IN THE COURT OF APPEALS OF MISSISSIPPI. No CA COA SINECURE INVESTMENTS, LLC, ET AL.

Transcription

1 E-Filed Document Oct :48: CA COA Pages: 16 IN THE COURT OF APPEALS OF MISSISSIPPI No CA COA CRAIG W. CLEVELAND APPELLANT VS. SINECURE INVESTMENTS, LLC, ET AL. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE HOLDERS OF GSAMP 2002-HE2, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2002-HE2 APPELLEES CROSS-APPELLANT VS. CRAIG W. CLEVELAND CROSS-APPELLEE Appeal from the Chancery Court of Prentiss County, Mississippi (Hon. Jacqueline Estes Mask) REPLY BRIEF OF APPELLEE/CROSS-APPELLANT DEUTSCHE BANK NATIONAL TRUST COMPANY, SOLEY IN ITS CAPACITY AS TRUSTEE FOR GSAMP MORTGAGE LOAN TRUST 2002-HE2 TO THE RESPONSE OF APPELLANT/CROSS-APPELLEE CRAIG W. CLEVELAND Jason E. Fortenberry (MSB #102282) Anna Sweat Day (MSB #104485) BRADLEY ARANT BOULT CUMMINGS LLP 188 East Capitol Street, Suite 400 Jackson, MS Telephone: (601) Facsimile: (601) Attorneys for Appellee/Cross-Appellant Deutsche Bank National Trust Company, Solely in its Capacity as Trustee for GSAMP Mortgage Loan Trust 2002-HE2 October 23, 2015

2 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii ARGUMENT... 1 A. There is no issue of fact as to whether Deutsche Bank received proper notice of forefeiture. 1 i. The notice to Deutsche Bank was untimely. 1 ii. There are no genuine issues of material fact as to whether the Clerk made the requisite notations and certifications in the tax sale book. 2 iii. Cleveland s equity arguments are without merit. 5 iv. Expiration of the redemption period is not tantamount to a statute of limitations, nor does it extinguish Deutsche Bank's lien where there is an invalid tax sale. 6 v. Cleveland is estopped from raising statute of limitations issues on appeal. 8 CONCLUSION... 9 CERTIFICATE OF SERVICE i

3 TABLE OF AUTHORITIES Cases Fitch v. Valentine, 959 So. 2d 1012 (Miss. 2007)... 8 Hamner v. Yazoo Delta Lumber Co., 56 So. 466 (Miss. 1911)... 7 Hancock Bank v. Ladner, 727 So. 2d 743 (Miss. Ct. App. 1999)... 6, 7 Huss v. Gayden, 991 So. 2d 162 (Miss. 2008)... 9 In re West, No NPO, 2014 WL (Bnkr. S.D. Miss. May 22, 2014)... 1, 2 Lamar Life Ins. Co. v. Mente & Co., 178 So. 89 (Miss. 1938)... 2 Landry v. Bedou, 147 So. 298 (Miss. 1933)... 4 Morgan v. Trustmark Nat l Bank, 99 So. 3d 263 (Miss. Ct. App. 2012)... 9 Pace v. Wedgeworth, 20 So. 2d 842 (Miss. 1945)... 3, 4 Russell Invest. Corp. v. Russell, 78 So. 815 (Miss. 1938), judgment set aside, 182 So. 102 (Miss. 1938)... 7, 8 SKL Investments, Inc. v. Am. Gen. Fin., Inc., 22 So. 3d 1247 (Miss. Ct. App. 2009)... 3, 6, 8 Thigpen v. Kennedy, 238 So. 2d 744 (Miss. 1970)... 5 Tofino Holdings, LLC v. Donnell & Sons, LLC, 119 So. 3d 358 (Miss. Ct. App. 2013)... 1 ii

