivalent, by a nationally recognized rating organization; and
      4. The insurance coverage shall provide that the Consumer Protection Division of the Office of the Attorney General shall be named as an additional interested party.
    2. If the debt adjuster engages in debt adjusting in relation to any debt that is primarily for personal, family, or household use that is secured by a mortgage, deed of trust, other equivalent consensual security interest on residential real property, or collateral that has a mortgage lien interest in residential real property, the amount of insurance coverage required in paragraph (a) of this subsection shall be increased by two hundred fifty thousand dollars ($250,000).
    1. A debt adjuster shall maintain a bond issued by a surety company admitted to do business in this Commonwealth. The bond shall be in the amount of twenty-five thousand dollars ($25,000) in favor of the Attorney General for the benefit of the Commonwealth for any violation of this chapter or any person suffering injury or loss by reason of any violation of this chapter. A copy of the bond shall be filed with the Attorney General. (8) (a) A debt adjuster shall maintain a bond issued by a surety company admitted to do business in this Commonwealth. The bond shall be in the amount of twenty-five thousand dollars ($25,000) in favor of the Attorney General for the benefit of the Commonwealth for any violation of this chapter or any person suffering injury or loss by reason of any violation of this chapter. A copy of the bond shall be filed with the Attorney General.
    2. The bond required by paragraph (a) of this subsection shall be in effect during the period of the debt adjuster’s registration as well as for two (2) years after the debt adjuster ceases to provide debt-adjusting services to debtors.
    3. A change in ownership of a debt adjuster shall not release, cancel, or terminate liability under any bond previously filed unless the Attorney General agrees in writing to the release, cancellation, or termination because the debt adjuster has filed a new bond meeting the requirements of paragraph (a) of this subsection.
    4. The proceeds of the bond required by paragraph (a) of this subsection shall be paid to any person suffering injury or loss by reason of any violation of this chapter or to the Attorney General for any violation of this chapter or shall be paid pursuant to the terms of any order of a court of competent jurisdiction. Any person who is damaged by any violation of this chapter may bring an action against the bond to recover damages pursuant to this paragraph, provided the aggregate liability of the surety shall not exceed the amount of the bond.
    5. In lieu of the bond required by paragraph (a) of this subsection, a debt adjuster may, with the written approval of the Attorney General, deliver to the Attorney General an irrevocable letter of credit issued or confirmed by a financial institution authorized by law to transact business in the Commonwealth. The irrevocable letter of credit shall be in the amount of twenty-five thousand dollars ($25,000) in favor of the Attorney General for the benefit of the Commonwealth or any person suffering injury or loss by reason of any violation of this chapter.
    6. If the debt adjuster engages in debt adjusting in relation to any debt that is primarily for personal, family, or household use that is secured by a mortgage, deed of trust, other equivalent consensual security interest on residential real property, or collateral that has a mortgage lien interest in residential real property, the amount of the bond required in paragraph (a) of this subsection or the irrevocable letter of credit approved pursuant to paragraph (e) of this subsection shall be increased by fifty thousand dollars ($50,000).
  7. A debt adjuster may not, directly or indirectly:
    1. Misappropriate or misapply money held in trust;
    2. Settle a debtor’s debt if the amount the debtor will owe after settlement is equal to or more than fifty percent (50%) of the amount of the debt prior to settlement unless, after the creditor has assented, the debtor assents to a settlement for which the amount the debtor will owe after settlement is equal to or more than fifty percent (50%) of the amount of the debt prior to settlement;
    3. Take a power of attorney that authorizes the debt adjuster to settle a debt, unless the power of attorney is expressly limited to the debtor’s debts and grants authority to settle debts only if the amount the debtor will owe after settlement is less than fifty percent (50%) of the amount of the debt prior to settlement. However, in no event shall an agreement confer on a debt adjuster a power of attorney to negotiate or settle any of the debtor’s debt that is primarily for personal, family, or household use that is secured by a mortgage, deed of trust, other equivalent consensual security interest on residential real property, or collateral that has a mortgage lien interest in residential real property;
    4. Exercise or attempt to exercise a power of attorney after a debtor has terminated an agreement;
    5. Initiate a transfer from a debtor’s account at a bank or with another person unless the transfer is:
      1. A return of money to the debtor; or
      2. Before termination of an agreement, properly authorized by the agreement and this chapter, and for payment to one (1) or more creditors pursuant to a plan or payment of a fee;
    6. Structure a plan in a manner that would result in a negative amortization of any of a debtor’s debts, unless a creditor that is owed a negatively amortizing debt agrees to refund or waive the finance charge upon payment of the principal amount of the debt;
    7. Settle a debt or lead a debtor to believe that a payment to a creditor is in settlement of a debt to the creditor unless, at the time of settlement, the debtor receives a certification by the creditor that the payment is in full settlement of the debt or is part of a payment plan, the terms of which are included in the certification, that upon completion will lead to full settlement of the debt;
    8. Make a representation that:
      1. The debt adjuster will furnish money to pay bills or prevent attachments;
      2. Payment of a certain amount will permit satisfaction of a certain amount or range of indebtedness;
      3. Participation in a plan will or may prevent litigation, garnishment, attachment, repossession, foreclosure, eviction, or loss of employment, and will or may stop efforts to collect a debt from the debtor;
      4. Failure to make required minimum payments to creditors will not or may not break the terms of agreements with creditors, will not or may not lead creditors to increase finance charges and pursue litigation, will not or may not be reported to consumer reporting agencies, or will not or may not have an adverse effect on the debtor’s credit report and credit score; or
      5. Fees paid to a debt adjuster will be used to pay creditors;
    9. Misrepresent that it is authorized or competent to furnish legal advice or perform legal services;
    10. Take a confession of judgment or power of attorney to confess judgment against a debtor;
    11. Purchase a debt or obligation of the debtor;
    12. Receive from or on behalf of the debtor:
      1. A promissory note or other negotiable instrument other than a check or a demand draft; or
      2. A postdated check or demand draft;
    13. Lend money or provide credit to the debtor, except as a deferral of a settlement fee at no additional expense to the debtor;
    14. Obtain a mortgage or other security interest from any person in connection with the services provided to the debtor;
    15. Provide the debtor less than the full benefit of a compromise of a debt arranged by the debt adjuster; or
    16. Charge the debtor for or provide credit or other insurance, coupons for goods or services, membership in a club, access to computers or the Internet, or any other matter not directly related to debt adjusting services or educational services concerning personal finance.
  8. Any unfair, false, misleading, or deceptive act or practice in the conduct of debt adjusting is prohibited. For purposes of this subsection, “unfair” shall be construed to mean unconscionable.

