Holyfield v. Whitehead et al

Filing 27

ORDER ON APPEAL. Signed by District Judge Debra M. Brown on 9/5/14. (jtm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
OXFORD DIVISION

WILLIAM HOLYFIELD

APPELLANT

V.

NO. 3:13-CV-00227-DMB

L.V. WHITEHEAD; and JOYCE
WHITEHEAD

APPELLEES
ORDER ON APPEAL

This is an appeal brought by Appellant-Debtor William Holyfield challenging numerous
post-trial decisions made by the United States Bankruptcy Court for the Northern District of
Mississippi. This Court has jurisdiction over Holyfield’s appeal pursuant to 28 U.S.C. § 158(a).
I
Standard of Review
Where, as here, an appeal derives from a core proceeding1 in a bankruptcy court, “the
district court … applies a de novo standard of review to … conclusions of law and [a] clearlyerroneous standard to findings of fact.” In re BP RE, L.P., 735 F.3d 279, 282 (5th Cir. 2013)
(citing 28 U.S.C. § 158(a)).
II
Relevant Factual and Procedural Background
While convoluted, the facts of this case are largely undisputed.
A. Underlying Facts
On August 10, 1995, William B. Wallace executed a warranty deed conveying to Plaintiff
Joyce Whitehead property located at 15082 Old Panola Road, Como, Mississippi 38619

1

28 U.S.C. § 157(b)(2) sets forth a non-exhaustive list of core proceedings. The presiding bankruptcy judge found
that, insofar as Appellees L.V. Whitehead and Joyce Whitehead asserted claims against Holyfield, the debtor in the
bankruptcy action, this matter was a “core proceeding as contemplated by 28 U.S.C. § 157(b)(2)(A), (B), and (O).”
Doc. #10 at 1. This conclusion has not been challenged on appeal.

(“Land”). Doc. #10 at 2. The conveyance was secured by an August 9, 1995, deed of trust
executed by Joyce2 in favor of Thomas Schuler, as trustee for Wallace. Id. The deed of trust on
the Land was recorded on December 1, 1997. Id.
Earlier, on April 15, 1997, Joyce and her daughter Lisa Oliver purchased a 1997 Redman
Brighton-LE mobile home (“Mobile Home”) from Holloway Homes and placed it on the Land.
Doc. #10 at 2, 12. Pursuant to the terms of the sales contract, Joyce and Oliver were obligated to
pay Holloway $462.84 per month. Id. at 2.
On May 7, 1997, Joyce and Oliver executed a “Certificate of Mobile Home as Real
Estate” designating the Mobile Home as part of the real estate for taxation purposes. Doc. #10 at
3. On June 24, 1997, the certificate was recorded in the Office of the Chancery Clerk of Panola
County, Mississippi. Id. Shortly after, Holloway informed Joyce and Oliver that Oliver failed to
qualify as a borrower due to her having previously filed for bankruptcy. Id.
On June 18, 1997, Joyce and L.V. executed an “Installment Note, Security Agreement,
and Disclosure Statement” (“Mobile Home Security Agreement”) in favor of Holloway
regarding the $51,672 outstanding balance on the Mobile Home. Doc. #10 at 3.

The Mobile

Home Security Agreement provided for 360 monthly payments in the amount of $472.56. Id.
The same day, Holloway assigned the Mobile Home Security Agreement to South Trust Mobile
Services, Inc. (“South Trust”). Id. On July 1, 1997, a UCC-1 Financing Statement reflecting the
sale and related financing of the Mobile Home was filed in the personal property lien records of
the Panola County Chancery Clerk and with the Mississippi Secretary of State. Id.
On August 26, 2002, following years of tax delinquency, the parcel was sold at a tax sale
to S&S Properties, LLC. Doc. #10 at 4. During the subsequent two-year redemption period, the
Panola County Chancery Clerk provided notice of the sale to Joyce, via certified mail and service
2

To avoid confusion, the opinion will refer to Joyce Whitehead and L.V. Whitehead by their first names.

