Parrish v. Fed. Nat'l Mortg. Ass'n

• Decision Date: 16 June 2016
• Docket Number: Record No. 150454
• Court: Virginia Supreme Court
• Parties: Brian D. Parrish, et al. v. Federal National Mortgage Association

292 Va. 44

787 S.E.2d 116

Brian D. Parrish, et al.

v.Federal National Mortgage Association

Record No. 150454

Supreme Court of Virginia.

June 16, 2016

Drew D. Sarrett (Henry W. McLaughlin ; Law Office of Henry McLaughlin, on briefs), Richmond, for appellants.

Michael R. Shebelskie, Richmond, (Geoffrey J. O'Brien ; Hunton & Williams; Atlantic Law Group, on brief), for appellee.

PRESENT: Lemons, C.J., Mims, McClanahan, Powell, and Kelsey, JJ., and Russell and Millette, S.JJ.

OPINION BY JUSTICE WILLIAM C. MIMS

In this appeal, we consider whether a general district court has subject matter jurisdiction under Code §§ 16.1–77(3) and 8.01–126 to adjudicate an action for unlawful detainer when a homeowner challenges the validity of a trustee's deed after foreclosure, and whether a circuit court has such jurisdiction under Code §§ 16.1–106 and 17.1–513 in a de novo appeal from such a proceeding. We also consider whether a circuit court may consider in a de novo appeal the pleadings originally filed in the general district court proceeding.

I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW

Brian D. and Teresa D. Parrish owned a parcel of real property situated in Hanover County, which they conveyed by deed of trust to Brian K. Stevens, trustee, to secure a note in the principal amount of $206,100, plus interest. In May 2014, ALG Trustee, LLC, the substitute trustee under the deed of trust, conveyed the parcel by trustee's deed to Federal National Mortgage Association (“Fannie Mae”). Fannie Mae thereafter sent the Parrishes a notice to vacate. It later filed a summons for unlawful detainer in the general district court.

The Parrishes responded by alleging that the foreclosure was invalid because their deed of trust incorporated 12 C.F.R. § 1024.41(g), which they asserted prohibits foreclosure if a borrower submitted a completed loss mitigation application more than 37 days before the foreclosure sale. They alleged that they had submitted such an application. They further alleged that Fannie Mae (their lender as well as the foreclosure purchaser) and its agent had instigated the foreclosure despite the pending application and in breach of the deed of trust. The court awarded Fannie Mae possession and the Parrishes filed a de novo appeal in the circuit court.

In the circuit court, Fannie Mae filed a motion for summary judgment or motion in limine in which it argued that its trustee's deed was prima facie evidence of its right of possession. It argued that the circuit court should exclude any defense contesting the validity of the foreclosure from which the deed arose because the general district court lacked subject matter jurisdiction to try title in a proceeding on unlawful detainer. Fannie Mae contended that because the circuit court's subject matter jurisdiction on appeal from the general district court was merely derivative of the general district court's subject matter jurisdiction, the circuit court also lacked such jurisdiction. The Parrishes opposed Fannie Mae's motion, arguing among other things that because the appeal was de novo, the circuit court could not consider the pleadings filed originally in the general district court, to which Fannie Mae referred in its motion. The court thereafter granted Fannie Mae's motion and awarded it possession of the parcel.

We awarded the Parrishes this appeal.

II. ANALYSIS

In one assignment of error, the Parrishes assert that the circuit court erred by granting Fannie Mae's motion for summary judgment and awarding it possession of the parcel. Fannie Mae responds that the circuit court did not err because it lacked subject matter jurisdiction to consider the validity of the foreclosure; the general district court had no subject matter jurisdiction to try title, so the circuit court had none in the appeal.

Subject matter jurisdiction is a threshold question. Spencer v. City of Norfolk , 271 Va. 460, 462, 628 S.E.2d 356, 357 (2006). It is a question of law we review de novo. Glasser & Glasser, PLC v. Jack Bays, Inc. , 285 Va. 358, 369, 741 S.E.2d 599, 604 (2013). Subject matter jurisdiction “is the authority granted through constitution or statute to adjudicate a class of cases or controversies.” Morrison v. Bestler , 239 Va. 166, 169–70, 387 S.E.2d 753, 755 (1990). In deciding questions of subject matter jurisdiction, we are not limited to the arguments raised by the parties. See id. at 169–70, 387 S.E.2d at 755–56 (noting that courts may raise questions of subject matter jurisdiction sua sponte and that parties can neither waive nor confer subject matter jurisdiction).

