Broadmoor Realty, Inc. v. First Nationwide Bank

• Decision Date: 14 September 1990
• Parties: BROADMOOR REALTY, INC. v. FIRST NATIONWIDE BANK. 89-468.
• Court: Alabama Supreme Court

Page 779

568 So.2d 779

BROADMOOR REALTY, INC. v. FIRST NATIONWIDE BANK.

89-468.

Supreme Court of Alabama.

Sept. 14, 1990.

William J. Baxley and Joel E. Dillard of Baxley, Dillard & Dauphin, Birmingham, for appellant.

Steven L. Nicholas of Sirote & Permutt, Mobile, for appellee.

MADDOX, Justice.

This appeal presents two issues: 1) whether the trial court erred in denying the defendant's motion to set aside a foreclosure sale or, in the alternative, to deny confirmation of that sale, and 2) whether the trial court erred in entering a summary judgment for the plaintiff bank on the defendant's counterclaim seeking an accounting in equity. The parties have been before this Court previously. SeeBroadmoor Realty, Inc. v. First Nationwide Bank [hereinafter "Broadmoor I "], 553 So.2d 122 (Ala.1989). Although the issues in Broadmoor I were different from the two issues presented here, the factual circumstances that underlie the two separate appeals are the same.

FACTS

The essential facts of this case were set forth in Broadmoor I, wherein we stated:

"Plaintiff First Nationwide Bank, successor in interest by merger with St. Louis Federal Savings and Loan Association (hereinafter 'St. Louis Federal'), is a federal savings bank with its principal place of business in San Francisco, California. Defendant Broadmoor Realty, Inc., successor by name change to East Perdido Properties, Inc. (hereinafter 'East Perdido'), is an Alabama corporation with its principal place of business in St. Louis County, Missouri. Defendant Town and Campus International, Inc. (hereinafter 'Town and Campus'), is a Missouri corporation with its principal place of business also in St. Louis County, Missouri.

"On July 19, 1983, East Perdido (now Broadmoor Realty) executed a promissory note for $9,400,000 and an accompanying mortgage on certain real estate to First Nationwide, for which Town and Campus was guarantor. On August 26, 1983, East Perdido, Town and Campus, St. Louis Federal, Realty Sales, Inc., and First Prudential Corporation entered into a joint venture agreement under the name of Coastal Perdido Properties (hereinafter 'Coastal Perdido') for the purpose of 'acquiring, holding, developing, and selling certain real estate' in Baldwin County, Alabama. On August 30, 1983, Coastal Perdido assumed the mortgage given by East Perdido to First Nationwide. In an unrelated transaction, East Perdido executed another promissory note to First Nationwide on March 19, 1984, for $900,000 with a revolving line of credit, which was also guaranteed by Town and Campus.

"When the joint venture defaulted on the mortgage and Broadmoor Realty defaulted on the revolving note, First Nationwide sued Broadmoor Realty, Town and Campus, and Coastal Perdido on September 22, 1987, demanding foreclosure on the mortgaged property and a money judgment on both promissory notes. The trial court granted partial summary judgment for First Nationwide on three of its six counts, ordering foreclosure of the mortgage and ordering Broadmoor Realty and Town and Campus to pay $1,177,008.93, representing the balance due on the $900,000 note plus interest and attorney fees."

553 So.2d at 123. In Broadmoor I, this Court held that the trial court did not err in entering a partial summary judgment for First Nationwide Bank (hereinafter "First Nationwide") on counts three, five, and six of its six-count complaint, which sought respectively, a court-ordered foreclosure sale of the real estate mortgaged by East Perdido (now Broadmoor Realty) to St. Louis Federal (now First Nationwide) to secure the $9,400,000 loan, a judgment against Broadmoor Realty for $994,131.36 plus interest and attorney fees owed to First Nationwide resulting from Broadmoor Realty's default on its $900,000 loan, and a judgment against Town and Campus, as guarantor of the $900,000 loan, for the amount to be entered against Broadmoor Realty resulting from its default on that loan.

