Holly Springs Realty Group, LLC v. BancorpSouth Bank
Docket Number: | 2009-CA-00923-COA Linked Case(s): 2009-CA-00923-COA ; 2009-CT-00923-SCT |
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Court of Appeals: |
Opinion Link Opinion Date: 11-09-2010 Opinion Author: Ishee, J. Holding: Affirmed. |
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Additional Case Information: |
Topic: Real property - Notice of tax sale - Foreclosure sale - Named as party - Doctrine of inverse order of alienation - M.R.C.P. 8 - Favored parties - Breach of order - Suretyship - Partitioning property Judge(s) Concurring: King, C.J., Myers, P.J., Roberts and Carlton, JJ. Non Participating Judge(s): Lee, P.J., Irving, Griffis, Barnes and Maxwell, JJ. Procedural History: Bench Trial Nature of the Case: CIVIL - REAL PROPERTY |
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Trial Court: |
Date of Trial Judgment: 05-08-2009 Appealed from: Lafayette County Chancery Court Judge: Glenn Alderson Disposition: ORDERED JUDICIAL FORECLOSURE OF BANK’S LIEN ON CONDO UNIT Case Number: 2007-504A |
Party Name: | Attorney Name: | Brief(s) Available: | ||
Appellant: | Holly Springs Realty Group, LLC |
FRANK M. HURDLE |
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Appellee: | Holly Springs Realty Group, LLC | JOHN J. CROW JR., DANIEL MYLES MARTIN |
Synopsis provided by: If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
Topic: | Real property - Notice of tax sale - Foreclosure sale - Named as party - Doctrine of inverse order of alienation - M.R.C.P. 8 - Favored parties - Breach of order - Suretyship - Partitioning property |
Summary of the Facts: | Van Buren Group, LLC executed a promissory note in September 2001 in favor of BancorpSouth Bank in the amount of $5.4 million to build a 30-unit condominium, the Van Buren Condominium, in Oxford. In order to secure payment of the note, Van Buren executed a deed of trust in favor of the Bank on the entire condominium. The debt was to be repaid to the Bank through the sale of condominium units by Van Buren. As the units were sold, the note was renewed from time to time to show the decreasing amount owed by Van Buren. Each condo unit sold in the $300,000 range. Twenty-one units were sold by Van Buren, and the proceeds of the sales were remitted to the Bank less costs, expenses, and commission, which the Bank credited to the debt and for which it executed partial releases of the deed of trust for the units sold. However, the Bank discovered that Van Buren had sold at least five of the condominium units without its knowledge or consent and without remitting any of the money from the sale to the Bank. These units were not released from the Bank’s deed of trust. Van Buren defaulted in making payments on the note, and in October 2007, the Bank filed for a declaratory judgment setting out the rights of the parties and for the immediate judicial foreclosure of unit 309; if that sale failed to satisfy the debt, then the Bank sought the sale of the five undisclosed units – units 111, 102, 201, 207, and 303. The legal action named Van Buren and eleven other entities and individual unit owners as defendants. The defendants included Claiborne Frazier, Shelby K. Brantley Jr, and Robert Crumpton, members of Van Buren; Austin Frazier and C.E. Frazier, two of the guarantors of the indebtedness owed by Van Buren; and five purchasers to whom Van Buren had sold condominium units without remitting any of the proceeds to the Bank. At the time the foreclosure was filed, the Bank thought that unit 309 was owned by Van Buren since it had received no payment from the sale of the unit and had not executed a partial release of the deed of trust as to unit 309. Accordingly, the Bank stated in its filing that unit 309 remained subject to the deed of trust and served as collateral for the payment of the debt. On January 24, 2008, a default judgment was entered as to defendants Claiborne Frazier, Austin Frazier, and C.E. Frazier in the amount of $1,214,533. After the foreclosure pleading was filed by the Bank on October 17, 2007, Holly Springs Realty applied for and received a tax deed from the City of Oxford; the tax deed was recorded in the office of the Chancery Clerk of Lafayette County on February 15, 2008. Unknown to the Bank, the City of Oxford had held a tax sale on August 29, 2005, at which it sold unit 309 to Holly Springs Realty for $472.68. It is undisputed that prior to the expiration period fixed by law for the redemption of unit 309 from the tax sale, no notice was given to the Bank, as the mortgage lienholder. Sometime in March 2008, the Bank became aware of Holly Springs Realty’s tax deed on unit 309. On March 28, 2008, the Bank and Holly Springs Realty entered into an agreed order that Holly Springs Realty would be refunded all the money it had paid for Van Buren’s taxes plus18% interest on the aforesaid amounts. In exchange, Holly Springs Realty agreed that the tax deed would be set aside as to the mortgage interest of the Bank. In April 2008, the Bank petitioned the chancery court to join Holly Springs Realty as a necessary and indispensable party for the limited purpose of determining title to unit 309. The Bank said that it was about to foreclose on unit 309 and that because of its tax deed, Holly Springs Realty was a necessary party. The motion was granted. In