Alabama Home Mortg. Co., Inc. v. Harris

• Decision Date: 14 June 1991
• Citation: 582 So.2d 1080
• Parties: ALABAMA HOME MORTGAGE COMPANY, INC., et al. v. I.L. HARRIS and Rosa Lee Harris. 89-1851.
• Court: Alabama Supreme Court

Page 1080

582 So.2d 1080

ALABAMA HOME MORTGAGE COMPANY, INC., et al. v. I.L. HARRIS and Rosa Lee Harris.

89-1851.

Supreme Court of Alabama.

June 14, 1991.

Grover S. McLeod, Birmingham, for appellants.

Jesse P. Evans III and Douglas L. McWhorter of Najjar Denaburg, P.C. and David Tanner, Birmingham, for appellees.

INGRAM, Justice.

Thomas R. Roberson and his wife, Emma Roberson, along with Alabama Home Mortgage Company ("AHM"), appeal from a summary judgment in favor of I.L. and Rosa Lee Harris, declaring that the Harrises held fee simple title to a certain parcel of real property.

The complex, though undisputed, facts in this case reveal that on March 1, 1984, the Robersons executed a mortgage to AHM. The mortgage pertained to property located in Jefferson County and secured a $17,165.49 loan made by AHM to the Robersons. On May 31, 1984, the Robersons executed another mortgage on the same parcel of land to the Harrises. The second mortgage, which secured a $12,500.00 loan made by the Harrises to the Robersons, did not disclose the Robersons' prior mortgage to AHM.

In the early part of 1987, the Robersons defaulted on their mortgage to the Harrises; consequently, the Harrises foreclosed the mortgage on February 9, 1987. The property was sold pursuant to the terms of a power of sale clause in the mortgage. The Harrises were the highest bidders at the foreclosure sale and were, therefore, the purchasers of the Robersons' interest in the property.

Soon after the Robersons' mortgage to the Harrises was foreclosed, the Robersons defaulted on their mortgage to AHM. As a result, AHM foreclosed on the Robersons' mortgage and purchased the property at an April 6, 1987, foreclosure sale. On May 27, 1987, AHM deeded the property back to the Robersons by way of a quitclaim deed. The Robersons then paid AHM $200 and gave a new mortgage to AHM securing a note for $10,473.00.

On May 16, 1988, the Harrises sent a letter to AHM, demanding a statement of charges from AHM related to its foreclosure of the mortgage given to it by the Robersons. The letter purported to demand the statement of charges in order that the Harrises could effect a redemption of the property at issue. AHM responded to the Harrises' demand with a statement of charges. However, the Harrises disputed the statement submitted by AHM on the basis that it included items that were not properly chargeable. Thereafter, the Harrises sued AHM and the Robersons. In addition to a general prayer for equitable relief, the Harrises asked the trial court to determine the order of the encumbrances on the property, to determine the proper amount that the Harrises must pay in order to redeem the property in question, and to order the defendants to convey the property to the Harrises once the redemption price had been paid.

The Robersons and AHM filed a motion for summary judgment, wherein they alleged that there was no genuine issue of material fact and that they were entitled to a judgment as a matter of law. The trial court, however, denied the motion. Subsequently, the Harrises filed a motion for summary judgment, in which they also alleged that there was no genuine issue of material fact and that they were entitled to a judgment as a matter of law declaring them to be the owners of the property at issue, or, alternatively, declaring them to be entitled to redeem the property from the foreclosure by AHM. The trial court granted the Harrises' motion and entered a judgment declaring them to be the owners of full legal title to the property at issue. The trial court further held that the Harrises held the property free of any claim by either AHM or the Robersons. The Robersons and AHM appealed.

The Robersons and AHM raise two primary issues for our consideration in this appeal. The first issue is whether the trial court erred in entering a summary judgment for the Harrises. The second is whether, by operation of the judgment of the trial court, the Robersons and AHM have been deprived of their interest in the property without due process of law.

We first look to the propriety of the trial court's entry of a summary judgment for the Harrises, bearing in mind the general principle that a second mortgage is subordinate to a first mortgage. See Atlas Subsidiaries, Inc. v. Nixon, 47 Ala.App. 103, 251 So.2d 235 (1971). It is undisputed in this case that the Robersons' May 31, 1984, mortgage to the Harrises, was subordinate to the Robersons' March 1, 1984, mortgage to AHM. The execution of the first mortgage operated to convey legal title to the mortgaged property to AHM. See Lloyd's of London v. Fidelity Sec. Corp., 39 Ala.App. 596, 105 So.2d 728 (1958); Moorer v. Tensaw Land & Timber Co., 246 Ala. 223, 20 So.2d 105 (1944). Thereafter, the equity of redemption remained in the Robersons as mortgagors. See McDuffie v. Faulk, 214 Ala. 221, 107 So. 61 (1926). The equity of redemption is the right of the mortgagor to pay the debt secured by the mortgage, thereby entitling the mortgagor to a reconveyance or defeasance of the title conveyed by the mortgage. § 35-10-26, Ala.Code 1975; Denman v. Payne, 152 Ala. 342, 44 So. 635 (1907).

When a mortgagor executes a second mortgage, the equity of redemption as to the first mortgage is conveyed to the second mortgagee. Atlas Subsidiaries, Inc. v. Nixon, supra. However, the mortgagor still retains an equity of redemption right as to the second mortgage. Id. Therefore, in the present case, when the Robersons mortgaged their property to AHM, the Robersons retained an equity of redemption in the property. This equity of redemption, however, was conveyed by the Robersons to the Harrises in the second mortgage. Following the execution of the second mortgage, the Harrises held the equity of redemption as to the mortgage held by AHM, although the Robersons retained such a right with regard to the mortgage to the Harrises.

A valid foreclosure sale of property subject to a mortgage extinguishes the equity of redemption; however, a postforeclosure right of redemption arises in the mortgagor pursuant to § 6-5-230, Ala.Code 1975. Dominex, Inc. v. Key, 456 So.2d 1047 (Ala.1984). The period of redemption is one year from the time that the property is sold at a valid foreclosure sale. § 6-5-230. Unlike the equity of redemption, which exists prior to foreclosure and is deemed an interest in the mortgaged property, the statutory right of redemption arises after foreclosure and is a mere personal privilege conferred by statute; it is not property or a property right. Dominex, Inc. v. Key, supra.

In the instant case, when the Harrises foreclosed on the Robersons' mortgage, the Robersons' equity of redemption in their mortgage to the Harrises was extinguished, but the statute then provided the Robersons a one-year right of redemption with regard to the mortgage that was foreclosed. It is undisputed that the Robersons never attempted to exercise their statutory right to redeem the property from the Harrises' foreclosure. Also, when AHM foreclosed on the Robersons' mortgage, the equity of redemption that the Robersons had conveyed to the Harrises via the second mortgage was extinguished. The Harrises then had a one-year statutory right of redemption with regard to the mortgage that was foreclosed by AHM. We find, however, that under the facts presented in this case, the Harrises were not forced...