History. Enact. Acts 2005, ch. 38, § 2, effective June 20, 2005; 2010, ch. 86, § 3, effective July 15, 2010.

380.050. Administrative regulations governing debt adjusting.

The Attorney General shall promulgate administrative regulations in accordance with KRS Chapter 13A to ensure the proper administration and enforcement of this chapter.

History. Enact. Acts 2005, ch. 38, § 3, effective June 20, 2005.

380.060. Person engaged in debt adjusting to contract with debtor — Disclosure and notice to debtor — Debtor’s right to cancel.

  1. A person engaged in debt adjusting shall contract in writing with the debtor and obtain the debtor’s signature on the contract which shall designate the date on which the debtor actually signs the contract as the date of the transaction and fully disclose the exact nature of the debt-adjusting services and the total amount and terms of compensation.
  2. Any debtor entering into a contract to provide debt-adjusting services shall have a right to cancel the contract until midnight of the fourteenth day after the day on which the debtor signs a contract offer to enter into a contract for debt-adjusting services, except as provided in subsection (7) of this section.
  3. The following notice, printed in at least twelve (12) point boldface type and completed with the name and address of the debt adjuster, shall appear on the contract under the conspicuous caption “DEBTOR’S RIGHT TO CANCEL” and shall read as follows:

    NOTICE OF CANCELLATION

    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    (enter date of transaction)

    You may cancel this contract or offer without penalty or monetary obligation, within fourteen (14) days from the above date. To cancel this transaction, you may use any of the following methods: mail or otherwise deliver a signed and dated copy of this cancellation notice, or any other written notice of cancellation which you sign and date to (enter physical address of debt adjuster) or e-mail a notice of cancellation to (enter name of debt adjuster) at (enter e-mail address of debt adjuster) not later than midnight of (enter date fourteen (14) days after transaction date).

    I hereby cancel this transaction.

    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    (Date)

    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    (Debtor’s Signature)

  4. Cancellation occurs when the debtor gives written notice of cancellation to the debt adjuster at the physical or e-mail address stated in the contract or offer to perform services.
  5. Notice of cancellation, if given by mail, is given when it is deposited in a mailbox properly addressed and postage prepaid and, if given by e-mail, when the debtor sends the e-mail.
  6. Notice of cancellation given by the debtor is sufficient if it indicates in writing the intention of the debtor not to be bound by the contract or offer of services.
  7. Until the debt adjuster has complied with the disclosure notice required by subsection (3) of this section, the debtor may cancel the contract or offer of services by notifying the debt adjuster of his or her intention to cancel.

