Court Opinion

ID: 37132
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:49:23+00
Date Added: 2024-06-11T17:15:34.003813
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
                       REVISED DECEMBER 8, 2004
                                                             November 11, 2004
                IN THE UNITED STATES COURT OF APPEALS
                        FOR THE FIFTH CIRCUIT             Charles R. Fulbruge III
                                                                  Clerk

                             No. 03-60278

DARLEEN JACOBS LEVY,

                              Plaintiff-Counter-Defendant-Appellee,

versus

CARL MCGILL AND MCGILL WELLWORKS, INC.,

                           Defendants-Counter-Claimants-Appellants.

                       --------------------
           Appeal from the United States District Court
             for the Southern District of Mississippi
                            (01-CV-68)
                       --------------------

Before WIENER and PRADO, Circuit Judges, and KINKEADE,* District
Judge.

PER CURIAM:**

     Defendants-appellants Carl McGill and McGill Wellworks, Inc.

(collectively, “the McGills”) appeal the district court’s denial of

their motion for summary judgment as to whether Hibernia National

Bank (“Hibernia”) acquired title to a note and deed of trust

encumbering real property in Mississippi by virtue of an assignment

from the Federal Deposit Insurance Corporation (“FDIC”) and then

     *
       District Judge for the Northern District of Texas, sitting
by designation.
     **
       Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
conducted a valid foreclosure sale to pass title to plaintiff-

appellee Darleen Jacobs Levy (“Levy”). The McGills also appeal the

district court’s order, following a bench trial, that quieted

Levy’s title to the property based on a determination that they had

failed to establish continuous adverse possession of 62 lots for

ten years.    We affirm the district court on both counts.

                      I.   FACTS AND PROCEEDINGS

     Over a period of years, Carl McGill and his former wife, Mary

McGill, acquired title to 82 lots in the Dolan’s Race Track

Addition subdivision in Gulfport, Mississippi.     In June 1987, Carl

and Mary encumbered the property to secure a loan from the First

National Bank of Slidell, Louisiana (“First National”), executing

a Deed of Trust to E.C. Stuart, Jr., Trustee.

     First National subsequently went into receivership, and the

FDIC succeeded to its interest in Carl and Mary’s note and Deed of

Trust by operation of law.3      After obtaining authority from the

United States District Court for the Eastern District of Louisiana,

the FDIC sold First National’s assets, including Carl and Mary’s

note and Deed of Trust, to Hibernia under an Asset Purchase

Agreement (“APA”).    In August 1989, Hibernia executed a Notice of

Substitution of Trustee for the Deed of Trust and appointed Robert

L. Genin, Jr. as substitute trustee.

     3
         See 12 U.S.C. § 1821(d)(2)(A)(i).

                                   2
     In October 1989, Carl and Mary transferred their interest in

the lots to McGill Wellworks, Inc., a Mississippi corporation.

Carl and Mary McGill subsequently defaulted on the loan secured by

the property.4     After publication and posting of a substituted

trustee’s notice of sale, Genin held a foreclosure sale on May 1,

1990 and conveyed the property to Hibernia.

     After the foreclosure sale, the McGills continued to use the

property and the improvements on it as they had done before the

foreclosure sale.     During 1990 and 1991, Carl McGill, his sister-

in-law,    Tammy   McGill,   or   both,   had   several   encounters   with

representatives of Hibernia during which they were ejected by the

McGills from what they believed to be their rightful property.           In

May 1992, Hibernia sold the property at auction to Levy for $8,800.

     In July 2000, Levy filed a Complaint for Damages and to Quiet

Title against the McGills in the United States District Court for

the Eastern District of Louisiana.          Levy sought to confirm and

quiet her title to the 82 lots that she had acquired from Hibernia.

Levy also sought to recover revenue that the McGills had collected

on the property over the years.

     The United States District Court for the Eastern District of

Louisiana transferred the case to the United States District Court

for the Southern District of Mississippi.5           The McGills filed a

     4
         In 1989, Mary separated from Carl and later divorced him.
     5
         Hereafter, all references to the “district court” are to the
United     States District Court for the Southern District of

                                     3
counterclaim in the district court setting forth five counts: (1)

confirmation of title by adverse possession; (2) removal of title

clouds created by Levy’s complaint; (3) confirmation of title and

removal   of   clouds   as   to    lots       that   Levy   did   not   claim;   (4)

confirmation    of   title    to    a     prescriptive       easement;    and    (5)

declaratory judgment that Levy did not have title to the property

because her predecessor-in-title, Hibernia, acquired its title by

a defective Substituted Trustee’s Deed.6

     In October 2001, the district court entered an Agreed Order

that dismissed with prejudice “all claims for monetary damages”

between the McGills and Levy.             The Agreed Order also dismissed

without prejudice all claims “relating to surveys, boundary lines

and physical location of the subject real property . . . .”

