FSRJ Props., LLC v. Walker

• Decision Date: 09 October 2015
• Docket Number: 2140648.
• Parties: FSRJ PROPERTIES, LLC v. Johnny WALKER.
• Court: Alabama Court of Civil Appeals

195 So.3d 970

FSRJ PROPERTIES, LLC

v.Johnny WALKER.

2140648.

Court of Civil Appeals of Alabama.

Oct. 9, 2015.

Brian J. Ritchey of Ritchey & Ritchey, PA, Birmingham, for appellant.

Carl E. Chamblee, Jr., of Chamblee & Malone, LLC, Birmingham, for appellee.

PER CURIAM.

On June 19, 2007, and June 20, 2007, Johnny Walker, the mortgagee, and Pat Sanford, individually and in his capacity as the president of Sanford Investments, Inc. (Sanford Investments”), entered into two separate mortgage agreements—one regarding certain real property in St. Clair County (“the St. Clair property”) and the other regarding certain real property in Talladega County (“the Talladega property”). The mortgage documents were properly recorded. On June 20, 2007, Sanford, individually and in his capacity as president of Sanford Investments, executed two promissory notes, each in the amount of $250,000, in favor of Walker. Over the next several months, Sanford remitted payments to Walker; however, by December 2007, Sanford had ceased making payments.

On March 17, 2008, Sanford Investments executed a warranty deed to the St. Clair property in favor of FSRJ Properties, LLC (“FSRJ”), for $300,000.¹ The language of the warranty deed indicates that the St. Clair property was “free from all encumbrances.” The warranty deed reads, in pertinent part:

“And [Sanford Investments] does for itself and for its successors and assigns covenant with [FSRJ], its successors and assigns, that they are [sic] lawfully seized in fee simple of said premises; that they have [sic] a good right to sell and convey the same as aforesaid; that they [sic] will and their successors and assigns shall warrant and defend the same to [FSRJ], its successors and assigns forever against the lawful claims of all persons except as herein stated.”

The warranty deed was recorded on March 21, 2008.

By letters dated June 3, 2008, and August 20, 2008, Walker informed Sanford that he intended to foreclose on the mortgage to the St. Clair property and the Talladega property unless Sanford or Sanford Investments paid their debt in full and that a title search had revealed that Sanford Investments had sold the St. Clair property to FSRJ without Walker's written consent as required in the mortgage agreement. Properly noticed foreclosure sales were held, and Walker purchased the St. Clair property and the Talladega property at those sales. The foreclosure deeds were recorded, and Walker leased the St. Clair property to a tenant. In 2009, litigation occurred in the Talladega District and Circuit Courts regarding possession of the Talladega property, which was ultimately awarded to Walker after Sanford was evicted from the Talladega property.

On December 31, 2013, more than five years after Walker purchased the St. Clair property at the foreclosure sale, Sanford, Sanford Investments, and FSRJ filed a complaint in the St. Clair Circuit Court. Sanford, Sanford Investments, and FSRJ requested an order that would void the November 13, 2008, foreclosure deed to the St. Clair property and that would determine the parties' rights to the St. Clair property, including determining the amount of money owed to Sanford, Sanford Investments, and FSRJ from Walker's rental income. In the complaint, FSRJ alleged that Sanford and Sanford Investments had executed a mortgage on the St. Clair property in favor of Walker in consideration for a loan in the amount of $250,000; that, after defaulting on the loan, Sanford Investments had executed a warranty deed to convey the St. Clair property to FSRJ; that Walker had foreclosed on the mortgage and purchased the St. Clair property at a foreclosure sale; and that Walker had taken constructive possession of the St. Clair property and leased it to a tenant, from whom he had collected monthly rental payments.

On January 31, 2014, Walker filed a motion to dismiss Sanford, Sanford Investments, and FSRJ's action. Walker asserted, among other things, that the applicable limitations period for actions to set aside a mortgage foreclosure is two years and that that period had expired before they filed the action. FSRJ filed a response to Walker's motion to dismiss. FSRJ asserted that the applicable statute-of-limitations period for disputes regarding real property is 10 years. On February 25, 2014, the circuit court entered an order in which it denied Walker's motion to dismiss.

On February 24, 2014, Walker filed a motion for a summary judgment. Walker argued that he was entitled to a summary judgment based upon the grounds of “res judicata,” “statute of limitations,” or “lack of standing.”² On March 3, 2015, FSRJ filed a motion for a summary judgment. FSRJ argued that it was entitled to a summary judgment because the foreclosure deed was void and because the judgment regarding the Talladega property had satisfied the terms of “the Note”; therefore, FSRJ argued, it would be inequitable to award Walker ownership of the St. Clair property.

