PEMBROKE ROAD WAREHOUSES, LLC v. EAGLE WAY AG, LLC d/b/a EAGLE WAREHOUSES; PNL PARTNERS 2001, L.P.; HOPKINSVILLE ASSOCIATED LIMITED PARTNERSHIP; CRESTAR BANK/CRESTAR BANK, N.A.; CHRISTIAN COUNTY, KENTUCKY; MULLINS LOGISTICS, INC., A Kentucky Corporation; MULLINS WAREHOUSES, LLC, A Limited Liability Company; PENNYRILE DISTRIBUTION, INC., f/k/a PHILIP MULLINS COMPANY, INC., A Kentucky Corporation; GENERAL TOBACCO COMPANY, INC.; BRUCE CLINE and CHARLES E. POWELL
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RENDERED:
AUGUST 26, 2005; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-001372-MR
PEMBROKE ROAD WAREHOUSES, LLC
v.
APPEAL FROM CHRISTIAN CIRCUIT COURT
HONORABLE JOHN L. ATKINS, JUDGE
ACTION NOS. 01-CI-01762, 02-CI-01226, AND 02-CI-01467
EAGLE WAY AG, LLC d/b/a
EAGLE WAREHOUSES; PNL PARTNERS 2001, L.P.;
HOPKINSVILLE ASSOCIATED LIMITED PARTNERSHIP;
CRESTAR BANK/CRESTAR BANK, N.A.;
CHRISTIAN COUNTY, KENTUCKY;
MULLINS LOGISTICS, INC., A Kentucky Corporation;
MULLINS WAREHOUSES, LLC, A Limited Liability
Company; PENNYRILE DISTRIBUTION, INC.,
f/k/a PHILIP MULLINS COMPANY, INC.,
A Kentucky Corporation;
GENERAL TOBACCO COMPANY, INC.;
BRUCE CLINE and
CHARLES E. POWELL
AND
APPELLANT
APPELLEES
NO. 2003-CA-001373-MR
MULLINS LOGISTICS, INC.;
MULLINS WAREHOUSES, LLC;
PENNYRILE DISTRIBUTION, INC.,
f/k/a PHILIP MULLINS COMPANY, INC.
APPELLANTS
v.
APPEAL FROM CHRISTIAN CIRCUIT COURT
HONORABLE JOHN L. ATKINS, JUDGE
ACTION NOS. 01-CI-01762, 02-CI-01226, AND 02-CI-01467
EAGLE WAY AG, LLC d/b/a
EAGLE WAREHOUSES;
PNL PARTNERS 2001, L.P.;
HOPKINSVILLE ASSOCIATED LIMITED PARTNERSHIP;
CRESTAR BANK/CRESTAR BANK, N.A.;
PEMBROKE ROAD WAREHOUSES, LLC;
CHRISTIAN COUNTY, KENTUCKY;
GENERAL TOBACCO COMPANY, INC.;
BRUCE CLINE and
CHARLES E. POWELL
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BUCKINGHAM, JOHNSON, AND MINTON, JUDGES.
BUCKINGHAM, JUDGE:
Pembroke Road Warehouses, LLC (PRW); Mullins
Logistics, Inc.; Mullins Warehouses, LLC; and Pennyrile
Distribution, Inc., f/k/a Philip Mullins Company, Inc.; appeal
from orders and judgments of the Christian Circuit Court in a
case involving the rights of a tenant and subtenants following a
foreclosure action.
We affirm.
The factual and procedural history in this case is
very complicated.
Therefore, we will set forth only such facts
as are necessary to understand and resolve these appeals.
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Hopkinsville Associates Limited Partnership (HA)
purchased fourteen acres of property upon which two warehouses
were located, and it executed a mortgage that, at the time of
foreclosure, was held by PNL Partners 2001 (PNL).
HA leased the
property and warehouses to PRW beginning July 1, 2000, through
February 28, 2002.
The rental amount was $8,000 per month, and
the lease was recorded in the county clerk’s office.
On December 14, 2001, PNL filed a foreclosure
complaint in the Christian Circuit Court against HA after HA
defaulted in its mortgage payments. 1
PRW was also named as a
defendant in PNL’s complaint because of its recorded lease
interest.
