Campbell v. Bank of Am., N.A.

Decision Date13 September 2013
Docket Number2100246.
Citation141 So.3d 492
PartiesBrenda F. CAMPBELL and C.W. Campbell v. BANK OF AMERICA, N.A.
CourtAlabama Court of Civil Appeals

OPINION TEXT STARTS HERE

Alabama Supreme Court 1111284.

Kenneth J. Lay, Birmingham, for appellants.

John T. Bender, Mobile, for appellee.

On Application for Rehearing

PITTMAN, Judge.

This court's opinion of March 30, 2012, is withdrawn, and the following is substituted therefor.

Brenda F. Campbell and her son, C.W. Campbell, appeal from a judgment in favor of Bank of America, N.A. (“Bank of America”), in an ejectment action. We affirm.

Facts and Procedural History

The Jefferson Circuit Court's judgment recites the following facts:

“The parties entered into a mortgagor/mortgagee relationship based on a mortgage and note, which originated on June 10, 1998. Subsequently, the [Campbells] experienced financial difficulties, and the loan was accelerated in 2004 as a result of default for nonpayment. Over the next two years, the evidence shows that [Bank of America] initiated a number of loss-mitigation procedures as well as other actions designed to help the [Campbells] avoid foreclosure. These actions were unsuccessful, and although [Bank of America] set a date for a foreclosure sale in late 2006, the [Campbells] stayed the sale by filing a Chapter 13 bankruptcy petition. Over the next two years, numerous bankruptcy petitions were filed, further delaying foreclosure proceedings. [Bank of America] was granted relief from the stay of the foreclosure sale in June of 2008, and notice of the sale was again given to the [Campbells]. The foreclosure sale took place on September 3, 2008, at which time [Bank of America] took title.

“At trial, the [Campbells] did not dispute the fact that they were in default; rather, they argued that [Bank of America] failed to comply with [United States Department of Housing and Urban Development] regulations regarding loss-mitigation procedures, and that the foreclosure sale was therefore wrongfully initiated. Specifically, the [Campbells] alleged that [Bank of America] was guilty of noncompliance by failing to both 1) offer all possible loss-mitigation programs to [them] before beginning foreclosure proceedings, and 2) reinitiate loss-mitigation efforts after the relief from stay was granted and before foreclosure proceedings were resumed.”

Following a bench trial, the circuit court entered a judgment determining that the United States Department of Housing and Urban Development (“HUD”) loss-mitigation procedures were mandatory, that Bank of America had substantially complied with those procedures, and that Bank of America had established its right to eject the Campbells from the property. The Campbells filed a timely postjudgment motion and requested a hearing on that motion. The circuit court set a date for a hearing, but it denied the motion before the hearing was held. The Campbells timely appealed. The supreme court subsequently transferred the appeal to this court pursuant to Ala.Code 1975, § 12–2–7(6).

Standard of Review

“Where evidence is presented to the trial court ore tenus, a presumption of correctness exists as to the court's conclusions on issues of fact; its determination will not be disturbed unless it is clearly erroneous, without supporting evidence, manifestly unjust, or against the great weight of the evidence.” Pollard v. Unus Props., LLC, 902 So.2d 18, 23 (Ala.2004) (quoting American Petroleum Equip. & Constr., Inc. v. Fancher, 708 So.2d 129, 132 (Ala.1997)). ‘However, as to issues of law, ... “ ... our review is de novo. Padgett v. Conecuh County Comm'n, 901 So.2d 678, 685 (Ala.2004) (quoting Alfa Mut. Ins. Co. v. Small, 829 So.2d 743, 745 (Ala.2002)).”

Weeks v. Wolf Creek Indus., Inc., 941 So.2d 263, 268–69 (Ala.2006).

Discussion
I.

The Campbells argued in the circuit court and they now maintain on appeal that Bank of America's alleged noncompliance with HUD loss-mitigation alternatives to foreclosure constitutes a defense to a foreclosure action. An ejectment action following a nonjudicial foreclosure, however, is not a “foreclosure action,” and a defense in such an action asserting errors in the foreclosure process is a collateral attack on a foreclosure. See Dewberry v. Bank of Standing Rock, 227 Ala. 484, 493, 150 So. 463, 470 (1933) (characterizing the action in Jones v. Hagler, 95 Ala. 529, 10 So. 345 (1891), in which the plaintiff sought possession of certain property he had purchased from a trustee, who had sold the property pursuant to a power of sale in a deed of trust, and in which the defendant had asserted irregularities in the sale, as “a statutory action in the nature of ejectmentan indirect or collateral attack upon the foreclosure of real and personal property sold by a trustee, under the power [of sale in a deed of trust] (some emphasis in original; some emphasis added)). Accord Pinkert v. Lamb, 215 Ark. 879, 883, 224 S.W.2d 15, 17 (1949) (stating that an ejectment action is a “collateral attack by appellees on the ... foreclosure decree and sale ..., and the burden [is] on them to prove such defects therein as would render the sale and decree void”); Dime Sav. Bank, FSB v. Greene, 2002 Pa.Super. 392, 813 A.2d 893, 895 (2002) (stating that [a]n ejectment action is a proceeding collateral to that under which the land was sold” and that, “where it is claimed that [an] underlying default judgment [in a judicial-foreclosure action] is merely voidable, that claim will not be entertained because such a judgment can not be reached collaterally”).