As courts not of record, general district courts are creations of the General Assembly. Va. Const. art. VI, § 8 ; Code § 16.1–69.7. They are courts of limited jurisdiction and may exercise only such subject matter jurisdiction as has been expressly conferred by statute. Addison v. Salyer , 185 Va. 644, 648, 40 S.E.2d 260, 262 (1946). It is well-settled that when exercising its appellate jurisdiction in a de novo appeal, the circuit court's subject matter jurisdiction is derivative of the court not of record from which that appeal is taken. Id. at 651–52, 40 S.E.2d at 264. Therefore, when exercising its de novo appellate jurisdiction, the circuit court has no more subject matter jurisdiction than the general district court had in that court's original proceeding.¹ Thus, the scope of the general district court's subject matter jurisdiction is the dispositive issue here.

Code §§ 16.1–77(3) and 8.01–126 confer upon general district courts subject matter jurisdiction to try actions for unlawful detainer. However, we have expressly held that courts not of record have no subject matter jurisdiction to try title to real property. Addison , 185 Va. at 648–49, 40 S.E.2d at 262 ; see also Warwick v. Mayo , 56 Va. 528, 540–41 (1860) (“In Virginia, it is not pretended that [courts not of record] have ever been empowered by any statute to try, without writ, titles to land in civil causes.”). In the 156 years since Warwick and the 70 years since Addison , the General Assembly has amended the provision currently codified at Code § 8.01–126 several times. See , e.g. , 1870–71 Acts ch. 130; 1890 Acts ch. 213; 1904 Acts ch. 211; 1940 Acts ch. 193. Nevertheless, it has not expressly conferred upon general district courts subject matter jurisdiction to try title in an unlawful detainer action. We presume that the legislature is aware of its own statutes conferring subject matter jurisdiction upon courts not of record and our precedents interpreting them. Andrews v. Commonwealth , 280 Va. 231, 286, 699 S.E.2d 237, 269 (2010). Its silence therefore evidences approval. Manchester Oaks Homeowners Ass'n v. Batt , 284 Va. 409, 428, 732 S.E.2d 690, 702 (2012).

However, this creates a conundrum because some actions for unlawful detainer necessarily turn on the question of title. Unlawful detainer is an action against a defendant who lawfully entered into possession of real property but whose right to lawful possession has since expired. It is brought by a plaintiff lawfully entitled to possession at the time of suit, which the defendant is then unlawfully withholding. Allen v. Gibson , 25 Va. 468, 473 (1826). The validity of the plaintiff's right of possession is an issue that, when disputed, must be determined in the adjudication of the unlawful detainer action. Id. at 474. The plaintiff must show either (1) prior actual possession, which was then yielded to the defendant under some temporary or defeasible estate that has ended, or (2) a right of possession acquired after the defendant's entry. Id. at 474–76.

Whether the plaintiff has a right of possession will not always present a question of title. Such a question will never arise in the first class of cases, where the plaintiff's right is based on prior actual possession. For example, a landlord may bring an action for unlawful detainer against a tenant who holds possession of the leased premises in violation of the lease or after it has expired. In such cases, the defendant's possession is derivative of the plaintiff's title, and the defendant is not permitted to challenge it. Emerick v. Tavener , 50 Va. 220, 223 (1852). However, a plaintiff in the second class of cases, who claims a right of possession acquired after the defendant's original, lawful entry, must show the validity of that right. When the plaintiff's after-acquired right of possession is based on a claim of title, the plaintiff may be required to establish the validity of that title. Corbett v. Nutt , 59 Va. 624, 648 (1868).² Actions for unlawful detainer in the foreclosure context generally fall into this category.³

In most foreclosure cases, a trustee's deed will satisfy the foreclosure purchaser's burden to establish that it acquired a right of possession after the homeowner's original, lawful entry, and the homeowner will have no good-faith basis to contest it. However, in limited circumstances, the homeowner could allege facts sufficient to place the validity of the trustee's deed in doubt. In such cases, the general district court's lack of subject matter jurisdiction to try title supersedes its subject matter jurisdiction to try unlawful detainer and the court must dismiss the case without prejudice. Warwick , 56 Va. (15 Gratt.) at 542 (“[O]n being convinced that the case involves a bona fide claim of title to real estate,” a court not of record “is bound to dismiss [the proceeding] immediately.”).⁴

This holding does not mean that any naked allegation that the trustee's deed is invalid will put the deed in doubt, thereby divesting the general district court of jurisdiction. The question of title raised by the homeowner's allegations must be legitimate. Id. at 542 (requiring dismissal if “the case involves a bona fide claim of title” (emphasis added)). Because “a court always has jurisdiction to determine whether it has subject matter jurisdiction,” Morrison , 239 Va. at 170, 387 S.E.2d at 755, the court has the...