Magic City Capital, LLC v. Twickenham Place Partners, LLC
| Decision Date | 25 October 2019 |
| Docket Number | 1180215 |
| Citation | 296 So.3d 274 |
| Parties | MAGIC CITY CAPITAL, LLC v. TWICKENHAM PLACE PARTNERS, LLC |
| Court | Alabama Supreme Court |
Bill D. Bensinger of Christian & Small LLP, Birmingham, for appellant.
Benjamin L. McArthur and Michael W. Rich of Maynard Cooper & Gale, P.C., Huntsville, for appellee.
Magic City Capital, LLC ("Magic City"), appeals from a summary judgment entered by the Madison Circuit Court ("the trial court") in favor of Twickenham Place Partners, LLC ("Twickenham"). Because events that occurred during the trial-court proceedings rendered the action moot and the trial court, therefore, was divested of subject-matter jurisdiction, we dismiss the appeal.
The following facts are undisputed. On August 15, 2014, Twickenham executed a lease agreement with Huntsville Asian Rim, LLC ("HAR"), in which HAR agreed to lease certain property from Twickenham for the purpose of opening a restaurant in Huntsville. Section 5.4 of the lease provided, among other things:
The lease also provided in § 14.3:
"[Twickenham] hereby expressly subordinates any and all claim, right, lien (including, without limitation, any common law or statutory landlord's lien), title and security interest in and to all furniture, goods, equipment and personal property of the security interest of [HAR'S] lender, if any, either existing as of the execution date of this Lease or hereafter."
On November 17, 2014, HAR executed a security agreement in favor of Magic City in exchange for a $250,000 loan. Pursuant to the security agreement, Magic City was granted a security interest in HAR's personal property used in operating the restaurant. In September 2015, HAR defaulted on its lease obligations to Twickenham, and, thereafter, HAR removed some of, but not all of, its personal property from the restaurant. On October 5, 2015, Twickenham notified Magic City by letter that HAR had defaulted on its lease obligations. In that letter, Twickenham recognized Magic City's priority lien on HAR's furniture and equipment and indicated that it was potentially interested in acquiring that property from Magic City. Twickenham asked that Magic City contact Twickenham if it was interested in selling the personal property. On October 15, 2015, Twickenham served HAR with a notice of the termination of the lease.
At some point thereafter, HAR defaulted on its loan obligations to Magic City. According to Magic City's complaint, Magic City declared HAR in default of the loan obligations and demanded possession of the personal property from HAR and from Twickenham. Twickenham denied that Magic City demanded possession of the personal property from it.
In February 2016, HAR filed a petition for protection pursuant to Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Alabama. The bankruptcy proceedings were terminated on May 17, 2017. According to Twickenham, Magic City did not assert its purported superior interest in the personal property at any time during the pendency of the bankruptcy proceedings. On May 30, 2017, Magic City sued Twickenham and Prime, Inc., the new tenant for the property, seeking a judgment declaring its security interest superior to Twickenham's and the recovery of, or the reasonable value of, the personal property.
On June 30, 2017, Twickenham and Prime filed a motion to dismiss in which they asserted, among other things, that Prime did not have possession or control of the personal property sought by Magic City. On September 12, 2017, the trial court granted the motion to dismiss in part and dismissed Prime as a defendant. Thereafter, Twickenham filed an answer and asserted various affirmative defenses, including the doctrines of laches and equitable estoppel.
On June 8, 2018, Magic City filed a motion for a summary judgment in which it argued that Twickenham's interest in the personal property was subordinate to Magic City's interest and that Twickenham had wrongfully converted the personal property. In support of its motion, Magic City submitted a copy of the lease agreement, a copy of the security agreement, copies of correspondence between Twickenham and HAR and Magic City, an affidavit of Brian Bateh, a manager of Magic City, and an affidavit of Roy Hockman, the former managing member of HAR. Hockman testified in his affidavit that HAR had defaulted on its lease and loan obligations and that Magic City had demanded possession of the personal-property collateral from both HAR and Twickenham. Hockman did not specify the dates on which the alleged demands for possession of the personal property occurred. Bateh provided affidavit testimony similar to Hockman's.
On September 13, 2018, Twickenham filed another motion to dismiss in which it asserted that HAR's debt allegedly secured by the personal property to which Magic City claimed a superior interest had been paid in full by Hockman and, therefore, that Magic City's claims were moot and there was no longer a justiciable controversy before the trial court. Magic City filed a response to Twickenham's motion to dismiss in which it alleged that, in November 2014, when HAR entered into the security agreement with Magic City, Hockman had executed a guaranty agreement pursuant to which he guaranteed all of HAR's obligations. Magic City further asserted that Hockman had executed and delivered to Magic City a mortgage in which he gave Magic City a lien relative to some of his real property. Magic City alleged that, on June 12, 2018, Hockman sold the real property and remitted payment to Magic City to satisfy his obligations under the guaranty agreement. Magic City argued that, as a surety, Hockman was entitled to enforce Magic City's rights in order to seek reimbursement through subrogation. Magic City further asserted that Hockman, who was not a party, should be permitted to continue the action in Magic City's name as a surety, rather than being added as a party, pursuant to Rule 25(c), Ala. R. Civ. P. Magic City, however, did not submit the alleged guaranty agreement or any other documentation evidencing Hockman's status as HAR's surety.1
On October 1, 2018, Twickenham filed a response in opposition to Magic City's summary-judgment motion and a cross-motion for a summary judgment. In its motion, Twickenham argued that HAR had abandoned the property it left in the leased premises and that the equitable doctrines of laches and estoppel barred Magic City's claims. Twickenham argued that, pursuant to § 5.4 of the lease, because HAR did not remove the personal property within 30 days of termination of the lease, the property became Twickenham's property. Therefore, Twickenham argued, there was no basis to subordinate Twickenham's interest in the personal property and Magic City did not have security interest in it. Twickenham further asserted that, even if Magic City maintained a security interest and had lawful grounds on which to assert a superior claim to the personal property, the doctrines of laches and equitable estoppel foreclosed its claims because Magic City waited almost two years to assert its claim to the personal property HAR had abandoned after defaulting under the lease. In support of its motion, Twickenham provided an affidavit from William Stroud, the managing member of Triad Properties Holdings, LLC, the managing member of Twickenham. In his affidavit, Stroud testified that at no time during the pendency of HAR's bankruptcy proceedings did Magic City assert any superior interest in the personal property. Twickenham also provided a copy of the lease agreement between Twickenham and HAR.
Magic City filed a response in opposition to Twickenham's cross-motion for a summary judgment. In its response, Magic City argued that its security interest in the personal property survived Twickenham's termination of the lease because, it said, HAR had granted Magic City a security interest in the personal property. Magic City also argued that Hockman's satisfaction of his guaranty obligations made no difference as to whether Twickenham's termination of the lease defeated Magic City's security interest.
Twickenham responded to Magic City's opposition and submitted additional material in support of its motion to dismiss and cross-motion for a summary judgment in which it again argued that Magic City's claims were moot because, it asserted, once Hockman satisfied HAR's indebtedness to Magic City, Magic City no longer had a security interest in the personal property. On October 24, 2018, the trial court entered a summary judgment in favor of Twickenham without specifying the ground or grounds upon which it relied. Magic City filed a notice of appeal.
Magic City challenges the summary judgment on the bases that the lease demonstrates Magic City's superior security interest and that Twickenham did not carry its burden of demonstrating the applicability of the doctrine of laches or equitable estoppel. Magic City does not address the argument in Twickenham's summary-judgment motion...
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