Following the trial court's entry of summary judgment for First Nationwide on count three of its complaint (the count seeking a court-ordered foreclosure sale of the mortgaged property of Broadmoor Realty), First Nationwide filed a motion to receive a credit on its bid, in lieu of a cash bid, to be offered by it at the foreclosure sale to the extent of the judgment entered against Broadmoor Realty resulting from its default on First Nationwide's $9,400,000 loan. ¹ Pursuant to the trial court's order, First Nationwide was permitted, at the foreclosure sale, to enter a non-cash bid to the extent of the debt owed to it by Broadmoor Realty. According to the register's report, First Nationwide, the sole bidder, offered a bid of $2,500,000 for the property, which was accepted by the register, and that amount was credited against the debt owed to First Nationwide by Broadmoor Realty. Following the trial court's confirmation of that foreclosure sale, a deed was issued by the register to First Nationwide, and after the trial court denied Broadmoor Realty's motion to set aside the foreclosure sale or, in the alternative, to deny confirmation of that sale, the trial court entered a final order dismissing First Nationwide's three remaining counts against Broadmoor Realty, and also entered a summary judgment for First Nationwide on Broadmoor Realty's counterclaim seeking an accounting of the assets and liabilities of the joint venture named Coastal Perdido. ²

I

Broadmoor Realty argues that the trial court erred in permitting First Nationwide to receive a credit on its foreclosure bid to the extent of the judgment entered against Broadmoor Realty resulting from its default on the $9,400,000 loan. Broadmoor Realty argues that, because the notice of foreclosure sale specified that the foreclosed-upon property would be sold at public outcry "to the highest bidder for cash," the trial court could not permit First Nationwide to enter a non-cash bid for the property and consequently could not confirm the foreclosure sale. In support of that position, Broadmoor Realty cites the case of McCully v. Chapman, Adm'r, 58 Ala. 325 (1877). That case involved the unauthorized decision by an administrator to sell estate property on credit and not "for cash" as explicitly ordered by the probate court. We find that case to be distinguishable. Unlike the McCully case, the trial court in this case expressly stated in its order that First Nationwide could receive a credit on its bid offered at the foreclosure sale to the extent of the judgment entered against Broadmoor Realty resulting from its default on the $9,400,000 loan. The fact that the trial court entered that order after the foreclosure sale announcement had been published in the local paper is not critical.

The underlying purpose of a foreclosure sale is to sell property at public outcry in order to generate funds to pay the affected creditors. To force First Nationwide, the sole creditor, to tender a "cash bid" at a foreclosure sale for property that it initially looked to as security for its loan to Broadmoor Realty is unnecessary in light of the fact that any cash bid given by First Nationwide at the foreclosure sale would later be returned to it and credited against the debt owed by Broadmoor Realty. To require the "cash bid" here would be to elevate form over substance. The logic of not requiring a "cash bid" in a case such as this has already been noted in other courts. See In re Renne, 55 F.Supp. 868 (D.C.Neb.1944); Mogilka v. Jeka, 131 Wis.2d 459, 389 N.W.2d 359 (Wis.App.), review dismissed, 131 Wis.2d 594, 393 N.W.2d 297 (1986); Pennington v. Purcell, 155 Miss. 554, 125 So. 79 (1929).

For the aforementioned reasons, we affirm the trial court's order permitting First Nationwide to use its judgment entered against Broadmoor Realty to pay its bid price for the foreclosure property in lieu of a cash bid, as well as its denial of Broadmoor Realty's motion to set aside the foreclosure sale or, in the alternative, to deny confirmation of that sale.

II

The second and final issue raised by Broadmoor Realty involves the summary judgment for First Nationwide on Broadmoor Realty's counterclaim seeking an accounting in equity of the assets, credits, debts, liabilities, transactions, and dealings of Coastal Perdido. As noted earlier, the partners of Coastal Perdido were East Perdido (now Broadmoor Realty) and Realty Sales. At the time of Realty Sales' involvement in the joint venture, it was a wholly owned subsidiary of First Nationwide. Under the terms of their joint venture agreement, Broadmoor Realty and Realty Sales agreed to make contributions to a common fund for the sole purpose of "acquiring, holding, developing, and selling" certain real estate located in Baldwin County. Furthermore, the agreement stated that upon "termination of this Joint Venture, all assets of the Joint Venture shall be distributed to the parties then entitled thereto, and a final accounting shall be made of the assets, credits, debts, liabilities, transactions, and dealings of the Joint Venture." The agreement also stipulated that the partners would share equally in the profits and losses generated by their joint venture.

In order to acquire the funds needed to purchase the desired real estate, Broadmoor Realty and Realty Sales (i.e. Coastal Perdido) stipulated in their joint venture agreement that Coastal Perdido would assume payment of the mortgage note executed by Broadmoor Realty to St. Louis Federal (now First Nationwide). Because of...