On March 18, 2002, the circuit court entered a
judgment and order of sale wherein the court directed the
property be sold at public auction to satisfy the indebtedness
of HA to PNL.
Although PRW had filed a motion seeking language
that would make any sale subject to PRW’s lease, no such
language was included in the order.
Thereafter, on April 23,
2002, PNL filed a motion to terminate the lease. 2
The property was sold at public auction on May 13,
2002, for $1.5 million.
1
It was purchased by Bruce Cline and
See 01-CI-01762.
2
Without obtaining PNL’s written approval, HA and PRW attempted both a lease
extension and a lease modification. Through its motion, PNL sought to either
terminate PRW’s lease or in the alternative have PRW pay rent as provided in
the original lease through the date the judicial sale was confirmed.
-3-
Charles Powell, who assigned their interest to Eagle Way Ag, LLC
(Eagle Way), a company the two men had established.
The
purchase price was ultimately paid to MCR Properties, Inc.
(MCR), which had purchased the mortgage from PNL before the
sale.
On June 21, 2002, the court entered an order
confirming the sale and giving Eagle Way a writ of possession to
the property “as of the close of business on June 28, 2002.”
On
June 22, 2002, PRW filed a notice of appeal with this court.
The closing of the sale took place on June 25, 2002.
On June
28, 2002, PRW filed a motion for a temporary injunction after
Eagle Way attempted to have PRW immediately evicted from the
property.
The court denied the motion.
PRW’s appeal was later
dismissed because it failed to join an indispensable party
(Eagle Way) to the appeal. 3
Following its purchase of the property, Eagle Way
learned that the original lease agreement between HA and PRW had
been subleased by PRW to Mullins Warehouses, LLC, and then
assigned to Philip Mullins Company, Inc., which later changed
its name to Pennyrile Distribution, Inc.
Further, following the
filing of PNL’s foreclosure action, HA attempted to extend PRW’s
lease from March 1, 2002, to March 31, 2003.
Eventually,
Mullins Logistics was assigned the sublease, and it subleased
3
See 2002-CA-001584-MR.
-4-
the property to other tenants.
recorded.
None of the subleases were
PRW, Mullins Warehouses, Philip Mullins Company,
Pennyrile Distribution, Inc., and Mullins Logistics are all
companies that were either owned or controlled by Philip
Mullins.
After the order confirming the sale, Mullins
Logistics, a sublessee under PRW, continued to collect the rent
from other sublessees of the property.
Eagle Way, as owner of
the property pursuant to the public auction, filed a complaint
in the Christian Circuit Court on August 22, 2002, against
Mullins Logistics based on an allegation that it was being
denied the right to collect the rent from the property it owned. 4
Eagle Way further alleged that it was entitled to all rental
proceeds derived from the property subsequent to June 28, 2002.
Eagle Way moved the court to enter a judgment in its
favor against the defendants in the amount of $27,569.85, the
amount of rent that Mullins Logistics had collected from the
property after June 28, 2002.
The court ordered the
consolidation of Eagle Way’s case with the foreclosure action by
PNL against HA and PRW and with a third action, one filed by
Mullins Logistics against various defendants based on a claim of
tortious interference. 5
4
See 02-CI-01226.
5
See 02-CI-01467.
-5-
In a Memorandum Opinion and Judgment entered on June
3, 2003, the court addressed all three actions.
As to the
foreclosure action that had been previously appealed, the court
held that the leases were terminated by operation of law when
the order confirming the sale was entered.
The court stated
that the issue of leases was not reserved by the parties and
that the appeal from the order confirming the sale had been
dismissed.
As to Eagle Way’s action, the court awarded summary
judgment in Eagle Way’s favor in the amount of $27,569.85.
The
court rejected arguments by the lessee and sublessees that they
were holdover tenants or possessors of a valid lease.
The court
reasoned that the defendants “could have raised all defenses
available to a tenant in the course of the initial litigation
and did not.
now.”
They are barred from asserting those defenses
The court then made that portion of the judgment final
and appealable.
Finally, the court made no disposition of
Mullins Logistics’ tortious interference claim, and we assume
that the claim is still subject to litigation in the circuit
court.