After hearing arguments of counsel and reviewing the documentary submissions, the circuit court entered an order on April 15, 2015, in which it granted Walker's motion for a summary judgment on all the claims, concluding specifically that the claims of FSRJ were “barred by the applicable statute of limitations.” It denied FSRJ's motion for a summary judgment.

FSRJ filed a notice of appeal to this court that same day.³ This appeal was transferred by this court to our supreme court for lack of subject-matter jurisdiction, and our supreme court transferred the appeal to this court, pursuant to § 12–2–7(6), Ala.Code 1975

. FSRJ seeks our review of whether the circuit court erred by concluding that the applicable statute-of-limitations period had expired before it filed its complaint, and it requests a determination as to whether it has superior right, title, and interest in the St. Clair property.

“This Court's standard for reviewing a summary judgment has been stated many times, most recently in Potter v. First Real Estate Co., 844 So.2d 540 (Ala.2002)

, in which this Court stated:

“ ‘We review a summary judgment de novo. American Liberty Ins. Co. v. AmSouth Bank, 825 So.2d 786 (Ala.2002).

“ ‘ “We apply the same standard of review the trial court used in determining whether the evidence presented to the trial court created a genuine issue of material fact. Once a party moving for a summary judgment establishes that no genuine issue of material fact exists, the burden shifts to the nonmovant to present substantial evidence creating a genuine issue of material fact. ‘Substantial evidence’ is ‘evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.’ In reviewing a summary judgment, we view the evidence in the light most favorable to the nonmovant and entertain such reasonable inferences as the jury would have been free to draw.”

“ ‘Nationwide Prop. & Cas. Ins. Co. [v. DPF Architects, P.C. ], 792 So.2d [369] at 372 [ (Ala.2001) ], quoted in American Liberty Ins. Co., 825 So.2d at 790.’

“844 So.2d at 545.”

Mt. Carmel Estates, Inc. v. Regions Bank, 853 So.2d 160, 164 (Ala.2002)

.

In his motion for a summary judgment, Walker argued that Kelley Realty Co. v. McDavid, 211 Ala. 575, 577, 100 So. 872, 874 (1924)

, establishes a two-year statute of limitations for actions to set aside a foreclosure. Actually, Kelley Realty addressed the prescriptive period for a mortgagor to bring an action to set aside a foreclosure sale due to irregularities in the notice of sale. The mortgagor in that case had argued that the mortgagee had failed to properly advertise the foreclosure sale, that that defect rendered the sale absolutely void, and that the mortgagor could redeem the property within 10 years from the date of the sale. Kelley Realty, 211 Ala. at 577, 100 So. at 874. Our supreme court held, however, that the failure to strictly follow the notice provisions of the mortgage rendered the foreclosure sale “voidable only to the election of the mortgagor, properly and seasonably asserted.” Id. Our supreme court adopted the rule from other jurisdictions that, in the absence of special and equitable circumstances, a mortgagor has only two years to commence an action to avoid a defective foreclosure sale or, upon the expiration of that two-year period, the doctrine of laches would bar the claim.⁴ Id.

Nevertheless, in the present case, the circuit court entered a summary judgment in favor of Walker on the theory that our supreme court had applied a two-year statute of limitations in Kelley Realty, and FSRJ has acquiesced to that characterization; therefore, we analyze the case accordingly. See Lewis v. Oakley, 847 So.2d 307, 311 (Ala.2002)

(appellate court will review case based on legal theories advanced in trial court to which all parties have acquiesced).

FSRJ argues that Kelley Realty should not be followed in this case because, it says, the allegations in its complaint seeking “to void the foreclosure deed,” are not attempts to set aside the foreclosure sale by which Walker obtained title to the St. Clair property. FSRJ contends that it is seeking only a declaratory judgment determining the rights of the parties based on the fact that FSRJ had obtained a warranty deed to the St. Clair property before Walker obtained his foreclosure deed and on the fact that Walker knew about the existence of that warranty deed when he purchased the St. Clair property.

Based on those allegations, FSRJ requested that the circuit court

“declare the rights of the parties with respect to their respective interest in the [St. Clair property], and to order Walker to void the foreclosure deed obtained by him on the [St. Clair property] and refund to [FSRJ] all monies received for rent on this real property from the date of the foreclosure sale to date.”

As grounds for that relief, FSRJ asserted that the promissory note executed by Sanford, individually and in his capacity as president of Sanford...