In a direct attack on a foreclosure—that is, an action seeking declaratory and injunctive relief to halt the foreclosure sale before it occurs see, e.g., Ferguson v. Commercial Bank, 578 So.2d 1234 (Ala.1991); Bank of Red Bay v. King, 482 So.2d 274 (Ala.1985); and Woods v. SunTrust Bank, 81 So.3d 357 (Ala.Civ.App.2011), or an action to set aside the sale after it has occurred, see, e.g., Beal Bank, SSB v. Schilleci, 896 So.2d 395 (Ala.2004); Kelly v. Carmichael, 217 Ala. 534, 536, 117 So. 67, 69 (1928); and Browning v. Palmer, 4 So.3d 524 (Ala.Civ.App.2008)—any circumstance in the foreclosure process that would render the foreclosure sale void or voidable may be asserted. In a proceeding involving a collateral attack on a foreclosure, however, only those circumstances that would render the foreclosure sale void may be raised as an affirmative defense.

[T]he true distinction between void and voidable acts, orders, and judgments, is, that the former can always be assailed in any proceeding, and the latter, only in a direct proceeding.” Alexander v. Nelson, 42 Ala. 462, 469 (1868). See, e.g., Carlton v. Owens, 443 So.2d 1227, 1231 (Ala.1983) (stating that [t]he only remedy available to a defendant subject to a voidable judgment is a direct appeal from that judgment; a collateral attack is not allowed”); City of Dothan v. Dale Cnty. Comm'n, 295 Ala. 131, 324 So.2d 772 (1975) (holding that, because city's annexation of county land was, at most, voidable, opponents could not attack the annexation in a collateral proceeding); 23 Am.Jur.2d Deeds § 162 (2002) (stating that [a] voidable deed must be attacked, if at all, directly, but a deed that is void may be collaterally attacked by anyone whose interest is adversely affected by it” (footnote omitted)).

One commentator has identified three types of flaws in the foreclosure process: those that will render the foreclosure sale void; those that will render the sale merely voidable; and those that are insignificant.

[W]hen the power [of sale in a mortgage] is exercised in violation of the laws or of the security instrument terms, questions arise as to whether compliance with the laws or instrument provisions is a prerequisite for the exercise of the power so that the purported sale is utterly void, or whether the violation is merely sufficiently egregious as to produce a voidable sale, or whether it is so insignificant as to have no impact on the sale.”

____________________

Courts frequently speak of flaws in [nonjudicial-foreclosure] sales so serious that they produce a void sale.... What the courts mean in denominating a sale as void is that adversely affected parties may have a sale set aside even though the property passed into the hands of a bona fide purchaser. In this sense of the term, there are very few void sales. Most of the cases in which a sale to a bona fide purchaser was set aside involved sales by trustees or mortgagees who lacked the power to sell.”

12 Thompson on Real Property §§ 101.04(c)(2) and 101.04(c)(2)(i) at 401–02 (Thomas ed.1994) (footnotes omitted).

“Where a defect is not so egregious as to make the sale utterly void but not so inconsequential as to be overlooked, the sale will be voidable; that is, it can be set aside at the request of an injured party so long as the legal title has not moved to a bona fide purchaser. This follows from the traditional common law rule that a subsequent bona fide purchaser of a legal title takes free of hidden equities. The right of an injured party to set aside a deed because of flaws that produce only a voidable title is an equitable right cut off by transfer to a bona fide purchaser.”

Id., § 101.04(c)(2)(ii) at 403.

In Alabama, the following circumstances may render a foreclosure sale void: (1) when the foreclosing entity does not have the legal right to exercise the power of sale, as, for example, when that entity is neither the assignee of the mortgage, Sturdivant v. BAC Home Loans Servicing, LP, [Ms. 2100245, December 16, 2011] ––– So.3d –––– (Ala.Civ.App.2011), nor the holder of the promissory note, Perry v. Federal Nat'l Mortg. Ass'n 100 So.3d 1090 (Ala.Civ.App.2012), at the time it commences the foreclosure proceedings; (2) when “the debt secured by the mortgage was fully paid prior to foreclosure,” Lee v. Gaines, 244 Ala. 664, 666, 15 So.2d 330, 331 (1943); (3) when the foreclosing entity failed to give notice of the time and place...

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