4 Statutes Miss. Code Miss. Code Miss. Code , 2, 8 Miss. Code Miss. Code , 2, 8 Miss. Code , 2, 3, 4 iii

5 ARGUMENT A. There is no issue of fact as to whether Deutsche Bank received proper notice of forfeiture. i. The notice to Deutsche Bank was untimely. Nowhere in Cleveland s response to Deutsche Bank s cross-appeal does he address Deutsche Bank s untimely notice of expiration of the redemption period for the 2010 tax sale. Cleveland has not done so because he cannot dispute that that the notice to Deutsche Bank was not sent by certified mail within the required timeframe, thereby rendering the tax sale void as to Deutsche Bank. The clerk of the chancery court is required, within the time fixed by law for notifying owners, [to] send by certified mail with return receipt requested to the lienholder a notice of the right to redeem the property from the tax sale. Miss. Code Ann The time fixed by law for notifying owners, in turn, is within one hundred eighty (180) days and not less than sixty (60) days prior to the expiration of the time of redemption with respect to land sold. Miss. Code Ann Therefore, the chancery clerk has a 120-day window in which to send notice of the right to redeem to a lienholder by certified mail, return receipt requested, which closes 60 days prior to the expiration of the redemption period. Id , -5. See also Miss. Code Ann (requiring that the Clerk make a notation in the tax sale book certifying, among other things, the date of mailing by registered mail the notice to the lienors ). Relevant case law discussing these provisions makes clear that lienholder notice must be actually sent (and not merely issued) within the prescribed time-frame. See, e.g., Tofino Holdings, LLC v. Donnell & Sons, LLC, 119 So. 3d 358, (Miss. Ct. App. 2013) (holding that notice to the record owner was defective under Sections and where not personally served on the owner within the 120-day statutory window); In re West, No

6 NPO, 2014 WL , at *4 (Bnkr. S.D. Miss. May 22, 2014) (holding that Section requires personal service within the time frame prescribed by the statute ). The Supreme Court has confirmed that the means of service of the notice to the lienor must be by registered or certified mail. See Lamar Life Ins. Co. v. Mente & Co., 178 So. 89, 89 (Miss. 1938) ( When a chancery clerk, in obedience to this statute, sends the required notice by registered mail, whether the lienor receives it or not is of no consequence, for the statute will have been complied with. ) (emphasis added). Accordingly, the law in Mississippi is clear that notice of the right to redeem the property from the tax sale must be sent to the lienholder by certified or registered mail within the 120-day time period. Here, the returned receipt in the Chancery Clerk s file for the 2010 sale shows that the notice was mailed to Deutsche Bank on July 6, 2012 only 55 days prior to the expiration of the redemption period on August 30, R. 189, 237; R.E. 192, 343. The notice was sent well short of the minimum 60-day notice requirement of Sections and and, therefore, runs afoul of the clear statutory mandate. Accordingly, the Chancery Court erred by summarily denying summary judgment in favor of Deutsche Bank on its counterclaim that the Chancery Clerk s failure to follow the statutorily prescribed procedures for sending notice to lienholders rendered the tax sale void as to Deutsche Bank. ii. There is no genuine issue of material fact as to whether the Clerk made the requisite notations and certifications in the tax sale book. Cleveland could not be more wrong in his statement that genuine issues of material fact remain as to whether the Chancery Clerk complied with Section , which provides as follows: Upon completing the examination for said liens, the clerk shall enter upon the tax sale book upon the page showing the sale a notation to the effect that such examination had been made, giving the names and addresses, if known, of said lienors, the book and page where the liens are created, and the date of mailing 2

