Title: J. Davis and Co. v. Albuquerque Fed. S&L Ass'n

State: alabama

Issuer: Alabama Supreme Court

Document:

536 So. 2d 55 (1988)
JIM DAVIS AND COMPANY
v.
ALBUQUERQUE FEDERAL SAVINGS & LOAN ASSOCIATION, et al.
87-643.

Supreme Court of Alabama.
November 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:
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:
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:
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:
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 terms of the assignment. "In garnishment proceedings, the creditor stands in the debtor's shoes to enforce the debtor's rights against third parties." Druid City Hospital Board, supra. Thus, because *58 Centennial was owed no rent money after the default and foreclosure, and in light of the earlier assignment, Davis, standing in Centennial's shoes, had no right to the rent monies that it could enforce.
Thus, contrary to the argument of plaintiff, there was no severance of the obligation to pay rent monies in favor of Davis when its notice of the garnishment was served upon the tenants. We believe that the decision in Walsh v. Bank of Moundville, 222 Ala. 164, 132 So. 52 (1930), supports this position. In that case, one Kelly held a recorded mortgage executed by one Owens in 1915. Several years later Kelly died. E.P. Walsh was appointed Kelly's administrator, and he foreclosed the mortgage, with Carrie Walsh becoming the purchaser. E.P. Walsh conveyed the property to her. The mortgaged property had been in the possession of a number of tenants. These tenants had given rent notes before foreclosure to one Owens, as agent (of the mortgagor) for the annual rent. Owens endorsed these notes to the Bank of Moundville. Although E.P. Walsh did not notify the tenants of anything concerning these rents, he did notify the Bank of Carrie Walsh's purchase of the land and that she would demand the rents for the current year. Nevertheless, the tenants paid the Bank the amounts due under the rent notes, and when the Bank refused to pay over those monies to the purchaser at the foreclosure sale, Carrie Walsh, she sued the Bank.
This Court posed the legal question in Walsh, 222 Ala. at 165, 132 So. at 52:
This Court went on to uphold the right of the purchaser at the foreclosure sale, 222 Ala. at 166, 132 So. at 53:
Because, therefore, a severance of the rents by an assignment cannot be made voluntarily by the mortgager to the detriment of the mortgagee-purchaser, it follows that such a severance likewise cannot be made involuntarily by a garnishment. This result must follow because the judgment creditor "stands in the shoes" of the judgment debtor-mortgagor, and in that position the judgment creditor cannot use garnishment to force the tenants to make *59 payments to the creditor which the judgment debtor could not force them to make to the debtor himself. Pettus, supra.
This result is consistent with the language of Code of 1975, § 35-4-32, viz.: "Every conveyance of an estate in any hereditament, corporeal or incorporeal, is good and effectual without attornment of the tenant; but no tenant who has paid his rent without notice of such conveyance is liable therefor."
In support of its position, plaintiff cites us to Mack v. Beeland Brothers Mercantile Co., 21 Ala.App. 97, 105 So. 722 (1925). Respectfully, we note that we do not find that decision inconsistent with our decision here. In that case, one Parker owned lands that he mortgaged to one Mack. There is no indication in the opinion that the mortgage itself limited the mortgagor's rights to the rent, payable in cotton. Later, in 1922, Parker executed a one-year lease of these lands to Bush, who agreed to pay, on October 1, as the rent, 1,000 pounds of cotton. In July, Beeland Brothers levied an attachment against Parker under which it garnished Bush, the tenant. During the next month Mack, the mortgagee, notified Bush that the mortgage, which had been in default, was due, and demanded the 1922 rent. Bush answered the garnishment by stating that a warehouse receipt for the cotton had been deposited in a bank with instructions to deliver it to the court-designated party. The court held that the garnishment lien validly attached to the cotton, and that the mortgagee, Mack, acquired no lien on the cotton by virtue of the notice served upon the tenant, Bush, thereafter.
This Court is unpersuaded by Davis's argument that Mack, supra, is the controlling authority. As previously noted, there is no indication in the Mack opinion that the mortgagor's right to receive rent was limited by the mortgage itself, as was Centennial's under the mortgage executed by it to AFS. This mortgage stated in pertinent part:
We note that this right to receive rents is conditional. Once default occurs, under the plain language of the mortgage, the mortgagor is divested of any right to rents that subsequently accrue. Furthermore, contrary to Davis's argument otherwise, there is no requirement, either contractual or statutory, that notice be given before Centennial is divested of this conditional right.
In addition to the mortgage language conveying future rents to AFS, Centennial executed the aforementioned "Conditional Assignment of Leases and Rentals" setting over to AFS all then-existing and future leases of Centennial in the mortgaged property and all rents arising from said leases as additional security for the loan from AFS. This agreement states:
As in the mortgage, there is no requirement that notice be given before Centennial is divested of its right to receive rents.
Davis argues that notice to the tenants is a condition precedent to AFS's entitlement to future rents. We do not agree with Davis's interpretation of the notice provision in the "Conditional Assignment of Leases and Rentals," which provides:
Relying on Mack, supra, Davis argues that AFS's right to rentals springs into existence only after notice is given to the tenants that AFS intends to claim rents; that such notice was given only after the writs of garnishment were served; and, therefore, that Davis's lien attached first and preempted any conditional right AFS might have, until Davis's judgment against Centennial is satisfied.
