United States of America v. Real Property

Filing 39

MEMORANDUM OPINION AND ORDER For the reasons stated within, IberiaBank's motion to stay is DENIED; Brooks' motion for summary judgment is GRANTED, except for Brooks' request that IberiaBank be found not to be an innocent owner. A final judgment in accordance with this order will not be entered until the Defendant Property is sold and a disbursement of the sale proceeds becomes necessary. Signed by Judge William M Acker, Jr on 6/14/13. (SAC )

FILED
2013 Jun-14 PM 04:00
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,

}
}
Plaintiff,
}
}
v.
}
}
REAL PROPERTY KNOWN AS
}
420 STERLING PARK CIRCLE,
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ALABASTER, SHELBY COUNTY, ALL }
FIXTURES AND APPURTENANCES
}
THEREON,
}
}
Defendant.
}

CIVIL ACTION NO.
2:12-cv-02961-WMA

MEMORANDUM OPINION AND ORDER
Before the court is a motion for summary judgment filed by
claimant Dr. Flemings Brooks (“Brooks”).

(Doc. 31).

Brooks

contends that he is entitled to a judgment as a matter of law
declaring that he is the owner of an interest in certain real
property pursuant to 18 U.S.C. § 983, and that his interest is
superior to that of all others. Brooks is one of several claimants
in this civil forfeiture action filed by the United States in rem
against Real Property known as 420 Sterling Park Circle, Alabaster,
Shelby County, Alabama, and all Fixtures and Appurtenances Thereon
(“Defendant Property”), based on alleged criminal activity by
claimant Christopher Linton (“Linton”).

After Brooks filed this

Rule 56 motion, another claimant, IberiaBank, filed a motion to
stay any ruling on the Rule 56 motion, pointing out that it is
appealing a state court order that denied its motion pursuant to
Rule 24, Ala. R. Civ. P., for leave to intervene in a closed state

case in order to move under Rule 60(b), Ala. R. Civ. P., to set
aside the state court judgment that purported to reform a mortgage
from Linton to Brooks.

(Doc. 35).

IberiaBank, as a judgment lien

holder, points out that favorable outcomes of its appeal, and of
its subsequent proposed Rule 60(b) motion, will move its judgment
lien against the Defendant Property to a position ahead of the
Brooks mortgage.
Background
When Linton was a teenager in Samson, Alabama he knew Brooks
and Brooks knew him.

In late 2010, Linton, a lawyer, contacted

Brooks seeking a loan of $300,000 to help finance his new law firm.
To secure the transaction Linton and his wife, Carli, agreed to
mortgage

to

Brooks

the

Defendant

Property,

which

was

their

residence.
A lawyer retained by Brooks prepared a Loan and Security
Agreement

specifically referencing

the

“Sterling

Park

property, the Lintons’ residence, as the “collateral.”

Circle”
Brooks’s

lawyer also drafted the mortgage instrument, which, unknown to
Brooks (and perhaps to Linton) contained a legal description not of
the Defendant Property, but of a totally different parcel.

On

December 29, 2010, the Lintons executed the Loan and Security
Agreement, agreeing to secure the $300,000 loan from Brooks with
their primary residence.

On March 2, 2011, as agreed, the Lintons

executed the mortgage in favor of Brooks.

2

The said mortgage

instrument with the erroneous legal description was duly recorded
in Shelby County, Alabama, where the Defendant Property is located.
In late 2011, after the loan matured and was in default,
Brooks learned of the scrivener’s error in the drafting of the
mortgage.

In January 2012, Brooks retained new counsel to collect

the debt and to reform the mortgage to correct the scrivener’s
error.

On February 7, 2012, Brooks commenced an action in the

Circuit Court of Shelby County to reform the mortgage. On February
9, 2012, Brooks recorded a lis pendens in the Shelby County probate
court, providing constructive notice of his legal action that, if
successful in reforming the mortgage, would allow him to foreclose
upon the Defendant Property.
On March 9, 2012, IberiaBank commenced a collection action in
the United States District Court for the Northern District of
Alabama against Linton and two LLCs as guarantors of loans the bank
had made in January 2012.

After obtaining a judgment against

Linton, IberiaBank recorded a certificate of judgment in Shelby
County on July 9, 2012.
On September 10, 2012, the Shelby County court entered a final
amended order in the reformation action correcting the scrivener’s
error and reforming the Brooks mortgage to contain the correct
legal description of the Defendant Property.

Three days later on

September 13, 2012, the United States filed the instant forfeiture
action and recorded its lis pendens in Shelby County.