2

by the Sheriff of Panola County; and to the public, via publication in The Southern Reporter on
June 10, 2004. Id. at 4–5.
On December 23, 2004, Joyce filed a voluntary Chapter 13 action in the Bankruptcy
Court for the Northern District of Mississippi. Doc. #10 at 6.
On February 28, 2005, Wachovia Bank, N.A., the successor to South Trust, granted
Vanderbilt Mortgage and Finance, Inc., power of attorney to enforce and maintain the Mobile
Home Security Agreement. Doc. #10 at 6.
On November 15, 2005, the Panola County Chancery Clerk executed a tax deed
conveying the Land to S&S. Doc. #10 at 6. Approximately two months later, on January 22,
2006, S&S quitclaimed the Land to Holyfield for $2,000. Id. at 7.
On March 9, 2007, Joyce leased the Land and the Mobile Home from Holyfield for $550
per month. Doc. #10 at 7. On May 21, 2007, Holyfield filed an action against Joyce in the
Justice Court of Panola County for eviction and the collection of $1,800 in unpaid rent. Id. at 7.
The case settled. Id.
On November 13, 2007, Holyfield filed a second eviction/rent recovery action against
Joyce in justice court. Doc. #10 at 7. Following a judgment in favor of Holyfield, Joyce
appealed the justice court judgment to the Circuit Court of Panola County. Id.
On February 5, 2008, Joyce’s Chapter 13 action was dismissed. Doc. #10 at 6. Pursuant
to the confirmed bankruptcy plan, Joyce paid $12,205 to Vanderbilt on the outstanding debt of
the Mobile Home. Id. Twenty days later, on February 25, 2008, Holyfield filed his own Chapter
13 action. Id. at 8.

3

On September 25, 2008, the Circuit Court conducted a de novo trial on Joyce’s appeal of
the justice court judgment. Doc. #10 at 8. On December 2, 2008, the Circuit Court issued a
judgment of eviction against Joyce and set a hearing to determine damages. Id.
At an unspecified time in 2009, Vanderbilt brought suit against the Whiteheads to recover
the unpaid balance of the Mobile Home Security Agreement. Doc. #14 at 101–02. The case
subsequently settled. Id. Under the terms of the settlement, the debt secured by the Mobile
Home Security Agreement was extinguished. Id.
On September 29, 2009, the Whiteheads filed this adversary proceeding. Doc. #10 at 8.
The Whiteheads’ complaint sought various reliefs against Holyfield and Wallace, including a
determination of ownership of the Land and the Mobile Home and recovery of rent payments
made to Holyfield.3 Doc. #4. Holyfield counterclaimed for unpaid rent. Doc. #6.
On August 9, 2010, Vanderbilt assigned and quitclaimed its security interest in the
Mobile Home to Joyce and L.V. Doc. #10 at 8–9. On July 18, 2011, the Circuit Court of
Panola County stayed the Holyfield action pending the resolution of this proceeding. Id. at 9. At
the time of the stay, the issue of damages remained pending before the state court. Id. at 8.
In early 2012, the Mobile Home was vandalized. Doc. #2. Through insurance he
maintained on the Mobile Home, Holyfield received $5,411.25 in insurance proceeds. Id. The
insurance funds were placed in an escrow account pending resolution of this matter.
B. The Bankruptcy Court Proceedings
From April 16–17, 2012, the bankruptcy court held trial on the competing claims of
ownership and entitlement to rent. Docs. #14, #17. On May 3, 2012, the bankruptcy judge

3

The complaint asserted claims against Panola County stemming from its alleged violation of Mississippi law in
executing the tax sale. The bankruptcy court dismissed Panola County as a defendant. Doc. #10 at 16–17. This
decision has not been appealed. The complaint also listed Locke D. Barkley (the Chapter 13 Trustee) as a
defendant, seeking a court order directing Barkley to transfer ownership of the Mobile Home to the Whiteheads.

4

issued an opinion concluding that: (1) the August 26, 2002, tax sale was valid, and that title to
the Land rested with Holyfield; (2) South Trust (the assignee of the Mobile Home Security
Agreement) was not notified of the tax sale and that, therefore, “the tax sale is void as to South
Trust and its successors in interest;” and (3) as the successor in interest to South Trust (through
Vanderbilt and Wachovia), the Whiteheads owned a security interest in the Mobile Home. Doc.
#10 at 16–18. The May 2012 opinion explicitly declined to address: (1) whether Vanderbilt was
a necessary party to the litigation; (2) the amount of indebtedness secured by the Mobile Home;
(3) entitlement to net proceeds of rent derived from rental of the Mobile Home;4 and (4) the
extent of Wallace’s economic interest in the litigation. Id.
On June 4, 2012, the bankruptcy judge issued a supplemental order concluding that: (1)
while the Whiteheads held a security interest in the Mobile Home, Holyfield held title to the
structure; (2) the Whiteheads were entitled to the insurance proceeds and that “[i]f the insurance
proceeds are insufficient to restore the mobile home to a reasonable condition, Holyfield would
then be liable for any deficiency;” and (3) “no evidence has been presented that would merit a
finding of misconduct on the part of Wallace or an assessment of damages against him.” Doc.
#13 at 3–4.
On September 20, 2012, the bankruptcy judge issued a third order, holding that: (1) the
“costs and expenses necessary to restore the mobile home to a habitable condition is the sum of
$5,911.25;” (2) the Whiteheads’ claims against Holyfield should be offset by a $500 insurance
deductible for the repairs on the Mobile Home; and (3) “other than the insurance policy proceeds

4

Specifically, the bankruptcy judge wrote: “there will necessarily have to be an apportionment of the amount of rent
that should be attributed to the mobile home compared to the amount of rent that should be attributed to the ‘ground’
lease.” Doc. #10 at 17–18.

