Jim Davis and Co. v. Albuquerque Federal Sav. & Loan Ass'n

• Decision Date: 10 November 1988
• Citation: 536 So.2d 55
• Court: Alabama Supreme Court
• Parties: JIM DAVIS AND COMPANY v. ALBUQUERQUE FEDERAL SAVINGS & LOAN ASSOCIATION, et al. 87-643.

Page 55

536 So.2d 55

JIM DAVIS AND COMPANY v. ALBUQUERQUE FEDERAL SAVINGS & LOAN ASSOCIATION, et al.

87-643.

Supreme Court of Alabama.

Nov. 10, 1988.

William B. Hairston, Jr., and William B. Hairston III of Engel, Hairston & Johanson, Birmingham, for appellant.

Ezra B. Perry, Jr., and Walter Fletcher of Dominick, Fletcher, Yeilding, Wood & Lloyd, Birmingham, for appellee.

BEATTY, Justice.

Plaintiff, Jim Davis and Company ("Davis"), appeals from a summary judgment in favor of Albuquerque Federal Savings & Loan Association ("AFS"), defendant-intervenor, in plaintiff's action against Centennial Office Venture ("Centennial"), defendant, to recover certain rent monies owed by tenants of a building formerly owned by Centennial. The summary judgment was made final pursuant to Rule 54(b), A.R.Civ.P. We affirm.

Centennial owned an office building occupied by a number of tenants under leases that called for the monthly payment of rent. The rents were payable on or about the first of every month for that month in advance.

On May 8, 1985, Centennial gave a promissory note and mortgage on this property to AFS, which conveyed:

"All buildings, structures and improvements of every nature whatsoever now or hereafter situated on the property described in subparagraph (a) above, all fixtures, machinery, equipment and personal property of every nature whatsoever now or hereafter owned by the Mortgagor and located in, on, or used or intended to be used in connection with or with the operation of said property, buildings, structures or other improvements, including all extensions, additions, improvements, betterments, renewals and replacements to any of the foregoing.

"Together with all easements, rights-of-way, gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, and all estates, rights, titles, interest, privileges, liberties, tenements, hereditaments, and appurtenances whatsoever, in any way belonging, relating to or appertaining to any of the property hereinabove described, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired by Mortgagor, and the reversion or reversions, remainder and remainders, rents, issues, profits thereof, and all the estate, right, title, interest, property, possession, claim and demand whatsoever at law, as well as in equity, of the Mortgagor of, in and to the same, including but not limited to:

"(a) All rents, profits, issues and revenues of the Mortgaged Property from time to time accruing, whether under the leases or tenancies now existing or hereafter created, reserving to Mortgagor, however, so long as Mortgagor is not in default hereunder, the right to receive and retain the profits thereof...."

This mortgage was duly recorded on May 9, 1985, in Jefferson County, where the property is located.

On the same day that the mortgage was executed, i.e., May 8, 1985, Centennial, as landlord, executed a "Conditional Assignment of Leases and Rentals" to AFS, thus assigning all of the rent accruing under said leases. This assignment, which was also duly recorded in Jefferson County on May 9, 1985, reserved to Centennial the right to exercise the powers of landlord under said leases, including the right to collect rents on a monthly basis, unless and until Centennial should violate any of the provisions, covenants, or terms of the note and mortgage. The plain language of the assignment set over unto AFS all rents, subject to Centennial's right to collect them as long as Centennial was not in default under the note and/or mortgage. It also provided:

"7. WRITTEN NOTICE AS AUTHORITY TO MAKE PAYMENT: A notice in writing by AFS & L to the tenants advising the latter that a default has occurred on the part of Landlord in the performance of the terms, provisions and covenants of the aforesaid Note and Mortgage, or of this agreement, and requesting that all future accruals of rent or other payments under said leases be paid to AFS & L under this agreement, shall be construed as conclusive authority for such payments to be made to AFS & L, and from and after the date of the giving of such notice all accruals of rent or other payments under the said leases shall be paid to AFS & L, pursuant to this agreement and such notice."

At some point prior to October 3, 1987, the mortgagor, Centennial, defaulted on its mortgage indebtedness, whereupon AFS proceeded to foreclose, advertising the sale of the property, under the terms of the mortgage, on October 3, 10, and 17, 1987. The events which led to this controversy then occurred.