These appeals followed.
PRW argues that the circuit court erred when it
terminated its rights under the lease from HA.
We begin by
noting that PRW has already filed a direct appeal to the
original foreclosure action.
The court entered the order
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confirming the sale on June 21, 2002.
a notice of appeal with this court.
Two days later, PRW filed
That appeal was later
dismissed because PRW failed to join an indispensable party
(Eagle Way) to the appeal.
A review of the order confirming the sale indicates
both that it left open issues concerning rent and attorney’s
fees and that it lacked finality language.
Under these
circumstances, PRW’s first appeal may well have been dismissed
by this court for the additional reason that it was an appeal
from an interlocutory order.
For this reason, we will assume,
without deciding, that the effect of the Memorandum Opinion and
Judgment entered by the court on June 3, 2003, gave finality to
the court’s ruling on the issue of PRW’s rights under its lease
with HA.
Assuming that is the case, PRW then timely appealed
from that judgment.
PRW raises two issues in its brief.
First, it argues
that the circuit court erred in holding that its lease with HA
terminated by operation of law when the order confirming the
sale was entered.
As we have noted, the initial lease of the property
from HA to PRW ended on February 28, 2002.
The foreclosure
complaint was filed by PNL on December 14, 2001.
Although HA
and PRW attempted to extend the lease from March 1, 2002,
through March 31, 2003, such attempt was not a valid extension
-7-
of the lease because the Security Agreement and the Assignment
of Rents and Leases signed on behalf of HA provided that, once a
foreclosure action was filed, HA could only lease the property
with the written approval of the mortgage holder (PNL).
Since
PNL did not give written approval of the attempted lease
extension, it was not valid as to PNL.
Therefore, the court
correctly concluded that PRW did not have a valid lease after
February 28, 2002, and that PRW’s lease terminated by operation
of law no later than the date the order confirming the sale was
entered.
PRW’s second argument is that the court erred in
ruling that PRW was not a holdover tenant.
The applicable
statute provides:
If, by contract, a term or tenancy for a
year or more is to expire on a certain day,
the tenant shall abandon the premises on
that day, unless by express contract he
secures the right to remain longer. If
without such contract the tenant shall hold
over, he shall not thereby acquire any right
to hold or remain on the premises for ninety
(90) days after said day, and possession may
be recovered without demand or notice if
proceedings are instituted within that time.
But, if proceedings are not instituted
within ninety (90) days after the day of
expiration, then none shall be allowed until
the expiration of one (1) year from the day
the term or tenancy expired. At the end of
that year the tenant shall abandon the
premises without demand or notice, or stand
in the same relation to his landlord that he
did at the expiration of the term or tenancy
aforesaid; and so from year to year, until
-8-
he abandons the premises, is turned out of
possession, or makes a new contract.
KRS 6 383.160(1).
PRW argues that if its lease with HA is
determined to have expired on February 28, 2002, then it became
a holdover tenant 90 days thereafter since no party to the
action filed a forcible detainer action to remove it from the
property.
In making this argument, PRW misstates the full
holding in Terry v. Henry, 274 Ky. 778, 120 S.W.2d 404 (1938).
Further, this argument overlooks the facts surrounding the
foreclosure action.
PRW argues Terry stands for the premise that, in order
to remove a holdover tenant, a party must rely solely on a
detainer action filed in district court within 90 days of the
end of the lease.
A review of Terry shows the court merely
stated a detainer action could be used.
120 S.W.2d at 407.
Further, the court specifically stated, “We express no opinion
about what could have been accomplished . . . if they had sought
other remedies.”
Id.
Kentucky law has long recognized the writ
of possession as one of the other remedies available to the
buyer at a judicial sale.
188, 160 S.W.2d 588 (1942).
See Henderson v. Meadows, 290 Ky.
Thus, we find no error in the fact
that Eagle Way sought possession through a writ of possession.
6
Kentucky Revised Statutes.
-9-
Nor can we accept PRW’s argument that no action was
taken to contest its continued possession.
Early in the
foreclosure action, PNL put all parties on notice that it would
not approve continued occupancy of the property.
First, on
March 6, 2002, PNL filed a motion that all rents be turned over
to it.