     Both parties then moved for summary judgment on two issues:

(1) whether Hibernia’s foreclosure on the McGills’ Deed of Trust

was valid; and (2) whether the McGills adversely possessed 62 of

the 82 lots for a continuous period of ten years.                 In January 2002,

the district court found that no genuine issue of material fact

existed as to the validity of the foreclosure sale and granted

summary judgment in favor of Levy on this issue.                   As the McGills

claimed title to only 62 of the 82 lots, the district court’s grant

Mississippi.
     6
      As the McGills do not argue counts three and four on appeal,
they are abandoned. See Meadowbriar Home for Children, Inc. v.
Gunn, 81 F.3d 521, 533 (5th Cir. 1996) (citing Randall v. Chevron
U.S.A., Inc., 13 F.3d 888, 911 (5th Cir. 1994)).

                                          4
of summary judgment in favor of Levy quieted her title as to the 20

uncontested lots.        The district court also ruled that genuine

issues   of   material    fact    existed     with     regard   to    the   adverse

possession issue and thus denied both parties’ motions on that

claim.

     After a bench trial on the issue of adverse possession only,

the court entered a final judgment that cleared Levy’s title to the

remaining 62 lots.       The district court determined that Levy’s suit

had not tolled the McGills’ alleged period of adverse possession

until February 2001, when the District Court for the Eastern

District of Louisiana transferred it to the Southern District of

Mississippi.7      As     such,    the       McGills    needed       to   establish

commencement of any alleged period of adverse possession by March

1991, ten years before the transfer to the Mississippi district

court.   The district court ruled that the McGills had failed to

prove commencement of a period of adverse possession by March 1991

by making a positive assertion of a right hostile to the record

title owner. In the alternative, the district court concluded that

the McGills had interrupted any period of adverse possession that

     7
       The filing of a suit to contest the adverse possessor’s
possession interrupts the ten-year period. See Trotter v. Roper,
92 So. 2d 230, 232 (Miss. 1957). The question whether the district
court correctly determined that Levy’s suit did not toll the ten-
year period until its transfer to the Mississippi district court is
not before us for review; neither would the answer to that question
affect the outcome of this action.

                                         5
might have been established when they acknowledged Hibernia’s and

Levy’s title to the foreclosed lots.           This appeal ensued.

                                II.   ANALYSIS

A.   Summary Judgment

     1.     Standard of Review

     We review a district court’s grant or denial of summary

judgment de novo and use the same standard as that applied by the

district court.8       Summary judgment is “proper, if, viewing the

evidence and inferences drawn from that evidence in the light most

favorable to the non-moving party, there is no genuine issue of

material fact and the moving part is entitled to judgment as a

matter of law.”9       At this stage, “a court may not weigh the

evidence    or   evaluate     the   credibility   of   witnesses,      and   all

justifiable inferences will be made in the non-moving party’s

favor.”10

     2.     Discussion

     The    McGills   raise    several     arguments   with   regard    to   the

district court’s denial of their motion for summary judgment on the

issue of the validity of the foreclosure sale.            The McGills first

     8
       United States ex. rel. Reagan v. E. Tex. Med. Ctr. Reg’l
Healthcare Sys., – F.3d —, 2004 WL 1959083, at *2 (5th Cir. Sept.
21, 2004).
     9
       Id. (citing FED. R. CIV. PROC. 56(c); Daniels v. City of
Arlington, 246 F.3d 500, 502 (5th Cir. 2001)).
     10
       Id. (citing Morris v. Covan World Wide Moving, Inc., 144
F.3d 377, 380 (5th Cir. 1998)).

                                       6
argue that Hibernia never acquired title to the property from the

FDIC because the FDIC’s assignment to Hibernia was invalid.                   To

support this proposition, the McGills argue that the district court

erred when it admitted the APA between Hibernia and the FDIC as

evidence that the FDIC assigned the Deed of Trust to Hibernia.               The

McGills also argue that the district court erred when it concluded

that the APA was a valid assignment to Hibernia because (1) it

lacked definiteness;        (2)   Levy   failed   to    prove   that   the   FDIC

delivered the assignment to Hibernia; and (3) Hibernia did not

record the assignment.

          The McGills objected to the admissibility of the APA on

hearsay     grounds.   We    review      a   district    court’s    ruling    on

admissibility of evidence for abuse of discretion.11               The district

court did not abuse its discretion here. The McGills’ objection to

the APA as hearsay is meritless.12

     A thorough review of the record reveals no reversible error in

the district court’s conclusion that the APA operated as a valid

assignment to Hibernia of the McGills’ note and Deed of Trust.               The

     11
          See United States v. Pace, 10 F.3d 1106, 1115 (5th Cir.
1993).
     12
       See, e.g., Kepner-Tregoe, Inc. v. Leadership Software, Inc.,
12 F.3d 527, 540 (5th Cir. 1994) (“‘Signed instruments such as
wills, contracts, and promissory notes are writings that have
independent legal significance, and are nonhearsay.’ . . . The
admission of a contract to prove the operative fact of the
contract’s existence thus cannot be the subject of a valid hearsay
objection. To introduce a contract, a party need only authenticate
it.”).

