Alliance Mortg. Co. v. Pastine

• Decision Date: 16 June 2006
• Docket Number: No. 91,929.,91,929.
• Citation: 136 P.3d 457
• Court: Kansas Supreme Court
• Parties: ALLIANCE MORTGAGE COMPANY, Plaintiff/Appellee, v. Gary P. PASTINE, Jimmy Dale Leighty, Jr., Hannelore Leighty, John & Mary Doe, Defendants, Beneficial Mortgage of Kansas, Inc., Defendant/Appellee, The Corporation Company, Inc., and State of Kansas Department of Revenue, Defendants, and Everett W. Cox, Jr., and Tanya E. Cox, Appellants.

136 P.3d 457

ALLIANCE MORTGAGE COMPANY, Plaintiff/Appellee, v. Gary P. PASTINE, Jimmy Dale Leighty, Jr., Hannelore Leighty, John & Mary Doe, Defendants Beneficial Mortgage of Kansas, Inc., Defendant/Appellee The Corporation Company, Inc., and State of Kansas Department of Revenue, Defendants, and Everett W. Cox, Jr., and Tanya E. Cox, Appellants.

No. 91,929.

Supreme Court of Kansas.

June 16, 2006.

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S. Mark Edwards, of Hoover, Schermerhorn, Edwards, Pinaire & Rombold, of Junction City, argued the cause and was on the briefs for appellants.

Mark L. Mellor, of Mellor & Miller, P.A., of Wichita, argued the cause and was on the briefs for appellee Beneficial Mortgage Company of Kansas, Inc.

Linda S. Mock, of Shapiro and Reed, of Overland Park, was on the brief for appellee Alliance Mortgage Company.

The opinion of the court was delivered by BEIER, J.:

This appeal presents issues of first impression regarding the notice of sheriff's sale due a junior mortgage holder who has been made a party in a senior mortgage holder's foreclosure proceeding.

Alliance Mortgage Company (Alliance) sued to foreclose its first mortgage on real property in Junction City when debtor Hannelore Leighty defaulted. Beneficial Mortgage of Kansas, Inc. (Beneficial), was a second mortgagee and was named as a party defendant. Beneficial entered its appearance after proper service of summons, answered, and claimed an interest in the subject property. It asked the trial court to determine that it held a valid mortgage on the property, to determine the priority of the claims on the property, and to grant "such other and further relief as the Court deems just and equitable." It did not attempt to foreclose its mortgage or seek to reduce its interest to judgment, and it did not set out the amount it was due.

The district court entered a decree of foreclosure, finding Alliance held a first and prior lien upon the property. The court entered judgment in favor of Alliance and against Leighty for $31,375.17, plus interest and listed expenses. The court stated Beneficial held a valid junior lien on the property. It also stated defendants would be barred from claiming any interest or lien in or to the property "subject only to the right of redemption from the Sheriff's Sale within three months from the date thereof." The trial court issued an order of sale to the Geary County Sheriff when the judgment was not paid within 10 days.

The sale was scheduled for December 12, 2002. Beneficial knew of the sale date, although neither it nor its counsel was served notice pursuant to K.S.A. 60-205 and no notice was published pursuant to K.S.A. 60-2410(a). It authorized its attorney, David Troup, to bid $117,500 at the sale. The December 12 sale was cancelled when Leighty filed for bankruptcy.

In July 2003, the bankruptcy court granted Alliance an order lifting its stay, and the sale was rescheduled for July 31, 2003. Notice of the sale was published in the Junction City Daily Union pursuant to K.S.A. 60-2410(a). Again, however, no notice was served on Beneficial or its counsel pursuant to K.S.A. 60-205. This time, Beneficial also did not receive informal notice. Alliance's attorney later stated that her secretary forgot to notify Beneficial informally of the new sale date.

Appellants Everett W. Cox, Jr., and Tanya E. Cox were the successful bidders at the sale. They paid $85,001 to the sheriff's office on the same day. The sheriff's return indicates that $43,290.73 of this amount went toward Alliance's judgment, interest, insurance, and other expenses, resulting in excess proceeds of $41,710.27.

Beneficial quickly filed a motion asking the court to set aside the sale or, in the alternative, to allow a substitute bid. In its motion, Beneficial asserted that it did not learn about the rescheduled sale until after it had occurred. Beneficial also claimed that, had Alliance notified it, it would have bid $117,500 on the property. Beneficial attached a copy of a letter addressed to Troup that directed Troup to bid $117,500 at the sale that had been scheduled for December 2002.

Beneficial served all parties, including the Coxes, with its motion. The law firm representing Alliance had notified the Coxes the day of the sale that there was a problem.

Beneficial's motion was initially set for hearing in September 2003, but the hearing was continued to November 7. The record on appeal reflects no objection to the continuance by Beneficial.