7 by registered mail the notice to the lienors. If the clerk finds no liens of record, he shall so certify on said tax sale book. In each instance the clerk shall date the certificate and sign his name thereto. Miss. Code Ann (emphasis added). Cleveland concedes that the Clerk failed to make the notations and certification in the tax sale book pursuant to Section See Hrg. Tr. at 22 (Cleveland s counsel stating, [W]e ve attached a copy, your Honor, of the tax sale book page in the Chancery Clerk s records for this sale. It states the name of the purchaser and the date of the sale and that s it. It has a checkmark out beside it.... [T]he only other mark on it is the checkmark.); R.E. 33. See also R. 190 (copy of the tax sale book for the sale, which is devoid of any information regarding the name and address of the lienholders, the book and page (or instrument) numbers of any instruments creating the liens, the date that any notices were sent to the lienholders, or whether the Clerk actually conducted the statutorily required search for the record lienholders.); R.E Therefore, there is no genuine issue of material fact as to whether the Clerk failed to make the notations and certifications in the tax sale book pursuant to Section Cleveland instead argues that the spirit of the statute can be satisfied by other parol evidence in the clerk s tax sale file. See Appellant s Reply Brief at 13. The plain language of Section , however, does not leave room for Cleveland s assertion that its requirements can be satisfied by the clerk copy[ing] the page [from the tax sale book] and collect[ing] the documents together in a file in his office. Id. On the contrary, any deviation from the strict requirements of Section renders the sale void. SKL Investments, Inc. v. Am. Gen l Fin., Inc., 22 So. 3d 1247, 1250 (Miss Ct. App. 2009) (upholding trial court s decision that the tax sale was void as to the lienholder due to the clerk s failure to strictly follow Section ). Cleveland s argument that parol evidence supplants the requirements of Section is contrary to controlling precedent. In Pace v. Wedgeworth, the Supreme Court expressly 3

8 confirmed that evidence of the Clerk s performance of duties under the tax sale statutes cannot rest in parole and the only entry permitted by the statute to have effect, and to have probative value must be a certificate dated and signed by the clerk, in accordance with the prescribed procedure set out in the statute. 20 So. 2d 842, 847 (Miss. 1945) (emphasis added). Cleveland ignores the holding in Pace, which completely dispels his argument that parol evidence can satisfy the requirements of Section , and instead relies upon an entirely irrelevant case Landry v. Bedou, 147 So. 298, 199 (Miss. 1933). Landry involved a petition to set aside a tax deed to certain property filed by a plaintiff who claimed that he had paid the taxes on the land covered in the tax deed, and that the sale was the result of a double assessment of the property. 147 So. at 299. The issue in Landry was whether parol evidence could be considered to determine whether the land intended to be described in each assessment was in fact the same. Id. The Supreme Court held simply that a map containing the correct description of the property served as competent parol evidence to determine whether the correct property was taxed in light of conflicting descriptions in the assessments. Id. Neither the facts nor the holding in Landry are applicable to the case at bar. Unlike the plaintiff in Landry, Cleveland is not relying on parol evidence to clarify an ambiguous legal description or tax assessment, but is instead relying on such evidence as a surrogate for the statutorily prescribed duties, which he cannot do in light of the clear requirements of Section , and the precedent interpreting the statute. 1 1 Even if Cleveland s parol evidence argument had merit (it does not), the documents in the Clerk s file conclusively establish that the notice sent to Deutsche Bank was defective. The Notice of Forfeiture to Lienor in the Clerk s records has no book and page number creating the lien, and contains no date. R. 191; R.E In addition, the proof of certified mailing of the notice to Deutsche Bank shows that it was mailed less than 60 days prior to the expiration of the redemption period. R. 189, 237; R.E. 192, 343. Therefore, even if one were to consider everything in the Clerk s file, the sale is still invalid as to Deutsche Bank. 4