3

On October

12, 2012, Brooks recorded the reformation order in Shelby County.
Brooks thereupon began foreclosure proceedings pursuant to the
power of sale in the reformed mortgage.

The foreclosure sale took

place on November 21, 2012, at which time Brooks bid the amount he
was owed and was the highest and best bidder.

On November 28,

2012, Brooks provided notice to the Lintons pursuant Ala. Code § 65-251 to vacate the Defendant Property.

On December 4, 2012, he

recorded his foreclosure deed in Shelby County.
On May 1, 2013, this court entered a consent order in the
above-entitled forfeiture action ordering the interlocutory sale of
the Defendant Property.
Brooks contends that he is due $300,000 principal, accrued
interest in the amount of $83,342.47, plus interest at the rate of
$98.63 per diem from April 22, 2013, plus expenses including
reasonable

attorneys

fees.

Although

he

contends

that

the

foreclosure sale was effective to give him complete title to the
Defendant Property subject to any redemption rights, he disclaims
any interest in the proceeds of the prospective sale beyond the
balance he is owed, and that was secured by the former mortgage.
Probably the reason Brooks does not insist on receiving the entire
proceeds to be realized from the consent sale is that other
claimants might complain and muddy the water if Brooks gets overly
ambitious.

Except

for

IberiaBank,

Brooks’s motion for summary judgment

4

no

claimant

is

resisting

On February 11, 2013, five months after the Shelby County
court’s reformation judgment was final, IberiaBank filed a motion
to vacate it and/or set it aside pursuant to Rule 60(b)(4), (6),
Ala. R. Civ. P.

The Shelby County court denied the said motion

upon a finding that IberiaBank was not a party to the action and
had no standing to challenge the final judgment.

On March 19,

2013, IberiaBank filed a motion to intervene in the closed state
court action, and another motion to vacate and/or set aside the
judgment, invoking Rules 24 and 60(b), Ala. R. Civ. P.

On May 6,

2013, the Shelby County court denied IberiaBank’s motion for leave
to intervene and made several findings, including:
Although IberiaBank had knowledge of this action in
September 2012 at the latest, it took no action to become
involved until February 11, 2013, well after a final
judgment had been entered and the Forfeiture Action had
been filed. Allowing IberiaBank’s post-judgment request
for relief at this late stage will only complicate the
issues and will conflict with the federal Forfeiture
Action in which all interested parties have been joined.
(Doc. 37-1 at ¶ 8).

On May 9, 2013, IberiaBank appealed the state

court’s order denying its Rule 24, Ala. R. Civ. P., motion.

That

appeal is currently pending.
IberiaBank’s Motion to Stay
IberiaBank moves this court for a stay until the conclusion of
state court proceeding that, it contends, will materially affect
title to the Defendant Property if it obtains the relief it seeks.
Specifically,

IberiaBank

argues

that

the

Shelby

County

court

improperly denied its motion for leave to intervene, a prerequisite
5

to its filing of a Rule 60(b) motion, and that, if the Alabama
Supreme Court reverses the Shelby County court, the final judgment
upon which Brooks relies could be set aside by the Shelby County
court upon a Rule 60(b) motion.
There is no compelling reason to grant IberiaBank’s motion for
a stay.

IberiaBank did not attempt to set aside the reformation

judgment until over five months after the state court entered it,
and made it appealable with a Rule 54(b) order.

Rule 60(b)

provides that “the court may relieve a party . . . from a final
judgment order” and that “[t]he motion shall be made with a
reasonable time.”

(emphasis added)

The Shelby County court

expressly determined that IberiaBank’s request for post-judgment
relief came too late and exercised its discretion not to allow
IberiaBank to intervene.

(See Doc. 37-1 at ¶ 8).

Although this court is not in the business of predicting what
the Alabama Supreme Court will do, it is highly unlikely that
IberiaBank will be granted the relief it seeks.

A trial court has

broad discretion in ruling on Rule 24 and Rule 60(b) motions.

On

appeal, rulings on such motions are only reviewed for abuse of
discretion.
1993).

Wright v. Wright, 628 So. 2d 915, 916 (Ala. Civ. App.

IberiaBank’s appeal is narrow in scope and addresses only

the propriety of the trial court’s denial of the Rule 24 motion.
Id.

The appeal does not directly involve issues regarding the

underlying reformation judgment.

Id.
6

It is impossible to predict the length of time the Alabama
Supreme Court will require to decide IberiaBank’s appeal.

It is

easier to predict the outcome of the said appeal than to predict
how long a stay pending that appeal and any subsequent proceedings
would last.

