Court Opinion

ID: 2737469
Source: CourtListenerOpinion
Date Created: 2014-09-26 18:01:59.716734+00
Date Added: 2024-06-11T12:18:05.557234
License: Public Domain

REL: 09/26/2014

Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.

          SUPREME COURT OF ALABAMA
                              SPECIAL TERM, 2014
                             ____________________

                                    1120302
                             ____________________

 Ex parte First United Security Bank and Paty Holdings, LLC

                     PETITION FOR WRIT OF CERTIORARI
                      TO THE COURT OF CIVIL APPEALS

  (In re: First United Security Bank and Paty Holdings, LLC

                                           v.

W. Hardy McCollum, Judge of Probate of Tuscaloosa County, et
                            al.)

              (Tuscaloosa Circuit Court, CV-10-901031;
                  Court of Civil Appeals, 2110828)
1120302

MURDOCK, Justice.

    This Court granted certiorari review to clarify our

decision in First Union National Bank of Florida v. Lee County

Commission, 75 So. 3d 105 (Ala. 2011), and to further address

who is the "owner" entitled to recover excess funds received

from the tax sale of real estate.       We reverse and remand.

                  I. Facts and Procedural History

    First United Security Bank ("First United") and its

wholly    owned   subsidiary,   Paty   Holdings,   LLC   (sometimes

hereinafter referred to collectively as "the bank"), brought

suit to recover excess funds received by Tuscaloosa County

from the tax sale of real estate owned by Wayne Allen Russell,

Jr., and on which First United had a mortgage.            The bank

foreclosed on its mortgage after the tax sale but before the

demand for excess proceeds was made.

    In their decision below, the Court of Civil Appeals

stated the facts and the substance of the trial court's

judgment as follows:

         "On December 30, 2010, First United Security
    Bank filed a verified complaint against W. Hardy
    McCollum, in his capacity as Tuscaloosa County Judge
    of Probate, and Peyton Cochrane, in his capacity as
    Tuscaloosa County Tax Collector, seeking, among
    other things, a judgment declaring that it was

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    entitled to the excess funds Tuscaloosa County
    received at the sale of the property for unpaid
    taxes. The complaint was later amended to add
    Russell as a defendant and Paty Holdings, LLC, as a
    plaintiff.

         "The case was submitted to the trial court for
    a decision upon the parties' briefs and the
    following joint stipulation of facts:

              "'....

               "'4. On or about February 15, 2002,
          Wayne Allen Russell, Jr. ... executed a
          note and mortgage in favor of First United
          Security Bank .... Said mortgage was
          recorded   in  the   Probate  Records   of
          Tuscaloosa County ....

               "'5. On May 25, 2010, ... certain
          [parcels of land] subject to the bank's
          mortgage ... were sold at a tax sale due to
          unpaid 2009 property taxes.

               "'6 & 7 [The two parcels at issue were
          sold for a combined amount of $42,000, of
          which    $32,305.12    represents    excess
          proceeds.]

               "'8. ... First United Security Bank
          assigned its foreclosure bid rights to ...
          Paty Holdings, LLC. ... Paty Holdings,
          LLC was the highest bidder at [a]
          foreclosure sale [on July 8, 2010,] with a
          bid in the amount of $2,381,790.00 and
          recorded a foreclosure deed .... The bid
          amount equaled the amount of [Russell's]
          indebtedness to the bank.

              "'....

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               "'10. ...     W. Hardy McCollum as
          Tuscaloosa County Judge of Probate and
          Peyton Cochrane as Tuscaloosa County Tax
          Collector informed [First United Security
          Bank and Paty Holdings, LLC,] that [they]
          must pay the excess bids in order to redeem
          the property taxes but that [they] would
          not be entitled to a refund of the excess
          bids. Instead, [McCollum and Cochrane]
          asserted that the excess bids to be paid by
          [First United Security Bank and Paty
          Holdings, LLC,] will be made payable to ...
          Russell. ...