5

in the sum of $5,411.25, Holyfield owes the plaintiffs nothing, and the plaintiff, Joyce
Whitehead, owes Holyfield nothing.” Doc. #2 at 4–5.
The Whiteheads and Holyfield both appealed.5
III
Analysis
Holyfield advances four enumerations of error on appeal: (1) the tax sale was valid as
against South Trust and its successors, including the Whiteheads; (2) even if the tax sale was
invalid against South Trust, the security interest is unenforceable insofar as the underlying
indebtedness was extinguished; (3) Holyfield proved entitlement to rental income; and (4) the
Whiteheads were not entitled to the insurance proceeds flowing from the damage to the Mobile
Home. Doc. #23.
A. The Validity of the Tax Sale
“In cases where [a] mobile home is assessed on the land rolls, the penalty for nonpayment
or delinquency of taxes shall be the same as is prescribed by law in regard to real estate.” Miss.
Code Ann. § 27-53-17(1)(a) (West 2002). Mississippi law provides that lands burdened by
unpaid taxes may be sold at a tax sale. Miss. Code Ann. § 27-41-15 (2002). Where land is sold
at a tax sale, the law provides a two-year period, running from the day of sale, during which “any
person interested in the land sold for taxes, may redeem the same, or any part of it ….” Miss.
Code Ann. § 27-45-3 (2002).
Commensurate with the redemption period, the clerk of the chancery court must issue
statutory notice “within one hundred eighty (180) days and not less than sixty (60) days prior to
the expiration of the time of redemption.” Miss. Code Ann. § 27-43-1 (2002). In this regard,
“[i]t shall be the duty of the clerk of the chancery court to examine the record of deeds,
5

The Whiteheads failed to file an appellate brief and their appeal was dismissed for lack of prosecution. See
Whitehead v. Holyfield, 3:13-cv-00190 (N.D. Miss. Aug. 19, 2014).

6

mortgages and deeds of trust in his office to ascertain the names and address of all mortgagees,
beneficiaries and holders of vendors liens of all lands sold for taxes [and to] within the time fixed
by law for notifying owners, send [notice] to all such lienors so shown of record.” Miss. Code
Ann. § 27-43-5 (2002).
At the conclusion of a tax sale redemption period, a purchaser may request a deed of
conveyance from the relevant chancery clerk. Miss. Code Ann. § 27-45-23 (2002). “[S]uch
conveyance shall vest in the purchaser a perfect title with the immediate right of possession to
the land sold for taxes.” Id. However, “[a] failure to give the required notice to such lienors
shall render the tax title void as to such lienors.” Miss. Code Ann. § 27-43-11 (2002). “In the
event that a tax sale is rendered void for improper notice to one lienholder, but not others, the
purchaser is faced with two options. The purchaser may opt to retain the property subject to the
lien of the improperly-noticed lienholder. Alternatively, the purchaser may opt to file a claim for
a refund, thereby relinquishing all rights to the property.” SKL Invs., Inc. v. Am. Gen. Fin., 22
So.3d 1247, 1250–51 (Miss. Ct. App. 2009).
In the proceeding below, the bankruptcy judge held that, pursuant to § 27-43-11, the tax
sale was invalid as to South Trust because “it is undisputed that South Trust had no notice of the
tax sale or of the expiration of the period of redemption.” Doc. #10 at 15. Holyfield contends
that insofar as the lien was not recorded in the records of deeds, mortgages, and deeds of trust,
South Trust was not a “lienor” within the meaning of § 27-43-11 and that, therefore, the
invalidity provision of the section is inapplicable. Doc. #23 at 17. Specifically, Holyfield
submits that § 27-43-11 “makes the tax [sale] ineffective only to lienors to whom the Chancery
Clerk was required to give notice and failed so to do [and that] South trust was not one of those
entities ….” Id.

