Fredrick J. Douglas and Linda L. Douglas v. Troy Bank & Trust Company

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Rel: 8/24/2012 Notice: T h i s o p i n i o n i s s u b j e c t t o f o r m a l r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , A l a b a m a A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may b e made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . ALABAMA COURT OF CIVIL APPEALS SPECIAL TERM, 2012 2110053 F r e d r i c k J . Douglas and L i n d a L. Douglas v. Troy Bank & T r u s t Company Appeal from Coffee C i r c u i t Court (CV-11-9) PITTMAN, Judge. In A p r i l brought ejectment 2011, T r o y Bank & Trust an a c t i o n i n t h e C o f f e e Company Circuit Court ("the bank") seeking o f F r e d r i c k J . D o u g l a s a n d L i n d a L. D o u g l a s f r o m a p a r t i c u l a r p a r c e l of r e a l property l o c a t e d i n Coffee In i t s c o m p l a i n t , the the Douglases had County. t h e bank a l l e g e d , i n p e r t i n e n t p a r t , t h a t mortgaged t h a t property to secure the 2110053 r e p a y m e n t t o t h e bank o f a p a r t i c u l a r p r o m i s s o r y n o t e , b u t had d e f a u l t e d i n m a k i n g payments on t h a t n o t e , w h e r e u p o n t h e bank had foreclosed upon the mortgage and had subsequently p u r c h a s e d t h e r e a l p r o p e r t y a t an a u c t i o n h e l d p u r s u a n t t o t h e power o f s a l e i n t h a t m o r t g a g e ; t h e bank f u r t h e r a l l e g e d , i n p a r a g r a p h 4 o f i t s c o m p l a i n t , t h a t a l t h o u g h t h e b a n k h a d made a demand f o r p o s s e s s i o n o f t h e p r o p e r t y , t h e D o u g l a s e s c o n t i n u i n g t o occupy t h e p r o p e r t y , and i t c o n t e n d e d were that D o u g l a s e s had t h e r e b y f o r f e i t e d t h e i r r i g h t s o f r e d e m p t i o n to the property. The Douglases answered the the as complaint, a d m i t t i n g the t r u t h of paragraph 4 but otherwise denying the bank's statements. After a n s w e r , t h e bank f i l e d May 27, June 2011, 22, w h i c h was was 2011. a motion the t r i a l 1 The the Douglases g r a n t e d , and a new filed seeking a t r i a l c o u r t s e t an Douglases had filed trial initial a motion their setting; trial date on of to continue, d a t e o f S e p t e m b e r 6, 2011, set. On September 1, 2011, the Douglases d i s m i s s , a s s e r t i n g t h a t the t r i a l We w o u l d r e m i n d t h e B e n c h R. C i v . P., p r o v i d e s , s u b j e c t not p r e s e n t i n t h i s case, t h a t be s e t ... a t l e a s t s i x t y (60) trial." 1 2 filed a motion to court lacked subject-matter and B a r t h a t R u l e 4 0 ( a ) , A l a . to certain l i m i t e d exceptions " [ t ] h e t r i a l of a c t i o n s s h a l l days b e f o r e t h e d a t e s e t f o r 2110053 j u r i s d i c t i o n b e c a u s e , t h e y s a i d , t h e bank was n o t a " h o l d e r i n due c o u r s e " o f t h e n o t e o r t h e m o r t g a g e made t h e b a s i s o f t h e f o r e c l o s u r e s a l e and t h a t t h e bank h a d f a i l e d t o s u r r e n d e r t o t h e D o u g l a s e s t h e " o r i g i n a l wet i n k s i g n a t u r e p r o m i s s o r y n o t e and m o r t g a g e . " A f t e r an o r e t e n u s p r o c e e d i n g ( t h e t r a n s c r i p t of not which does appear i n the record), the