History. Enact. Acts 2010, ch. 86, § 2, effective July 15, 2010.

380.070. Debt adjuster to take reasonable measures to protect debtor’s personal information.

  1. A debt adjuster shall take reasonable measures to:
    1. Ensure the security and confidentiality of a debtor’s personal information;
    2. Protect against any anticipated threats or hazards to the security or integrity of a debtor’s personal information; and
    3. Protect against unauthorized access to or use of a debtor’s personal information.
  2. The reasonable measures required by this section shall include, at a minimum:
    1. Design and implementation of a comprehensive information security program that:
      1. Is written in one (1) or more readily accessible parts;
      2. Contains administrative, technical, and physical safeguards that are appropriate to the size and complexity of the debt adjuster, the nature and scope of the debt adjuster’s activities, and the sensitivity of any personal information at issue;
      3. Designates one (1) or more employees to coordinate compliance with the information security program; and
      4. Identifies reasonably foreseeable internal and external risks to the security, confidentiality, and integrity of the personal information of a debtor that could result in the unauthorized access to or use of the information, and assesses the sufficiency of any safeguards in place to control these risks. At a minimum, the risk assessment required by this subparagraph shall include consideration of risks in each relevant area of the debt adjuster’s operation, including employee training and management, information systems, information processing, information storage, information transmission, information disposal, and detecting, preventing, and responding to failures to comply with the information security program.
    2. Design and implementation of information safeguards to control the risks identified by the risk assessment required by this subsection, as well as regular testing or other monitoring of the effectiveness of the safeguards of key controls, systems, and procedures;
    3. Requirements for regular training of employees who will or may have access to records containing personal information of debtors regarding compliance with the information security program required by this subsection;
    4. Oversight of service providers to whom personal information of a debtor will be disclosed, by taking reasonable steps to select and retain service providers that are capable of maintaining appropriate safeguards for the personal information at issue, as well as requiring service providers, by contract, to implement and maintain those safeguards;
    5. Evaluation and adjustment of the information security program in light of the results of testing and monitoring, any material changes to the operation or business arrangements of the debt adjuster, or any other circumstances that the debt adjuster knows or has reason to know may have a material impact on compliance with the information security program; and
    6. A requirement that when records containing personal information of a debtor are disposed of the records shall be shredded, erased, or otherwise modified so the personal information is made unreadable or indecipherable through any means.

History. Enact. Acts 2010, ch. 86, § 7, effective July 15, 2010.

380.080. Debt adjuster prohibited from sale of debtor’s personal information without written authorization — Confidentiality agreement.

  1. Notwithstanding any other provision of law, a debt adjuster shall not sell or transfer a debtor’s personal information unless the debtor provides a valid authorization that includes a specification that the debtor’s personal information may be sold or transferred by the debt adjuster who received the debtor’s personal information.
  2. An authorization shall:
    1. Be in writing; and
    2. Provide that prior to any sale or transfer of the debtor’s personal information, the debt adjuster shall obtain a written confidentiality agreement from the person to whom the personal information is sold or transferred stating that the person will not sell or transfer the debtor’s personal information.

History. Enact. Acts 2010, ch. 86, § 8, effective July 15, 2010.

380.090. Annual disclosure of debt adjuster’s policies and practices to be provided to debtor.

  1. Prior to obtaining a debtor’s personal information, a debt adjuster shall provide a clear and conspicuous disclosure to the debtor of the debt adjuster’s policies and practices with respect to:
    1. Disclosing the debtor’s personal information to others, including the categories of personal information that may be disclosed;
    2. Disclosing the personal information of persons for whom the debt adjuster is no longer providing a debt-adjusting service or product; and
    3. Protecting the debtor’s personal information.
  2. The disclosure required by this section shall also be provided to the debtor at least annually while the debt adjuster is providing debt-adjusting services or products to the debtor.

History. Enact. Acts 2010, ch. 86, § 9, effective July 15, 2010.

380.100. Agreement for debt adjusting — Contents — Right to confer power of attorney upon debt adjuster — Prohibited provisions.