its order of foreclosure on unit 309, the chancery court noted that the Bank had not received notice of the tax sale and the running of the redemption period as required by law – a point which was not disputed. The chancery court found that because of this lack of notice, the mortgage lien of the Bank was unaffected by the tax sale and was a first, prime, and paramount lien on unit 309. The chancellor noted that there was still approximately $1.3 million left owing on the Van Buren note. The chancellor then ordered that unit 309 be sold at a foreclosure sale and the proceeds applied to this debt. The chancellor further ordered that the $21,533.69 in taxes, which Holly Springs Realty had placed in the registry of the court, were to be delivered to Holly Springs Realty. Holly Springs Realty appeals. |
Summary of Opinion Analysis: | Issue 1: Named as party It is true that the initial complaint and amended complaint did not list Holly Springs Realty as a party. The reason for this is because at the time the complaints were filed, the Bank had no notice that Holly Springs Realty should be a defendant since the Bank had no notice of the tax sale. Further, this issue is without merit for the obvious reason that Holly Springs Realty was joined as a party pursuant to a June 5, 2008, order of the court which granted the Bank’s petition to join Holly Springs Realty as a necessary and indispensable party for the limited purpose of determining title to the property. Further, Holly Springs Realty made an appearance in the lawsuit. One waives process and service upon making a general appearance. Issue 2: Doctrine of inverse order of alienation Holly Springs Realty argues that the party which brought the action, the Bank, should “stand quietly by” while the chancellor determines who should pay the debt of Van Buren. The Bank met the basic rules of pleading under M.R.C.P. 8, by stating its claim for relief. As the litigation progressed, it brought forth its proof that unit 309 was one of the properties covered by the deed of trust. There is no requirement that a plaintiff must “stand quietly by” as its claim is litigated by others. Holly Springs Realty also argues that the chancellor should have invoked the equitable doctrine of inverse order of alienation to decide how the units should be sold. The doctrine is based upon the presumption that unless expressed by contract, one person’s property should not be used to pay the debts of another. In other words, a mortgagee must sell or foreclose upon what the mortgagor has left first because the mortgagor is responsible for the payment of the debt and not the others to whom he has sold property; then if that sale does not cover the debt, the mortgagee must sell in the inverse order of which the property was sold by the mortgagee. Thus, the doctrine is invoked when land subject to a lien has been alienated to different persons by the mortgagee and the mortgagor seeks to sell or foreclose upon the separate parcels. The failure of the City of Oxford to give notice of the redemption period to the Bank made the tax sale to Holly Springs Realty void as to the Bank. Therefore, Holly Springs Realty cannot call upon this Court to evoke the equitable principle. Issue 3: Favored parties The five condo owners to whom Van Buren had sold units but did not submit the money from the sale to the Bank were named as defendants in the initial complaint before the Bank even learned of Holly Springs Realty’s tax deed. Holly Springs Realty continually describes the five as the “favored parties” of the Bank and claims that the five have a “Mary Carter-type” agreement with the Bank. A Mary Carter agreement also known as a “loan-receipt agreement,” is an agreement between a plaintiff and one or more defendants in which the settling defendant “loans” a stated amount of money to the plaintiff and is entitled to be repaid the loan from any recovery the plaintiff receives from a non-settling defendant. The essential feature of the so-called Mary Carter agreement is the repayment of the loan from money recovered from the nonsettling co-defendants. If there is no recovery, there is no repayment. Although Holly Springs Realty argued that there was a “Mary Carter-type” agreement between the Bank and the other defendants, it offered no proof of such an agreement. Without proof, these bare allegations must fail. Issue 4: Breach of order Holly Springs Realty argues that the Bank entered into an agreed order with it and then breached the terms of the order; therefore, the agreement should be nullified because of the Bank’s non-compliance and further that the Bank should lose its lien on unit 309. The agreed order is really no more than a restatement of the relevant law and the facts of the case. By law, Holly Springs Realty’s tax deed did not apply to the Bank, so the parties merely agreed to follow the law. Issue 5: Suretyship Holly Springs Realty’s argument regarding suretyship was never put before the chancellor for decision. The trial court will not be put in error on matters which were not submitted to it for review. Issue 6: Partitioning property There is no requirement in the deed of trust specifying that the property must be sold as a whole. The decision on how the Bank would recover its investment was up to the Bank. |
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