Could a private buyer of a Kentucky delinquent tax bill recover attorney fees from the taxpayer?

Plain-English summary

In 1997, Kentucky's Attorney General answered a county attorney's question about private buyers of delinquent property-tax certificates. Such a buyer could sue to collect the certificate, but the AG concluded that a court could not add the buyer's attorney fees to the collection award. KRS 134.490 offered debt-enforcement remedies without expressly authorizing attorney fees.

The opinion considered the usual exceptions to the rule that litigants pay their own lawyers. It found no contract in the collection proceeding, no express fee provision in the statute, and no fit for the equitable theories it examined. Collecting a purchased certificate benefited the buyer rather than a shared fund or the public in the way those theories required.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Private certificate buyers

The AG distinguished a purchaser's right to enforce a delinquent tax certificate from a right to collect lawyer fees. The phrase “all the remedies available for the enforcement of a debt” in KRS 134.490(1)(a) did not expressly mention attorney fees. Under the opinion's reading of Kentucky law, a statute had to authorize those fees expressly.

County attorneys and delinquent taxpayers

The opinion contrasted private collection with county-attorney collection. A county attorney received a commission under KRS 134.500(3), paid from distribution by the county clerk, rather than an attorney-fee charge against the defaulting taxpayer. The AG doubted a system that would make a taxpayer's added liability depend on who bought or collected the certificate, but described that policy point as speculative.

Common questions

Did buying a delinquent tax bill entitle the buyer to lawyer fees?

No. The AG said the purchaser could pursue debt-enforcement remedies, but KRS 134.490 did not expressly authorize an attorney-fee award.

Could a court award fees because the collection helped the public?

The AG said routine collection of a purchased certificate did not qualify under the private-attorney-general theory it discussed. The government had already received the proceeds of the tax-bill sale, and the buyer's later collection served the buyer.

Could the buyer claim the common-fund exception?

The opinion said no. The recovered money went to the certificate buyer alone, and the theory did not authorize shifting fees onto the losing taxpayer.

Did the AG decide whether Kentucky courts would accept those equitable theories in other cases?

No. It said their broader availability remained unsettled and concluded only that neither applied to routine certificate-of-delinquency collection.

Background and statutory framework

Unpaid property-tax bills became certificates of delinquency that private parties could buy and enforce. Unsold certificates went to the Revenue Cabinet or county attorney. The AG applied Kentucky's ordinary rule that each side pays its own lawyer, examined statutory and equitable exceptions, and found no basis for shifting fees in the private collection at issue.

Citations and references

• KRS 134.450: tax-bill sale and certificate process described by the opinion.
• KRS 134.490: private collection remedies.
• KRS 134.500: unsold certificates and county-attorney collection.
• Holsclaw v Stephens, Ky, 507 SW 2d 462, 480 (1974): express statutory authorization for attorney fees.
• Dorman v Baumlisberger, 271 Ky 806, 113 SW 2d 432, 433 (1938): equitable fee awards depend on case circumstances.

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG97-012.htm

Original opinion text

OAG 97-12

April 24, 1997

Subject: Attorney fees in property tax collection actions

Requested by: Mike Conliffe, Jefferson County Attorney

Written by: Ross T. Carter

Syllabus: Court cannot award attorney fees to private party who purchases delinquent tax certificates

Statutes construed: KRS 134.490

Opinion of the Attorney General

When property taxes are not paid, the tax bill is sold and converted into a certificate of delinquency. KRS 134.450. Private parties may purchase delinquent tax bills and collect the amount due by filing collection actions, lien enforcement actions, or both. KRS 134.490. Certificates of delinquency that are not sold to private parties are turned over to the Revenue Cabinet or the county attorney for collection. KRS 134.500.

