Bernals Inc. v. Kessler–greystone Llc.

• Decision Date: 25 March 2011
• Docket Number: 1091121.
• Citation: 70 So.3d 315
• Parties: BERNALS, INC., and Maria E. Adanv.KESSLER–GREYSTONE, LLC.
• Court: Alabama Supreme Court

70 So.3d 315

BERNALS, INC., and Maria E. Adan

v.KESSLER–GREYSTONE, LLC.

1091121.

Supreme Court of Alabama.

March 25, 2011.

Gregory A. Kennemer, Birmingham, for appellant.James M. Messer of Messer Law Firm, P.C., Birmingham, for appellee.WOODALL, Justice.

Maria E. Adan appeals from a default judgment for $84,271.24 in favor of Kessler–Greystone, LLC (“Kessler”), on Kessler's claim against Adan and Bernals, Inc. (“Bernals”), seeking accelerated rental payments and attorney fees. Bernals appeals from a summary judgment in favor of Kessler for $130,029.44 in attorney fees and the same accelerated rental payments on Kessler's claim against Adan and Bernals and in favor of Kessler on counterclaims that Bernals asserted against Kessler. We vacate the judgments, dismiss the action, and dismiss the appeal.

I. Facts and Procedural History

This dispute arose out of a “Lease Agreement made and entered into on ... the 8th day of June, 2005, between Taylor Properties, LLC [ (‘Taylor’),] an Alabama limited liability company, or its successors and assigns (hereinafter called ‘Landlord’), and Bernals, Inc., [an] Alabama corporation (hereinafter called ‘Tenant’).” The leased premises consisted of suites 113 and 114 in a building in Shelby County known as Greystone Park. “The Leased Premises [were] to be used and occupied by Tenant” as a “Cuban Restaurant—Dine In & Take Out.” The lease was signed by Maria E. Adan, the sole owner of Bernals. Bernals subsequently used the leased space to operate a Cuban restaurant called Cuban Grill 280. Adan also executed a “guarantee of lease,” whereby she agreed to personally guarantee “full and prompt payment of rent.”

On September 1, 2005, Taylor entered into a contract with Brentwood Properties, Inc. (“Brentwood”), whereby Brentwood agreed to manage and operate the Greystone Park premises on behalf of Taylor (“the Brentwood–Taylor agreement”). As part of its responsibilities under the Brentwood–Taylor agreement, Brentwood was to collect all rents due from the tenants of Greystone Park. In addition, the Brentwood–Taylor agreement specified that Brentwood was to “take all reasonable necessary action to enforce tenant leases, including but not limited to serving tenants with notices to vacate the leased premises ... and undertaking collection and eviction procedures.” The Brentwood–Taylor agreement was to terminate on August 31, 2007, or upon the sale of Greystone Park. On February 1, 2007, Taylor sold Greystone Park to Kessler.

On February 7, 2008, Brentwood sued Bernals and Adan alleging breach of contract. Brentwood's complaint stated:

“1. On or about the 8th day of June, 2005, the Plaintiff, Brentwood Properties, Inc., and the Defendant, Bernals, Inc., entered into a written lease agreement for certain premises in the building known as Greystone Park....

“2. On or about the 25th day of July, 2005, ... Adan ... executed a personal guaranty for the above stated written lease agreement.

“3. [Bernals and Adan] breached the said agreements by failing to pay the proper rental amounts, by failing to pay the proper late fees, and by failing to pay the proper utility fees.

“4. [Brentwood] claims a reasonable attorney's fee ... pursuant to the said agreements.

“WHEREFORE, [Brentwood] demands judgment against the Defendants in the sum of [$75,000], plus a reasonable sum as attorney's fees, plus interest and costs.”

Several months later, on July 1, 2008, Brentwood entered into a written property-management agreement with Kessler (“the Brentwood–Kessler agreement”), similar to the Brentwood–Taylor agreement.

On March 20, 2009, Brentwood filed a motion for a summary judgment. In their reply to that motion, Bernals and Adan argued that Brentwood had no standing to sue based on an alleged breach of the lease agreement because Brentwood was not a party to the lease agreement. On April 13, 2009, the trial court denied Brentwood's summary-judgment motion.

On April 14, 2009, Brentwood filed a motion to substitute Kessler for itself in the action. The trial court granted that motion. On April 17, 2009, Bernals filed counterclaims against Kessler alleging breach of contract, fraud, breach of warranty of quiet enjoyment, trespass, and negligence.

A bench trial of the case was scheduled for April 28, 2009. A few days before that date, a dispute surfaced for the first time regarding the spelling of Adan's name. Adan's name had appeared in the style of the complaint and on subsequent pleadings and motions as “Marca E. Adan,” and the action had been so styled.

On the day set for trial, the parties—including Adan—appeared in court. The dispute over Adan's name was again taken up at that time. It is undisputed that no such person as “Marca” E. Adan exists. It is likewise undisputed that “Maria” E. Adan had signed the lease and the guarantee and that she and her counsel were present in court on the day set for trial.