trial court e n t e r e d a j u d g m e n t i n f a v o r o f t h e bank and a w a r d e d t h e bank p o s s e s s i o n of the p r o p e r t y at i s s u e . denial of t h e i r postjudgment The D o u g l a s e s , a f t e r t h e motion filed pursuant 5 9 ( e ) , A l a . R. C i v . P., a p p e a l e d ; t h e i r a p p e a l was to this c o u r t p u r s u a n t t o A l a . Code 1975, In t h e i r a p p e l l a t e b r i e f , the U n i f o r m Commercial pro se as original transferred 12-2-7(6). Code ("UCC"), t h e D o u g l a s e s , a p p e a r i n g c o u r t , argue t h a t the t r i a l the Rule and c i t i n g v a r i o u s p o r t i o n s o f they d i d throughout j u r i s d i c t i o n because, § to the proceedings i n the trial c o u r t d i d n o t have s u b j e c t - m a t t e r t h e y s a y , t h e bank n e i t h e r s u r r e n d e r e d p r o m i s s o r y n o t e and m o r t g a g e t o them n o r t h o s e documents w i t h t h e t r i a l court. 2 filed This s o r t of c h a l l e n g e t o c r e d i t o r s ' r i g h t s has b e e n r a i s e d i n a s u f f i c i e n t number o f cases arising foreclosure 2 by in states that, like Alabama, means o t h e r t h a n j u d i c i a l a c t i o n T h e b a n k has n o t f a v o r e d t h i s 3 authorize ( s u c h as court with a brief. a 2110053 contractually itself has reserved earned the power generally Diessner 618 F. 2d sale) that the s h o r t h a n d m o n i k e r "show me See Supp. of v. 1184, contention the note." Mortgage E l e c . R e g i s t r a t i o n 1187 (D. Ariz. 2009) Sys., (noting that f e d e r a l " d i s t r i c t c o u r t s ' h a v e r o u t i n e l y h e l d t h a t [ t h e ] "show me the federal note" argument district California, and foreclosure courts merit,'" sitting statute does F a r k a s v. not F. Supp. Mortgage, a (S.D. federal similar offensive, rather report recommendation w i t h Alabama law, prevent a Nevada, creditor "show from me the the of the proceedings"). C i v i l Action (not judge by considering that, contentions of under do not property m o r t g a g e d as s e c u r i t y f o r r e p a y m e n t o f a d e b t : "[A]s best the Court can understand i t , ... P l a i n t i f f s want D e f e n d a n t s t o p r o v e t h a t t h e y have t h e l e g a l a u t h o r i t y t o f o r e c l o s e on t h e p u r c h a s e d p r o p e r t i e s b e f o r e t h e y t a k e s u c h a c t i o n ; t h e s e have b e e n r e f e r r e d t o as 'show me t h e n o t e ' c l a i m s . See, e.g., Zambrano v. HSBC Bank USA, I n c . , [ C i v i l A c t i o n No. 01:09-cv-996] (E.D. Va. May 25, 2010) [not 4 an agreed i n h i s proposition a t t a i n i n g possession No. reported a debtor i n capacity, note" and non-judicial A l a . 2010) presented than a defensive, such Inc., magistrate claims by presentation commencing f o r e c l o s u r e Suntrust 2d), whether to a l l o w and opinions Arizona, require 10-0512-CG-M, December 15, 2010 in in citing further holding that "Arizona's o r i g i n a l note before In lacks 2110053 r e p o r t e d i n F. Supp. 2 d ] . To t h i s end, have r e f e r e n c e d v a r i o u s l a w s w h i c h t h e now consider. Plaintiffs Court w i l l "Defendants have argued that Plaintiffs' fundamental j u s t i f i c a t i o n f o r t h i s a c t i o n i s without s u p p o r t as A l a b a m a i s a n o n - j u d i c i a l f o r e