  1. An agreement for debt adjusting shall:
    1. Be in writing;
    2. Be dated and signed by the debt adjuster and the debtor;
    3. Include the name of the debtor and the address where the debtor resides;
    4. Include the name, business address, and telephone number of the debt adjuster;
    5. Be delivered to the debtor immediately upon formation of the agreement. Delivery of an electronic record occurs when the agreement is made available in a format in which the debtor may retrieve, save, and print the agreement and the debtor is notified that the electronic record is available;
    6. Disclose:
      1. The services to be provided;
      2. The amount, or method of determining the amount, of all fees, individually itemized, to be paid by the debtor;
      3. The schedule of payments to be made by or on behalf of the debtor, including the amount of each payment, the date on which each payment is due, and an estimate of the date of the final payment;
      4. Whether a plan provides for regular periodic payments to creditors and, if a plan provides for regular periodic payments to creditors:
        1. Each creditor of the debtor to which payment will be made, the amount owed to each creditor, and any concessions the debt adjuster reasonably believes each creditor will offer; and
        2. The schedule of expected payments to each creditor, including the amount of each payment and the date on which it will be made;
      5. Each creditor that the debt adjuster believes will not participate in the plan and to which the debt adjuster will not direct payment;
      6. That the debt adjuster may terminate the agreement for good cause, upon return of unexpended money of the debtor;
      7. That the debtor may cancel the agreement as provided in KRS 380.060 ;
      8. That the debtor may contact the Attorney General with any questions or complaints regarding the debt adjuster;
      9. The address, telephone number, and Internet address or Web site of the Attorney General;
      10. That participation in a plan may not prevent litigation, garnishment, attachment, repossession, foreclosure, eviction, or loss of employment, and may not stop efforts to collect a debt from the debtor;
      11. That failure to make required minimum payments to creditors may be breaking the terms of agreements with creditors, may lead creditors to increase finance charges and pursue litigation, may be reported to consumer reporting agencies, and may have an adverse effect on the debtor’s credit report and credit score;
      12. The earliest date by which the debt adjuster will contact each creditor to attempt to adjust the debtor’s debts or, for settlement of unsecured debts, the estimated amount of money that shall be accumulated in savings before negotiations may begin; and
      13. That fees paid to a debt adjuster will not be used to pay creditors;
    7. Provide that the debtor has a right to terminate the agreement at any time, without penalty or obligation, by giving the debt adjuster written or electronic notice, in which event:
      1. The debt adjuster will refund all unexpended money that the debt adjuster or its agent has received from or on behalf of the debtor for the reduction or satisfaction of the individual’s debt; and
      2. All powers of attorney granted by the debtor to the debt adjuster are revoked and ineffective;
    8. Provide that the debtor authorizes any financial institution in which the debt adjuster or its agent has established a trust account to disclose to the Attorney General any financial records relating to the trust account; and
    9. Provide that the debt adjuster will notify the debtor within five (5) days after learning of a creditor’s decision to reject or withdraw from a plan. This notice shall include:
      1. The identity of the creditor; and
      2. The right of the debtor to modify or terminate the agreement.
  2. An agreement may confer on a debt adjuster a power of attorney to negotiate with creditors of the debtor on behalf of the debtor and to settle the debtor’s debt if the amount the debtor will owe after settlement is less than fifty percent (50%) of the amount of the debt prior to settlement. An agreement shall not confer a power of attorney to settle the debtor’s debt if the amount the debtor will owe after settlement is equal to or more than fifty percent (50%) of the amount of the debt prior to settlement. An agreement shall provide that the debt adjuster shall obtain the assent of the debtor prior to settling a debt if the creditor has assented to a settlement for which the amount the debtor will owe after settlement is equal to or more than fifty percent (50%) of the amount of the debt prior to settlement. However, in no event shall an agreement confer on a debt adjuster a power of attorney to negotiate or settle any of the debtor’s debt that is primarily for personal, family, or household use that is secured by a mortgage, deed of trust, other equivalent consensual security interest on residential real property, or collateral that has a mortgage lien interest in residential real property.
  3. An agreement shall not:
    1. Provide for application of the law of any jurisdiction other than the United States and this state;
    2. Contain a provision that restricts the debtor’s remedies under this chapter or under any other law; or
    3. Contain a provision that:
      1. Limits or releases the liability of any person for not performing the agreement or for violating this chapter; or
      2. Indemnifies any person for liability arising under the agreement or this chapter.
  4. All rights and obligations specified in paragraphs (g), (h), and (i) of subsection (1) of this section, subsection (2) of this section, subsection (3) of this section, and KRS 380.060 , exist even if not provided in the agreement.
  5. A provision in an agreement which violates paragraphs (g), (h), and (i) of subsection (1) of this section, subsection (2) of this section, or subsection (3) of this section is void.