9 For these reasons and those set forth in Deutsche Bank s opening brief, the Chancery Court erred by summarily denying Deutsche Bank s motion for summary judgment on its counterclaim that the Chancery Clerk s failure to make the requisite entries and certifications in the tax sale book renders the sale void as to Deutsche Bank. iii. Cleveland s equity arguments are meritless. Cleveland has argued throughout these proceedings that Deutsche Bank should be equitably estopped from asserting its lien rights over the subject property. However, even assuming, arguendo, that the balance of equities favor Cleveland (they do not 2 ), there is no case law in Mississippi that would allow such concerns to validate an otherwise invalid tax sale. The plain language of the statutes and controlling case law could not be clearer that the tax sale here is both (1) void in its entirety due to the indisputably defective notice of the expiration of the redemption period to the record owner and (2) void as to Deutsche Bank because the Chancery Clerk failed to follow the statutorily prescribed procedures for giving and certifying notice to lienholders of the expiration of the redemption period. Consequently, equity does not preclude Deutsche Bank from asserting its lien rights. 3 Any holding to the contrary would nullify the tax sale notice statutes by allowing a tax sale to be upheld even where a clerk has failed to follow the clear mandates of the tax sale statutes. Such a result was neither authorized nor intended by the Legislature. 2 In addition, Cleveland s unclean hands preclude him from seeking equity. See, e.g., Thigpen v. Kennedy, 238 So. 2d 744, 746 (Miss. 1970) (The principle of unclean hands dictates that he who comes into equity must come with clean hands. ). Cleveland purchased the subject property knowing it was encumbered by a valid and recorded deed of trust, on the heels of a tax sale of which he admittedly had knowledge and knew to be invalid, with the hope that Deutsche Bank would simply walk away. See Appellant s Reply Brief at 8 n.8, 11 (Cleveland admitting that he knew of Deutsche Bank s lien prior to purchasing the property); R (Cleveland admitting that he knew of the tax sale before obtaining the Assignment of Right, Title and Interest ); R.E Because Deutsche Bank s lien was never terminated by virtue of the invalid tax sale, Cleveland s repeated efforts to paint Deutsche Bank s lien as extinguished are simply without merit. 5

10 iv. Expiration of the redemption period is not tantamount to a statute of limitations, nor does it extinguish Deutsche Bank s lien where there is an invalid tax sale. Cleveland takes the untenable position that expiration of the redemption period for a tax sale acts as a statute of limitations and, thereby, extinguishes any lien that may exist on the subject property, notwithstanding the invalidity of the tax sale. See Appellant s Reply Brief at 3. However, none of the Mississippi cases that Cleveland cites for that proposition actually support it, particularly when the underlying tax sale is invalid. In Hancock Bank v. Ladner, this Court held that a mortgagee s lien under a deed of trust was extinguished upon maturity of a tax title, but did so only where the lien at issue was created between the date of valid tax sale and the end of the two-year redemption period, and where the mortgagee had actually received statutorily proper notice of the tax sale but took no action during the redemption period. 727 So. 2d 743 (Miss. Ct. App. 1999). The issue addressed in Ladner was whether the aggrieved lender could, in equity, revive its extinguished lien by having the tax sale purchaser unilaterally transfer the property back to the debtor via quitclaim deed, which the Court found it could not do under the circumstances. Id. Ladner did not hold that the maturity of an invalid tax sale ipso facto extinguishes a valid lien, nor did it hold that a mortgagee is barred from challenging the validity of a tax sale after expiration of the redemption period or that the expiration otherwise acts as a statute of limitations. Appellant s Reply Brief at 3. Ladner is wholly inapplicable to the instant case, because Deutsche Bank s lien was in existence prior to the tax sale (since 2000), and the tax sale is concededly invalid because neither Deutsche Bank nor Ms. Lewis received statutorily-required notice of forfeiture. This Court has directly addressed the alleged impact of Ladner under the precise circumstances here, and has confirmed that Ladner simply does not apply. SKL Investments, 22 So. 3d at Nor does Ladner support Cleveland s claims of inequity based on Deutsche Bank s agreement in principle 6