In a memorandum opinion on December 17, 2003, the district court denied the motion. The district court found Beneficial's lien had been adjudicated but ruled Beneficial was not entitled to equitable protection because it had failed to provide evidence of the lien's amount, pursue a judgment, or otherwise protect its interest. The court also ruled that a junior lienholder was not entitled to actual notice of a sheriff's sale under K.S.A. 60-2410(a) and specifically held that the sheriff's sale had been conducted according to law in all respects.

Beneficial requested a rehearing, which was held on January 15, 2004. Alliance's attorney argued that it was regular practice in foreclosures to notify interested parties of sheriff's sales informally rather than by service under K.S.A. 60-205. Beneficial's attorney agreed that this had been common practice. The court noted that both attorneys treated the law "rather cavalierly" in never serving by mail and filing proof of service on the one hand yet demanding on the other that actual notice was required once the practice of informal notice failed because of a mistake.

In January 2004, the district court vacated its previous memorandum opinion. It held that Beneficial was denied due process when it was not given actual notice enabling it to bid at the sale. It also held that Beneficial was a creditor entitled to redeem and that it should have an additional 10 days to do so. Although this was characterized as an "extension" of Beneficial's redemption right, the parties appear to agree that this remedy actually effected a resuscitation of any redemption right Beneficial may have held.

On January 22, 2004, Beneficial paid $117,500 into the court, and the court ordered disbursal of $88,686.50 to the Coxes, which the Coxes accepted. Beneficial then filed a motion to confirm the redemption, and the Coxes filed a motion in response, seeking to reopen the notice issue. The district court granted Beneficial's motion and denied the Coxes' motion from the bench.

The Coxes appealed to the Court of Appeals, arguing that: (1) The district court erred in extending Beneficial's redemption period beyond the 3 months allowed under K.S.A. 60-2414(m) after it found that the sale was otherwise in conformity with the law and that Beneficial elected not to protect its interests; and (2) because Beneficial was entitled only to publication notice of the sheriff's sale under K.S.A. 60-2410(a), its due process rights were not violated.

Two members of the Court of Appeals' panel, Judges Henry Green and G. Joseph Pierron, agreed that the district court had abused its discretion in allowing Beneficial to redeem out of time. Alliance Mortgage Co. v. Pastine, 33 Kan.App.2d 442, 104 P.3d 405 (2005). They reversed and remanded the case with an order to confirm the sale at which the Coxes were the high bidders, provided the Coxes paid the original foreclosure sale price of $85,001 within 30 days of the issuance of the Court of Appeals' mandate. The majority further held that the sale to the Coxes was reasonable under K.S.A. 60-2415(a) and that K.S.A. 60-2410(a) was a more specific service statute and controlled over K.S.A. 60-205. Beneficial was therefore entitled only to notice by publication of the sheriff's sale. Alliance, 33 Kan.App.2d at 451, 104 P.3d 405.

Judge Lee Johnson dissented, arguing that Beneficial was "entitled to receive notice of impending action as a participating litigant, not because of its status as a junior lienholder." Alliance, 33 Kan.App.2d at 458, 104 P.3d 405. He argued that K.S.A. 60-2410(a) "is not a substitute for compliance with the K.S.A.2003 Supp. 60-205 requirement to notify other parties of actions being taken in the case." Alliance, 33 Kan.App.2d at 458, 104 P.3d 405. He also argued that the plain language of K.S.A. 60-2414 entitled any creditor to redeem if its claim "is or becomes a lien prior to the expiration of the time allowed by law for the redemption by creditors." K.S.A. 60-2414(c). He argued that Beneficial was such a creditor and that the statute gave it standing to redeem. Alliance, 33 Kan.App.2d at 459, 104 P.3d 405.

Acquiescence

On appeal, Beneficial challenges jurisdiction. It argues that the Court of Appeals lacked jurisdiction to hear the Coxes' appeal because the Coxes' acceptance and use of the redemption funds Beneficial paid to the district court constituted acquiescence in the district court's judgment.

The right to appeal is purely statutory. If the record indicates that jurisdiction does not exist, an appeal must be dismissed. See Nguyen v. IBP, Inc., 266 Kan. 580, 588, 972 P.2d 747 (1999).

Acquiescence to a judgment cutting off the right of appellate review occurs when a party voluntarily complies with a judgment by assuming the burdens or accepting the benefits of the judgment contested on appeal. Varner v. Gulf Ins. Co., 254 Kan. 492, 494-95, 866 P.2d 1044 (1994). A party that voluntarily complies with a judgment should not be allowed to pursue an inconsistent position by appealing from that judgment. Varner, 254 Kan. at 495, 866 P.2d 1044. Because acquiescence involves jurisdiction, the matter raises a question of law subject to unlimited review by this court. See Cypress Media, Inc. v. City of Overland Park, 268 Kan. 407, 414, 997 P.2d 681 (2000).

Although the Coxes accepted the benefits of the district court's ruling, our analysis does not stop here. We have held that an appeal...