Within its motion, PNL made it clear that it had not
approved of any attempt to extend or modify the lease between HA
and PRW.
Then on April 23, 2002, PNL filed a motion to
terminate all leases and subleases or, in the alternative, to
extend them based on the original terms through the confirmation
of sale.
Finally, once the sale was confirmed by court order on
June 21, 2002, it became final as to the rights of all named
parties in the property.
See Smith v. Decker, 374 S.W.2d 487,
490 (Ky. 1964); KRS 426.574.
In short, Eagle Way took any
rights PRW had in the property once the sale was confirmed. 7
We also note that PRW’s argument as to being a
holdover tenant is foreclosed by its judicial admissions.
PRW
filed numerous documents in the case that indicated a concession
that it was not a holdover tenant.
The appeal of the Mullins companies is likewise
without merit.
In the court’s Memorandum Opinion and Judgment,
7
PRW did file a motion asking that any sale of the property be subject to its
lease. However, that motion was not granted. Further, PRW’s reliance on
Kendall v. Thirwell, 453 S.W.2d 604 (Ky. 1970), is misplaced. In that case,
the sale was made expressly subject to lease rights.
-10-
the court determined that Eagle Way had the sole right to
possess the property and that the Mullins companies had no
right, title, or interest therein.
In contesting this
conclusion, the Mullins companies rely both on the argument that
they obtained valid rights through PRW and on the argument that
they also qualify as holdover tenants.
A holdover tenant can claim rights under KRS 383.160.
The Mullins companies claim no action was taken against them
until more than 90 days after their leases/assignments expired
on February 28, 2002.
Thus, they claim they are entitled to
holdover for an additional year.
The Mullins companies’ argument on this point fails
for several reasons.
First, a holdover tenant relationship
arises between parties to the lease/assignment that has expired.
See Case v. Home Tobacco Warehouse Co., 311 Ky. 95, 223 S.W.2d
569, 571 (1949).
(“[I]t is presumed that the terms of the
original lease are carried over into the extension provided by
the statute.”)
Under the facts in this case, the Mullins
companies could claim holdover status, but only as to PRW.
The
Mullins companies cannot claim holdover status directly against
Eagle Way or its predecessors in title as their contract
extended only to PRW.
Further, the fact that the Mullins
companies can claim continued possession through the continued
occupancy of their subtenants serves merely as a basis for PRW
-11-
to claim continued occupancy.
See Ventura Hotel Co. v. Pabst
Brewing Co., 33 Ky. L.Rptr. 149, 109 S.W. 354, 356 (1908) (A
tenant is said to retain possession through its subtenants for
purposes of determining its status as a holdover tenant under
the statute.) 8
As we have already rejected PRW’s claim as a
holdover tenant, this is of no help to the Mullins companies.
Any further argument by the Mullins companies relies
on the claim that PRW had an interest, through a valid lease or
as a holdover tenant, which in turn was passed to them.
As we
have noted herein, PRW had no interest in the property following
the order confirming the sale.
to the Mullins companies.
Thus, it had no interest to pass
Therefore, we conclude that the
circuit court correctly held that Eagle Way had sole right to
possess the property beginning June 28, 2002, and that the
Mullins companies had no right, title, or interest therein.
The judgment and orders of the Christian Circuit Court
are affirmed.
8
While the Ventura case is designated as “[n]ot to be officially reported,”
we adopt its reasoning as persuasive on this matter.
-12-
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT, PEMBROKE ROAD
WAREHOUSES, LLC:
BRIEF AND ORAL ARGUMENT FOR
APPELLEE, EAGLE WAY AG, LLC,
d/b/a EAGLE WAREHOUSE:
Kimberly A. Hoagland
Hopkinsville, Kentucky
David L. Cotthoff
Hopkinsville, Kentucky
BRIEF AND ORAL ARGUMENT FOR
APPELLANTS, MULLINS LOGISTICS,
INC., MULLINS WAREHOUSES,
LLC., AND PENNYRILE
DISTRIBUTION, INC., f/k/a
PHILIP MULLINS COMPANY, INC.:
Kenneth W. Humphries
Hopkinsville, Kentucky
-13-
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