Eb Investments v. Atlantis Development, 1040410.

• Decision Date: 23 November 2005
• Docket Number: No. 1040410.,1040410.
• Citation: 930 So.2d 502
• Parties: EB INVESTMENTS, L.L.C. v. ATLANTIS DEVELOPMENT, INC., et al.
• Court: Alabama Supreme Court

930 So.2d 502

EB INVESTMENTS, L.L.C. v. ATLANTIS DEVELOPMENT, INC., et al.

No. 1040410.

Supreme Court of Alabama.

November 23, 2005.

COPYRIGHT MATERIAL OMITTED

Robert F. Vargo, Huntsville, for appellant.

F. Page Gamble, Birmingham, for appellees.

NABERS, Chief Justice.

EB Investments, L.L.C. ("EB"), appeals from the order of the Madison Circuit Court dismissing with prejudice its action against Atlantis Development, Inc., Javad Ajdarodini, and Bobby Ajdarodini. We affirm in part, reverse in part, and remand.

I. Facts and Procedure

The facts and procedural history of this case are complicated. At the heart of this dispute are two parcels of real property owned by Atlantis Development ("the property"), which are subject to multiple mortgages that have been assigned through a series of transactions to EB.

On September 20, 1996, Atlantis Development acquired the property by warranty deed. On the same day, Atlantis Development, Javad Ajdarodini, and Bobby Ajdarodini (hereinafter collectively referred to as "Atlantis") entered into a mortgage and security agreement with Jacobs Bank pursuant to which the property secured a loan of $28,000. Atlantis later executed two additional mortgages on the property with Jacobs Bank to secure loans in the amounts of $148,000 and $12,027.25, creating a total indebtedness secured by the property in the amount of $188,027.25. Subsequently, Jacobs Bank merged with Regions Bank.

On or about March 9, 1997, Atlantis received notice that a previous owner of the property intended to exercise a statutory right of redemption. Until that time, Atlantis had been unaware of the deficiencies in the chain of title of the property, i.e., that the previous owner of the property had purchased it at a foreclosure sale. The statutory right of redemption that allegedly existed was eventually assigned to another entity, John Lary, L.L.C., which sued Atlantis Development and others in the Madison Circuit Court in a separate action, CV-97-563 ("the Lary action"), on March 21, 1997, for the right to redeem the property. The right-of-redemption issue in the Lary action remained pending until November 4, 2004, when the circuit court entered a summary judgment for Atlantis Development and the other defendants in that action and concluded that John Lary, L.L.C., had no right to redeem the property.¹

Though the Lary action is not before this Court in this appeal, we must discuss it because rulings in that case affect the present dispute between Atlantis and EB. Although we do not have the full record of the Lary action before us, a substantial portion of it, including the rulings pertinent to this dispute, is contained in the record of the instant case.

On July 2, 2003, Regions Bank assigned the three mortgages Atlantis had originally executed with Jacobs Bank to Mississippi Valley Title Insurance Company, who in turn on December 1, 2003, assigned the mortgages to Aquarius Investments, Inc. Soon thereafter, Aquarius Investments, finding Atlantis in default, sought to foreclose on the property.

On December 29, 2003, after three weeks' notice by publication in the Madison County Record, a newspaper of general circulation published in Madison County, Aquarius Investments conducted a public foreclosure sale, a remedy provided under the terms of the mortgages; at the sale, Aquarius Investments purported to purchase the property for a credit against the indebtedness secured by the senior mortgage. On December 30, 2003, Aquarius Investments assigned the two junior mortgages on the property to EB, who, in turn, having acquired the next priority mortgage against the property, exercised its statutory right of redemption and obtained title to the property. On that same day, EB notified Atlantis that it had obtained title to the property and gave Atlantis 10 days to vacate the premises.

On January 5, 2004, Atlantis acknowledged receipt of EB's notice to vacate; Atlantis, however, did not vacate. Instead, on January 8, 2004, Atlantis filed a motion for a temporary retraining order ("TRO") against EB with the circuit court in the Lary action. At that point, EB had not sued Atlantis. Furthermore, EB was never named as a party in the Lary action. The circuit court in the Lary action granted Atlantis's motion and purported to retroactively void by a TRO the foreclosure sale that had occurred on December 29, 2003, and, as well, declared EB's vacation notice to Atlantis void.

On January 21, 2004, EB filed in the Madison Circuit Court² its initial complaint for ejectment against Atlantis. On that same day, the circuit court in the Lary action issued a preliminary injunction against EB.

