Bockman v. Wch, L.L.C.

• Decision Date: 19 May 2006
• Docket Number: 1040305,1040419.
• Citation: 943 So.2d 789
• Parties: Jim G. BOCKMAN v. WCH, L.L.C. WCH, L.L.C. v. Jim G. Bockman.
• Court: Alabama Supreme Court

943 So.2d 789

Jim G. BOCKMAN v. WCH, L.L.C.

WCH, L.L.C. v. Jim G. Bockman.

1040305

1040419.

Supreme Court of Alabama.

May 19, 2006.

Patrick G. Nelson of Johnston, Moore, Maples & Thompson, Huntsville, for appellant/cross-appellee Jim G. Bockman.

William S. Pritchard III of Pritchard, McCall & Jones, L.L.C., Birmingham; and Patrick D. Pinkston of Enslen, Pinkston & Courtney, LLP, Wetumpka, for appellee/cross-appellant WCH, L.L.C.

SMITH, Justice.

This appeal and cross-appeal arise from a dispute over the amount a junior mortgagee must pay to exercise his statutory right to redeem property. Jim G. Bockman, the plaintiff below and the junior mortgagee, appeals from a summary judgment in favor of the senior mortgagee, WCH, L.L.C. ("WCH"), holding that the debt owed under a promissory note and secured by a mortgage on real property included interest upon unpaid interest (case no. 1040305). WCH, the defendant below, cross-appeals from a summary judgment in favor of Bockman holding that the debt secured by a mortgage owned by WCH, but having a lower priority than the mortgage owned by Bockman, is not a lawful charge to be included in the redemption costs (case no. 1040419). We affirm.

Facts and Procedural History

The material facts of this case are undisputed. Hartley Silica, Inc. ("Hartley"), owned real property in Autauga County ("the property"). Hartley borrowed money five times from various lenders, and the debt from those loans was secured by five different mortgages on the property.

On September 7, 1989, Hartley borrowed $561,230 from William I. Dozier, D.C. Mercer, and Austin V. White, Jr. ("the mortgagees"). The debt was evidenced by a promissory note ("the note") and was secured by a mortgage on the property ("the first mortgage"). The note stated:

"[Hartley] promises to pay to the order of [the mortgagees] the principal sum of Five hundred sixty-one thousand two hundred thirty and no/100 Dollars ($561,230.00), with interest thereon from date at the rate of ten percent (10%) per annum, the said indebtedness being payable in the following manner: 40 semiannual payments of $32,707.62 each with the first payment due 6 months from [September 7, 1989]. Said payments represent the principal at 10% interest amortized over a 20 year period with payments made every six months. The 40th and last payment shall be in the amount of $33,663.30.

"Each payment shall be applied first to the payment of acrued [sic] interest and the balance as credit on the principal. Said principal and interest ... shall bear interest from maturity at the said rate until paid."

On September 12, 1989, the first mortgage was recorded in the probate judge's office in Autauga County. Hartley paid a total of $166,415.24 on the note.¹

On May 11, 1992, Hartley borrowed $468,311 from Bockman, and the debt was secured by a mortgage on the property ("the second mortgage"). The second mortgage was recorded in the probate judge's office in Autauga County on June 12, 1992. In 1994, Bockman made two more loans to Hartley that were also secured by mortgages on the property ("the third and fourth mortgages").

On September 25, 1997, Hartley and the mortgagees executed an amendment to the terms of the note and the first mortgage ("the 1997 agreement"). Hartley was in default under the terms of the note and the first mortgage, and the 1997 agreement allowed Hartley to avoid foreclosure on the property. Under the terms of the 1997 agreement, Hartley and the mortgagees agreed that, as of August 15, 1997, the balance due on the note was $750,000. They further agreed that the balance due would be $800,000 if full payment of the mortgage was made on or before November 15, 1997.² Hartley never made any further payments on the note, but the mortgagees elected not to exercise their right to foreclose on the property.

On March 22, 2000, Hartley borrowed money from WCH.³ The debt was evidenced by a promissory note and was secured by a mortgage on the property ("the fifth mortgage"). The fifth mortgage was recorded in the probate judge's office in Autauga County on April 10, 2000. Hartley never made any payments on the debt secured by the fifth mortgage.

Through a series of assignments, the mortgagees sold the note and first mortgage to WCH on May 5, 2003. Therefore, WCH became the holder of the note and the first mortgage, as well as the fifth mortgage. Because Hartley was in default on the debt secured by the first mortgage, WCH exercised its right to foreclose on the property. On May 6, 2003, a foreclosure sale was conducted under the provisions of the first mortgage. WCH was the highest bidder; it purchased the property for $1,357,291.