7

Section 27-43-11 provides in full:
For examining the records to ascertain the names and addresses of lienors, the
chancery clerk shall be allowed a fee of Seven Dollars ($7.00) in each instance for
each lien where a lien is found of record, and said fees shall be taxed against the
owner of said land, if same is redeemed, and if not redeemed, then said fees are to
be taxed as part of the cost against the purchaser. A failure to give the required
notice to such lienors shall render the tax title void as to such lienors, and as to
them only, and such purchaser shall be entitled to a refund of all such taxes paid
the state, county or other taxing district after filing his claim therefor as provided
by law.
Holyfield submits that § 27-43-11 must be read in conjunction with § 27-43-5. Section
27-43-5 states in relevant part:
It shall be the duty of the clerk of the chancery court to examine the record of
deeds, mortgages and deeds of trust in his office to ascertain the names and
addresses of all mortgagees, beneficiaries and holders of vendors liens of all lands
sold for taxes; and he shall, within the time fixed by law for notifying owners,
send by certified mail with return receipt requested to all such lienors so shown of
record the following notice ….
Id. (emphases added).
Under Holyfield’s reading, the phrase “such lienors so shown of record” refers only to
holders of liens which are “contained in the records of deeds, mortgages, and deeds of trust
which the Clerk was required to examine.” Doc. #23 at 17–18. Holyfield further submits that
the invalidity provision of § 27-43-11 applies only to those lienors entitled to notice under § 2743-5. Id. Holyfield continues that, because South Trust’s UCC-1 financing statement was not
located in one of the enumerated records, the chancery court was not required to provide notice
and that, therefore, the bankruptcy court erred in applying the invalidity provision of § 27-43-11 .
Upon consideration, the Court concludes that § 27-43-11, which references but does not
define, “required notice to … lienors” should be read in conjunction with § 27-43-5, which sets
the parameters of the required notice. See Ashcraft v. Bd. of Supervisors of Hinds Cnty., 36
So.2d 820, 822 (Miss. 1948) (“It is a familiar rule of statutory construction that, when several
8

different sections of a Code deal with the same subject-matter, these sections are to be so
interpreted that they shall harmonize not only with each other, so that each shall stand with as
full effect as possible consistently with the other related sections, but that they shall each be
made to fit into the general and dominant policy of the particular system of which they are a
part.”). By its express terms, § 27-43-5 places a duty on the clerk of the chancery court to
examine only a specific list of instruments in his office to ascertain the identities of only those
“mortgagees, beneficiaries and holders of vendors liens of lands sold for taxes,” and then to
provide notice to those “such lienors so shown of record.”

The use of the word “such”

immediately in front of “lienors” unmistakably refers to the “mortgagees, beneficiaries and
holders of vendors liens” described earlier in the text of § 27-43-5.

See Oxford English

Dictionary Online, www.oed.com (last visited Sep. 3, 2014) (search for “such, adj. and pron.”)
(defining “such” as meaning “[o]f the character, degree, or extent described, referred to, or
implied in what has been said”).6 Similarly, the inclusion of the word “so” before “shown,”
necessarily relates back to the section’s direction to search a limited group of records. Id. (last
visited Sep. 3, 2014) (search for “so, adv. and conj.”) (defining “so” as meaning “[i]n the way or
manner described, indicated, or suggested”). Put differently, the section directs the clerk to
search a specific group of records, compile a list of relevant specified lienors from those records,
and then provide notice to those lienors discovered in the way or manner described.7
Here, it is undisputed that the Mobile Home Security Agreement was not recorded in any
of the record categories enumerated in § 27-43-5. Accordingly, notice to South Trust was not
6

See Summerall v. State, 41 So.3d 729, 734 (Miss. 2010) (considering Oxford English Dictionary definition in aid
of statutory interpretation).

7

If the statute required notice to all lienors of record (rather than just those in the records listed), the inclusion of the
word “so” would be superfluous. Barton v. Blount, 981 So.2d 299, 303 (Miss. Ct. App. 2007) (“‘A construction
which will render any part of a statute inoperative, superfluous, or meaningless is to be avoided’”) (quoting State ex.
rel. Pair v. Burroughs, 487 So.2d 220, 226 (Miss.1986)).

9

required, and the invalidity provision of § 27-43-11 is inapplicable to such lien.8 The bankruptcy
court erred in holding to the contrary.
B. The Split of the Security Interest from the Underlying Debt
Next, Holyfield contends that even if the tax sale was void as to the security interest
perfected by the Mobile Home Security Agreement, the lien was extinguished because the debt
underlying the lien was satisfied by the settlement between the Whiteheads and Vanderbilt. Doc.
#23 at 20.
Under Mississippi law, “[i]f no debt exists, then the lien perishes.”

Frierson v.

