Baldwin County Federal Savings Bank v. Central Bank of the South

• Decision Date: 28 June 1991
• Citation: 585 So.2d 1279
• Parties: BALDWIN COUNTY FEDERAL SAVINGS BANK v. CENTRAL BANK OF THE SOUTH, et al. 89-1457.
• Court: Alabama Supreme Court

Page 1279

585 So.2d 1279

BALDWIN COUNTY FEDERAL SAVINGS BANK v. CENTRAL BANK OF THE SOUTH, et al.

89-1457.

Supreme Court of Alabama.

June 28, 1991.

Rehearing Denied Aug. 16, 1991.

Claude E. Bankester and Daniel T. Bankester of Wilkins, Bankester, Biles & Wynne, Bay Minette, for appellant.

Daniel G. Blackburn of Stone, Granade, Crosby & Blackburn, Bay Minette, for appellees.

PER CURIAM.

Baldwin County Federal Savings Bank ("BCFSB") appeals from a judgment in favor of the plaintiffs, Steve Odom, Diane Odom, and Central Bank of the South ("Central"), in a declaratory judgment action. The complaint was filed by Central and the Odoms to determine the status of two liens against undeveloped beachfront property in Baldwin County that is owned by the Odoms. ¹

On March 30, 1986, the Odoms bought the subject property from Gulf Sun Investments, Inc. ("Gulf Sun"). They did not immediately record their deed. On May 15, 1986, the Odoms mortgaged the property to Central. As with the Odoms' deed, the mortgage held by Central was not immediately recorded. On June 4, 1986, BCFSB, which had on May 22 obtained a judgment against Gulf Sun, recorded a certificate of that judgment. On July 16, 1986, the Odoms' deed and Central's mortgage were recorded.

After learning that BCFSB had filed its certificate of judgment against Gulf Sun, Central and the Odoms filed a complaint wherein they asked the court to declare that their separate interests in the property were superior to any rights BCFSB might have in the property by virtue of its judgment against Gulf Sun. After an ore tenus hearing, the trial court entered a judgment declaring that the Odoms' title to the property, as described in the deed from Gulf Sun, and Central's interest in the property, obtained through the mortgage from the Odoms, were "paramount and superior" to the rights of BCFSB and its successors and assigns. That judgment did not contain specific findings of fact. The court denied BCFSB's motion for a new trial, and BCFSB appeals.

BCFSB argues that, because it recorded its certificate of judgment before the recording of the Odoms' deed and Central's mortgage, its rights in the property are superior to those held by the Odoms and by Central. ² Alternatively, it argues that the court's implicit finding that the Odoms' possession was such as to give it notice of the Odoms' unrecorded deed and Central's unrecorded mortgage before it filed the certificate of judgment is not supported by the evidence.

At the outset, we note that the scope of this Court's review regarding the resolution of fact questions in ore tenus cases is restricted:

"It is the law in Alabama that where evidence has been presented orally, a presumption of correctness attends the trial court's conclusion on issues of fact, if these conclusions were based totally or in part on oral testimony. This Court will not disturb the trial court's conclusions unless they are clearly erroneous and against the great weight of the evidence. Cougar Mining Co. v. Mineral Land & Mining Consultants, Inc., 392 So.2d 1177 (Ala.1981); Raidt v. Crane, 342 So.2d 358 (Ala.1977); Adams Supply Co. v. United States Fidelity & Guaranty Co., 269 Ala. 171, 111 So.2d 906 (1959)."

First Alabama Bank v. Martin, 425 So.2d 415, 425 (Ala.1982). In addition, in cases such as this one, where the court did not make specific findings of fact, this Court will assume that the court made the findings necessary to support its judgment, unless such findings would be clearly erroneous and against the great weight and preponderance of the evidence. Hand v. Stanard, 392 So.2d 1157, 1159 (Ala.1980).