11 to settle the claims of the tax sale purchaser, Sinecure. Unlike Ladner, Deutsche Bank has not attempted to craft an end-run around the consequences of a valid tax sale, but instead has simply made a legitimate business decision to avoid costly litigation and to expedite the relief to which it is entitled by virtue of a void tax sale one which Cleveland himself knew to be invalid. To some degree, Deutsche Bank s agreement with Sinecure actually benefits Cleveland because it erases Sinecure s title which is the exact same relief that Cleveland sought in both of his lawsuits below and because it relieves Cleveland of the obligation to make Sinecure whole in the event he successfully cancelled Sinecure s tax title. Cleveland s reliance on Hamner v. Yazoo Delta Lumber Co. is also misplaced. The Court in Hamner did not hold that expiration of the redemption period serves as a statute of limitations, as Cleveland suggests. 56 So. 466 (Miss. 1911). Rather, the Hamner Court held that, pursuant to section 2735 of the Miss. Code of 1892 (now Miss. Code Ann ), actual occupation by an occupant claiming under a tax deed for three years after expiration of the redemption period is an absolute bar to the original owner to set up any defense, or to test the right of the occupant claiming under the tax conveyance. Id. at 496. See also Miss. Code Ann ( Actual occupation for three years, after two years from the day of sale of land held under a conveyance by a tax collector in pursuance of a sale for taxes, shall bar any suit to recover such land or assail such title because of any defect in the sale of the land for taxes, or in any precedent step to the sale.... ). There is no evidence before this Court to suggest that the subject property has been or is being occupied by Cleveland, thus the holding in Hamner is inapplicable. Cleveland also cites Russell Investment Corp. v. Russell to support his claim that expiration of the redemption period serves as a statute of limitations. 178 So. 815 (Miss. 1938), judgment set aside, 182 So. 102 (Miss. 1938). 7 Similar to Hamner, Russell involved the

12 interpretation of a statute related to the redemption of title to land sold or forfeited to the State for delinquent taxes. Id. The statute at issue in Russell was Miss. Code Ann , which the Court confirmed allows two years after the period of redemption expires to attack the tax sale for property struck off to the State. Russell is inapplicable here because it does not stand for the proposition that Cleveland so contends, and because the subject property was not struck off to the State. Sections and of the Mississippi Code provide lienholders with the right to set aside an invalid tax sale after the redemption period has expired. Moreover, this Court has confirmed that the failure to give proper notice to a lienholder renders that tax sale void as to that lienholder, even where the two-year redemption period has expired. SKL Investments, 22 So. 3d at Cleveland s argument that Deutsche Bank s ability to challenge the tax sale is somehow foreclosed by the expiration of the redemption period is contrary to Mississippi law and is meritless. 4 v. Cleveland is estopped from raising statute of limitations issues on appeal. In response to Deutsche Bank s cross-appeal, Cleveland suggests that a genuine issue of material fact exists as to whether the statute of limitations on Deutsche Bank s ability to recover the debt has expired. Appellant s Reply Brief at 5 n.7; at 12 n.12. This is not an issue that was presented to the trial court and, therefore, this Court should not consider it for the first time on appeal. See Fitch v. Valentine, 959 So. 2d 1012, 1021 (Miss. 2007) ( Issues not raised at trial cannot be raised on appeal. ). Contrary to Cleveland s assertion, Deutsche Bank has not 4 Notably, if Cleveland was correct that the expiration of the redemption period forecloses any challenge to a tax sale, Cleveland s claims would be barred because he purchased his interest in the subject property after the tax sale matured, and after the tax deed had been issued and recorded. 8