According to Adan's affidavit, the proceedings ended after approximately an hour, and the trial was to be continued to a later date. Nevertheless, on May 1, 2009, the trial court entered, in pertinent part, the following order:

“Upon oral motion made by the plaintiff, Kessler–Greystone, LLC, the name of the defendant, Marca E. Adan, is hereby changed to reflect the Defendant's correct and proper name, Maria E. Adan.

“Further, the Court finds that service of the Summons and Complaint was properly made upon said defendant, Maria E. Adan, at her personal residence address, and that said defendant, Maria E. Adan, is the signatory to the said lease agreement and personal guaranty forming the basis to the plaintiffs, Kessler–Greystone, LLC's, Complaint.

“Further, the Court finds that the defendant, Maria E. Adan, failed to appear for trial in the above-referenced matter.

“Therefore, judgment by default is hereby entered in favor of plaintiff, Kessler–Greystone, LLC, and against defendant, Maria E. Adan, in the amount of Eighty–Four Thousand Two Hundred Seventy–One and 24/100 Dollars ($84,271.24), plus costs of court.”

(Emphasis added.)

Adan moved to set aside the default judgment. That motion was denied. On December 11, 2009, Kessler filed a motion for a summary judgment on Bernals's counterclaims against it and a renewed motion for a summary judgment on its claims against Bernals. On February 2, 2010, the trial court granted Kessler's motion for a summary judgment as to Bernals's counterclaims and entered a judgment against Bernals in the sum of $130,029.44.

On February 16, 2010, Kessler filed a motion to revise the judgment against Adan to coincide with the amount of the judgment entered against Bernals. On February 26, 2010, Bernals filed a motion to alter, amend, or vacate the judgment against it. On March 29, 2010, the trial court denied Kessler's motion to revise the judgment against Adan. On April 2, 2010, the trial court denied Bernals's motion to alter, amend, or vacate the judgment.

On May 13, 2010, Bernals and Adan filed a notice of appeal to this Court from those judgments. On appeal, they renew their challenge to Brentwood's standing to commence this action, that is, to invoke the subject-matter jurisdiction of the trial court. That challenge is dispositive of this case.

II. Discussion

The question of standing implicates the subject-matter jurisdiction of the court. Ex parte Howell Eng'g & Surveying, Inc., 981 So.2d 413, 419 (Ala.2006). “When a party without standing purports to commence an action, the trial court acquires no subject-matter jurisdiction.” State v. Property at 2018 Rainbow Drive, 740 So.2d 1025, 1028 (Ala.1999). Moreover, “[t]he jurisdictional defect resulting from the plaintiff's lack of standing cannot be cured by amending the complaint to add a party having standing.” Cadle Co. v. Shabani, 4 So.3d 460, 463 (Ala.2008). “When the absence of subject-matter jurisdiction is noticed by, or pointed out to, the trial court, that court has no jurisdiction to entertain further motions or pleadings in the case. It can do nothing but dismiss the action forthwith.” Id. When a circuit court lacks subject-matter jurisdiction, all orders and judgments entered in the case, except an order of dismissal, are void ab initio. Redtop Market, Inc. v. State, 66 So.3d 204 (Ala.2010). Thus, if Brentwood lacked standing to commence this action, then the absence of subject-matter jurisdiction was not cured by the substitution of Kessler, and every order and judgment entered by the trial court is void.

“Standing ... turns on ‘whether the party has been injured in fact and whether the injury is to a legally protected right.’ ” 2018 Rainbow Drive, 740 So.2d at 1027 (quoting Romer v. Board of County Comm'rs of the County of Pueblo, 956 P.2d 566, 581 (Colo.1998) (Kourlis, J., dissenting)). Brentwood's initial complaint sought damages and attorney fees from Bernals and Adan for an alleged breach of the lease agreement, alleging therein that Brentwood leased the premises to Bernals. However, it is undisputed that Brentwood was not a party to the lease agreement. “It is well-settled law that ‘one not a party to, or in privity with a contract, cannot sue for its breach.’ ” Dunning v. New England Life Ins. Co., 890 So.2d 92, 97 (Ala.2003) (quoting Twine v. Liberty Nat'l Life Ins. Co., 294 Ala. 43, 50, 311 So.2d 299, 305 (1975)).

Kessler's sole response to the jurisdictional challenge is an assertion that Brentwood had standing to sue based on a breach of the lease agreement as a third-party beneficiary of that agreement. See Russell v. Birmingham Oxygen Serv., Inc., 408 So.2d 90 (Ala.1981) (noting that “a third person has no rights under a contract between others,” and no standing to sue based on a breach of that contract, “unless the contracting parties intend that the third person receive a direct benefit enforceable in court”). According to Kessler, “the lease agreement entered into between Taylor ... and Bernals on June 8, 2005, was for the benefit of the property manager, Brentwood,.... ...