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
2 SC-2023-0414
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
3 SC-2023-0414
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
4 SC-2023-0414
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
5 SC-2023-0414
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
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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
2 SC-2023-0414
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
3 SC-2023-0414
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
4 SC-2023-0414
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
5 SC-2023-0414
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").
6 SC-2023-0414
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
7 SC-2023-0414
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.
8 SC-2023-0414
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.