Davis had contracted with Centennial on April 14 and June 9, 1986, to provide janitorial and other services for the building. When a dispute arose between them concerning that contract, Davis sued Centennial and recovered a judgment against Centennial in the amount of $15,255.44, plus costs. To enforce this judgment, the clerk of the Jefferson County Circuit Court issued writs of garnishment which were served on 22 tenants occupying office space in the building under the lease agreements that Centennial had assigned to AFS. The writs were served on the tenants on October 26, 1987, and notice of the garnishments was served on Centennial on October 27, 1988.

On the next day, October 28, 1987, Centennial's mortgage was foreclosed, with AFS purchasing the property. Notice of this change of ownership of the building from Centennial to AFS was given to the tenants on that same day, October 28, 1987, and again on November 2, 1987, advising that rental payments due after October 28, 1987, were to be paid directly to AFS.

Beginning on October 28, 1987, the garnishee-tenants answered the garnishments, some acknowledging possession of rent money belonging to Centennial, some denying any debt to Centennial, and some stating that rent was currently not due. Some answered claiming that the rent was due not to Centennial, but to AFS.

On November 18, 1987, AFS moved to intervene in the case of Davis v. Centennial, asserting the pertinent facts stated above, and concluding:

"8. In view of the foregoing, none of the tenants of said building is indebted to Centennial or otherwise in any way liable pursuant to said Writs of Garnishment for any payments for rent or otherwise for the use or occupancy of the subject premises from and after October 28, 1987.

WHEREFORE, AFS prays for an order that all payments of rental or any other sums due and owing for the use or occupancy of the subject premises by any of the tenants from and after October 28, 1987 are not due to Centennial or to plaintiff. AFS further prays for an order declaring that said payments are in fact due to AFS and for such other and further relief as is just."

In due course AFS was allowed to intervene, and pursuant to the circuit court's order the tenants paid their rent monies into court. Thereafter, AFS moved for summary judgment based upon the pleadings and motions and the affidavits of James Reich, executive vice-president of AFS, and James Bennett, executive vice-president of the realty company that acted as property manager of the building for AFS. Upon consideration, the trial court granted summary judgment in favor of AFS, ordering the clerk to pay to AFS the amounts being held by the court. This appeal followed.

It should be noted that AFS claims no entitlement to rent monies for October 1987 or before. The issue between the parties, then, concerns rent monies due from Centennial building tenants for November 1987 onward. Davis maintains that its garnishment lien attaches to all rent monies from those tenants, from October 26, 1987, until its judgment is satisfied. AFS, on the other hand, claims those rent monies under the terms of the mortgage and conditional assignment and as purchaser of the leased property on October 28, 1987, at the foreclosure sale under the mortgage. For the reasons that follow, we hold that summary judgment for AFS was proper, and we affirm.

Under the law of garnishment, the money sought "must be due absolutely and without contingency." Escambia Chemical Corp. v. United Insurance Co. of America, 396 So.2d 66 (Ala.1981). Furthermore, a creditor may not garnish property not belonging to the defendant. Druid City Hospital Board v. Epperson, 378 So.2d 696 (Ala.1979). Thus, notwithstanding that plaintiff Davis gave notice of its judgment to Centennial's tenants two days before AFS bought the property at the foreclosure sale, nevertheless, at that time there were not, and, indeed, could not have been, any sums "due absolutely," because the future rents were not then due to Centennial. That is to say, Centennial, which was in default at that time, could not have maintained an action of debt or indebitatis assumpsit on the unliquidated and unmatured rent payments. Sloss v. Glaze, 231 Ala. 234, 164 So. 51 (1935). Nor could Centennial have maintained such an action after the rent became due, because Centennial no longer had a right to collect rents at that time due to its default and the foreclosure.

In Pettus v. Dudley Bar Co., 218 Ala. 163, 164, 118 So. 153 (1928), this Court observed:

"It is a universal rule that the garnishee is to be placed in no worse condition by operation of the proceedings against him than he would be if the defendant's claim against him were enforced by the defendant himself. Garrett v. Mayfield Mills, 153 Ala. 602, 44 So. 1026. Garnishment proceedings were not intended to entitle a creditor to hold such properties or funds which in truth do not belong to the debtor and which should not as a matter of equity be applied as a payment of his debts."

When Centennial defaulted and AFS foreclosed upon the mortgage, AFS, not Centennial, became the entity to whom the rent monies were to be paid. Therefore, when those rent installments matured, AFS, not Centennial, was the entity to whom those monies were owed, both under the terms of the mortgage and under the...