History. Enact. Acts 2010, ch. 86, § 11, effective July 15, 2010.

380.110. Cause of action for loss resulting from violation of KRS Chapter 380 — Time limitation on prosecution of action.

  1. Any person who enters into a debt-adjusting transaction and thereby suffers any ascertainable loss of money or property, real or personal, as a result of a violation of this chapter, may bring an action under the Rules of Civil Procedure in the Circuit Court in which the person resides or where the transaction in question occurred, to recover actual damages. The court may, in its discretion, award actual damages and may provide such equitable relief as it deems necessary or proper. Nothing in this section shall be construed to limit a person’s right to seek punitive damages where appropriate.
  2. Upon commencement of any action brought under subsection (1) of this section, the clerk of the court shall mail a copy of the complaint or other initial pleading to the Attorney General and, upon entry of any judgment or decree in the action, shall mail a copy of such judgment to the Attorney General.
  3. In any action brought by a person under this section, the court may award to the prevailing party, in addition to the relief provided in this section, reasonable attorney’s fees and costs.
  4. Any person bringing an action under this section shall bring such action within one (1) year after any action of the Attorney General has been terminated or within two (2) years after the violation of this chapter, whichever is later.

History. Enact. Acts 2010, ch. 86, § 6, effective July 15, 2010.

380.120. Waiver of debtor’s rights void and unenforceable.

Any waiver by the debtor of rights or protections provided in this chapter is contrary to public policy, is void and unenforceable, and will not relieve the debt adjuster of any obligation placed upon the debt adjuster by this chapter.

History. Enact. Acts 2010, ch. 86, § 5, effective July 15, 2010.

380.130. Prohibition of limitation on right of financial institution to collect valid debts.

Nothing in this chapter shall be construed to limit the ability of a financial institution licensed by KRS Chapter 286 from collecting on debts it is owed by a debtor.

History. Enact. Acts 2010, ch. 86, § 12, effective July 15, 2010.

Legislative Research Commission Note.

(7/15/2010). When this statute was created in 2010 Ky. Acts ch. 86, sec. 12, it contained a reference to “Nothing in Sections 1 to 12 of this Act.” The Reviser of Statutes has changed that language to read “Nothing in this chapter” under the authority of KRS 7.136 .

380.990. Penalties.

  1. In any action brought alleging a violation of this chapter, if the court finds that a person is willfully using or has willfully used a method, act, or practice declared unlawful by this chapter, the Attorney General, upon petition to the court, may recover, on behalf of the Commonwealth, a civil penalty of not more than five thousand dollars ($5,000) per violation.
  2. Any person who violates the provisions of KRS 380.040 in the state is guilty of a misdemeanor and, upon conviction, shall be punished by a fine of five hundred dollars ($500) or imprisonment not to exceed sixty (60) days, or both such fine and imprisonment.
  3. A violation of this chapter shall be deemed an unfair, false, misleading, or deceptive practice in the conduct of trade or commerce in violation of KRS 367.170. All of the remedies, powers, and duties provided by KRS 367.190 to 367.300 and the penalties pertaining to acts and practices declared unlawful under KRS 367.170 shall apply with equal force and effect to acts and practices in violation of this chapter, except as provided in subsection (1) of this section.
  4. In addition to subsection (1) of this section:
    1. A court may make such additional orders or judgments as may be necessary to restore to any person in interest any moneys or property, real or personal, which may have been paid out as a result of any practice in violation of this chapter;
    2. A court shall have jurisdiction in an action brought in the name of the Commonwealth by the Attorney General or the county attorney, to enjoin, as an unfair or deceptive trade practice pursuant to KRS 367.170, the continuation of any debt-adjusting business or the offering of any debt-adjusting services as defined in KRS 380.010 ;
    3. A court may appoint a receiver who shall have all the powers and authority pursuant to KRS 367.210 for the property and money employed in the transaction of business by a debt adjuster to ensure the return to debtors of their money and property received by the debt adjuster which has not been paid to the creditors of the debtors; and
    4. In any action brought by the Attorney General or a Commonwealth or county attorney under this chapter, in which the Commonwealth has substantially prevailed, the court shall award, in addition to the relief provide elsewhere in this chapter, reasonable attorney’s fees, investigative costs, and litigation costs including expert witness fees and expenses.

History. Enact. Acts 1970, ch. 190, § 3; 2005, ch. 38, § 5, effective June 20, 2005; 2010, ch. 86, § 4, effective July 15, 2010.