Mississippi Road Supply Co., 75 So.2d 70, 72 (1954); see also Estate of Walters v. Freeman, 904
So.2d 1140, 1143 (Miss. Ct. App. 2004) (“Once the debt was paid in full, the security agreement
terminated.”).

Here, the debt underlying the Mobile Home Security Agreement vanished

sometime in 2010.9 Accordingly, even if the security interest was not extinguished by the 2005
conveyance of the tax deed to S&S,10 it was extinguished no later than 2010. Id.
C. Holyfield’s Entitlement to Unpaid Rent
Below, the bankruptcy court considered competing claims arising from rental of the Land
and the Mobile Home. Specifically, Holyfield sought rent due from Joyce for alleged unpaid
rental payments during her occupancy of the Mobile Home and the Land. Doc. #2 at 3–4.
Joyce, in turn, argued that the security interest perfected by the Mobile Home Security

8

The Court is mindful that this holding has the potential to harm a faultless lien holder who properly records a
security interest prior to a tax-debtor’s designation of a mobile home as real property. However, this concern may
be mitigated by the ability of lenders to contractually require notice from a debtor of any such designation, and by
the general public interest in encouraging “purchases of land held by the [taxing authority] for nonpayment of
taxes,” Stern v. Parker, 25 So.2d 787, 791 (Miss. 1946).

9

Vanderbilt assigned the Whiteheads its interest in the Mobile Home on August 9, 2010. The Court assumes that
this was the approximate date of the settlement.

10

See Girard Sav. Bank v. Worthey, 761 So.2d 230, 233–34 (Miss. Ct. App. 2000) (execution of tax deed following
sufficient notice terminated security interest in property).

10

Agreement “entitled [her] to rents that Holyfield allegedly collected from tenants who occupied
the mobile home from March, 2009, until it was destroyed early in calendar year 2012.” Id. at 3.
In his September 2012 order, the bankruptcy judge noted that the Mobile Home Security
Agreement “covers ‘proceeds of the collateral including the proceeds of all insurance’ [but] does
not specifically mention rents or rental income.” Id. at 4. Nevertheless, the court determined
that, while Joyce owed Holyfield $8,400 in unpaid rent, “[b]ecause the proof is so inconclusive
as to the claims of the plaintiffs … against Holyfield for his failure to turn over collected rents,
the court is of the opinion that these competing claims regarding rents should equitably be
considered a nullity.” Id. at 4.
It appears the bankruptcy court held that the Whiteheads, as successors to South
Trust/Vanderbilt, held the right to enforce the Mobile Home Security Agreement against
Holyfield, and that such right carried with it a right to collect rents. Even if the instrument
carried such a right, the holding is flawed insofar as, explained above, the relevant security
interest was extinguished by conveyance of the tax deed in 2005. Accordingly, this Court
concludes that the bankruptcy court erred in offsetting the rents owed to Holyfield against
uncertain amounts derived from an extinguished security interest. Thus, remand on this issue is
warranted to allow the bankruptcy court an opportunity to ascertain the proper amount of rent
owed to Holyfield.
D. Entitlement to Insurance Proceeds
Finally, Holyfield challenges the bankruptcy court’s June 2012 conclusion that Joyce and
L.V. “are entitled to enforce their security interest in the mobile home, as well as, [sic] to any
and all insurance proceeds that might be available to repair and restore the mobile home to a
reasonable condition.” Doc. #13 at 3. Although the June 2012 order omitted a justification for

11

its holding, the bankruptcy court later noted, in its September 2012 order, that the Mobile Home
Security Agreement “covers … the proceeds of all insurance ….’” Doc. #2 at 4. Insofar as it
appears that the bankruptcy court reached its insurance conclusion through its holding that the
Whiteheads are entitled to enforce the Mobile Home Security Agreement, this Court concludes
that the issue of who owns the rights to the insurance proceeds also must be re-evaluated on
remand consistent with this opinion.
IV
Conclusion
For the reasons set forth above, the Court concludes that the bankruptcy court erred in
holding that: (1) the tax sale is unenforceable as against the Mobile Home Security Agreement
under § 27-43-11; (2) the security interest survived the 2010 elimination of the debt underlying
the Mobile Home Security Agreement; (3) the assignment of the Mobile Home Security
Agreement entitled the Whiteheads to rent collected by Holyfield; and (4) the assignment of the
Mobile Home Security Agreement entitled the Whiteheads to the insurance proceeds collected
by Holyfield following the damage to the Mobile Home. Thus, this matter is REMANDED for
proceedings consistent with this opinion.

SO ORDERED, this the 5th day of September, 2014.

/s/ Debra M. Brown
UNITED STATES DISTRICT JUDGE

12