In issuing the preliminary injunction, the circuit court in the Lary action once again declared the foreclosure sale and the vacation notice void. The court concluded:

"4. The December 29, 2003 foreclosure sale regarding Lot 2, Block 2, Pavilion Phase 1, and Lot 12, Block 1, Pavilion Phase 2, and Notice to Vacate delivered December 31, 2003, should be deemed void due to:

"(a) Any transactions regarding the real property involved in this litigation was [sic] strictly prohibited by this court during the August 19, 1998, hearing.[³]

"(b) Notice was not provided to movants regarding the foreclosure sale as required by Section 6-8-66[,] Ala.Code (1975), nor did movants receive any form of actual notice.

"(c) The mortgage under which the foreclosure sale occurred, should this court later determine the 1997 redemption by John Lary, L.L.C. was valid, could itself be deemed null and void.

"5. Said sale should be deemed void due to the doctrine of unclean hands, since if allegations in movant's Cross-Claim against [Ray] McKee[⁴] be proven would allow McKee to take advantage of his wrongful conduct in this transaction, in allowing the foreclosure to stand.

"Accordingly it is hereby ORDERED, ADJUDGED AND DECREED,

"A. That the foreclosure sale which occurred on December 29, 2003, is void and of no effect; and "B. That the vacation notice dated December 30, 2003 is also void and of no effect, and that movants are not required to comply with such notice; and

"C. That this Court acknowledges jurisdiction, pursuant to Rule 65(d)(2)[, Ala.R.Civ.P.,] of not only the parties to this action, [the Lary action,] but also [EB] Investments, L.L.C., as being `in active participation or concert with' Defendant Ray McKee, and are, along with the parties to this action hereby enjoined from conducting any further transactions regarding the real property subject to this litigation, to include sending of vacation notices, ejectment proceedings, transfer of interests, foreclosure or any other actions until there has been a final adjudication in this matter as to the rights of the parties, status of redemption and other related matters."

The record of the case before us indicates that Ray McKee, a defendant in the Lary action, was the registered agent for EB and Aquarius Investments. Those entities appear to have been controlled by McKee's wife — apparently the ground on which the circuit court in the Lary action based its authority to include EB in the scope of its order.

On January 30, 2004, EB, along with Aquarius Investments, filed a special appearance in the Lary action in order to challenge the TRO and the preliminary injunction the circuit court had entered in that action. EB moved to declare both orders void under Rule 60(b)(4) and (6), Ala.R.Civ.P. While its Rule 60 motion was pending, EB petitioned the Alabama Court of Civil Appeals for a writ of mandamus; that petition was subsequently transferred to this Court. In its petition, EB asked this Court to direct the circuit court in the Lary action to rule on and grant its Rule 60 motion.⁵ On April 15, 2004, this Court denied the petition, without an opinion. Ex parte EB Invs., L.L.C. (No. 1030922).

Following this Court's denial of its petition for a writ of mandamus, EB once again attempted to foreclose on the property occupied by Atlantis.⁶ In its TRO and preliminary injunction purporting to void the first foreclosure sale, the circuit court in the Lary action had concluded that Atlantis had not been given sufficient notice of the foreclosure sale under § 6-8-66, Ala.Code 1975;⁷ thus, before the second foreclosure sale, EB served Atlantis via certified mail as well as through three weeks' publication notice. On June 21, 2004, following the three-week notice period, EB conducted another public foreclosure sale at which it purported to purchase the property for a credit against the indebtedness owed by Atlantis. On that same day, EB notified Atlantis that it had foreclosed on the property and once again gave Atlantis 10 days to vacate the premises.

On July 2, 2004, the circuit court issued a new order in the Lary action in which it acknowledged that EB had conducted a foreclosure sale on June 21, 2004. The circuit court concluded that that sale was in direct violation of the preliminary injunction it had entered on January 21, 2004, and the court declared the sale and resulting vacation notice void. Furthermore, the circuit court ordered EB to appear and show cause why it should not be found in contempt of court.

On August 5, 2004, Atlantis filed a motion to dismiss this action. On August 19, 2004, EB filed its second amended complaint,⁸ adding a count styled "Relief from Judgment or Order," asserting a collateral attack on the preliminary injunction issued against EB in the Lary action. On September 15, 2004, Atlantis moved to dismiss EB's second amended complaint, which we have construed as a motion for failure to state a claim under Rule 12(b)(6), Ala. R.Civ.P.⁹

On October 1, 2004, the circuit court in this case granted Atlantis's motion to dismiss all counts with prejudice. On October 29, 2004, EB moved the circuit court to alter, amend, or vacate its judgment under Rule 59(e), Ala.R.Civ.P. On November 12, 2004, following the resolution of the right-of-redemption issue in the Lary...