Even if the Alabama Supreme Court were to reverse the

order that denied IberiaBank’s Rule 24 motion, the matter would
only

be

remanded

to

the

Shelby

County

court

for

further

proceedings, i.e., to consider the Rule 60(b) motion, which was
only mentioned by the Shelby County court in dicta because, without
becoming an intervenor, IberiaBank lacked the standing as a party
to

file

a

Rule

60(b)

motion.

The

Shelby

County

court

has

telegraphed its likely course of action upon any remand. It opined
that even “[i]f the order were to be set aside, it still appears
that the Brooks Mortgage would be due to be reformed.”

It

explained:
Based upon th Loan and Security Agreement executed by the
Lintons and the testimony of Dr. Brooks, there appears to
have been consideration for the Brooks Mortgage.
IberiaBank cites Kittle v. Sand Mountain Bank, 437, So.
2d 100, 101 (Ala. 1983) in which the wife denied
receiving any loan proceeds or other benefits and claimed
there was no consideration for the mortgage she had
executed.
In this case Carli Linton acknowledges
consideration in writing.
(Doc. 37-1 at ¶ 4).
Under these facts and circumstances, this court finds no
reason to delay an adjudication of the title dispute between Brooks
and IberiaBank.

This is especially true when, at the parties’

7

urging, this court entered the order to which IberiaBank expressly
consented, for interlocutory sale of the Defendant Property.

To

stay the proceedings and not to determine the various claimants’
respective rights to the proceeds of the anticipated sale would be
frustrate to the purpose of that order.

If the stay were granted

and the Alabama Supreme Court acknowledged a right in IberiaBank to
intervene, and remanded the case to the Shelby County court, and if
the Shelby County court then denied IberiaBank’s Rule 60(b) motion,
IberiaBank could appeal again to the Alabama Supreme Court, and
elongate the stay for another indeterminate period of time, likely
beyond the tenure of the undersigned as a judge.
Brooks’s Rule 56 Motion1
Brooks contends that there are no genuine issues of material
fact, thus entitling him to judgment as a matter of law, declaring
(1) that he is an innocent owner of the subject real property
pursuant to 18 U.S.C. § 983, (2) that IberiaBank is not an innocent
owner of the subject real property; (3) that putative claimants
that have not timely filed claims after notice have no interest in
the Defendant Property, and (4) that the Brooks mortgage, as
reformed, must be treated as the first lien on the Defendant
Property.

Neither IberiaBank nor any other claimant has submitted

evidence in opposition to Brooks’s motion and do not address any of

1

Due to the procedural posture of the case, all facts and
reasonable inferences therefrom will be viewed in the light most
favorable to the non-movants.
8

the legal authorities cited by Brooks.

Instead, IberiaBank argues

that the facts are incomplete because of its pending appeal of the
denial of its motion to intervene, discussed supra. Based on the
undisputed facts, Brooks is entitled to judgment as a matter of
law.
A.

Brooks is an Innocent Owner of the Sterling Park Circle
Property Pursuant to 18 U.S.C. § 983

The

right

of

the

United

States

to

obtain

an

order

of

forfeiture is subject to the rights of “innocent owners” of the
property sought to be forfeited.

18 U.S.C. § 983(d).

This

subsection provides:
An innocent owner’s interest in property shall not be
forfeited under any civil forfeiture statute.
The
claimant shall have the burden of proving that the
claimant is an innocent owner by a preponderance of the
evidence.
(emphasis added). When a claimant acquires an interest in property
sought to be forfeited after the alleged criminal conduct upon
which the forfeiture action is based has occurred, as is true in
this case, an “innocent owner” means:
a person who, at the time that person acquired the
interest in the property –
(I) was the bona fide purchaser or seller for value
(including a purchaser or seller of goods or
services for value); and
(ii) did not know and was reasonably without cause
to believe that the property was subject to
forfeiture.
18 U.S.C § 983(d)(3)(A) (emphasis added).
9

To be an “innocent

owner” of the Defendant Property, Brooks must establish that he is
a “bona fide purchaser” and that, at the time he acquired his
interest in the property, he had no actual knowledge of the
allegedly illegal activities at issue in the case.

See United

Sates v. Real Property at 5000 Palmetto Drive, 928 F.2d 373, 375
(11th Cir. 1991).
A bona fide purchaser (“BFP”) is a person

who (1) acquires

legal title, (2) in good faith, (3) for adequate consideration, (4)
without notice of any claim of interest in the property by any
other party.