                                         7
McGills cite to Mississippi Code Annotated §§ 15-3-1(c) as support

for the proposition that the APA was not sufficiently definite to

convey the Deed of Trust to Hibernia.13         The McGills also cite

Mississippi Code Annotated 89-1-3 as support for the proposition

that the FDIC had to deliver the Deed of Trust to Hibernia.14            As

the district court noted, the language of these statutes indicates

that neither explicitly pertains to the assignment or transfer of

a security interest. Indeed, Section 15-3-1(c) mentions nothing on

“definiteness.”    The McGills cite to no other authority to support

these arguments.

     Neither do the McGills cite to any applicable authority to

support   their   argument   that   the   parties   had   to   record   the

assignment.15      Although the McGills cite to Mississippi Code

Annotated § 89-5-29 as support for this proposition, we conclude

that the district court did not err when it found that the language

     13
        “An action shall not be brought whereby to charge a
defendant or other party . . . upon any contract for the sale of
lands . . . unless, in each of said cases, the promise or agreement
upon which such action may be brought, or some memorandum or note
thereof, shall be in writing, and signed by the party to be charged
therewith or signed by some person by him or her thereunto lawfully
authorized in writing.” MISS. CODE ANN. § 15-3-1(C).
     14
        “An estate of inheritance or freehold, or for a term of more
than one year, in lands shall not be conveyed from one to another
unless the conveyance be declared by writing signed and delivered.”
MISS. CODE ANN. § 89-1-3.
     15
       See Scruggs v. Northern, 85 So. 89, 91 (Miss. 1920) (noting
that the failure to record the assignment of a note secured by a
deed of trust does not affect the validity of the assignee’s
substitution of trustee).

                                    8
of Section 89-5-29 requires that a party record only mortgage and

deed of trust documents themselves or documents that evidence a

substitution of trustee.16

     The McGills also contend that the foreclosure sale itself was

invalid. To support this argument, the McGills argue that the

Substitution    of   Trustee   instrument   and   the   notice   of   the

foreclosure sale did not meet the requirements of Mississippi law,

because they did not (1) show how Hibernia acquired the benefit of

the Deed of Trust and (2) properly name the original beneficiary of

the Deed of Trust, First National.

     Under Mississippi law, a foreclosure sale is presumed valid.17

The burden of proving invalidity is on the party who seeks to set

aside the foreclosure sale.18       To meet this burden, the party

attacking the validity of the sale must prove that the trustee

failed “to perform a necessary condition precedent to the valid

exercise of [the trustee’s] power of sale or there must exist an

     16
        “Except as hereinafter provided, all mortgages and deeds of
trust upon land given to secure the payment of money, and all
instruments of writing whereby a trustee is substituted under any
such deed of trust, and all instruments of writing canceling or
satisfying, or authorizing the cancellation or satisfaction of any
such mortgage or deed of trust, shall be recorded separately from
other instruments relating to land or records, and such records
shall be called ‘records of mortgages and deeds of trust on land.’”
MISS. CODE ANN. § 89-5-29.
     17
          See Myles v. Cox, 217 So. 2d 31, 34 (Miss. 1968).
     18
          See id.

                                   9
inadequate consideration plus inequitable circumstances.”19               As the

McGills     do      not     allege    that     there     existed    “inadequate

consideration,” they must prove that the trustee failed to satisfy

a condition precedent to his power of sale.

     We perceive no error in the district court’s conclusion that

the notice and advertisement of the foreclosure sale met the

requirements of Mississippi law.             Like the district court, we have

found no law that requires a substitution of trustee instrument to

demonstrate —— in detail —— how the secured party obtained its

interest.       There is no dispute that the parties properly recorded

the Substitution of Trustee instrument here; neither do the parties

dispute that the Deed of Trust allows the legal holder to appoint

a substitute trustee.            The Substitution of Trustee instrument

clearly stated that Hibernia was the holder of the McGills’ note

and Deed of Trust.           In addition, the instrument stated that the

then-current holder of the note and Deed of Trust was “Hibernia

National        Bank,     formerly   First    National     Bank    of   Slidell,

Louisiana.”20      In sum, we conclude that the district court did not

err when it granted summary judgment in favor of Levy and against

the McGills on the validity of the foreclosure sale.