c l o s u r e s t a t e and the proof that Farkas seeks i s not required .... Alabama statutes set out the p r o c e d u r e s f o r f o r e c l o s i n g on p r o p e r t y i n t h i s S t a t e w h i c h do n o t r e q u i r e t h e p a r t i e s t o go i n t o c o u r t ; n o t h i n g t h e r e i n p r o v i d e s f o r the r e l i e f Plaintiffs c l a i m t h e y a r e due. See A l a . Code [ 1 9 7 5 ] , §§ 35-10¬ 11 [ e t seq.] P l a i n t i f f s have d i r e c t e d t h i s C o u r t ' s a t t e n t i o n t o no law s u p p o r t i n g t h e i r a s s e r t i o n s o f 'show me t h e n o t e . ' On t h e o t h e r hand, D e f e n d a n t s have p o i n t e d t o f e d e r a l c o u r t d e c i s i o n s w h i c h have r e j e c t e d such claims i n n o n - j u d i c i a l f o r e c l o s u r e states. See Zambrano[, s u p r a ] ; P e l z e l v. First S a v i n g Bank N o r t h w e s t , [No. C10-5688BHS] (W.D. Wash. S e p t e m b e r 27, 2010) [not r e p o r t e d i n F. Supp. 2 d ] ; Diessner v. Mortgage Electronic Registration S y s t e m s , 618 F. Supp. 2d 1184, 1187 (D. A r i z . 2 0 0 9 ) . F i n d i n g t h o s e o p i n i o n s c o n s i s t e n t and well-reasoned, c o u p l e d w i t h P l a i n t i f f s ' f a i l u r e t o d e m o n s t r a t e any law w h i c h s u p p o r t s t h e i r a s s e r t i o n s , t h e C o u r t f i n d s t h a t P l a i n t i f f s have n o t s t a t e d a v i a b l e c l a i m i n asserting that Defendants need to demonstrate ownership of the mortgage note b e f o r e t a k i n g any a c t i o n a g a i n s t them. " P l a i n t i f f s have a l s o r e f e r e n c e d A r t i c l e 3 o f t h e [UCC] i n a s s e r t i n g D e f e n d a n t s ' n e e d t o 'show them t h e n o t e ' .... Under A l a b a m a l a w , t h e UCC i s i r r e l e v a n t to n o n - j u d i c i a l f o r e c l o s u r e proceedings (see A l a . Code [1975,] §§ 35-10-11 t h r o u g h 14). P l a i n t i f f s ' claim i s without merit." The reasoning of the magistrate r e c o m m e n d a t i o n , w h i c h was judge as the district judgment of d i s m i s s a l a d o p t e d by court's (see own F a r k a s v. 5 judge's the report presiding opinion Suntrust and district supporting Mortg., its Inc., 2110053 C i v i l A c t i o n No. 10-0512-CG-M (S.D. A l a . J a n u a r y 5, 2011) (not r e p o r t e d i n F. Supp. 2 d ) ) , was l a t e r e n d o r s e d i n l a r g e measure by of the United Circuit, States which a f f i r m e d Court the Appeals district for court's the Eleventh judgment: " F a r k a s ' s c l a i m t h a t S u n T r u s t had t o e s t a b l i s h a ' p r o o f o f c l a i m ' u n d e r t h e [UCC] to enforce the p r o m i s s o r y n o t e as a ' n e g o t i a b l e i n s t r u m e n t ' d i d n o t s t a t e a c l a i m f o r r e l i e f under Alabama law. A f o r e c l o s u r e i s an a c t i o n on a m o r t g a g e and, as s u c h , i s n o t g o v e r n e d by t h e [UCC]. See A l a . Code [1975, §] 7-3-104(a) ... (defining a negotiable instrument); Ala. Code [1975,] §§ 35-10-11 to 35-10-14 ... (Alabama's f o r e c l o s u r e s t a t u t e ) ; T r i p l e J C a t t l e , I n c . v. Chambers, 551 So. 2d 280, 282 ( A l a . 