On April 14, 2004, Bockman, who held the second, third, and fourth mortgages, "made a demand for lawful charges for redemption from foreclosure" pursuant to the statutory right of redemption set out in § 6-5-248, Ala.Code 1975. Section 6-5-248, Ala.Code 1975, permits "[a]ny junior mortgagee" to redeem property that has been sold. This statutory right of redemption must be exercised within one year from the date of the sale. To exercise the right of redemption, a junior mortgagee must

"pay or tender to the purchaser or his or her transferee the purchase price paid at the sale, with interest at the rate allowed to be charged on money judgments . . . and all other lawful charges, also with interest aforesaid; lawful charges are the following:

"(1) Permanent improvements as prescribed herein.

"(2) Taxes paid or assessed.

"(3) All insurance premiums paid or owed by the purchaser

"(4) Any other valid lien or encumbrance paid or owned by such purchaser or his or her transferee or if the redeeming party is a judgment creditor or junior mortgagee or any transferee thereof, then all recorded judgments, recorded mortgages and recorded liens having a higher priority in existence at the time of sale which are revived under Section 6-5-248(c)."

§ 6-5-253(a), Ala.Code 1975.

WCH responded to Bockman's "demand for lawful charges for redemption from foreclosure," but Bockman disputed the redemption cost calculated by WCH. On May 4, 2004, Bockman filed a declaratory-judgment action against WCH seeking a determination of the amount of money he must pay to redeem the property. Bockman also tendered $1,184,664 with the complaint alleging that, under § 6-5-253, Ala.Code 1975, this was the amount necessary for him to redeem the property. WCH answered Bockman's complaint and denied Bockman's allegation that the tendered amount was the correct redemption cost.

On August 26, 2004, WCH filed a motion for a summary judgment with supporting affidavits and exhibits. In support of the motion, WCH submitted a detailed calculation of what it contended was the correct redemption cost. Joseph M. Broday, a certified public accountant, prepared this calculation, and he testified in an affidavit that Bockman was required to pay $2,473,197.16 to redeem the property. WCH alleged that this amount represented the sum of the purchase price it had paid at the foreclosure and all other "lawful charges" as set out in § 6-5-253(a), Ala.Code 1975.

The trial court ordered Bockman to submit a response to WCH's summary-judgment motion by September 15, 2004, and set the hearing on the motion for September 21, 2004. Bockman did not respond to WCH's summary-judgment motion until the morning of September 21, 2004, the same day set for the hearing on the motion. Bockman filed his own motion for a summary judgment with his response to WCH's motion. Bockman argued that WCH's redemption-cost calculation was erroneous because, he said, it was partly based on the terms of the 1997 agreement. Bockman contended that, because the 1997 agreement was executed after the execution of the second, third, and fourth mortgages, it could not be enforced against him in calculating the redemption cost.

At the hearing, WCH asked the trial court if it could submit supplemental materials to support its motion for a summary judgment, and the trial court granted WCH's request. On September 24, 2004, WCH submitted a "supplemental brief and affidavit." The supplemental materials included an alternative redemption-cost calculation. J. Wray Pearce, a certified public accountant, prepared this calculation based on the premise that the 1997 agreement could not be enforced against Bockman.⁴ Pearce testified in an affidavit that Bockman had to pay $1,849,809.03 to redeem the property. WCH argues that this calculation was prepared according to the original terms of the note.

Bockman replied to WCH's supplemental materials arguing that the calculation set out in WCH's "supplemental brief and affidavit" was incorrect for two reasons. First, Bockman argued that the calculation was erroneous because it was based on the premise that the debt owed under the note and secured by the first mortgage included interest upon unpaid interest. Second, Bockman argued that the calculation was erroneous because it included the amount necessary to pay the debt secured by the fifth mortgage.

On October 20, 2004, the trial court entered a final order on Bockman's and WCH's motions for summary judgment. The trial court found that neither Bockman's nor WCH's calculation of proposed redemption costs complied with § 6-5-253(a), Ala.Code 1975. The trial court ordered that Bockman must pay $1,625,874.80 to redeem the property. In determining the redemption amount, the trial court found that the 1997 agreement could not be enforced against Bockman in calculating the redemption cost and that the amount necessary to pay off the debt secured by the fifth mortgage was not a permissible "legal charge" to be included in the redemption cost. The trial court ordered that Bockman had to deposit with the clerk of the court the additional sum of $441,210.80 (in addition to the $1,184,664 he had already tendered) plus accrued interest at $145.06 per day from May 4, 2004, to validly exercise his right of redemption. In its final...