              "'...'

         "The parties subsequently stipulated that Black
    River Holdings, LLC, 'the current owner' of the
    property, had proposed to redeem the property and
    had assigned any rights it had to the excess funds
    to First United Security Bank. The parties also
    stipulated that the excess tax-sale proceeds were to
    be held pending the trial court's determination of
    the case.

         "On May 25, 2012, the trial court entered a
    judgment, stating:

               "'1. The primary issue in this case is
          ... between ... First United Security Bank
          and Paty Holdings, LLC, and ... Wayne Allen
          Russell, Jr. who qualifies as the "owner"
          or the "person legally representing such
          owner" under Ala. Code [1975,] Section
          40–10–28. In First Union National Bank of
          Florida v. Lee County Commission[, 75 So.
3d 105] (Ala. ... 2011), the Alabama
          Supreme Court addressed this very issue
          when   it   concluded    "that   when   the
          Legislature directs in Section 40–10–28[,
          Ala. Code 1975,] that the excess funds from
          a tax sale shall be paid over to the owner

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          or his agent," the term "owner" means "the
          person against whom taxes on the property
          are assessed." Under the Stipulated Facts
          of the parties, that person would be ...
          Wayne Allen Russell, Jr.

               "'2. [First United Security Bank and
          Paty Holdings, LLC,] argue that the result
          in this case should be different from that
          in First Union National Bank, because
          unlike the mortgagee in First Union
          National Bank, there had been a foreclosure
          by the mortgagee in this case. Thus, in
          this case [First United Security Bank and
          Paty Holdings, LLC,] contend that as the
          foreclosing mortgagee, ... First United
          Security Bank is the full owner of the
          subject property. This argument would be
          persuasive if the foreclosure had occurred
          prior to the tax sale, as it is clear from
          the opinion in First Union National Bank
          that the Supreme Court was referring to a
          foreclosure which occurred prior to the tax
          sale and not after the tax sale as occurred
          in this case.

              "'....

               "'Accordingly, the Court finds in
          favor of [McCollum, Cochrane, and Russell]
          and against [First United Security Bank and
          Paty Holdings, LLC]. It is therefore the
          order of the Court that the relief
          requested by [First United Security Bank
          and Paty Holdings, LLC,] is hereby denied.
          It is the further order of the Court that
          ... Russell ... is entitled to the refund
          of the excess funds from the tax sale at
          issue in this case.    Costs are taxed to
          [First United Security Bank and Paty
          Holdings, LLC].'"

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First United Sec. Bank v. McCollum, [Ms. 2110828, Nov. 30,

2012] ___ So. 3d ___, ___ (Ala. Civ. App. 2012) (emphasis

added).

                   II. Standard of Review

         "Our standard of review is de novo: 'Because the
    issues presented by [this appeal] concern only
    questions of law involving statutory construction,
    the standard of review is de novo. See Taylor v.
    Cox, 710 So. 2d 406 (Ala. 1998).'       Whitehurst v.
    Baker, 959 So. 2d 69, 70 (Ala. 2006). ..."

Ex parte Birmingham Bd. of Educ., 45 So. 3d 764, 767 (Ala.

2009).

                        III. Analysis

    The issue presented here is whether a purchaser at a

foreclosure sale is an "owner" entitled under Ala. Code 1975,

§ 40-10-28, to receive the excess proceeds from a tax sale of

the real property foreclosed upon.1     Section 40-10-28, as it

read at the time of the foreclosure and attempted redemption

in this case, provided, in pertinent part:

         "The excess arising from the sale of any real
    estate remaining after paying the amount of the
    decree of sale, and costs and expenses subsequently
    accruing, shall be paid over to the owner, or his
    agent, or to the person legally representing such
    owner, or into the county treasury, and it may be

    1
     Section 40-10-28 was amended while this case was pending.
See note 2, infra.
                              6
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     paid   therefrom   to    such   owner,   agent   or
     representative in the same manner as to the excess
     arising from the sale of personal property sold for
     taxes is paid. ..."