When a county attorney collects certificates of delinquency, he receives a percentage of the amount due each taxing district. KRS 134.500(3). This commission is paid by the county clerk when making distribution. When a private party collects a certificate of delinquency, the party "shall have all the remedies available for the enforcement of a debt." KRS 134.490(1)(a). The Jefferson County Attorney asks whether KRS 134.490(1)(a), or any other provision of the law, authorizes a court to award attorney fees to the private collector of a certificate of delinquency. The answer is no.

Kentucky follows the American rule, which states that each litigant pays his own attorney. Dulworth & Burress Tobacco Warehouse, Inc. v Burress, Ky, 369 SW 2d 129, 133 (1963). Kentucky cases recognize three exceptions to the rule: contractual provisions, statutory provisions, and cases raising important equitable considerations.

A debt collection proceeding involves no contracts, so the first exception is inapplicable.

In order for attorney fees to be awarded under a statute, the award must be expressly authorized in the statute. Holsclaw v Stephens, Ky, 507 SW 2d 462, 480 (1974). Nothing in KRS 134.490 expressly mentions attorney fees, so the second exception is inapplicable.

Courts may award attorney fees in certain equitable proceedings. Kentucky State Bank v Ag Services, Inc., Ky App, 663 SW 2d 754 (1984). Kentucky court decisions provide little guidance in the application of this exception, saying only that it is "largely within the discretion of the court, depending on the facts and circumstances of each particular case." Dorman v Baumlisberger, 271 Ky 806, 113 SW 2d 432, 433 (1938). Courts around the country have upheld equitable awards of attorney fees under at least two theories: the private attorney general theory and the common fund theory.

The private attorney general theory is expressed in various ways. One authority says, "A plaintiff's attorneys are entitled to reasonable attorney fees where, as a result of their efforts, constitutional rights of societal importance are protected to the benefit of a large number of people." 7 Am Jur 2d, Attorneys at Law 239 (1980). A federal court has said, "When private litigants vindicate a strong public policy and provide widespread public benefit though their efforts, attorney fees should be paid by the adverse party. . . . Otherwise, the 'private attorney general' would be penalized by the significant cost of litigation for furthering important public interests through his individual suit." Incarcerated Men of Allen County Jail v Fair, 507 F 2d 281, 284-85 (1974).

It can hardly be said that collecting a certificate of delinquency protects constitutional rights of societal importance, or that it furthers important public interests. If the delinquency were not collected by the private litigant, it would be collected by the government. The public interest was satisfied when the tax bill was sold; it makes no difference to the government whether the private party later collects on the certificate of delinquency. In any event, the Attorney General does not collect tax bills; we do not envision any court finding that private collectors of certificates of delinquency are providing a benefit to the public worthy of denomination as the act of a private attorney general.

The essence of the common fund theory is the litigant's protection, creation, or increase of a common fund or property that is shared with others. 20 Am Jur 2d, Costs 66 (1995). The theory is inapplicable for two reasons. First, the fruits of the private tax collector's efforts are not shared; the fund that is created exists for the sole benefit of the collector. Second, the common fund theory does not authorize the taxing of attorney fees against the unsuccessful litigant, but merely redistributes the funds that are paid as a result of the litigation. In a tax collection case, the plaintiff already receives the full amount of the judgment.

Whether Kentucky courts will apply the private attorney general theory or the common fund theory in a proper case remains to be seen. This opinion merely states that even if Kentucky courts accept the soundness of these theories, neither theory applies in a routine certificate of delinquency collection.

Although it is somewhat speculative for us to say so, we doubt that Kentucky courts would approve a collection system in which defaulting taxpayers could be forced to pay additional sums as attorney fees depending on the identity of the party collecting the delinquency. The county attorney's commission is not assessed against the defaulting taxpayer. An award of attorney fees in a particular case could only be assessed against the defaulting taxpayer. Public policy hardly supports the subjecting of taxpayers to inconsistent liabilities even though the circumstances of their default could be identical.

We conclude that courts cannot award attorney fees to private parties who collect certificates of delinquency.

A. B. Chandler III

Attorney General

Ross T. Carter

Manager of the Opinions Branch