B.   Bench trial

     1.     Standard of Review

     19
          Id.
     20
          Record on Appeal 3:424.

                                        10
     We review bench trial findings of fact for clear error and

conclusions of law de novo.21

     2.    Discussion

     As for the 62 lots to which they claim ownership under adverse

possession, the McGills argue on appeal that the district court

erred when it held that they failed to prove a hostile claim of

ownership for an uninterrupted period of ten years.         To establish

a claim of adverse possession under Mississippi law, the claimant

has the burden of showing that his possession was (1) under a claim

of ownership; (2) continuous and uninterrupted; (3) hostile —— as

opposed   to   amicable   and   permissive   ——   possession;   (4)   open,

notorious, and visible; (5) peaceful; and (6) exclusive.22              The

claimant must establish, by clear and convincing evidence, each of

these elements for a period of ten years.23          The parties dispute

only three of these elements: (1) claim of ownership; (2) hostile

possession; and (3) continuous and uninterrupted possession.

     The district court ruled that the McGills failed to prove by

clear and convincing evidence that they made a positive assertion

of a right hostile to Hibernia’s or Levy’s title sufficient to

     21
       Adams v. Unione Mediterranea di Sicurita, 364 F.3d 646, 655
(5th Cir. 2004) (quoting Baldwin v. Stalder, 137 F.3d 836, 839 (5th
Cir. 1998)).
     22
       See Martin v. Simmons, 571 So. 2d 254, 257 (Miss. 1990);
Cheatham v. Stokes, 760 So. 2d 795, 799 (Miss. Ct. App. 2000).
     23
       See MISS. CODE ANN. § 15-1-13(1); Rice v. Pritchard, 611 So.
2d 869, 871 (Miss. 1992).

                                    11
overcome the presumption that a mortgagor who holds property after

a   foreclosure   sale   is   in   permissive,   as   opposed   to   hostile,

possession.24     The district court also ruled that the McGills

fatally interrupted any period of hostile possession that they may

have begun when they acknowledged that Hibernia —— and then Levy ——

held title to the property.

      After a careful consideration of the entire record and the law

applicable here, we can discern no error in the district court’s

holding.25   We are satisfied that the district court did not err in

holding that the McGills interrupted any alleged period of adverse

      24
       See, e.g., St. Regis Pulp & Paper Corp. v. Floyd, 238 So.
2d 740, 744 (Miss. 1970) (“Such permissive possession of lands,
even if long continued, does not confer title in the person in
permissive possession until a positive assertion of a right hostile
to the owner has been made known to him. The Mississippi courts
have held that a tenant at sufferance may not set up a hostile
claim of adverse possession based simply upon possession.”).
Further, the Mississippi Supreme Court has held that
     [t]o acquire title by possession two things must occur,
     to-wit, an occupation, actual or constructive, and a
     claim of ownership. Neither is effectual without the
     other. No continuance of occupation, no matter how long
     protracted, will avail unless accompanied by claim of
     title; and every presumption of law is that the occupant
     holds in subordination and not adversely, to the true
     owner.
Newman v. Smith, 84 So. 2d 512, 515 (Miss. 1956) (emphasis added).

      25
           Because we find dispositive the district court’s
determination that the McGills interrupted any alleged period of
adverse possession, we need not reach the issue whether a district
court —— under Mississippi law —— can determine an adverse
possession claim when it has not determined the boundaries to the
property. See Tutor v. Pannell, 809 So. 2d 748 (Miss. Ct. App.
2002) (reversing chancery court’s ruling on adverse possession
because chancery court made no determination as to boundaries of
property).

                                      12
possession when Carl McGill acknowledged Hibernia’s title to the

foreclosed        lots     during    his     encounter       with   the   Hibernia

representatives and when McGill Wellworks’s lawyer acknowledged

Levy’s title to the same property.                   Any acknowledgment by an

adverse possessor that the record owner of real property has title

is   inconsistent        with   a   claim    of    adverse    possession.26     The

transcript of the January 10, 1992 videotaped encounter between

Carl McGill and the Hibernia representative reveals that Carl

repeatedly acknowledged Hibernia’s title to the foreclosed lots.

Further,     in    March    1994,    David       Oliver,   attorney   for     McGill

Wellworks, wrote a letter to Levy in which he acknowledged that

Levy had acquired the foreclosed lots from Hibernia.27                          The

district court did not err in this regard.

                                III.    CONCLUSION

      For the foregoing reasons, the judgments of the district are,

in all respects,

AFFIRMED.

      26
           Ford v. Rhymes, 103 So. 2d 363, 364 (Miss. 1958).
      27
        The letter informed Levy that “[t]his office has been
consulted by Dolan Trailer Park, a/k/a McGill Wellworks, Inc.
concerning perhaps unbeknownst to you a possible boundary dispute
which concerns the property which you have acquired from Hibernia
Bank.” Record on Appeal 3:513 (emphasis added).

                                            13