This provision does not define "owner" and does not, by its

terms, impose any limitation on when the owner must have

acquired its interest in the property in order to be eligible

to   receive   the   excess   proceeds   from   a   tax   sale   of   the

property.

     In First Union National Bank of Florida v. Lee County

Commission, 75 So. 3d 105 (Ala. 2011), this Court held that

the term "owner" in § 40-10-28 meant "the person against whom

taxes on the property were assessed," 75 So. 3d at 117, and

that the term "owner" does not include a mortgagee who has not

foreclosed on its mortgage. In reaching this conclusion, this

Court noted (1) that the statute does not define the term

"owner" and (2) that Ala. Code 1975, § 40-10-120(a), specifies

a broader range of persons who are entitled to redeem the

property from a tax sale.      This Court then concluded that the

different language in the two related statutes limits the

breadth of the term "owner" in § 40-10-28 so as to exclude

mere mortgagees.

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       This Court in First Union also rejected the argument that

a mere mortgagee is an "owner" by virtue of the fact that

Alabama is a "title" state in which the mortgagee holds legal

title to property and the mortgagor holds only equitable

title.         This   Court   provided        a   thorough    discussion     of

precedent, including Loventhal v. Home Insurance Co., 112 Ala.
108,    115,    20 So. 419,   420       (1896),   in    support   of   the

proposition that "equitable title is more than an interest in

property; it is ownership of the property."                  First Union, 75
So. 3d at 113.

       Lastly, this Court in First Union rejected various policy

and equitable arguments in favor of treating a mortgagee as an

owner entitled to the excess proceeds, noting, among other

things, that mortgagees have potential remedies regarding

excess tax-sale proceeds.           In this regard, we specifically

made note of the mortgagee's ability to "foreclose upon the

property, purchase it at the foreclosure sale, and thereby

merge the equitable title with the legal title, thus becoming

entitled to any excess funds."                75 So. 3d at 116 (emphasis

added).

                                         8
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    The bank argues that this case is distinguishable from

First Union because First United foreclosed its mortgage

before the demand for or the payment of the excess funds and

thus became the "owner" by virtue of owning both legal and

equitable title to the property.   We agree.

    The Court of Civil Appeals rejected the bank's argument,

holding that First Union stands for the proposition that the

excess funds "are payable only to the person in whose name the

taxes are assessed at the time of the tax sale (or his agent

or representative)."   ___ So. 3d at ___ (emphasis added).   In

so doing, however, the Court of Civil Appeals erroneously

added a temporal qualification to this Court's holding in

First Union.   This addition extends this Court's holding in

First Union beyond its context and imposes a temporal element

on ownership that is not found in the statute itself or in

this Court's opinion in First Union.   Nothing in First Union

suggests that there is, or should be, a distinction between

one who completes a foreclosure purchase (or other purchase

for that matter) and becomes the "owner" of the property

before a tax sale and one who completes a purchase after the

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tax   sale,   but   before   the   payout   of   any   excess   tax-sale

proceeds.

      The issue in First Union was not the timing of a sale or

foreclosure, but whether a mere mortgagee -- with only a bare

legal title to the property -- was an "owner" of the property.

In First Union, the only claimants to the excess proceeds were

a mortgagor/owner (who was also the owner listed on the

assessment, and who apparently was still in possession of the

property) and a mortgagee who had not foreclosed and who had

only bare legal title.

      The reference in First Union to "owner" as "the person

against whom taxes on the property are assessed," 75 So. 3d at

114, was not intended to impose any temporal limitation on

when a person must become an "owner" in order to be entitled

to the excess proceeds.      Nor was it intended to limit "owner"

to the person or entity listed on the tax assessment, whether

or not that person or entity is the actual owner at the time

of the tax sale (and whether or not the owner was correctly

listed on the assessment).