1989) ( s t a t i n g t h a t , upon a d e f a u l t , the m o r t g a g e e has v a r i o u s r e m e d i e s , i n c l u d i n g o b t a i n i n g a j u d g m e n t on t h e n o t e s e c u r e d by t h e m o r t g a g e and a separate action to foreclose the mortgage). Alabama's foreclosure statute sets forth the requirements for conducting a non-judicial f o r e c l o s u r e u n d e r t h e 'power o f s a l e ' c o n t a i n e d i n t h e m o r t g a g e , b u t t h e s t a t u t e does n o t p r o v i d e a cause of a c t i o n f o r a mortgagor to r e q u i r e the mortgagee to e s t a b l i s h p r o o f of c l a i m p r i o r to i n i t i a t i n g the f o r e c l o s u r e . " F a r k a s v. S u n T r u s t M o r t g . , I n c . , 447 Cir. 2011) At a Douglases' Fed. Appx. 972, 973 (11th (emphasis added). minimum, "show me subject-matter then, the the substantive note" attack j u r i s d i c t i o n are upon t h e suspect. 3 The merits trial of the court's D o u g l a s e s have Moreover, to the e x t e n t t h a t the Douglases appear to c o n t e n d t h a t c l a i m e d v i o l a t i o n s on t h e p a r t o f t h e bank o f t h e f e d e r a l R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t , c o d i f i e d a t 12 U.S.C. § 2601 e t seq., v i t i a t e the bank's r i g h t to seek 3 6 2110053 c i t e d no a u t h o r i t y i n w h i c h a n o n j u d i c i a l f o r e c l o s u r e has held invalid for failure documentation evidencing repayment thereof. introduced exhibits, into to record evidence instrument bearing or the u n d e r l y i n g The including produce at present d e b t and reveals trial been original security for that the bank various evidentiary note and a Douglases' signatures and the photocopies the of a mortgage date of F e b r u a r y 8, 2008. B e c a u s e , i n t h i s c a s e , we must c o n c l u s i v e l y presume, absence court's in the judgment conclusively 3d 1228, presume photocopies sufficient ejectment. See photocopies); applicable a trial i s s u p p o r t e d by S t o n e v. S t o n e , 26 So. we of Rule omitted that the evidence, see 1231-32 ( A l a . C i v . App. that the to prove 1003, Ala. c f . A l a . Code 1975, to the transcript, negotiable trial the R. court bank's Evid. deemed right to those seek ( a d m i s s i b i l i t y of § 7-3-309(a) instruments 2009), (UCC provision setting forth c i r c u m s t a n c e s under which a person i s e n t i t l e d to e n f o r c e such an instrument despite l a c k i n g p o s s e s s i o n of i t ) . e j e c t m e n t , we n o t e o u r r e c e n t h o l d i n g i n Coleman v. BAC S e r v i c i n g , [Ms. 2100453, June 22, 2012] So. 3d (Ala. C i v . App. 2 0 1 2 ) , t o t h e c o n t r a r y ; i n t h a t c a s e , we s a i d t h a t a f o r e c l o s i n g e n t i t y ' s v i o l a t i o n s of another f e d e r a l s t a t u t e , i.e., the F e d e r a l Housing A c t , p e r t a i n i n g to l o s s m i t i g a t i o n "may n o t be r a i s e d as a d e f e n s e t o an e j e c t m e n t a c t i o n following a nonjudicial foreclosure." So. 3d a t . 7 2110053 B e c a u s e t h e D o u g l a s e s have f a i l e d t o d e m o n s t r a t e t h a t trial § court, 142(b), our Ala. jurisdiction to state's Const. court 1901), adjudicate of g e n e r a l did the not bank's the jurisdiction have subject-matter ejectment c o n c l u d e t h a t t h e j u d g m e n t u n d e r r e v i e w i s due (see t o be claim, we affirmed. AFFIRMED. Thompson, P.J., and Bryan, concur. 8 Thomas, and Moore, JJ.,

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