202 So. 3d 302
Ala.2015Background
- Chester and Emily Shepherd owned three contiguous parcels (Parcel 1: residence at 48 Holliday Rd; Parcel 2: beauty shop; Parcel 3: pasture).
- In Dec. 2003 the Shepherds executed a mortgage intended to encumber Parcel 1, but the attached legal description described Parcel 2; parties agreed to correct it later.
- The mortgage was assigned through servicing/assignment chains to Option One, the Trust, and ultimately U.S. Bank (USB) as trustee; foreclosure notices and filings contained inconsistent legal descriptions (Parcel 2 or 3).
- After defaults and failed bankruptcy proceedings, a foreclosure sale occurred in Sept. 2007; the Trust obtained a foreclosure deed describing Parcel 3 and agents took possession of the residence on Parcel 1.
- The Shepherds sued asserting trespass, wantonness, slander of title, negligence, and breach of contract; USB sought reformation/quiet-title/declaratory relief. Trial court found for Shepherds and awarded $3.92M; appellate court reverses in part.
Issues
| Issue | Shepherds' Argument | USB/Bank's Argument | Held |
|---|---|---|---|
| Whether the Dec. 2003 mortgage should be reformed to show Parcel 1 | Mortgage should not be reformed because parties knew the executed instrument described Parcel 2 (no mutual mistake) | Reformation appropriate under §35-4-153: parties intended Parcel 1; attaching wrong legal description was a mistake | Reversed trial court: reformation is warranted; clear, convincing evidence shows intent to encumber Parcel 1 and reformation may correct the description |
| Whether taking possession of Parcel 1 after default constituted trespass | Trust’s agents trespassed by taking possession of Shepherds’ home without right | Mortgagee had right to possession upon default; possession was lawful | Reversed trial court: possession after default was lawful; no trespass |
| Whether wantonness claim for lender/mortgage servicing conduct is viable | Bank acted knowingly, maliciously, and deliberately in refusing to cure title issues, interfering with sale, and clouding title | Servicing/foreclosure actions derive from contractual mortgage rights; tort claim not available for mortgage servicing; remedies are contractual or via slander-of-title | Reversed trial court: wantonness claim fails as a matter of law (contractual duties govern; AL law does not recognize such tort for mortgage servicing) |
| Whether BOA/LaSalle could be held liable despite not being party/served | Shepherds included BOA/LaSalle in judgment | BOA/LaSalle argued they were not proper parties and had no involvement or service | Appellate court reversed overall judgment; because trespass/wantonness reversed, it was unnecessary to resolve party-liability issues on remand |
Key Cases Cited
- Philpot v. State, 843 So.2d 122 (Ala. 2002) (presumption of correctness for ore tenus findings)
- Waltman v. Rowell, 913 So.2d 1083 (Ala. 2005) (limits on ore tenus presumption for legal conclusions)
- Mullinax v. Mullinax, 495 So.2d 646 (Ala. 1986) (reformation requires clear, convincing, satisfactory proof)
- Beasley v. Mellon Fin. Servs. Corp., 569 So.2d 389 (Ala. 1990) (reformation principles; mistake in description vs. mistake as to what was agreed)
- Boyce v. Cassese, 941 So.2d 932 (Ala. 2006) (trespass requires entry without legal right; possession under legal right is not trespass)
- Alabama Power Co. v. Laney, 428 So.2d 21 (Ala. 1983) (actions asserting title are not torts; slander-of-title is the appropriate remedy)