Bynum v. Barker, 39 So. 3d 1013, 1017 (Ala. 2009).2

Brooks meets all of these requirements.

Brooks acquired “legal

title” when he acquired the mortgage reformation decree on the
Defendant Property.

The efficacy of the reformed mortgage related

back to the date of the lis pendens.

Brooks thus became an “owner”

and could assert his claim of innocent ownership.

18 U.S.C. §

983(d)(6); see United States v. One Single Family Residence Located
at 6960 Miraflores Ave., 995 F.2d 1558, 1561 (11th Cir. 1993).
Brooks continued to be an “owner” after becoming the grantee in the
foreclosure deed.
faith.

Brooks

Second, Brooks acquired his interest in good

knew

Linton

when

2

Linton

was

a

teenager,

and

To determine Brooks’s interest in the property, the court
applies the real property law of Alabama, the state in which the
property is located. See United States v. One Single Family
Residence without Buildings located at 15621 S.W. 209th Ave.,
Miami, Fla., 894 F.2d 1511, 1517 (11th Cir. 1990).
10

graciously, if ill advisedly, loaned Linton’s law firm money to
finance its operations.
corn.

Brooks’s $300,000 loan is not a pepper

Its adequacy is not in dispute.

Finally, Brooks had no

notice of any claim of interest in the property by any other party
except, of course, the Lintons, as mortgagors.
Brooks has also satisfied the lack of knowledge requirement in
§ 983(d)(3)(A)(ii).

In March 2011, when Brooks acquired his

security interest, he did not know and had no reason to believe
that the Lintons’ personal residence was subject to forfeiture.
Based on their decades-long relationship, Brooks trusted Linton.
Brooks had no knowledge of any potential or actual criminal conduct
by Linton, and had no reason to believe that the Defendant Property
was exposed to possible forfeiture.

The loan to Linton was made in

good faith reliance on the security provided by the Lintons’
mortgage.
There is no evidence to suggest that this undertaking was
anything other than a simple secured loan transaction.

Brooks did

not become aware of any allegations of criminality by Linton until
November 2012, when he received notice of the instant forfeiture
action.

In fact, there is no evidence whatsoever to challenge any

of the facts essential to a finding that Brooks is an “innocent
owner” of the Defendant Property.
B.

IberiaBank’s Competing Interest.

IberiaBank holds a judgment lien on the Defendant Property

11

acquired subsequent to the filing of Brooks’s lis pendens. Whether
IberiaBank’s lien interest is superior to Brooks’s interest depends
entirely upon whether Brooks’ mortgage was properly reformed after
this constructive notice was provided IberiaBank.
C.

The Brooks Mortgage, As Reformed, Constitutes the First
Lien on the Defendant Property

The public records, like the rest of Brooks’s evidence, are
not in dispute.

At the time of foreclosure, Brooks held the

superior interest in the Defendant Property based on his lis
pendens.

“Lis pendens” is a doctrine that allows a party to

protect an interest in property while that interest is being
litigated.

The lis pendens acts

as a place holder for the

litigant’s interest. An order or judgment subsequently obtained in
litigation will date back to the critical date alleged in the
complaint upon which the lis pendens was based.
The original erroneous mortgage to Brooks was recorded on
March 2, 2011.

Because it did not contain a description of the

Defendant Property, it provided no constructive notice of an
interest by Brooks in the Defendant Property.

However, Brooks’s

action to reform the mortgage and to correct the scrivener’s error
was filed on February 7, 2012, and his lis pendens was filed on
February 9, 2012, long before IberiaBank filed its certificate of
judgment. This sequence of events had the effect of placing Brooks
in the position to foreclose the mortgage deemed to have existed
from March 2, 2011.
12

Conclusion
For the foregoing reasons, IberiaBank’s motion to stay is
DENIED, and because there are no disputed issues of material fact,
Brooks is entitled to judgment as a matter of law.
Brooks’s

motion

for

summary

judgment

is

GRANTED,

Accordingly,
except

for

Brooks’s request that IberiaBank be found not to be an innocent
owner, an issue the court finds unnecessary to its decision.

A

final judgment in accordance with this order will not be entered
until the Defendant Property is sold and a disbursement of the sale
proceeds becomes necessary, at which time Brooks will receive such
proceeds as are necessary to make him whole.

Tentatively, the

court does not believe that any attorneys’ fees occasioned by
litigation in this court, in the Shelby County court, or in the
Alabama Supreme Court, will be recoverable by Brooks.
Done this 14th day of June 2013.

_____________________________
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE

13