Court Opinion

ID: 9959726
Source: CourtListenerOpinion
Date Created: 2024-04-12 15:02:49.867445+00
Date Added: 2024-06-11T08:18:46.683884
License: Public Domain

Rel: April 12, 2024

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) 229-0650), 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
                             OCTOBER TERM, 2023-2024

                                _________________________

                                      SC-2023-0414
                                _________________________

                                         Alavest, LLC

                                                  v.

                                 Michael Joseph Harris

                      Appeal from Jefferson Circuit Court
                                (CV-22-901595)

STEWART, Justice.

       Alavest, LLC, appeals a judgment of the Jefferson Circuit Court

("the trial court") that, among other things, declared a foreclosure deed
SC-2023-0414

void in an ejectment action it had commenced against Michael Joseph

Harris. Because a necessary and indispensable party was absent from

the proceedings, we reverse the judgment and we remand the cause with

instructions.

                      Facts and Procedural History

     In February 2017, Harris purchased a home in Gardendale ("the

property") with a loan secured by a mortgage executed in favor of

HomeBridge Financial Services, Inc. In 2020, Mortgage Electronic

Registration Systems, Inc., on behalf of HomeBridge Financial,

transferred and assigned the mortgage to New Rez, LLC, d/b/a Shellpoint

Mortgage Servicing ("New Rez"). At some point thereafter, Harris

defaulted on his loan payments. On April 27, 2022, New Rez sold the

property at a foreclosure sale to Alavest. The following day, Alavest sent

a letter to Harris notifying him of the foreclosure sale and demanding

possession of the property. On May 16, 2022, Harris, through legal

counsel, sent a letter to Alavest notifying it of his request to redeem the

property and asserting that he had not received notice of the foreclosure

proceedings. Shortly thereafter, Alavest filed a complaint for ejectment

in the trial court. Harris filed an answer in which he asserted various

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affirmative defenses, including that the foreclosure sale was void. Harris

also asserted a counterclaim seeking a judgment declaring that the

foreclosure proceedings had been defective and in violation of § 6-5-248,

Ala. Code 1975. Alavest amended its complaint to add a claim of unjust

enrichment, filed a reply to Harris's counterclaim, and filed a motion to

dismiss the counterclaim. Alavest asserted that Harris's counterclaim

actually alleged a claim against New Rez, as mortgagee, who Harris had

not added as party to the action. The trial court denied Alavest's motion

to dismiss.

     After a bench trial, the trial court entered a judgment in favor of

Harris on Alavest's ejectment and unjust-enrichment claims because, it

determined, the foreclosure sale was void. The trial court reasoned that

the foreclosure proceedings did not comply with Alabama law because, it

said, the evidence before it demonstrated that Harris had not received

notice of the acceleration of the note evidencing the loan or notice of the

foreclosure sale until after Alavest had made a demand for possession of

the property. The trial court also stated that, with regard to Harris's

counterclaim, because New Rez was not a party to the action, "the only

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relief that [the trial court] can give in the absence of the mortgagee is to

declare the foreclosure sale void."

      Alavest filed a motion seeking to alter, amend, or vacate the

judgment or, in the alternative, seeking a new trial in which it alleged

that the trial court had erred in not joining New Rez as a party. Harris

filed a response in opposition to Alavest's motion in which he asserted

that New Rez was not required to be added as a party to the action. The

trial court denied Alavest's postjudgment motion, and Alavest timely

filed a notice of appeal.

                             Discussion

      Alavest challenges the judgment insofar as it declared the

foreclosure sale void. Alavest asserts that New Rez, as the foreclosing

mortgagee, was an indispensable party and that its absence from the

action "prevented the trial court from obtaining jurisdiction in this

matter." Alavest's brief at 9. This Court has made clear that an

indispensable party's absence from an action does not deprive the circuit

court of subject-matter jurisdiction. Campbell v. Taylor, 159 So. 3d 4 (Ala.

2014). Instead, "[t]he absence of a necessary and indispensable party

necessitates the dismissal of the cause without prejudice or a reversal

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with directions to allow the cause to stand over for amendment." J.C.

Jacobs Banking Co. v. Campbell, 406 So. 2d 834, 850-51 (Ala. 1981)(citing

Rogers v. Smith, 287 Ala. 118, 248 So. 2d 713 (1971)).

      In determining whether a party is necessary and, ultimately,

indispensable, Rule 19, Ala. R. Civ. P., provides a two-step process to

guide a trial court's decision. Holland v. City of Alabaster, 566 So. 2d 224,

226 (Ala. 1990). The trial court must first determine whether an absent

person should be joined, if feasible, under the guidance set forth in section

(a) of Rule 19, which provides, in pertinent part, that the person shall be

joined if

      "(1) in the person's absence complete relief cannot be accorded
      among those already parties, or (2) the person claims an
      interest relating to the subject of the action and is so situated
      that the disposition of the action in the person's absence may
      (i) as a practical matter impair or impede the person's ability
      to protect that interest or (ii) leave any of the persons already
      parties subject to a substantial risk of incurring double,
      multiple, or otherwise inconsistent obligations by reason of
      the claimed interest."