We find nothing in the language of this notice provision or in Code of 1975, § 35-4-32, cited above, to indicate that notice is necessary to "perfect" AFS's right to the rents. We interpret these notice provisions as mere protective devices that serve to limit the liability of a tenant who pays rent to his former landlord before he receives notice of a conveyance, default, or foreclosure. Even so, AFS did give actual notice to the tenants on October 28, 1987, before rent was due for the month of November, and again on November 2, 1987, that the mortgage had been foreclosed and that AFS had purchased the building.
Several aspects of the Mack decision distinguish it from this case. The most significant distinction is that in Mack there was no foreclosure, nor any other conveyance, of the mortgaged property.
Ala.Code 1975, § 35-9-33, provides: "The claim of the landlord for rent and advances, or for either, may be by him assigned; and the assignee shall be invested with all the landlord's rights, and entitled to all his remedies for their enforcement."
The conditional assignment of rents by Centennial "invested" AFS with Centennial's right to collect rents once default occurred. We see no suggestion in the Mack case that the rents were assigned to the mortgagee, as they were here. Such an assignment, by its own terms and under this statute, clearly gives AFS the right to maintain an action to recover rents, should the tenants default under the terms of their leases.
Therefore, the garnishees were not holding money or property belonging to Centennial at the time the writs of garnishment were served, or at the time of their answers, or at any time in the interim. Nor did the lease agreements between Centennial and the garnishee-tenants represent contracts upon which Centennial was owed a debt at the time of service of the writs or thereafter.
Garnishment is a purely statutory proceeding, defined by Ala.Code 1975, § 6-6-370, as:
Furthermore, as noted in Sloss v. Glaze, 231 Ala. 234, 164 So. 51, 53 (1935), "it [garnishment] is always administered upon equitable principles." In that case, Sloss had a garnishment writ issued on April 22, 1931, against Glaze in aid of a pending suit against one Aland. The writ was served on April 23, 1931, and Glaze answered "no indebtedness," which was contested. Sloss subsequently recovered a judgment against Aland, and the contest hearing resulted in judgment in favor of the garnishee. The plaintiff, Sloss, then appealed.
The undisputed facts were that Aland had executed a mortgage of certain property to the First National Bank of Birmingham *61 to secure his indebtedness to the bank. By written instrument dated April 9, 1931, which was duly recorded, the bank released a certain parcel of the mortgaged property with the oral understanding that under the terms of the agreement, Aland, who was then contemplating a trade of the property for property owned by one Yates, would either give the bank the proceeds of the trade or a mortgage on the property received in the exchange.
Aland and Yates consummated the trade, and Aland then entered into a contract with Glaze to sell the newly acquired property to him, still with the understanding that he would account to the bank for the proceeds of that exchange. This contract was executed on April 16, 1931. Several days thereafter, the aforementioned writ of garnishment was issued and served on Glaze. The garnishee answered that the executory contract between him and Aland represented no debt subject to garnishment because it merely called for the assumption of mortgage debt and the execution of an additional mortgage payable in the future.
In deciding the case, this Court clearly stated the rationale on which we affirm the judgment in the instant case. Quoting Marx v. Parker, 9 Wash. 473, 37 P. 675 (1894), the Court stated:
"`It is a general rule in garnishment that the plaintiff can obtain no greater beneficial relief against the garnishee than the judgment debtor would be entitled to, and that if the debtor's recovery would be limited to a mere legal title, without beneficial interest or right of enjoyment in himself, the proceeding must fail. A judgment creditor cannot have his debt satisfied out of property held in trust for another, no matter how completely his debtor may have exercised apparent ownership over it, unless it was upon the faith of such ownership that the credit was given. * * * Therefore, if the deposit in the bank was, in equity, the property of the city, although it stood in Parker's name, respondents had no right to a judgment against the garnishee.' This case [Marx v. Parker] was quoted and the principle therein announced followed by the Court of Appeals in Allen v. Woodruff, 2 Ala.App. 415, 56 So. 247, 249, which latter case was approvingly cited by this court in Pettus v. Dudley Bar Co., 218 Ala. 163, 118 So. 153, 154 [(1928) ], wherein the underlying principle was recognized and given application. In Allen v. Woodruff, the court said: `Garnishment proceedings were provided by statute to enable a creditor to reach property and funds of his unwilling debtor which cannot be reached by execution, but which, in equity and justice, should be applied to the payment of the debtor's debts. They were not intended to enable the creditor to subject properties or funds which in truth do not belong to the debtor, and which should not, as a matter of equity, be applied to the payment of his debts.'
We can affirm AFS's summary judgment only if we find that there was no genuine issue of material fact and that AFS was entitled to a judgment as a matter of law. Rule 56(c), A.R.Civ.P.; Ward v. Rhodes, Hammonds & Beck, Inc., 511 So. 2d 159 (Ala.1987); Whitehead v. Johnston, 467 So. 2d 240 (Ala.1985); Black v. Freeman Lumber Co., 509 So. 2d 914 (Ala.Civ.App.1987). Furthermore, we must view the evidence in a light most favorable to the non-moving party, and "summary judgment is improper if there is a scintilla of evidence to support the non-moving party." Mann v. City of Tallassee, 510 So. 2d 222, 225 (Ala.1987), citing Hale v. City of Tuscaloosa, 449 So. 2d 1243, 1245 (Ala.1984).
The operative facts of this case, as stated hereinabove, are undisputed. After careful study of the record, this Court finds that the equitable principles set out in Sloss, supra, in conjunction with the legal standards cited herein, mandate that AFS's summary judgment be, and it hereby is, affirmed.
AFFIRMED.
TORBERT, C.J., and MADDOX, ALMON and HOUSTON, JJ., concur.