Opinion ID: 1797539
Heading Depth: 1
Heading Rank: 1

Heading: Balance of Higher-Priority Mortgage

Text: SEI first contends that it is not required to include in the redemption price the higher-priority mortgage owned by FmHA. Specifically, SEI argues that Ala.Code 1975, § 6-5-253, does not require it to pay a higher-priority mortgage that is not owned by the purchasers at the foreclosure sale, the Byrds. See St. Clair Indus., Inc. v. Harmon's Pipe & Fitting Co., 282 Ala. 466, 213 So.2d 201 (1968); Fonde v. Lins, 259 Ala. 553, 67 So.2d 834 (1953); Stewart v. Stephenson, 243 Ala. 329, 10 So.2d 159 (1942); Estes v. Johnson, 234 Ala. 191, 174 So. 632 (1937). We disagree. After real property is sold at a foreclosure sale to pay the encumbrances on it, various parties may redeem that property from the purchaser by paying the appropriate redemption price. Ala.Code 1975, § 6-5-248. The redemption price includes taxes, the value of improvements, and certain outstanding encumbrances. Ala.Code 1975, § 6-5-253. The cases cited by SEI [2] interpreted the language of former § 6-5-235: (3) Any other valid lien or incumbrance paid or owned by such purchaser or his vendee, or any mortgagee of the purchaser to the extent of the amount necessary to redeem. (Emphasis added.) This language plainly required the redeeming party to pay only those encumbrances paid or owned by the purchaser. In 1988, however, the Legislature repealed § 6-5-235 and replaced it with § 6-5-253, which, in subsection (a), provides that the redemption price now includes: (4) Any other valid lien or encumbrance paid or owned by such purchaser or his or her transferee or if the redeeming party is a judgment creditor or junior mortgagee or any transferee thereof, then all recorded judgments, recorded mortgages and recorded liens having a higher priority in existence at the time of sale which are revived under Section 6-5-248(c). (Emphasis added.) See Ala. Acts 1998, Act No. 88-441, § 7, p. 647; see also Harry Cohen, The Statutory Right of Redemption in Alabama: A New Statute Is on the Horizon, 39 Ala. L.Rev. 131 (1987) (discussing the then-proposed bill that was later adopted as Act No. 88-441). Unlike its predecessor, § 6-5-253(a)(4) divides encumbrances into two categories: (1) those encumbrances paid or owned by the purchaser; and (2) all encumbrances of higher priority. The change in language effected by the 1988 amendment reflects the Legislature's intent to change the computation of the statutory redemption price from that described in St. Clair Indus., Fonde, Stewart, and Estes, supra. The change added to the redemption price paid by junior creditors all higher-priority encumbrances, whether or not they are owned by the purchaser. See Ex parte Sizemore, 605 So.2d 1221, 1227 (Ala.1992) (Having examined the statute [as it read both before and after] the 1986 amendment, we conclude that the legislature could not have been merely reiterating the law as it existed [before the amendment] without meaning to change the interpretations given to the [preamendment statute.]). The change effected by § 6-5-253(a)(4)'s inclusion of all higher-priority encumbrances in the redemption price was clearly intended to prevent financial windfalls to junior creditors. See City of Birmingham v. Hendrix, 257 Ala. 300, 307, 58 So.2d 626, 633-34 (1952) (stating that a court may ascertain the intent of a statute or of a provision therein by looking to the law as it existed before the statute was enacted). By requiring the redeeming creditor to pay off the first mortgage, § 6-5-253(a)(4) prevents SEI, the junior creditor, from vaulting over the holder of the first mortgage, FmHA, to become the possessor of the property. Thus, under § 6-5-253(a)(4), the second mortgagee cannot obtain an interest in the collateral that is superior to that of the first mortgagee without compensating the first mortgagee for the first mortgagee's interest. [3] The trial court correctly included the higher-priority mortgage in the redemption price.