      The Court of Civil Appeals' limitation of "owner" of the

property to the person in whose name the taxes were assessed

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at the time of the tax sale not only adds a temporal element

not found in the statute, but also is contrary to (1) the

ordinary      meaning     of     the    word    "owner"      (which    does    not

ordinarily betoken a prior owner who does not retain any

interest in the property at the time of the events at issue)

and (2) the ordinary expectations of purchasers and sellers of

real estate.        Ordinarily, the conveyance of real property

transfers not only the property itself but also all rights

appertaining thereto, unless excepted.                 We see no reason not

to include the right to receive the excess proceeds in the

rights transferred.            See W. Hereford and J. Haithcock, Money

for Nothing: Who Is Entitled to the Excess Paid at a Tax

Sale?, 73 Ala. Law. 424, 427 (2012) (seller of real estate

ordinarily gives up all rights to the sold property, including

the   right    to   the   excess proceeds);           Ala.    Op.     Att'y   Gen.

2011-087 (2011) (warranty deed normally conveys all rights in

the   property,     including          the    right   to   excess     proceeds);

McGallagher v. Estate of DeGeer, 934 So. 2d 391, 40 (Ala. Civ.

App. 2005) (right to rents and profits runs with the land).

      Further, as noted above, the opinion in First Union

specifically indicated that one of the possible remedies by

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which a mortgagee could protect itself would be a foreclosure

of   the   mortgage,   thereby   causing   a   merger   of   legal   and

equitable title in the foreclosure purchaser and a resulting

entitlement to the excess proceeds.            We see no reason to

conclude that such a merger is any more complete when it

occurs before a tax sale than when it occurs after it.

     Finally, limitation of the term "owner" to the owner in

whose name the taxes were assessed at the time of the tax sale

often would lead to inequitable results. The "assessed owner"

may not be the actual or equitable owner at the time of the

tax sale, either because the property was sold between the

October 1 assessment date and the date of the tax sale,              or

because the assessment was not changed after a sale to reflect

the name of the new owner.         In either of those instances,

payment of the excess proceeds to the assessed owner would

represent a windfall to the assessed owner and would unfairly

penalize the purchaser/current/actual owner. The injustice is

particularly acute if the current owner paid the excess

proceeds in order to redeem the property, but the excess

proceeds are then returned to the assessed owner, who did not

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pay the taxes, did not contribute to the redemption amount,

and no longer has any interest in the property.2

                       IV.   Conclusion

    Based on the foregoing, we conclude that the bank is

entitled to the excess tax-sale proceeds.     We reverse the

judgment of the Court of Civil Appeals and remand the case for

further proceedings consistent with this opinion.

    2
     While this case was pending, the legislature amended
§ 40-10-28 to provide that the excess tax-sale proceeds shall
be paid to "a person or entity who has redeemed the property."
Act No. 2013-370, Ala. Acts 2013 (emphasis added).          In
addition to the argument made by the bank as to the meaning of
§ 40-10-28 as written at the time of the events at issue, the
bank also argues that we should consider the amendment to §
40-10-28 to be retroactive and to apply to any property as to
which the excess proceeds had not been paid out as of
August 1, 2013, the effective date of that amendment. The
defendants disagree, contending that the amendment was
intended to apply only to tax sales made on or after that date
and, furthermore, that any other interpretation would upset
settled expectations and would be unconstitutional.        Our
judgment of reversal in favor of the bank in this particular
case is not dependent on the bank's argument on this issue.
Even if the bank were correct, in this case the entity
actually attempting to redeem the property is also the "owner"
of the property.
                              13
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    REVERSED AND REMANDED.

    Stuart, Bolin, Parker, Shaw, Main, and Wise, JJ., concur.

    Moore, C.J., concurs in the result.

    Bryan, J., recuses himself.*

     *Justice Bryan was a member of the Court of Civil Appeals
when that court considered this case.

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