      If the trial court determines that the absent person should be joined

under section (a), but cannot be made a party, then, pursuant to section

(b) of Rule 19, "the court shall determine whether in equity and good

conscience the action should proceed among the parties before it, or

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should be dismissed, the absent person being thus regarded as

indispensable." The determination whether an absent party is

indispensable or merely necessary "is a question to be decided in the

context of the particular case." J.R. McClenney & Son, Inc. v. Reimer, 435

So. 2d 50, 52 (Ala. 1983).

     The purposes of Rule 19 "include the promotion of judicial efficiency

and the final determination of litigation by including all parties directly

interested in the controversy." Byrd Cos. v. Smith, 591 So. 2d 844, 846

(Ala. 1991). This Court has held that, "in cases where the final judgment

will affect ownership of an interest in real property, all parties claiming

an interest in the real property must be joined." Id. at 846 (citing

Johnston v. White-Spunner, 342 So. 2d 754, 759 (Ala. 1977)). This Court

has also held that, in the context of boundary disputes, a mortgagee is a

necessary and indispensable party because its rights would be affected

by the judgment. See Rollan v. Posey, 271 Ala. 640, 645, 126 So. 2d 464,

468 (1961) (explaining that "all persons having a material interest, legal

or equitable, in the subject matter of a suit, must be made parties," based

on "the principle that no man's rights should be controverted in a court

of justice unless he has full opportunity to appear and vindicate them").

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     Alavest relies on Hawkins v. LaSalle Bank, National Ass'n, 24 So.

3d 1143 (Ala. Civ. App. 2009), which, it asserts, strongly implies that a

foreclosing mortgagee is a necessary party to a later ejectment action. In

Hawkins, the Court of Civil Appeals, in response to an argument that a

former mortgagee was an indispensable party, explained that, because

that mortgagee had assigned its rights in the mortgage before the

foreclosure sale, it was not a necessary party to the ejectment action. 24

So. 3d at 1151 (overruled on other grounds by Berry v. Deutsche Bank

Nat'l Tr. Co., 57 So. 3d 142 (Ala. Civ. App. 2010)).

     Harris, in defense of the judgment, argues that Barnes v. U.S. Bank

National Ass'n, 318 So. 3d 1209, 1214 (Ala. Civ. App. 2020), is "almost

identical" to this case and, he asserts, supports a conclusion that New

Rez was not indispensable or required to be added as a party. Harris's

brief at 4. Barnes did not involve issues relating to joinder of necessary

or indispensable parties. Another important distinction between Barnes

and the present case is that, in Barnes, the mortgagee was the entity that

had foreclosed on the mortgage, had purchased the property at the

foreclosure sale, and had initiated the ejectment action. The mortgagee

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assigned its rights to another entity only after it had commenced the

litigation.

      In this case, New Rez, the mortgagee and foreclosing entity, sold

the property at a foreclosure sale to Alavest. New Rez did not assign its

rights under the mortgage agreement to Alavest. The practical effect of

the trial court's judgment declaring the foreclosure sale void strips

Alavest of its rights to the property and restores New Rez as the

mortgagee and Harris as the mortgagor. SE Prop. Holdings, LLC v. Bama

Bayou, LLC, 329 So. 3d 1250, 1268 (Ala. 2020)("Once a foreclosure has

been set aside, the law in Alabama restores the parties to their former

positions and rights under the mortgage."). The trial court's judgment

declaring the foreclosure sale void, which was entered in New Rez's

absence, impeded New Rez's ability to protect its interest by preventing

it from defending the validity of the foreclosure proceedings and sale. See

Rule 19(a)(2)(i). In addition, Alavest is now "subject to a substantial risk

of incurring double, multiple, or otherwise inconsistent obligations by

reason of the claimed interest." Rule 19(a)(2)(ii). Accordingly, New Rez is

a necessary party that should be joined, if feasible.

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     However, because it does not appear from the record before this

Court that any attempt was made to add New Rez as a party, we remand

the cause for the trial court to order that New Rez be added as a party, if

feasible. See Smith v. Smith, [Ms. SC-2023-0264, Sept. 15, 2023] ___ So.

3d ___ (Ala. 2023); and Capitol Farmers Mkt., Inc. v. Delongchamp, 320

So. 3d 574 (Ala. 2020). If New Rez cannot be joined as a party, the trial

court, in considering the factors set forth in Rule 19(b), "shall determine

whether in equity and good conscience the action should proceed" in New

Rez's absence or whether New Rez is indispensable to the action, thus

requiring dismissal of the action without prejudice. Rule 19(b); see

Delongchamp, 320 So. 3d at 583, and J.C. Jacobs Banking Co., 406 So. 2d

at 850-51. Based on our conclusion, we pretermit discussion of the other

issues raised on appeal.

                            Conclusion

     The trial court's judgment is reversed, and the cause is remanded

for proceedings consistent with this opinion.

     REVERSED AND REMANDED WITH INSTRUCTIONS.

     Parker, C.J., and Wise, Sellers, and Cook, JJ., concur.

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