13 conceded that the statute of limitations on its ability to enforce the lien has expired, but that issue is simply not before the Court. See Appellant s Reply Brief at 12. Even assuming, arguendo, that Cleveland had not waived the issue on appeal, Cleveland has cited to absolutely no evidence or authority to support his incredibly vague and unsubstantiated assertion that the statute of limitations... by which [Deutsche Bank] could move to recover the debt owed... may have expired. Appellant Reply Brief at 5 n.7 (emphasis added). Cleveland ignores the fact that he bears the burden of proof to establish a statute of limitations defense and, therefore, also carries the burden to demonstrate that genuine issues of material fact remain concerning this affirmative defense in order to defeat summary judgment. See, e.g., Huss v. Gayden, 991 So. 2d 162, 165 (Miss. 2008); Morgan v. Trustmark Nat l Bank, 99 So. 3d 263, 267 (Miss. Ct. App. 2012). Cleveland has not satisfied his burden for purposes of defeating Deutsche Bank s summary judgment; therefore, Cleveland s argument that a genuine issue of material fact exists as to whether a statute of limitations defense exists is meritless. CONCLUSION The Chancery Court erred by denying Deutsche Bank s motion for summary judgment on its counterclaim that the sale for the 2009 ad valorem taxes is void as to Deutsche Bank due to the Chancery Clerk s failure to follow the statutorily prescribed procedures for giving and certifying notice to lienholders and, therefore, this denial should be reversed. RESPECTFULLY SUBMITTED, this the 23 rd day of October, /s/ Anna Sweat Day Jason E. Fortenberry (MSB #102282) Anna Sweat Day (MSB #104485) BRADLEY ARANT BOULT CUMMINGS LLP 188 East Capitol Street, Suite 400 Jackson, MS 39201

14 Telephone: (601) Facsimile: (601) Attorneys for Appellee/Cross-Appellant Deutsche Bank National Trust Company, Solely in its Capacity as Trustee for GSAMP Mortgage Loan Trust 2002-HE2 10

15 IN THE COURT OF APPEALS OF MISSISSIPPI No CA COA CRAIG W. CLEVELAND APPELLANT VS. SINECURE INVESTMENTS, LLC, ET AL. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE HOLDERS OF GSAMP 2002-HE2, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2002-HE2 APPELLEES CROSS-APPELLANT VS. CRAIG W. CLEVELAND CROSS-APPELLEE APPELLEE/CROSS-APPELLANT DEUTSCHE BANK NATIONAL TRUST COMPANY, SOLEY IN ITS CAPACITY AS TRUSTEE FOR GSAMP MORTGAGE LOAN TRUST 2002-HE2 S CERTIFICATE OF SERVICE I, Anna Sweat Day, one of the attorneys for Deutsche Bank National Trust Company, solely in its capacity as Trustee for GSAMP Mortgage Loan Trust 2002-HE2, do hereby certify that I served by United States Mail, postage prepaid, on the 23 rd day of October, 2015, a true and correct copy of the Brief of Appellee/Cross-Appellant Deutsche Bank National Trust Company, Solely in its Capacity as Trustee for GSAMP Mortgage Loan Trust 2002-HE2 to the Response of Appellant/Cross-Appellee Craig W. Cleveland, to the following interested parties: Thomas Cooley Langston & Lott, P.A. Post Office Box 382 Booneville, Mississippi Attorney for Appellant Jon J. Mims Rawlings & MacInnis, P.A. P.O.Box 1789 Madison, MS

16 Attorney for Sinecure Investments, LLC David Bubba Pounds, Clerk Prentiss County Chancery Court 100 North Main Street Booneville, MS Mississippi Department of Revenue J. Ed Morgan, Commissioner 1577 Springridge Road Raymond, MS City of Booneville, Mississippi c/o City Clerk Booneville City Hall 203 North Main Street Booneville, MS Jim Hood, Attorney General for the State of Mississippi Walter Sillers Building 550 High Street Suite 1200 Jackson, MS I further certify that I have this day served by United States Mail, postage prepaid, a true and correct copy of the same, to: Honorable Jacqueline Estes Mask Chancery Court Judge for Prentiss County, Mississippi P.O. Box 7395 Tupelo, MS TRIAL COURT JUDGE THIS the 23 rd day of October, /s/ Anna Sweat Day OF COUNSEL 12