BCFSB's first argument concerns the provisions of Ala.Code 1975, § 35-4-90(a). It contends that, pursuant to that section, once a judgment creditor records its certificate of judgment, all subsequently recorded conveyances are void as to that judgment. It directs this Court's attention to Johnson v. Haleyville Mobile Home Supply, Inc., 477 So.2d 328 (Ala.1985), as support for its argument.

We do not agree. Section 35-4-90(a) gives judgment creditors, purchasers, and mortgagees priority over an earlier executed deed that has not been recorded only when the judgment creditor, purchaser, or mortgagee records its instrument without actual knowledge or constructive notice of the earlier conveyance. Therefore, simply winning the race to the courthouse and recording first is not enough to give a lienholder priority. It is also necessary that the judgment creditor, whose rights, if any, attach upon the act of recording, record its judgment without notice of the earlier deed. Smith v. Arrow Transp. Co., 571 So.2d 1003 (Ala.1990); Department of Revenue v. Price-Williams, 545 So.2d 7 (Ala.1989); Gulf Oil Corp. v. Beck, 293 Ala. 158, 300 So.2d 822 (1974).

The language of § 35-4-90(a) indicates that it was drafted, at least in part, to prevent the result argued for by BCFSB:

"All conveyances of real property, deeds, mortgages, deeds of trust or instruments in the nature of mortgages to secure any debts are inoperative and void as to purchasers for a valuable consideration, mortgagees and judgment creditors without notice, unless the same have been recorded before the accrual of the right of such purchasers, mortgagees or judgment creditors."

Ala.Code 1975, § 35-4-90 (emphasis added).

The principle that recording first creates superior rights only when the recording party does not have actual knowledge or constructive notice of prior unrecorded conveyances is an equitable principle of long standing that has been consistently applied in cases involving judgment creditors. Smith v. Arrow Transp. Co., supra; Gulf Oil, supra; W.T. Rawleigh Co. v. Barnette, 253 Ala. 433, 44 So.2d 585 (1950); Burt v. Cassety, 12 Ala. 734 (1848). In Gulf Oil, this Court noted:

" 'It results from this view, that as the judgment creditor had, by the possession of the complainant, constructive notice of her title, he acquired no lien upon the land, in virtue of his judgment.' "

293 Ala. at 160, 300 So.2d at 823 (quoting Burt, supra, at 739; emphasis in original).

The character or quality of possession that is sufficient to provide notice has been described as "whatever is sufficient to put a party on inquiry" concerning possible competing claims to the property. Gamble v. Black Warrior Coal Co., 172 Ala. 669, 672, 55 So. 190, 190 (1911); Jefferson County v. Mosley, 284 Ala. 593, 226 So.2d 652 (1969). Under § 35-4-90(a), judgment creditors and purchasers are "on the same footing." Gulf Oil, supra; Burt, supra; Therefore, the quantum of possession needed to put a judgment creditor on notice is no greater than that which is deemed sufficient to put a purchaser on notice. Id.

In addition, BCFSB's reliance on our opinion in Johnson, supra, is misplaced. The sole issue addressed in Johnson was whether a judgment creditor's rights had accrued upon the recording of the certificate of judgment even though the judgment debtor thereafter filed a motion for new trial. 477 So.2d at 328. That opinion mentioned only summarily that the judgment creditor did not have notice of the deed that had been executed before it recorded its certificate of judgment. Id., at 329-30. Thus, Johnson did not address the issue that is central to the instant case, i.e., whether the judgment creditor had notice of unrecorded conveyances before it recorded its certificate of judgment.

BCFSB also argues that the evidence does not support the trial court's implicit finding that there was sufficient evidence of the Odoms' possession of the property to put it on notice of the Odoms' deed and, by inference, the subsequent mortgage to Central. ³ The determination of whether BCFSB was chargeable with notice of the Odoms' possession was a question of fact within the equity jurisdiction of the court. Hodges v. Beardsley, 269 Ala. 280, 283-84, 112...